1. ©2000, Michael A. Mische MOR 559 – Strategic Renewal University of Southern California Globalization Competing in a Transnational World Lecture 4 Competing in a Transnational World Lecture 4

2. Lecture 4: DESCRIPTION & OVERVIEW This sessions continues our discussion of the drivers of strategic change with a focus on globalization and transnationalism. Globalization has permanently altered the operating environment and strategy formulation efforts of virtually every major organization; it has radically changed the competitive landscape and redefined the traditional sources of competing. Consequently, understanding globalizations and its impacts on markets and businesses is critical to becoming and remaining a global leader and a high-performance organization. The objective of this lecture is to explore the issues and strategic implications of globalization, and to address key questions such as: What is the appropriate definition of globalization? What are the factors driving and influencing globalization? What are the impacts of globalization on competing? How does globalization affect strategy formulation? What is the relationship between globalization and the other drivers of change – IT and multiculturalism? DESCRIPTION & OVERVIEW This sessions continues our discussion of the drivers of strategic change with a focus on globalization and transnationalism. Globalization has permanently altered the operating environment and strategy formulation efforts of virtually every major organization; it has radically changed the competitive landscape and redefined the traditional sources of competing. Consequently, understanding globalizations and its impacts on markets and businesses is critical to becoming and remaining a global leader and a high-performance organization. The objective of this lecture is to explore the issues and strategic implications of globalization, and to address key questions such as: What is the appropriate definition of globalization? What are the factors driving and influencing globalization? What are the impacts of globalization on competing? How does globalization affect strategy formulation? What is the relationship between globalization and the other drivers of change – IT and multiculturalism? KEY LEARNING OBJECTIVES Globalization is one of the dominant and most determining forces in today’s markets and business environments. As such, this trend has some key implications as to high performance and and strategic renewal. For future business leaders, it is critical to develop a deep knowledge and understanding of the issues surrounding globalization and the ways it impacts business operations and strategies. Consequently, the main learning objectives are to: Understand the distinctions between the concepts of globalization and transnationalism. Understand the forces driving globalizations. Understand the impact of globalization on traditional market and industry barriers and how it changes the rules of competing. Recognize the marketing and investment opportunities as well as challenges created by globalization. Gain an understanding of the new forms of business and business models driven by globalization and transnationalism. Understand the effect of globalization on leadership styles and the required qualities of new leaders. Understand the interaction between globalization, multiculturalism and IT as the combined drivers of change. In the course of the lecture, we will also address the historical development of globalization and present some current statistical information regarding this trend. KEY LEARNING OBJECTIVES Globalization is one of the dominant and most determining forces in today’s markets and business environments. As such, this trend has some key implications as to high performance and and strategic renewal. For future business leaders, it is critical to develop a deep knowledge and understanding of the issues surrounding globalization and the ways it impacts business operations and strategies. Consequently, the main learning objectives are to: Understand the distinctions between the concepts of globalization and transnationalism. Understand the forces driving globalizations. Understand the impact of globalization on traditional market and industry barriers and how it changes the rules of competing. Recognize the marketing and investment opportunities as well as challenges created by globalization. Gain an understanding of the new forms of business and business models driven by globalization and transnationalism. Understand the effect of globalization on leadership styles and the required qualities of new leaders. Understand the interaction between globalization, multiculturalism and IT as the combined drivers of change. In the course of the lecture, we will also address the historical development of globalization and present some current statistical information regarding this trend.

