Global Strategy: A Synthesis Timothy Devinney

Why do Companies Invest Overseas? MThe Seeking of New Markets MSeeking of New Resources MSeeking of Greater Operational Efficiency

The Imperatives—A General IBS Framework Local Economic Conditions Intl Economic Conditions Local Cultural / Sociodemographic Conditions Local Political Environment Local Economic Conditions Local Cultural / Sociodemographic Conditions Local Political Environment Firm Strategic Disposition Firm Strategic Disposition Org n Cultural Org n History Technology Org n Structure Dist n of Business Product Struct r Org n Cultural Org n History Technology Org n Structure Dist n of Business Product Struct r

Entry Modes

Economics of Production “Global is Better” Economics of Production “Global is Better” Economics of Adaptation “Local is Better” Economics of Adaptation “Local is Better” PUSHPULL Globalization Pressures

Multifocal National Responsiveness ?????? Global Integration National Responsiveness Multinational Integration The extent to which the companies operations and products are responsive to market differences The extent to which the companies operations and products are responsive to market differences The extent to which the operations of the firm are integrated along a single dimension The extent to which the operations of the firm are integrated along a single dimension The Two Extremes of International Strategy

Dimensions of International Organisation Structure— Devinney et al Local Responsiveness High Low Global Integration High Transactional Completeness High Diversity of sources, type and uses increase Becomes more proprietary and protectible Economies of scale and scope increase the sources and applications and efficiency in use

Local Competence Importance of Local Market High Low HighLow Source: Bartlett & Ghoshal (1986) The Roles for Country/Regional Organisations Contributor Strategic Leader Black Hole Implementor

Goals Tools * Efficiency of Operations (Profit) * Management of Risk (Financial & Operational) * Innovation, Learning and Adaptation (Renewal) * Exploiting National Differences â Cost Differences (Comparative) â Customer Segmentation (Competitive) * Exploiting Economies of Scale * Exploiting Economies of Scope (Synergies) * Exploiting Intangible Assets (Knowledge & Expertise) Strategic Goals and Tools

Strategic Orientation and Asset Configuration Strategic Orientation Configuration of Assets and Capabilities Assets and Capabilities Required Building flexibility to respond to national differences Decentralised and nationally self-sufficient Strong, resourceful and entrepreneurial national operations Multinational Exploiting parent company knowledge and capabilities Sources of competency centralised. Operations decentralised Effective mechanisms for diffusion and adaptation International Building cost advantages through global EOS Centralised and globally scaled Size and the ability to manage standardisation Global Developing global efficiency while maintaining flexibility and the capacity to learn Interdependent, dispersed, specialised and controlled Strong culture of communication and transference. Arm's length management control system Transnational Source: Adapted from Bartlett & Ghoshal

Tools Source: Adapted from Bartlett & Ghoshal Implications for Synthesizing Global Strategy Efficiency Adaption/ Flexibility Risk Management High => Decentralization/ Network Low => Centralization High => Decentralization/ Network Low => Centralization High => Internal Diversification of Dimensions That Market Can Not Provide Insurance (Political, World Macroeconomic, Social, Competitive, Resource). External Instruments (e.g., Options & Futures, Swaps, etc.) Where Risk is Marketable Nat l Differences High => Cost Leadership/ Standardization Low => Differentiation High => Reliance on Modern Manufacturing Techiniques Stressing Variety and Speed (JIT, FMS) Scale Economies High => Cost Leadership/ Segmentation Low => Independent Operations Scope Economies High => Centralization/ Network Low => Decentralization High => Centralization/ Network Low => Decentralization Intangible Assets Goals

A Framework for Synthesizing Global Strategy Tools Source: Adapted from Bartlett & Ghoshal Efficiency Adaption/ Flexibility Risk Management Profit Based on Customer and Supply Diversity Customer-Focus, Flexibility, Experience, and Knowledge Transfer Macroeconomic, Political, Competitor, and Resource Risks Nat l Differences Profit Based on Standardization and Size Cost Reduction, Learning, and Process Engineering Scale Economies Profit Based on Production and Marketing Synergies Scope Economies Profit Based on Proprietary Knowledge and Expertise Knowledge and Expertise Transfer Intangible Assets Goals Risk Associated with a Lack of Flexibility Risk Associated with Joint Investment, Asset Specificity

Ten Macro Factors Leading to International Strategic Success MThe firm sees itself as a MNE led by a TMT that is comfortable on the world stage MDevelop integrated strategies that are costly and difficult to duplicate MAggressively implement these strategies and back it with large investments MUnderstand that technological innovation is a phenomenon that goes beyond the US and Western Europe MOperate as if the world was one market MHave organizational structures designed to handle world problems MHave systems that keep them abreast of political developments MHave TMTs that are international in composition MAllow international outside directors to play an important role MAre well managed—stick close to customers, run a lean organisation, and encourage autonomy and entrepreneurial activity

The International Strategic Questions for Companies in an Emerging Liberalised Market MDeveloping a Strategy for Expansion Outside the Home Market MSolidifying the Home Market MDeveloping an Expansion Strategy MDeveloping a Strategy for Protecting the Home Market MSolidifying the Home Market MDeveloping a Strategy to Integrate into the International MNE Network MFinding "Fit" with Potential Partners

NormalSeriousExtreme Good Satisfactory Poor Fully-Owned Subsidiary Majority Partnership Sales Branch Licensee with Small Participation Pure Licensing Indirect Exports Political & Economic Risk Strategic Fit Strategic Fit & Political Risk of Market Entry Strategies Majority Controlled Minority Interest Joint Venture