Global Strategy Mike W. Peng Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Global Strategy Mike W. Peng Chapter 1 Strategizing Around the Globe

Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Quiz Which of the following two cities has a larger number of Fortune Global 500 company headquarters? Beijing New York Fortune Global 500 HQ (2011 data from Fortune, July 23, 2012) Beijing (43 out of 73 from China) New York (18 NYC + 3 NYS out of 132 from the US) FYI: Texas 13 (Houston 6, DFW 4, San Antonio 1, Austin/Round Rock 1); Shanghai 6

© M. W. Peng ( 1–4 Global Strategy: One Size Fits All? Traditional “global strategy” is treating different countries as one worldwide or “global” market.  World car: Ford Contour (as the Mondeo in Europe)  World drink: Coke Classic?  World advertising commercial: Polar bear ads But that strategy has backfired repeatedly  There is no world car, no world drink, no world MTV A more balanced view—covering both global and local (non-global) aspects—is necessary

Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Why Study Global Strategy? Job and career aspiration opportunities  Expertise in global strategy is highly sought after Awareness of what is going on in the world  Preparation for international assignments Avoid downside risks of globalization  Necessary knowledge for people working in smaller companies

© 2010 Cengage Learning. All rights reserved. 7

Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. What is Strategy? Cont’d  Strategy should give coherence to decisions and actions  Managers must exert effective strategic leadership

Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Essence of Strategy Figure 1.3

Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

1–13 Why Do Firms Differ? Western firms (US/UK vs. German/French)  Have different (shorter- versus longer-term) planning horizons. Japanese firms  Are different from Western firms. Firms from emerging economies (Brazil, Russia, India, and China—BRIC)  EM 1.1. Foxconn The challenge is to understand the roots of these differences when trying to compete globally.

Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The “Strategy Tripod” Three Leading Perspectives on Strategy Figure 1.4

Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

1–17 How About Global Strategy? Traditional “global strategy”  Only relevant for MNEs from developed economies The same as “international” (non-U.S.) strategy  Wal-Mart went to Mexico in 1991: Did it go “global”?  Everything becomes “global”? Our definition of global strategy:  Strategy of firms around the globe  Both international and non-international (domestic)  Both developed and emerging economies

Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

1–21 What Determines the Success or Failure of Firms around the Globe? Acquiring and leveraging competitive advantage Strategy is about performance, about making a difference The Key: Sustaining such an advantage over time and across countries (regions) through replication and innovation.

Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 World  Chapter 11: Governing the Corporation Around the World  Chapter 12: Strategizing with Corporate Social Responsibility