1. Introduction to Global Competitive Strategy
© Professor Daniel F. Spulber

2. Global Competitive Strategy Suggested Course Outline
Introduction
Home country
Supplier and partner countries
Customer and competitor countries
Strategies for Global Value Added: Gains
Strategies for Global Value Added: Gains
Strategies for Global Value Added: Costs of trade
Competitive strategies: Global vs local
Competitive strategies: Modes of entry and FDI

3. Global Competitive Strategy Main Cases
Introduction
LENOVO
BP/ OIL INDUSTRY
P&G JAPAN
RENAULT-NISSAN
LI & FUNG
CEMEX
ZARA
FLEXTRONICS IN INDIA

4. Global Competitive Strategy
Introduction

5. Global Competitive Strategy
Outline of introduction
The global challenge
The global mosaic
The global strategy “Star Analysis”

6. Global Competitive Strategy
The Global Challenge
Globalization changes nature of competition
-- Competitors can be very different!
Innovative entrants, including emerging market firms
Global competitive advantage
Best sources of products, global brands
World-class cost efficiencies
Global pool of innovations
Global mix of transactions

7. Global Competitive Strategy
The Global Challenge
To serve large-scale global market
To address market differences across countries

8. Size of Global Business Current $ (Source: World Bank)
• World GDP: $ 41.3 trillion
(Gross Domestic Product)
US: $ 11.7 trillion
EU (25): $ 12 trillion
Japan $ trillion
Latin America and Caribbean $ trillion
Middle East and Africa $ trillion
India $ trillion
China $ trillion
High growth rate of emerging markets

9. Size of International Business Total exports of goods and services
World Trade $ 11 trillion
Merchandise $9 trillion
Agriculture, fuels and mining, manufactured goods
Services $2 trillion
Transportation, travel, commercial services

10. Growing importance of trade to US economy
Increases in:
Exports:
Capital goods (mainly semiconductors, computer accessories)
Industrial supplies
Consumer goods
Imports:
Industrial supplies and crude oil
Auto industry
Capital goods

11. Size of International Business
$1.5 trillion in international currency
transactions per day!
63,000 multinational corporations
Major source of economic growth and investment for developed and developing countries
Source of global technological innovation
Earnings growth for many companies (Wal-Mart, GE, Carrefour, Nestlé, Unilever, Cemex, Toyota, Samsung)

12. Why was Nokia so successful?
Why did Daimler-Chrysler have problems?
Why was Nokia so successful?

13. Global Competitive Strategy
The Global Mosaic
Vast economic differences across countries
GDP per capita, prices, wages
Underlying geographic differences
– Geography matters
Large “economic distances” between countries
“Sticky borders” preserve these differences
The arbitrage principle – economic differences evidence of sticky borders, many strategic opportunities remain
The world is bumpy!

14. Differences in economic activity

15. Business must bridge critical differences between countries
Language
Culture, customs, and history
Social institutions
Demographic differences: health, education
Public policies
Legal and regulatory systems
Business practices
Currencies
Technology

16. Differences in climate, topography,
natural resources

17. Global Competitive Strategy
The costs of trade: The Four T’s
Transaction costs
Tariff and non-tariff barriers
Transportation costs
Time costs
Borders are “sticky”

18. Business must navigate the World Trade System
Proposed
Caribbean Basin Initiative
NAFTA

19. Business strategy must account for changes in political relationships and trade deals between countries

20. The Arbitrage Principle
Country borders:
Restrict movement of inputs – capital, labor, technology, resources
Limit trade in goods and services
Create persistent differences in technology and information
Preserve economic differences -- prices and wages
Arbitrage reduces economic differences
Innovative transactions find arbitrage opportunities
Country borders provide opportunities and competitive advantage to international business

21. NEXT SESSION:
Analytical framework!
Global competitive advantage
Globalization challenges business strategy in a fundamental way
Trade costs are high resulting in economic differences between countries
The global mosaic offers opportunities for generating gains from trade
The successful global business develops innovative international transactions to gain global competitive advantage