1. Ch. 8 Global Strategies and the Multinational Corporation
Allen Hicks
Alex Raney
Christian Grandorf
Anthony Brown
Braden Walker

2. Competitive Advantage
In international industries, competitive advantage depends not just on a firm’s internal resources and capabilities, but also its national environment—in particular, the availability of resources within the countries in where it does business.

3. International Competitive Advantage
The Industry Environment
Key Success Factors
Firm Resources and Capabilities
Financial Resources
Technology
Reputation
Functional Capabilities
General management capabilities

4. International Competitive Advantage
The National Environment
Domestic market resources
Government policies
Exchange rate
Related and supporting industries
National resources and capabilities
Raw materials, communication, transportation, etc.

5. National Influences on Competitiveness
Comparative advantage states that a country has a comparative advantage in those products that make intensive use of those resources available in abundance within that country.
Bangladesh with unskilled labor, US with technological resources.
If exchange rates are well behaved, comparative advantage becomes competitive advantage

6. Porter’s National Diamond Framework
Strategy, Structure, and Rivalry
Competitive performance drives strategies and structures of firms in those industries.
Demand Conditions
Domestic markets provide the primary driver of innovation and quality and improvement.
Related and Supporting Industries
Cluster of industries
Factor Conditions
Resource constraints may encourage the development of substitute capabilities.

7. Consistency between strategy and national conditions
Establishing competitive advantage in global industries requires congruence between business strategy and the pattern of the country’s comparative advantage.
Bose uses US strength in basic research for international competiveness.

8. Limitations of the Diamond Model
Model is very general and fails to consider the attributes of home country’s trading partners
Lacks value and isn't applicable to smaller nations and ignores role of multinational corporations in nation’s success.
They suggest a “double diamond” framework that incorporates both a national and global diamond.

9. International Location of Production
Two considerations:
Where to locate production activities
How to enter a foreign market
Decisions concerning where to produce are being separated from decisions over where to sell.

10. Choosing the Location Four main considerations:
National resource availability: firms should manufacture in countries where resource suppliers are favorable.

11. Choosing the Location
Firm-specific competitive advantages: for firms whose competitive advantage is based on internal resources and capabilities, the best location depends on where those resources and capabilities are situated and how mobile they are.
Tradability: If it’s hard to transport a product and the more it’s subject to trade barriers or government restrictions, the more it will need to be produced in a local market.

12. Choosing the Location
Political Considerations: Government incentives, penalties, and restrictions affect location decisions.

13. Location and the Value Chain
The production of most goods and services comprises a vertical chain of activities.
A key feature of recent internationalization has been the international division of value chains as firms seek to locate to countries whose resource availability and cost best match each stage of the value chain.
Not all decisions are made off cost alone, most Western and Japanese companies look for the potential for overall operational efficiency.

14. Location and the Value Chain

15. How should a firm enter foreign markets?
Firms enter foreign markets in search of profitability
Profitability depends on the attractiveness of a market and whether or not they can establish a competitive advantage.
Comparative advantage depends on means of market entry
Transactions vs. direct investment

16. The Five Key Factors
Is the firm’s competitive advantage based on firm specific or country specific resources?
Is the product tradable and what are the barriers to trade?
Does the firm possess the full range of resources and capabilities for establishing a competitive advantage?
Can the firm directly appropriate the returns to its resources?
What transaction costs are involved?

17. International Alliances and Joint Ventures
A strategic alliance between two firms
Gives each company in the alliance access to each other’s resources
Economizes the international investment

18. Famous Joint Ventures Telefonica Moviles/TIM/T-Mobile/Orange
Fiat/Chrysler
Fuji/Xerox
Renault/Nissan

19. The Benefits of a Global Strategy
Cost benefits of scale and replication
Serving global customers
Exploiting national resources
Learning benefits
Competing strategically

20. The Need for National Differentiation
“Global Customer”
Pankaj Ghemawat – 4 key components
Cultural, Administrative and Political, Geographical, economic distances

21. Reconciling Global Integration with National Differentiation
Achieving ‘global localization’ involves standardizing product features and company activities where scale economies are substantial and differentiating where national preferences are strongest and where achieving them is not over-costly.
Reconciling global efficiency with appealing to customer preferences in each country also means looking at the globalization/national differentiation trade-off for individual products and individual function.

22. Strategy and Organization within the Multinational Corporation
Evolution of multinational strategies and structures
MNC’s are captives of their history: their strategy- structure configurations today reflect choices they made at the time of their international expansion

23. Reconfiguring the MNC: the Transnational Corporation

24. Organizing R&D and New Product Development
Probably the greatest challenges facing the top managers of MNCs are organizing, fostering, and exploiting innovation and new product development.
Assigning national subsidiaries global mandates allows them to take advantage of local resources and developing distinctive capabilities while exploiting globally the results of their initiatives.

25. Questions???