Global Enterprise and Competition Ashwin Mehta, Visiting Faculty 66.511.202 Fall 2007 Ashwin Mehta, Visiting Faculty

Microsoft launches Vista worldwide After five years of marketing blitz, the largest software maker unveils the new computer operating system Tuesday. January 30 2007: 9:21 AM EST NEW YORK (Reuters) -- Microsoft Corp. rolled out Windows Vista at retailers in 70 countries Tuesday, delivering a new computer operating system that aims to better manage the explosion of digital media and protect users from the dangers of the Internet. What are key planning elements?

Boeing is soaring on orders for its new 787 - Global Gamble The Forbes Global 2000, April 2006

Global Enterprise and Competition markets and operations in global terms, more diverse organization in terms of culture, few core values that are its major unifying force. It has a headquarters but is often managed from diverse locations Enterprise Business entity, profit motivation, growth, any size, any industry, B2B and B2C Competition Local, National, International and Global

TESCO - #3 retailer in the World 2X Wal-Mart in the UK Entering the US market

TESCO - A Very Successful Retailer

Reasons for success? Leadership Clubcard Employees Culture Supply chain Innovation Global markets

CATALOG DESCRIPTION: To be taken as last course in foundation core. Is an integrated investigation of global competitive issues to help students understand the processes of organization and technological innovation which permit businesses to achieve competitive advantages in a global environment. This course also deals with the nature and techniques of industry analysis necessary to the formulation of effective global strategy for the firm. 

Course Objectives: understand challenges and issues in operating across national boundaries develop analytical ability to formulate strategic options understand integration of key functional areas, including marketing, manufacturing, R&D and customer support use “strategy analysis” tools to develop scenarios, impact and select appropriate set of strategies improve research capability to gather and interpret key environmental data that define critical parameters for a global strategy

COURSE REQUIREMENTS: Text Book: Global Competitive Strategy, by Daniel Spulber, Cambridge University Press ISBN: 978-0-521-88081-7 2. Instructor’s Notes You can download class notes as shown in Class Schedule. 3. Other reading materials See Syllabus

4. Assignments. Group Projects: Group Projects: Each student will be assigned to a group to develop a strategic analysis of a company . Assigned cases: a written case analysis for three(3) cases, to be submitted via email as attachments. 3 – 5 students will present their assignments in the class. Students are expected to participate in class discussions. You are expected to arrive at class fully prepared to discuss the material assigned for that day.

Assignments also include presentations

Syllabus: http://faculty.uml.edu/amehta

What is a Modern Global Enterprise?* Focused on Enterprise-wise objectives, not local initiatives/priorities Aligning subsidiaries around a common strategic vision Managing from Center Integration of operations globally Sharing local innovations around the world Common Corporate culture, while managing sub cultures Fortune, February 2006

Considerations

Internationalization Strategy & Integration Operating Mode Own, JV’s, Partnering, Transactional Adaptation Other Issues Control, Management/skills, Cultures, Institutional, Ethics Market-specific, Regional, Global Organization Coverage Local, National, Regional, Global Functional, Divisional, Matrix Business Processes Internationalization Local, Global, Mixed Organic, M&A’s Strategy & Integration Corp, Business, Functional

The beginning … Who is being What is being Satisfied Satisfied? Business Definition Vision/Mission How are customer needs being satisfied

Mission Environment Assumptions The Theory of the Business* Required to maintain Leadership How do we make money Competencies Environment Assumptions Mission Making the Difference *: Peter Drucker

The Theory of the Business* Assumptions about Environment, Mission and Core Competencies Must Fit Reality The assumptions in all Three Areas Have to Fit One Another The Theory of the Business Must be Known and Understood Throughout the Organization The Theory of the Business has to be Tested Constantly *: Peter Drucker Session 1

Moneymaking Basics* Cash Margin Velocity Return Growth Change in “money making model” impacts all of these --- Dell selling through retailers Vs Direct only *: The Basics of Moneymaking, Ram Charan, http://finance.yahoo.com/expert/article/companyknow/35703

Outside In* --- External Environment Recognize changes and patterns (lifestyle, technology, competition Failures have consequences Build External Perspective Opportunities Threats Repositioning Business** Decision making process *: See Your Business Outside In, Ram Charan, http://finance.yahoo.com/expert/article/companyknow/30421 **: When – and How – to Reposition Your Business, ram Charan http://finance.yahoo.com/expert/article/companyknow/31627

What is Strategy? Strategy Use of scarce resource to achieve vision/mission and objectives Collection of actions: Corporate (what business/industry) Business (how to compete) Organization/function (where to allocate resources)

Example IBM Vision/Mission At IBM, we strive to lead in the invention, development and manufacture of the industry's most advanced information technologies, including computer systems, software, storage systems and microelectronics. We translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide. Session 1

Example: IBM Strategies IBM’s strategy is to pursue an innovation agenda with its clients, partners and in other relationships, and to continue refining its portfolio to achieve higher value. Through its understanding of where technology, client requirements and global business are headed, the company continually makes strategic decisions to maintain its leadership of this rapidly changing business by focusing on high-value innovation-based solutions and services while consistently generating high returns on invested capital for its shareholders. The company utilizes its entire portfolio — hardware, software, services, technology and research to maintain its leadership. Session 1

