Strategizing Around the Globe 1 Strategizing Around the Globe chapter Part I: Foundations of Global Strategy Global Strategy Mike W. Peng Copyright © 2009 Cengage. PowerPoint Presentation by John Bowen, Columbus State Community College All rights reserved.

Outline A global global-strategy book Why study global strategy? What is strategy? Fundamental questions in strategy What is global strategy? What is globalization? Global strategy and globalization at a crossroads Copyright © 2009 Cengage. All rights reserved.

A Global Global-Strategy Book Text departs from traditional view of global strategy Important to respond to local needs Traditional view of global strategy is incomplete and unbalanced Sacrifices local responsiveness and global learning Ignores how domestic firms compete with each other and with foreign entrants Traditional global strategy is only appropriate for large MNEs in developed countries It is dangerous to ignore less developed economies Copyright © 2009 Cengage. All rights reserved.

Why Study Global Strategy? Job and career aspiration opportunities Awareness of what is going on in the world Avoid downside risks of globalization Copyright © 2009 Cengage. All rights reserved.

What is Strategy? Origin-Greek word (strategos)-art of the general Sun Tzu, Chinese military strategist in 500 B.C. Modern-day application to business and competition dates to the 1960s Plan versus Action - strategy is “explicit, rigorous formal planning” versus “a set of flexible, goal-oriented actions” Strategy as Theory-how to compete successfully Firms have both intended and emergent strategies One firm’s strategies may not work in all situations Past success does not guarantee future success It is often difficult to change strategy Copyright © 2009 Cengage. All rights reserved.

What is Strategy? Cont’d Strategy should give coherence to decisions and actions Managers must exert effective strategic leadership Copyright © 2009 Cengage. All rights reserved.

Strategy STRATEGY AS PLAN STRATEGY AS ACTION “Concerned with drafting the plan of war and shaping the individual campaigns and, within these, deciding on the individual engagements” (Von Clausewitz, 1976)1 “A set of concrete plans to help the organization accomplish its goal” (Oster, 1994)2 STRATEGY AS ACTION “The art of distributing and applying military means to fulfill the ends of policy” (Liddel Hart, 1967)3 “A pattern in a stream of actions or decisions” (Mintzberg, 1978)4 “The creation of a unique and valuable position, involving a different set of activities ... making trade-offs in competing ...creating fit among a company’s activities” (Porter, 1996)5 Copyright © 2009 Cengage. All rights reserved.

Strategy, Cont’d. STRATEGY AS INTEGRATION “The determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals” (Chandler, 1962)6 “An integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage” (Hitt, Ireland, and Hoskisson, 2003)7 Sources: Based on (1) K. Von Clausewitz, 1976, On War, vol. 1 (p. 177), London: Kegan Paul; (2) S. Oster, 1994, Modern Competitive Analysis, 2nd ed. (p. 4), New York: Oxford University Press; (3) B. Liddell Hart, 1967, Strategy, 2nd rev. ed. (p. 321), New York: Meridian; (4) H. Mintzberg, 1978, Patterns in strategy formulation (p. 934), Management Science, 24: 934–948; (5) M. Porter, 1996, What is strategy? (pp. 68, 70, and 75), Harvard Business Review, 74(6): 61–78; (6) A. Chandler, 1962, Strategy and Structure (p. 13), Cambridge, MA: MIT Press; (7) M. Hitt, D. Ireland, & R. Hoskisson, 2003, Strategic Management, 5th ed. (p. 9), Cincinnati: Thomson South-Western Copyright © 2009 Cengage. All rights reserved.

The Essence of Strategy Copyright © 2009 Cengage. All rights reserved. Figure 1.2

Our definition: Strategy as theory Integrating both planning and action schools Leveraging the concept of “theory” A theory serves two purposes: Explanation and prediction Requiring replications and experimentations To establish the temporal (time-related) and geographic limits of an existing theory Understanding the difficulty of strategic change Copyright © 2009 Cengage. All rights reserved.

Fundamental Questions in Strategy Why do firms differ? Cultural differences between Western firms and Japanese companies Networks of relationships have powerful effect - keiretsu, guanxi, chaebol, blat How do firms behave? Industry-based view - focus on competitive forces within an industry that impact all firms Resource-based (capabilities) view - focus on internal strengths and weaknesses, firm specific resources and capabilities Institution-based view - focus on government and societal forces Copyright © 2009 Cengage. All rights reserved.

Fundamental Questions in Strategy cont’d What determines the scope of the firm? What determines the international success or failure of firms? Industry-based view - degree of competitiveness in the industry Resource-based view - firm specific differences in capabilities Institution-based view - institutional forces, such as economic reforms and government policy Copyright © 2009 Cengage. All rights reserved.

The “Strategy Tripod” Three Leading Perspectives on Strategy Copyright © 2009 Cengage. All rights reserved. Figure 1.3

What Is Global Strategy? Provide standardized products and/or services on a worldwide basis (i.e., traditional view) Any strategy outside one’s home country Our definition of global strategy: Strategies of firms around the globe Both international and non-international (domestic) Both developed and emerging economies Copyright © 2009 Cengage. All rights reserved.

What is Globalization? A new phenomenon since the late 20th century? A part of long-run human history? A pendulum view: Transportation and communication revolutions + breakdown of artificial barriers in trade and investment A process similar to the swing of a pendulum: Postwar history Semiglobalization? Copyright © 2009 Cengage. All rights reserved.

Global Strategy and Globalization at a Crossroads Three Defining Events - have brought corporate social responsibility, ethics, and governance to the forefront of strategic decisions Anti-globalization protests - lost jobs, downward pressure on wages for unskilled labor, environmental destruction Terrorist attacks Corporate governance crisis (Asian financial crisis, U.S. scandals) Copyright © 2009 Cengage. All rights reserved.

Global Strategy and Globalization at a Crossroads, Cont’d. Know Yourself, Know Your Opponents Understand strengths AND limitations Recognize the social, political, and environmental costs associated with globalization Current business school students exhibit values and beliefs different from the general public Be aware of bias and strategic blind spots Do not ignore non-government organizations (NGOs)-view them as partners Copyright © 2009 Cengage. All rights reserved.

Organization of the book Part I: Foundations of global strategy Chapter 1: Strategizing around the globe Chapter 2: Managing industry competition Chapter 3: Leveraging resources and capabilities Chapter 4: Emphasizing institutions, cultures, and ethics Part II: Business-level strategies Chapter 5: Growing and internationalizing the entrepreneurial firm Chapter 6: Entering foreign markets Chapter 7: Making strategic alliances and networks work Chapter 8: Managing global competitive dynamics Part III: Corporate-level strategies Chapter 9: Diversifying, acquiring, and restructuring Chapter 10: Strategizing, structuring, and learning around the globe Chapter 11: Governing the corporation around the globe Chapter 12: Strategizing with corporate social responsibility Copyright © 2009 Cengage. All rights reserved.