1. Topic 5
The Global Environment: Strategic Considerations for Multinational Firms

2. What is Globalization?
The strategy of approaching worldwide markets with standardized products

3. Some Reasons for Going Global – Proactive Approach
Economies of scale
Power and prestige
Protect home market via offense in competitor’s home
Additional resources
Lowered costs
Taxes / Incentives

4. Some Reasons for Going Global – Reactive Approach
Trade barriers
International competition
Regulations

5. Strategic Orientation of Global Firms
Ethnocentric
Values and priorities of parent organization should guide strategic decision making of all operations
Polycentric
Culture of country in which strategy is implemented dominates decision making
Regiocentric
Parent firm attempts to blend its own predispositions with those of region under consideration
Geocentric
Parent firm adopts global systems approach to decision making, emphasizing global integration

6. Beginning to Globalize: Key Steps
External assessment
Careful examination of critical features of the global environment, particularly to host nation’s status in
Economic progress
Political control
Nationalism
Internal assessment
Identification of resources in … technical and managerial skills, capital, labor, raw materials
Identification of capabilities in … product delivery, financial management systems

7. Factor U.S. Operations Int’l Operations
Obvious … but important … differences in Factors that Affect Strategic Management in the U.S. and Internationally
Factor
U.S. Operations
Int’l Operations
Language
English used almost universally
Use of local language required in many situations
Culture
Relatively homogeneous
Quite diverse, both between countries and within countries
Politics
Stable and relatively unimportant
Often volatile and of decisive importance
Economy
Relatively uniform
Wide variations among countries and among regions within countries

8. Differences (contd.) Labor Skilled labor available
Skilled labor “may” be scarce, requiring training or redesign of production methods
Financing
Well-developed financial markets
Poorly developed markets; capital flows subject to government control
Media research
Data easy to collect
Data difficult and expensive to collect
Advertising
Many media available, few restrictions
Media limited, many restrictions
Money
U.S. dollar used universally
Different currencies; problems created by changing exchange rates

9. Stakeholder Activism
Refers to demands placed on the global firm by the foreign environments in which it operates, principally by foreign governments

10. Multidomestic vs. Global Industries
A multidomestic industry is one in which competition is essentially segmented from country to country
A global industry is one in which competition crosses national borders

11. Factors Increasing Degree to Which an Industry is Multidomestic
Need for customized products to meet tastes or preferences of local customers
Fragmentation of industry, with many competitors in each national market
Lack of economies of scale in functional activities
Distribution channels unique to each country

12. The Global Challenge
Few “pure” cases of either global or multidomestic industries exist
The challenge – global firms must
Decide what activities should be performed where
Determine what degree of coordination should exist among them

13. International Strategy Options
High
Wholly owned
foreign subsidiary
Joint venture
Foreign branch
Licensing, contract manufacturing, franchising
Joint venture
Foreign branch
Product diversity
Licensing, contract manufacturing, franchising
Export
Joint venture
Low
High
Market complexity