Session 8: Global strategy Knut Haanæs Associate Professor Norwegian School of Management - BI

Why globalize? Why globalize? Global Strategy Mercedes case Issues of global strategy

Why globalize? Why globalize? Global Strategy Mercedes case Issues of global strategy

Why globalize?

Types of resources sought in globalization Natural resources: Mines, oil, gas Markets: Coca Cola, Nestlé Costs: Nike production abroad, cars in Poland, bicycles in Taiwan Knowledge: Car design, pharma, software, etc.

Administrative heritage - It is vital to recognize a company’s core strength The company would not exist without some deeply embedded strengths in its administrative heritage

Why globalize? Why globalize? Global Strategy Mercedes case Issues of global strategy

What is a global company? Optimizes activities globally. “What we do in country A influences what we do in country B.”

What is a transnational company? “Balances integration and local adaptation within all activities in order to locate centres.”

Need for integration Need for responsiveness HighLow High Economies of scale Capacity utilization Standardization Learning curve Comparative adv. Language Culture Preferences Local tastes Distribution Transportation Forces acting on MNC Source: Bartlett and Ghoshal (1987 )

Need for integration Need for responsiveness HighLow High Forces acting on different activities Source: Bartlett and Ghoshal (1987 ) Research Manufacturing Purchasing Development Marketing Sales

Types of subsidiaries Innovation Productivity High Low High Ideas seeking subsidiary Strategic subsidiary Efficiency seeking subsidiary Implementing subsidiary Software and Internet in Silicon Valley Bicycles in Taiwan, Shoes in Philippines, Clothes in China Mobile phone operations in Stockholm

Hedlund: The N-form corporation Combining, rather than dividing Temporary constellations, rather than permanent structures Coordination at lower levels, rather than only by managers Lateral communication, rather than vertical Manager as catalyst, architect and knowledge protector, rather than monitor and resource allocator Focusing, rather than diversifying corporation Heterarchy, rather than hierarchy –Several strategic apexes –Several ordering principles –Many knowledge bases Source: Hedlund (1986; 1994)

Konkurranse- arena Relaterte næringer Etterspørsels- forhold Faktorforhold Myndigheter Tilfeldigheter Strategy, structure and rivalry Supporting and related industries Demand conditions Factor conditions Public sector Coincidences Industry hosting advantages Porter (1990)

Mode of entry depends upon…. International experience Do we want to do this ourselves? Do we need control? When and how do we want to move? What is the size of the market? How risky is the market?