1. Strategizing Around the Globe
Part I: Foundations of Global Strategy
Copyright © 2005 South-Western. PowerPoint Presentation by David Ahlstrom, Chinese University of Hong Kong All rights reserved. and Charlie Cook, The University of West Alabama

2. What Global Strategy?
Traditional “global strategy” is treating different countries as one worldwide or “global” market.
World car: Ford Contour (as the Mondeo in Europe)
World drink: Coke Classic
World advertising commercial: Polar bear ads
But that strategy has backfired repeatedly
There is no world car, no world drink, no world MTV
Toyota Camry: Best-selling car in the US, but not even top-5 best-selling car in Japan (Honda Fit is #1 in Japan)
A more balanced view—covering both global and local (non-global) aspects—is necessary (Figure 1.1)
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3. HSBC (One of the world’s largest and most global banks): The World’s Local Bank
Source: Issued by HSBC Holdings, plc
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Figure 1.1

4. A Global Global-Strategy Book
Traditional global strategy books
Only dealing with MNEs from developed economies which practice “one-size-fits-all” “global strategy”
Traditional international business books
Only dealing with foreign entrants (usually MNEs) and ignoring local/domestic firms
Local/domestic firms are not necessarily passive
This is a global global-strategy book
Strategies of firms around the globe
Both international and non-international (domestic)
From both developed and emerging economies
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5. What is Strategy? From military strategy to strategic management
Strategy as plan (as in classic military planning)
SIA 1.2: A 250-year plan at Matsushita
Strategy as action – emergent strategy
Strategy has elements of both plan and action (Figure 1.2)
Strategy as integration – combination of plan and action
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6. The Essence of Strategy
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Figure 1.2

7. Fundamental Issues in Strategy Around the Globe
Why do firms differ?
How do firms behave?
What determines the scope of the firm?
What determines the international success or failure of firms?
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8. Why Do Firms Differ? Western firms (US/UK vs. German/French)
Have different (shorter- versus longer-term) planning horizons.
Japanese firms
Are different from Western firms.
Firms from emerging economies (e.g., China, Korea, Russia)
Are also different.
The challenge is to understand the roots of these differences when trying to compete globally.
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9. How Do Firms Behave? Three Views (Figure 1.3)
Industry-based view
Resource-based view
Institution-based view
Firms’ strategic behaviors are influenced by all three factors.
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10. Three Leading Perspectives on Strategy
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Figure 1.3

11. What Determines the Scope of the Firm?
In the West
In the 1960s and 1970s: Conglomeration
Since the 1980s: Diversification that focused on core competencies
In developing economies in the 1990s
China, India, Indonesia, Peru, South Africa, and South Korea
Conglomeration is still in vogue.
Some changes?
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12. What Determines the International Success or Failure of Firms?
Acquiring and leveraging competitive advantage
The Key: Sustaining such an advantage over time and across countries (regions) through replication and innovation.
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13. How About Global Strategy?
Traditional “global strategy”
Only relevant for MNEs from developed economies
The same as “international” (non-U.S.) strategy
Wal-Mart went to Mexico in 1991: Did it go “global”?
Everything becomes “global”?
Our definition of global strategy:
Strategies of firms around the globe
Both international and non-international (domestic)
Both developed and emerging economies
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14. A Glance at the World Economy
A $30 trillion economy (official GDP)
What will happen in 2020: assuming 4% annual growth for US, EU, and Japan and 9% for China ($ trillion) – see Figure 1.4
2003: US (10), EU (9.5), Japan (4), China (1.3)
2020: US (21), EU (19), Japan (8), China (5)
51 of top 100 economic entities (countries or companies) are MNEs
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15. Estimates of Gross Domestic Products (GDP), 2003–2020
Based on estimates from Economist, 2003, Bergernomics, in The World in 2003 (p. 30), London: The Economist GDP estimates are based on 4 percent annual growth for the US, EU, and Japan, and 9 percent for China. The size of food items is proportional to the size of the economies.
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Figure 1.4

16. The Top 10 Economies (GDP) and Firms (Sales), 2003
USA
Japan
Germany UK
France
China
Italy
Canada
Spain
Mexico
Wal-Mart BP
ExxonMobil
Royal Dutch/Shell
General Motors
Ford Motor
DaimlerChrysler
Toyota Motor
General Electric
Total
Sources: Adapted from (1) World Bank, 2004, World Development Indicators database ( accessed July 25, 2004), and (2) Fortune, 2004, The Fortune Global 500, July 26: F1–F2.
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Table 1.2

17. Changes in the Fortune Global 500, 1990–2003
Sources: Based on data from various issues of Fortune Global 500. Finland and Sweden are included as “others” prior to 1996 and as European Union after 1996.
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Table 1.3

18. The 20 Largest Firms (by Sales) Headquartered in Emerging Economies, 2003
Source: Adapted from Fortune, 2004, The Fortune Global 500, July 26: F1–F10.
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Table 1.4

19. Three Defining Events Anti-globalization protests Terrorist attacks
Since Seattle, 12/1999 (Table 1.5)
B-school students: More in favor of globalization (Table 1.6)
Terrorist attacks
9/11 and the war on terror
Corporate governance crises
Asia: Financial crisis (1997)
US: Enron, WorldCom, Arthur Andersen (2002)
EU: Royal Ahold (2003)
The post-Seattle, post-9/11, post-Enron world
More uncertainties, but also more potential opportunities
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20. Anti-Globalization Protests
Source: Adapted from (1) Business Week, 2001, When demonstrations turn violent, August 6: 8 and (2) Economist, 2003, Cancun’s charming outcome, September 20: 11.
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Table 1.5

21. Views on Globalization: American General Public versus Business Students
Sources: Based on (1) A. Bernstein, 2000, Backlash against globalization, Business Week, April 24: 43; (2) M. W. Peng & H. Shin, 2003, How do future business leaders view globalization? Working paper, Fisher College of Business, The Ohio State University, All differences are statistically significant.
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Table 1.6