Global Strategy: Harnessing New Markets to Extend Advantage Chapter Outline –Environmental Factors that have enhanced globalization –Strategies for Global Expansion Global Multi-domestic –Benefits of Global Expansion –Costs of Globalization –Balancing Global and Multi-Domestic Approaches

Reasons/Faciltators Exhibit 8-1 Narrowing of Demand Characteristics – 8-2, 269 Escalating R and D costs – 8-3, 270 Cost reduction pressures and economies of scale 8-4, 271 Government Industrial Policies – 8-5, 271 Reduction of factor costs (labor, capital; increase in workforce quality) Rise of new distribution channels (hypermarts) Reduction of transportation, communication, storage costs 8-6, 273 Internet access Reduction of tariffs worldwide – NAFTA, ASEAN, Mercosur, EU

Benefits of Global Expansion Market growth and expansion opportunities Recovery of R and D and investment costs Creation of distinct image Accelerated learning and transfer of new skills 8-11, p. 287

Costs of Global Expansion Costs of Strategic Leverage –Sustained investment required –Preserving and extending image Costs of Flexibility –High interdependence off subsidiaries –Change or development affecting all markets Costs of cooperation –Compromise –Accountability

Global versus Multi-Domestic Strategies Global – seeks to achieve a high level of consistency and standardization or products, processes and operations around the world; coordination of the firm’s many subsidiaries to achieve high interdependence and mutual support Multi-Domestic – seeks to adjust a firm’s products, processes, and operations for markets and regions around the world; allows subsidiaries to tailor their products, marketing, and other activities according to the needs of their specific markets

Characteristics of a Global Strategy Standardized products Global economies of scale in key components and activities Leveraging of technology across markets Global coordination of marketing and sales system- wide Cross-subsidization policies respond to competitive moves by other global strategy firms

Characteristics of a MD Strategy Customization or frequent adaptation of products for each separate market Few system-wide opportunities for economies of scale Value adding activities performed and duplicated in each market Coordination of marketing and sales within each market Quality and image across markets are important sources of competitive advantage