Global Business (Chap 2) Dept of Technology Management for Innovation (TMI), Graduate School of Engineering Professor Kazuyuki Motohashi 工学系研究科 技術経営戦略学専攻教授 元橋一之

Today’s class What is business strategy? What is global business strategy （ CAGE ） AAA framework

Business Strategy Mid or long term direction of business to achieve sustainable economic returns (corporate value) –Strategy: military terms, back to Sun’s “The Art of War” –MOST Mission: like “Sony is pioneer”, Objective: More concrete goal of business, corporate Strategy ： Short description of how to achieve goals Tactics ： Business unit level activities (often not documented) know your enemy, know thyself, and you shall not fear a hundred battles –External competition and internal competitiveness –3C of corporate management ： Competitor, Customer, Company

Business Strategy Analysis: SWOT Positioning School (by M. Porter): External competition focus RBV(Resource Based View) School: Internal competitiveness focus V(Value), R(Rarity), I(Imitability), O(Organization)

Strategic Planning Execution Communication Selection Strategic Options Evaluation Articulation of Strategic Goal Ex. creating new customer value Conducting logic tests (3C, SWOT analysis) Needs change? ex. low cost strategy? Pitfall: picking up bits and pieces

China is market or factory?

Local for local ( 地産地消） Export (traditional global business) Off-shore production

Why global strategy is different? (CAGE) Cultural Distance: language, customs, religion, cultures etc. Administrative Distance: regional integration administration (FTAs), currency, common suzerain state, political dispute Geographic Distance ： physical distance, time zone, Economic Distance ： per capital GDP, wages, living costs Value Creation by combining Adaptation, Aggregation, Arbitrage

India vs China from US viewpoint Ghemawat(2007)

AAA: How to manage “distance”? Adaptation ： Customization of product or services to local market: McDonald’s vegi- burger in India, soundless and compact fridge in China (by Panasonic)… Aggregation ： Globally (or regionally) standardized product and services: Toyota’s pickup tracks for SE Asia, Apple i-phone… Arbitrage ： Making profit out of distance ： Infosys, UNIQLO….

AAA mapping into P-M Grid Adaptation + Arbitrage Aggregation + Arbitrage Adaptation or Aggregation

AAA Triangle by P. Ghemawat

Shift of global strategies Ghemawat(2007)

Global Strategy Making Factory or Market?: Supply side story or demand side story or both? –Arbitration is not only for manufacturing process but for various kinds of activities called off-shoring Aggregation or Adaptation: –Marketing concept: market segmentation and targeting (or global market?)

Value Chain by M.E. Porter

Value Chain and Global Strategy

Local for local Off-shore R&D HQ for local HQ for global AAA and value chain Arbitrage Production Off shore site Aggregation for global customer Adaptation for local customer Mother factory Sales, services for local customers R&D HR, marketing and technology strategy, procurement

Customer type and global strategy B2CB2BB2G2C Goods Automobile TVs, cosmetics Parts Ind. Robots Steel Services Financial Retail HR service BPO Package (system integrator) IT System integrator Subway, Water Basically, adaptation to the customer Some arbitrage, but some not TBD

Case material: China and India India: factory or market? Please provide at least one example in each Quadrant of factory or market matrix. Pick up one industry of your favorite. Discuss attractiveness in India over China by CAGE framework. Then develop your global strategy plan based on AAA framework (which “A” should you put your focus on?)