1. International Business Global Corporate Strategy: Porter’s theory of national competitive advantage in industries

2. Why I’m still learning to teach this course  Prof. Hill makes a powerful argument in favor of globalization The text I used to use was wishy-washy  I don’t know if I like globalization as much as Prof. Hill I’m awed and excited by progress in China, India, Vietnam and other places  But globalization seems to have very negative impacts, too

3. I felt we’d learn more from a text with a strong point of view  My goal is to get you to understand globalization and the global economy If you believe in globalization, you’ll understand how to work with it  But I also want to give you tools to challenge globalization to work to make things better if you don’t believe in globalization

5. Global Corporate Strategy  The key issues: What are the big decisions in international business? How do we make them wisely for our firms? Global Corporate Strategy includes from the last half of last week’s session through (most of) the first half of the next session

7. Value Creation  The way to increase profitability is to create more value The amount of value a firm creates is measured by the difference between its costs and the value that consumers perceive in its products  Michael Porter states that there are two basic strategies for creating value Low-cost strategy suggests that a firm has high profits when it creates more value for its customers and does so at a lower cost Differentiation strategy focuses primarily on increasing the attractiveness of a product (getting customers to think it’s different and better than competitors’)

8. But to create value, you must think about who you’ll work with  Porter’s study of national competitive advantage provides the business context for the big decisions

10. Videos can be borrowed …  From the Instructional Resource Center, near the North 6 th St. entrance to campus (next to the old library - Clark Hall)

12. Porter says industries succeed where 4 factors are favorable

13. Factor conditions  Not the factors economists used to care about (Labor, land, capital, etc.)  Specialized factors that people create Labor with specialized skills Unique resources (phone systems built for Strategic Air Command in Omaha, Neb.)  Innovations to cope with a weakness can produce long-term strength Dutch bringing flowers indoors to cope with bad weather

14. Demand conditions (at home)  Demanding customers in the home market lead to competitive industries  If local customers need innovations, you can often sell those innovations in the world market Germans need washing machines with powerful spin cycles due to damp weather  They sell them elsewhere

15. Related and supporting industries  Good local suppliers repeatedly help you innovate

16. Firm strategy, structure, and rivalry  Strategy: Ambitious firms become world leaders  Structure: Industries succeed where local norms are in tune with industry needs Italian shoe makers benefit from preference for family firms in Italy German appliance firms gain from preference for big, disciplined organizations

17.  Rivalry: To succeed internationally, you need strong local competition When local competitors do better than you, “you get mad”  Pressure on firms in the local environment contributes to success

18. The 4 elements in the diamond work together as a system Each element can contribute to making the other elements strong