3. Lecture 4: CLASS SCHEDULE & AGENDA I.6:00 – 6:15Course Related Q&A Student Concerns General Discussions II.6:15 – 6:30Review of previous material Preview of current week’s material III.6:30 – 7:30Lecture IV.7:30 – 7:45Break V.7:45 – 9:00Lecture & Material/Topic Discussion VI.8:45 – 9:30Case Examples & Discussions VII.9:30 – 10:00Professor Available for Q&A, Discussion, etc. CLASS SCHEDULE & AGENDA I.6:00 – 6:15Course Related Q&A Student Concerns General Discussions II.6:15 – 6:30Review of previous material Preview of current week’s material III.6:30 – 7:30Lecture IV.7:30 – 7:45Break V.7:45 – 9:00Lecture & Material/Topic Discussion VI.8:45 – 9:30Case Examples & Discussions VII.9:30 – 10:00Professor Available for Q&A, Discussion, etc. READINGS Mische: Strategic Renewal, Chapter 3 Branch: “The Brand Builders Five Leaders Who Altered Business by Turning Great Products into Global Icons,” Fortune, May 10, 1999 Jacob: “Nokia Fumbles, but Don’t Count It Out,” Fortune, February 19, 1996 Young: “Wireless Wonderland,” Forbes, March 25, 1999 Guyon: “Next Up for Cell Phones: Weaving A Wireless Web,” Fortune, September 25, 1999 Fox: “Nokia’s Secret Code,” Fortune, May 1, 2000 READINGS Mische: Strategic Renewal, Chapter 3 Branch: “The Brand Builders Five Leaders Who Altered Business by Turning Great Products into Global Icons,” Fortune, May 10, 1999 Jacob: “Nokia Fumbles, but Don’t Count It Out,” Fortune, February 19, 1996 Young: “Wireless Wonderland,” Forbes, March 25, 1999 Guyon: “Next Up for Cell Phones: Weaving A Wireless Web,” Fortune, September 25, 1999 Fox: “Nokia’s Secret Code,” Fortune, May 1, 2000 CASES Nokia (article-built case) CASES Nokia (article-built case)

4. Lecture 4: READINGS/CONCEPT DISCUSSION & QUESTIONS 1.What are the distinguishing elements and qualities of a global company? How do these compare to transnational organizations and companies with international operations? 2.What are the key factors driving globalization and how do they affect the competitive dynamics and market structures? What new critical success factors emerge as a result of globalization? 3.Discuss the relationship between globalization and the concept of “marketspace” introduced in our previous discussions. Why is this relationship strategically important? 4.Consider the implications of globalization on: Organizational transformation and strategic renewal Organizational structures and business forms and models Leadership styles and necessary leadership qualities Strategy formulation and implementation 5.Discuss the concept of “synergies of purpose” and why it is central to understanding of globalization and developing effective global strategies? READINGS/CONCEPT DISCUSSION & QUESTIONS 1.What are the distinguishing elements and qualities of a global company? How do these compare to transnational organizations and companies with international operations? 2.What are the key factors driving globalization and how do they affect the competitive dynamics and market structures? What new critical success factors emerge as a result of globalization? 3.Discuss the relationship between globalization and the concept of “marketspace” introduced in our previous discussions. Why is this relationship strategically important? 4.Consider the implications of globalization on: Organizational transformation and strategic renewal Organizational structures and business forms and models Leadership styles and necessary leadership qualities Strategy formulation and implementation 5.Discuss the concept of “synergies of purpose” and why it is central to understanding of globalization and developing effective global strategies? CASE DISCUSSION & QUESTIONS Not specified Interactive class discussion CASE DISCUSSION & QUESTIONS Not specified Interactive class discussion

5. Lecture 4: LECTURE SUMMARY Globalization has a profound effect on the development of today’s marketspace, competitive dynamics and organizational strategies. High-performance companies manage the challenges and use the opportunities of globalization to their advantage; they are extremely flexible, develop extensive cultural sensitivities, knowledge of different political and social systems, competency and fluency in global business ethics and protocols as well as knowledge of local employee motivations and reward systems. In developing their global strategies they recognize that: 1.Globalization has permanently changed the competitive dynamics. 2.Globalization neutralizes many of the traditional sources and theories of creating competitive advantage. 3.Information technology (IT) is a significant enabler of globalization. 4.Strategic formulation for globalization requires different types of competencies and leadership qualities. 5.Global companies establish flexibility as a core strategy. LECTURE SUMMARY Globalization has a profound effect on the development of today’s marketspace, competitive dynamics and organizational strategies. High-performance companies manage the challenges and use the opportunities of globalization to their advantage; they are extremely flexible, develop extensive cultural sensitivities, knowledge of different political and social systems, competency and fluency in global business ethics and protocols as well as knowledge of local employee motivations and reward systems. In developing their global strategies they recognize that: 1.Globalization has permanently changed the competitive dynamics. 2.Globalization neutralizes many of the traditional sources and theories of creating competitive advantage. 3.Information technology (IT) is a significant enabler of globalization. 4.Strategic formulation for globalization requires different types of competencies and leadership qualities. 5.Global companies establish flexibility as a core strategy. CLASS & INDIVIDUAL ASSIGNMENTS In-Class Case Discussions CLASS & INDIVIDUAL ASSIGNMENTS In-Class Case Discussions SUPPLEMENTAL MATERIAL N/A SUPPLEMENTAL MATERIAL N/A

6. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische “It was once sacrosanct to talk about our cars being ‘Made in Germany.’ We have to change that to ‘Made by Mercedes,’ never mind where they are assembled.” Juergen Schremmp, CEO, DaimlerChrysler Corporation

7. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Globalization: An Ongoing Evolution…  A number of factors contribute to the evolution of globalization and transnationalism: Global Societal Changes Domestic Economic Dynamics Worldwide Political Shifts Global Economic Changes Advances in Technology New marketspace dynamics & imperatives New organizational forms & structures Shift to nontraditional, more externally focused business formats Increasingly international forms of business New competitive strategies

8. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Two Macro-Trends Become Critical…  Two major trends have combine as the essential drivers of globalization: Increasingly Interconnected and Interdependent Economies Megasized Organizations and Growing Rate of National and International M&As SOME ORGANIZATIONAL IMPLICATIONS: Leadership Resource management Enterprise-wide operations Organizations knowledge management and HR/talent development SOME ORGANIZATIONAL IMPLICATIONS: Leadership Resource management Enterprise-wide operations Organizations knowledge management and HR/talent development

9. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Understanding Globalization… Issues to Address 1.What is an appropriate definition for globalization? 2.What are the factors driving globalization? 3.What is the impact of globalization on strategy?

10. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische GLOBALIZATION: ESTABLISHING THE CONTEXT

11. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Globalization…Common Misconceptions 1.The following characteristics do not necessarily make a company global: – Plants, customers, employees and other assets in foreign countries – Revenue sources from abroad 2.Even if the majority of trades and revenues comes from sources outside the border, it does not mean that a company is a global leader.

12. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische The Five Drivers of Global Growth… 1.The democratization of politically and economically repressed countries and societies, increasing the mobility of employees. 2.The proliferation and availability of information technology, neutralizing the traditional sources of competitive advantage. 3.The interconnectivity of economies and the emergence of borderless companies and markets, changing the basic equation of market and economic equilibrium. 4.Increased consumer knowledge and choices, forcing companies to employ innovative practices and operations. 5.Mega-mergers and alliances, creating new forms of organizations that have deep competencies, extensive financial resources and the ability to redefine the rules of competing.

13. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Defining Globalization… Some Vague Thoughts “…having customers and operations all over the world, reducing our costs and streamlining our supply chain.” CEO of Fortune 500 Co. “…having customers and operations all over the world, reducing our costs and streamlining our supply chain.” CEO of Fortune 500 Co. “…an extraordinary capability to unify a global workforce around a single purposeful vision,…thinking globally.” Andersen Consulting “…an extraordinary capability to unify a global workforce around a single purposeful vision,…thinking globally.” Andersen Consulting “… losing jobs to foreigners.” An Employee “… losing jobs to foreigners.” An Employee “… Globalization is a hollow word. There is no generally accepted understanding of what it means.” J. Monardo, Chairman, Deloitte Touche Tomatsu “… Globalization is a hollow word. There is no generally accepted understanding of what it means.” J. Monardo, Chairman, Deloitte Touche Tomatsu

14. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Defining Globalization, cont’d… Traditional Thinking:  Differences and interactions between markets  Relationship between international subsidiaries the parent organization  Importance of product branding  Role of national identity or affiliation Modern Thinking:  Services  Intellectual property rights  Knowledge transfer  Multiculturalism and diversity  Uniformity of enterprise identity Notion/Emergence of TRANSNATIONALISM

15. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Defining Globalization… “The process of viewing and managing resources, products, customers, competencies and markets on a geographically indiscriminate and culturally inclusive basis, in a manner which best leverages and integrates the organization’s capabilities, optimizes its world-wide identity and de-emphasizes geographical uniqueness and national identity or origin.” Mische The Basic Principle: Being geographically indiscriminate. The Basic Principle: Being geographically indiscriminate.

16. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Levitt’s Global Model… Globalization is driven by: 1.Convergence of consumer sentiment 2.Massive and rapid proliferation of technologies and unprecedented access to knowledge 3.Global brand perceptions 4.Economies of scale afforded by standardization which reduces cost and increases return on investments  Products and services become increasingly standardized.  Individual product brand recognition begins to converge with the enterprise image.  Products and services become increasingly standardized.  Individual product brand recognition begins to converge with the enterprise image.

17. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Equidistant Thinking of Kenichi Ohmae… This philosophy requires:  That organizations view their customers, resources and markets from a holistic and equidistant perspective  High level of personal objectivity, awareness, sensitivity and unbiased behavior  Ability to scan the global environment, correctly interpret and prioritize issues and make the decisions which best optimize and leverage the entire resources of the organization on a global basis

18. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Global vs. Transnational Organizations… Global Companies  Retain a distinct country of origin identity  Stress geographical location, particular market or customer base Transnational Companies  Organizational forms and strategies have no particular country connotation or nationalistic centering  Leaders’ thinking and organizational focus are centered on worldwide brand name and image  Emphasis placed on uniform org. identity and entity recognition

19. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Six Key Attributes of Globalization… 1.Competing on a geographically indiscriminate basis 2.Utilizing cultural inclusiveness for strategic advantage 3.Providing for the standardization of product and process using “cross-platform” designs 4.Adaptability of product and process to a wide variety of uses based on common platform designs, highly configurable designs, and standardized assessment measurements 5.Adopting a consistent view of the market in its totality with the ability to “move” and reallocate resources and assets in a manner that optimizes strategic value 6.Acknowledging the realization that an organization can exist in multiple states of “globalization” and standardization

20. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische … And Defining Transnationalism… “The process of viewing and managing resources, products, customers, competencies and markets on a geographically indiscriminate and culturally inclusive basis, in a manner which best leverages and integrates the organization’s capabilities, while optimizing worldwide identity and de-emphasizing geographical uniqueness and country identity and/or origin.” Mische The Basic Principle: Being culturally inclusive. The Basic Principle: Being culturally inclusive.

21. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Evolution and Phases of Globalization… 1.Informal trading:  Trading and bartering  Driven by geographical characteristics  Determined by naturals resources  Driven by individual consumer needs 2.Formal agreement  Created by international political agreements  Formal trade agreements and contracts  Subject to legal interruptions and the discontinuities attributed to economic cycles, political events, political and societal structures, etc.  Dominant for the last 100 years 3.Interconnectivity  Based on interconnectivity and synergies of purpose  Driven by economic and strategic needs rather than governmental/political incentives  Rapidly evolving

22. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische  Effective global strategies create synergies of purpose through the integration of:  Synergy of purpose is best attained by: 1. Focusing on long-term business and social benefits 2. Integrating social responsibility with business strategies, policies and governance. 3. Implementing financial, cultural, educational and social commitments in the communities affected by their business. 4. Working to develop effective levels of social affiliation between the organization and the local communities Synergies of Purpose… Central Theme of Globalization STRATEGIES CONSISTENT PURPOSES VISION

23. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische …and the Five Challenges of Global Enterprises… Developing sensitivity to changes in political, social and economic balance of power, and the ability to distinguish between ascending and descending economies. Leverage technology investments to more effectively reach existing and emerging constituencies to communicate, transfer knowledge, share information and leverage resources at any time and any place – extend the enterprise. Driven by developments such as WTO, EMU, etc.; companies must now compete against, and with, global alternatives in mind. Globalization and more liberal trade agreements open an arena for new competitors; Any company that has a global competitor working in a local or domestic market must consider itself a global company. An effective use of business alliances and partnership will be critical to an organization’s ability to compete on a global scale and to become a global leader. Democratization: IT: Interconnectivity: Increased Competition: Mega-mergers & Intl. Alliances:

24. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Mergers & Alliances… Keys to Global Strategies DRIVERS OF GLOBAL M&As  Need to create synergies of purpose  Need to capture new markets  Costs pressures and demand for greater economies of scale  Need to acquire new intellectual capital and knowledge  Availability of common equity shares of target companies on publicly traded stock exchanges  Availability of public information on organizational performance  Relatively open governance style of US boards of directors DRIVERS OF GLOBAL M&As  Need to create synergies of purpose  Need to capture new markets  Costs pressures and demand for greater economies of scale  Need to acquire new intellectual capital and knowledge  Availability of common equity shares of target companies on publicly traded stock exchanges  Availability of public information on organizational performance  Relatively open governance style of US boards of directors STRATEGIC BENEFITS  Expanded core competencies  Sharing of structural costs  Risk mitigation  Access to new markets  Access to new knowledge  Creation of new markets and opportunities  Circumventing certain barriers to entry  Creation of synergies of purpose and EOS  Neutralizing competitor’s strategic and operational advantages  Accelerating change and setting new competitive rules STRATEGIC BENEFITS  Expanded core competencies  Sharing of structural costs  Risk mitigation  Access to new markets  Access to new knowledge  Creation of new markets and opportunities  Circumventing certain barriers to entry  Creation of synergies of purpose and EOS  Neutralizing competitor’s strategic and operational advantages  Accelerating change and setting new competitive rules

25. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische GLOBAL STRATEGIES FOR HIGH PERFORMANCE

26. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Three Key Attributes of Global High Performers 1.Global Management Perspective 2.Global Leadership 3.Uniform Global Brand Identity

27. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Comparing International, Global and Transnational Organizations…

28. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Global Management Perspective In contrast to domestic or international organizations, global high- performance leaders: – Manage resources as a worldwide single unit – Consider their capacities as a single worldwide resource – View their markets as a complete, single entity – Emphasize entity level branding – Create operational leverage – Integrate their organizations along common process, organizational, behavioral and measurement lines Global high-performance companies have the ability to view and manage themselves as single, integrated units.

29. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Global Leadership… High Market Fluidity Integrated Global Economies Growing Competitive Uncertainty New Levels of: Operational Excellence Organizational Agility Knowledge Transfer NEW WAYS OF STRATEGIC THINKING

30. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Global Leadership… Globalization drives new types of:  Personal characteristics and behaviors  Strategies  Organizational management practices Global high-performance leaders possess:  Unique technical and skills  Different professional experiences  Various life experiences  Diverse backgrounds, personalities and cultures  Different knowledge Heterogeneous/multicultural leaderships and teams will develop more innovative and exciting solutions… High-performer must establish and lead diverse and multicultural working environments.

31. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Uniform Global Brand Identity…  High-performance organizations form and implement strategies that rationalize their images, messages, operations, and brands on both a worldwide and enterprise-wide basis.  High-performers see the world essentially as one market, adjusted, as necessary, for individual nuances and emerging opportunities.  Global high performers understand and emphasize the importance of enterprise-wide identity on a global basis without regard to any nationalistic identity and country… the strength of the brand is found at the enterprise level.

32. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Impact of Globalization on Leaders and Brand Management… Globalization Globalization drives new leadership traits and brand management concepts  Global perspective and awareness  Organizational and cultural integration  Cultural immersion  Logical consolidation and physical distribution of resources  Organize around core competencies and shared services  Global perspective and awareness  Organizational and cultural integration  Cultural immersion  Logical consolidation and physical distribution of resources  Organize around core competencies and shared services Leadership Qualities  Global leverage of brand identity at the enterprise level  Single image and perception of enterprise  Common platform, tailorable to unique markets  Brand is the most important asset  Global leverage of brand identity at the enterprise level  Single image and perception of enterprise  Common platform, tailorable to unique markets  Brand is the most important asset Brands  View and manage resources on a geographically indiscriminate basis  Deemphasize national origin; emphasize brand identity  Global platform, local adaptation  View and manage resources on a geographically indiscriminate basis  Deemphasize national origin; emphasize brand identity  Global platform, local adaptation

33. Globalization & Transnationalism MOR 559 – Strategic Renewal University of Southern California ©2000, Michael A. Mische Strategic Implications of Globalization… 1.Defining completely new rules of competing:  Negates traditional management and strategy formulation practices. 2.Creating increasingly competitive and intensive environments. 3.Creating significant investment and marketing opportunities. 4.Driving new forms of business and global scales through mega- mergers and acquisitions on an unprecedented scale:  Increases global alliances and partnerships 5.Destroying the physical and geographic boundaries of companies, industries and markets. 6.Demanding new types of leaders and leadership styles. 7.Defining new ethics and morals for competing and leading.