1. Global Strategy: Harnessing New Markets to Extend Advantage
Chapter 8
Global Strategy: Harnessing New Markets to Extend Advantage
by Robert Pitts
& David Lei
Slides prepared by
John P. Orr
Cameron University
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

2. What you will learn…
Slide 1 of 2
Why companies need to develop strategies to expand across national borders
The key environmental factors that promote the need to expand into overseas markets
The two basic strategies used for expanding overseas: global and multidomestic
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3. What you will learn…
Slide 2 of 2
Balancing the benefits and costs of overseas expansion
How companies can continue to grow by becoming global players
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4. Boeing’s Global Strategy
Advanced research and development (R&D)
Manufacturing efficiencies and process improvements
Global marketing
Continuous product improvement and investment
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5. Coca Cola’s Global Strategy
A unifying message
Global distribution and business systems
New products and new variations
Community involvement
Recent initiatives
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6. Global Strategy: Introduction
Globalization
Viewing the world as a single market for the firm;
The process by which the firm expands across different regions and national markets.
Industry-Level View of Globalization
Changes in economic factors, such as economies of scale, experience, and R&D, which make competing on a worldwide basis a necessity.
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7. Ex. 8-1. Factors Promoting the Globalization of Markets
Narrowing of demand characteristics
Escalating costs of R& D
Cost reduction pressures and economies of scale
Government industrial policies
Reduction of factor costs (e.g., labor, capital)
Rise of new distribution channels
Reduction of transportation, communication, & storage costs
Internet access
Reduction of tariffs worldwide
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8. Ex. 8-2. Examples of Growing Homogeneity of Demand Slide 1 of 2
Communications equipment
Cellular phones
Sony Walkmans
Levi’s jeans
Commercial banking
Financial services
Color televisions and VCRs
Semiconductors
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9. Ex. 8-2. Examples of Growing Homogeneity of Demand Slide 2 of 2
Machine tools
Computers
Pharmaceuticals
Construction equipment
Commercial aircraft
Hollywood films
Television shows
Data and computer networks
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10. Ex. 8-3: Examples of R&D Intensive Industries Slide 1 of 2
Semiconductors
Software
Biotechnology
Communications systems
Pharmaceuticals
Commercial aircraft
Electronics
Composite materials
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11. Ex. 8-3: Examples of Growing Homogeneity of Demand Slide 2 of 2
Advanced imaging systems
Medical equipment
Fiber optics
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12. Ex. 8-4. Examples of Rising Economies of Scale/Cost Pressures
Steel
Automobile engines
Color television tubes
Semiconductors
Fiber optics
Office equipment
Telecommunications
Aircraft
Chemicals
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13. Ex. 8-5: Government Initiatives to Promote Industrial Development
Sematech (semiconductors) US
Steel, Computers, Autos, Artificial Intelligence, Advanced Materials, Aerospace
Japan
Semiconductors, Aerospace, Automobiles, Advanced Lasers, Optics EU
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14. Ex. 8-6. Examples of Declining Costs Slide 1 of 2
Transport Costs
Containerization
Intermodal shipping/rail
Air freight
Communication Costs
More global long distance carriers
Better ways to transmit voice, video data
Internet access
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15. Ex. 8-6. Examples of Declining Costs Slide 2 of 2
Storage Costs
Refrigeration
Just-in-time inventory
Reduction of perishability
Supply chain management
Virtual production/design
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16. Ex. 8-7. Global Strategy of ExpansionHQ
Systemwide approach to competing worldwide
Mutually interdependent subsidiaries
Centralized control and reporting of activities
Facilitates cross-subsidization policies across markets
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17. Ex. 8-8: Key Characteristics of a Global Strategy
Standard products
Global economies of scale in key components and activities
Leverage technology across many markets
Global coordination of marketing and sales systemwide
Cross-subsidization policies to respond to competitive moves by other global strategy firms
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18. Ex. 8-9: Multidomestic Strategy of ExpansionHQ
Competitive advantage is built in each separate national or regional market.
Markets and subunits are treated independently from one another.
Decentralized controls of activities, reporting back to headquarters.
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19. Ex. 8-10: Key Characteristics of a Multidomestic Strategy
Customization or frequent adaptation of products for each separate market
Few systemwide 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
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20. Ex. 8-11: Benefits of Global Expansion
Market growth and expansion opportunities
Recovery of R&D and investment costs
Creation of a distinct image
Accelerated learning and transfer of new skills
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21. Ex. 8-12: Costs Associated with Global Expansion Slide 1 of 2
Costs of Strategic Leverage
Sustained investment required
Preserving and extending image
Costs of Flexibility
High interdependence of subsidiaries (and businesses)
Change or development affecting all markets
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22. Ex. 8-12. Costs Associated with Global Expansion Slide 2 of 2
Costs of Cooperation
Compromise
Accountability
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23. Ethics: Global Concerns
Scandals with global reach
Lloyd’s of London embezzlement
French, German stock market fraud
Japanese business, political scandals
Varying approaches to ethics
Individual views strongly shape ethics of U.S. workers
Asian workers seen as “industrial soldiers”
U.S. enacts Foreign Corrupt Practices Act
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