Slide of strategic management w10

BMA799 STRATEGIC MANAGEMENT Lecture Ten: Global Strategy Learning objectives • Use the tools of industry analysis to examine the impact of globalisation on industry structure and competition • Analyse the implications of an organisation’s national environment for its competitive advantage • Formulate strategies for exploiting overseas business opportunities, including overseas market entry strategies and overseas production strategies • Formulate global strategies that achieve an optimal balance between global integration and national differentiation Introduction • This lecture examines the strategy implications of the global business environment • The discussion will differentiate between global and international strategy, business, local and international operations and global trade • Global strategy, business, trade and operations will be considered to be primarily focused on the global market, rather than on individual country or regional markets Global strategic management • Global strategic management views the world as a single, segmented, market and applies the organisation’s resources to the opportunities (and risks) it offers • The principal elements of global strategic management are similar to domestic strategic management Global strategic management • Organisational learning refers to retaining information obtained from past projects and events at the organisational level • Born global are organisations that plan and achieve global operations in just a few years • Offshoring operations involve transferring specific operations to another country • Outsourcing is a special type of offshoring The benefits of a global strategy • Companies that compete on a national basis are highly vulnerable, compared to companies that compete on a global basis • A global strategy can provide a greater degree of security for two reasons: • globalisation of customer preferences • scale economies The benefits of a global strategy • Further benefits of globalisation include: • cost benefits — scale and replication • exploiting national resource efficiencies • serving global customers • achieving a global-level knowledge of the industry • increasing the range of competitive options available Analysing a global industry • The impact of globalisation on competition can be analysed using Porter’s five forces of competition framework • The industry in which the global business operates in that country (or region) will then comprise all organisations, anywhere in the globe, that supply that national or regional market Analysing a global industry • The five forces of analysis include: • competition from potential entrants • rivalry among existing organisations • the bargaining power of buyers • the threat substitutes • the bargaining power of suppliers Impact of local conditions: comparative advantage • The term comparative advantage refers to the relative efficiencies of producing different products • Comparative advantage refer to the advantage gained by production of a product or service in one region over another due to local external conditions such as skill levels It does not apply to specific organisational capabilities The structured entry approach • Structured entry refer to a systematic approach to planning and implementing foreign market entry • The following steps should be considered: • assess the products in relation to the markets • set up objectives and goals • choose the entry mode • design the marketing plan Analysing an international market • Analysis of an international market is one of the most important aspects of the structured entry approach • Most organisations find that an international market is rarely as attractive as their assessment indicated • The analysis of a foreign market should incorporate knowledge of the market and a sensitivity analysis to determine the impact of inaccuracies in the analysis Emerging market analysis • An emerging market is a new or developing market • An emerging market is a particularly important type of market to consider when planning entry strategies • Many organisations find it difficult to identify the important features of their strategy for that market because of the lack of accurate and current information available due to the level of change that is occurring as the market emerges Assessing the organisation’s readiness • Assessing the preparedness involves considering how well the organisation can support a particular entry mode on the basis of: • financial preparedness (sufficient financial resources) • organisational readiness (sufficient people resources) • stakeholder support (for example, shareholder confidence) • Being the first organisation of a significant size into a market offers both significant advantages and disadvantages Dunning’s eclectic theory • Dunning’s eclectic theory provides a useful approach for selecting the best market entry mode • It argues that, for a successful entry: • the organisation must possess a competitive advantage that it can use in that market • the best (highest return) use of the organisation’s capabilities is through market entry, rather than exporting • the location selected must provide at least one desirable characteristic that can be combined with these capabilities advantageously Global strategic alliances • Strategic alliances are partnerships between organisations involving sharing of key resources to take advantage of significant opportunities • Strategic alliances are an important part of contemporary global business and are used by many large organisations to establish operations in new countries Maintaining strategic alliances • Strategic alliances can best be maintained by a combination of approaches • These include a regular partnership agreement review, commencing the alliance by achieving a good mutual understanding, and ensuring that there are skilled staff in place at all key levels by allocating the authority and responsibility for the alliance to specific managers International joint-venture partnerships • A joint-venture partnership refers to a partnership in a strategic project where the partners share equity • Joint-venture partnerships are a very important subset of strategic alliances — particularly in countries such as China where much of the investment by foreign companies has been through joint-venture partnerships Organising global operations • Managing business activities that cross national frontiers is complex • When designing a global business, it is important to adopt a structure for the entire business that reflects the global strategy that is to be adopted • The success of global strategies depends critically on the effectiveness with which they are implemented Global strategy orientation • Whereas domestic strategic thinking tends to be driven by an organisation’s mission, values and objectives, global strategy can also be driven by the orientation toward a specific global behaviour that an organisation selects • The three main orientations are a: product/service orientation regional orientation customer orientation Business structures for global organisations • There are three distinct eras to the history of business globalisation • Early twentieth century: era of the European multinational • Post-World War II: era of the American multinational • The 1970s and 1980s: the Japanese challenge Contemporary structures of global organisations • Four commonly identifiable global business structures are: • Multi-domestic • Multinational • Global • Transnational Global leadership • Leadership skills are an essential component of implementing strategy in global organisations • Two possible dimensions to global leadership are: • Organisation as a global leader • Leadership skills driving a global organisation • Review of successful global organisations suggests that the two dimensions are inter-linked • Global leadership behaviour must be driven by the complexity of organisation’s global environment Creating global strategy success • What are the overall success factors for global strategy? • What is the relative importance of the success factors in a particular country? • Are these factors influenced by the industry sector of the organisation – service and manufacturing for example? • What is the role of informal networks and structures in creating successful global strategy? Summary • It is important to acknowledge that global strategy is driven by a large number of factors and influences including: • Global complexity • Competitive context and position • Overseas market analysis • Competitive advantage • Global leadership ... opportunities (and risks) it offers • The principal elements of global strategic management are similar to domestic strategic management Global strategic management • Organisational learning refers to retaining... markets Global strategic management • Global strategic management views the world as a single, segmented, market and applies the organisation’s resources to the opportunities (and risks) it offers •... advantageously Global strategic alliances • Strategic alliances are partnerships between organisations involving sharing of key resources to take advantage of significant opportunities • Strategic alliances