Business successes and failures Always point to Strategy Strategy and Strategic Positioning Sustainable Session 1

Introduction to Global Competitive Strategy © Professor Daniel F. Spulber

Global Competitive Strategy Introduction

Global Competitive Strategy Outline of introduction The global challenge The global mosaic The global strategy “Star Analysis”

Global Competitive Strategy The Global Challenge Globalization changes nature of competition -- Competitors can be very different! Innovative entrants, including emerging market firms Global 500 Companies*: 2005 2006 2007 US 176 170 162 Japan 81 70 67 France/Germany/UK 111 111 108 China 15 20 24 Canada 13 14 14 India 5 6 6 *: Fortune

Global Competitive Strategy The Global Challenge Global competitive advantage Best sources of products, global brands World-class cost efficiencies Global pool of innovations Global mix of transactions

Global Competitive Strategy The Global Challenge To serve large-scale global market To address market differences across countries

Size of Global Business Current $ (Source: World Bank) • World GDP: $ 41.3 trillion (Gross Domestic Product) US: $ 11.7 trillion EU (25): $ 12 trillion Japan $ 4.6 trillion Latin America and Caribbean $ 2 trillion Middle East and Africa $ 1 trillion India $ 0.7 trillion China $ 1.9 trillion High growth rate of emerging markets

Size of International Business Total exports of goods and services World Trade $ 11 trillion Merchandise $9 trillion Agriculture, fuels and mining, manufactured goods Services $2 trillion Transportation, travel, commercial services

Growing importance of trade to US economy Increases in: Exports: Capital goods (mainly semiconductors, computer accessories) Industrial supplies Consumer goods Imports: Industrial supplies and crude oil Auto industry Capital goods

Size of International Business $1.5 trillion in international currency transactions per day! 63,000 multinational corporations Major source of economic growth and investment for developed and developing countries Source of global technological innovation Earnings growth for many companies (Wal-Mart, GE, Carrefour, Nestlé, Unilever, Cemex, Toyota, Samsung)

Why was Nokia so successful? Why did Daimler-Chrysler have problems? Why was Nokia so successful?

Global Competitive Strategy The Global Mosaic Vast economic differences across countries GDP per capita, prices, wages Underlying geographic differences – Geography matters Large “economic distances” between countries “Sticky borders” preserve these differences The arbitrage principle – economic differences evidence of sticky borders, many strategic opportunities remain The world is bumpy!

Business must bridge critical differences between countries Language Culture, customs, and history Social institutions Demographic differences: health, education Public policies Legal and regulatory systems Business practices Currencies Technology

Global Competitive Strategy The costs of trade: The Four T’s Transaction costs Tariff and non-tariff barriers Transportation costs Time costs Borders are “sticky”

Business must navigate the World Trade System Proposed Caribbean Basin Initiative NAFTA

Business strategy must account for changes in political relationships and trade deals between countries

The Arbitrage Principle Country borders: Restrict movement of inputs – capital, labor, technology, resources Limit trade in goods and services Create persistent differences in technology and information Preserve economic differences -- prices and wages Arbitrage reduces economic differences Innovative transactions find arbitrage opportunities Country borders provide opportunities and competitive advantage to international business

NEXT SESSION: Analytical framework! Global competitive advantage Globalization challenges business strategy in a fundamental way Trade costs are high resulting in economic differences between countries The global mosaic offers opportunities for generating gains from trade The successful global business develops innovative international transactions to gain global competitive advantage

Recap … Introduction to Global Business Competition Globalization 4T’s, GATT, WTO, Technology, … Opportunities Markets, Resources Analysis and Strategy Traditional (home country-based) to Global STAR Analysis Global Added Value Value Connection G5 Strategies Platform, Network, Intermediary, Entrepreneur, Investment

Assignment 1 Due November 15, 2007 GO TO THIS LINK (http://knowledge.wharton.upenn.edu/createpdf.cfm?articleid=719&CFID=2411127&CFTOKEN=34070626), REVIEW THE ARTICLE, DO A WEB RESEARCH ON COMPANIES DISCUSSED IN THE ARTICLE, AND ADDRESS THESE QUESTIONS: (YOU SHOULD WRITE AN INTRODUCTION/CONTEXT BEFORE ADDRESSING THESE QUESTIONS) How many stores do Wal-Mart, Home Depot and IKEA have in various countries/regions? Describe Wal-Mart and Home Depot’s International expansion strategies (i.e. acquisition, JV’s, organic growth) and comment on their results (successes/failures/challenges) Review Wal-Mart and Home Depot’s revenues over the last five years and analyze revenues from US Vs International. What has been the main thrust of IKEA’s International expansion strategy and how has it performed (review their financial and other data of past few years)? YOUR REPORT MUST BE BETWEEN 1000 AND 1500 WORDS AND MUST INCLUDE SOURCES REFERENCED.

Group Projects Group Formation Company Assignments Templates Review

Group Project Template 1. Company Financials (see Excel spreadsheet in “Group Project and Assignments Files”). Summarize key financial data (growth rates, major ratios, etc.)