Chapter Strategic Management in the Multinational Company: Content and Formulation © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Learning Objectives •• •• •• •• •• Define Define differentiation differentiation and and low low cost cost Understand Understand how how low-cost low-cost and and differentiation differentiation strategists strategists make make money money Recall Recall multinational multinational examples examples ofof use use ofof generic generic strategies strategies Understand Understand competitive competitive advantage advantage and and value value chain chain Understand Understand offensive offensive and and defensive defensive strategies strategies © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Learning Objectives •• •• Understand Understand basics basics ofof multinational multinational diversification diversification Understand Understand how how traditional traditional strategy strategy formulation formulation techniques techniques apply apply toto the the multinational multinational company company •• Realize Realize both both the the convergence convergence and and divergence divergence inin strategies strategies © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Basic Strategy for the Multinational Company •• Strategy: Strategy: the the central, central, comprehensive, comprehensive, integrated integrated and and externally externally oriented oriented set set ofof choices choices ofof how how aa company company will will achieve achieve its its objectives objectives © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Basic Strategy for the Multinational Company •• Important Importantstrategic strategicareas areas Arenas: Arenas:aacompany companyneeds needstotobe beable abletotodecide decidewhich which businesses businessesititwants wantstotobe beinin Vehicles: Vehicles:aaproperly properlystated statedstrategy strategyalso alsoneeds needstotoinclude include the thevehicles vehiclesaacompany companywill willuse usetotocreate createaapresence presenceinin specific specificmarkets marketsor orproducts products Differentiators/Economic Differentiators/EconomicLogic: Logic:aacompany companyalso alsoneeds needstoto decide decidewhat whatways waysititwill willuse usetotowin winover overcustomers customers Sequencing: Sequencing:aacompany companyalso alsoneeds needstotodecide decideininwhat what sequence sequenceand andatatwhat whatpace pacemajor majordecisions decisionswill willbe bemade made © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Basic Strategy for the Multinational Company •• Multinational Multinational companies companies use use many many ofof the the same same strategies strategies as as domestic domestic companies companies © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Competitive Advantage and Multinational Applications of Generic Strategies •• Generic Generic strategies: strategies: basic basic ways ways toto achieve achieve and and sustain sustain competitive competitive advantage advantage •• Competitive Competitive advantage: advantage: when when aa company company can can outmatch outmatch its its rivals rivals inin attracting attracting and and maintaining maintaining its its targeted targeted customers customers © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Competitive Advantage and Multinational Applications of Generic Strategies (cont.) •• Differentiation Differentiation strategy: strategy: providing providing superior superior value value toto customers customers •• Ex.: Ex.: BMW BMW competing competing inin the the world world market market by by providing providing high-quality high-quality and and performance performance sports sports cars cars •• Low-cost Low-cost strategy: strategy: producing producing atat aa lower lower cost cost than than competitors competitors •• Ex.: Ex.: Korean Korean semiconductor semiconductor firms firms © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part How Do Low-Cost and Differentiation Firms Make Money? •• Differentiation Differentiation •• Customers Customers often often pay pay aa higher higher price price for for extra extra value value •• Low-cost Low-cost •• Additional Additional profits profits come come from from cost cost savings savings © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Exhibit 5.1: Costs, Prices, and Profits for Differentiation and Low-Cost Strategies © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Competitor Analysis •• •• Profiles Profiles ofof competitor’s competitor’s strategies strategies and and objectives objectives Four Four steps steps 1.1 Identify Identify strategic strategic intent intent ofof competitors competitors 2.2 Identify Identify current current and and anticipated anticipated generic generic strategies strategies 3.3 Identify Identify current current and and anticipated anticipated offensive offensive and and defensive defensive competitive competitive strategies strategies 4.4 Assess Assess current current positions positions ofof competitors competitors © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Competitor Analysis (cont.) 1.1.Strategic Strategic intent intent Broad Broad objectives objectives ofof competitors competitors 2.2.Current Current and and anticipated anticipated generic generic strategies strategies Helps Helps determine determine key key KSF KSF 3.3.Current Current and and anticipated anticipated offensive offensive and and defensive defensive competitive competitive strategies strategies 4.4.Current Current positions positions © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Exhibit 5.7: Hypothetical Competitive Profiles of Four Companies in Different Countries © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Exhibit 5.7: Hypothetical Competitive Profiles of Four Companies in Different Countries © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Company-Situation Analysis: SWOT •• •• •• •• Strengths: Strengths: distinctive distinctive capability, capability, resource resource or or skill skill Weaknesses: Weaknesses: competitive competitive disadvantage disadvantage compared compared toto competitors competitors Opportunities: Opportunities: favorable favorable conditions conditions inin the the environment environment Threats: Threats: unfavorable unfavorable conditions conditions inin the the environment environment © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part SWOT Analysis •• •• More More complex complex than than for for domestic domestic firms firms Multinationals Multinationals face face more more complex complex general general and and operating operating environments environments •• Environments Environments vary vary by by country country © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Corporate Strategy Selection •• •• •• •• Diversified Diversified corporation corporation has has aa portfolio portfolio ofof businesses businesses Major Major issue issue isis which which businesses businesses toto invest invest inin and and which which businesses businesses toto divest divest The The basic basic tool: tool: matrix matrix analyses analyses The The most most popular popular isis the the growth-share growth-share matrix matrix ofof the the Boston Boston Consulting Consulting Group Group (BCG) (BCG) © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part BCG Share Matrix •• Division Division into into four four categories categories based based on on market market share share and and relative relative market market share share •• Stars: Stars: the the most most successful successful firm firm •• Dogs: Dogs: businesses businesses with with low low market market shares shares inin lowlowgrowth growth industries industries •• Cash Cash cows: cows: businesses businesses inin slow-growth slow-growth industries industries where where company company has has strong strong market-share market-share position position •• Problem Problem children: children: businesses businesses inin high-growth high-growth industries industries where where company company has has aa poor poor market market share share © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Exhibit 5.8: The BCG Growth Share Matrix © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Matrices •• All All matrices matrices help help answer answer basic basic strategy strategy formulation formulation question question such such as as •• Are Are businesses businesses inin attractive attractive industries? industries? •• Are Are most most businesses businesses growing? growing? •• Are Are there there sufficient sufficient cash cash cows cows toto finance finance other other businesses? businesses? •• IsIs business business portfolio portfolio well well positioned positioned for for the the future? future? •• IsIs the the some some strategic strategic synergies synergies among among businesses? businesses? © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Organizations Alike: Globalization and Convergence •• Convergence: Convergence: increasing increasing similarity similarity ofof management management practices practices •• Convergence Convergence isis most most apparent apparent with with transnational transnational firms firms •• Multinational Multinational firms firms competing competing inin the the same same industry industry tend tend toto have have similar similar structures structures and and strategies strategies regardless regardless ofof the the location location ofof the the company’s company’s headquarters headquarters © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Organizations Alike: Globalization and convergence •• How How Globalization Globalization pushes pushes organizations organizations toto be be more more similar similar Global Global customers customers and and products products Growing Growing levels levels ofof industrialization industrialization and and economic economic development development Global Global competition competition and and global global trade trade Gross-border Gross-border mergers, mergers, acquisitions, acquisitions, and and alliances alliances Cross-national Cross-national mobility mobility ofof managers managers Internationalization Internationalization ofof business business education education © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Organizations Alike: Globalization and convergence •• National Nationaldifferences differencesstill stillaffect affectthe theway waymany manyfirms firmscompete competevia via their theirchoices choicesofofstrategies strategies •• Three Threeimportant importantreasons reasonstotounderstand understandthe thenational nationaldifferences differences •• Managers Managersininsuccessful successfulmultinational multinationalfirms firmsmust mustunderstand understand and andanticipate anticipatethe thestrategies strategiesofofrivals rivalsfrom fromother othercountries countries •• Managers Managersininsuccessful successfulmultinational multinationalfirms firmsmust mustunderstand understand the thestrategies strategiesofofpotential potentialbusiness businesspartners partners •• Strategies Strategiesdeveloped developedininone onenational nationalcontext contextmight mightbe be copied copiedand andmodified modifiedtotofitfitanother anothernational nationalcontext context © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part The National Context and Organizational Strategy: Overview and Observations •• The The national national context context affects affects organizational organizational design design and and strategy strategy formulation formulation and and content content through through the the following following processes processes The The social social institutions institutions and and national national and and business business cultures cultures encourage encourage or or discourage discourage certain certain forms forms ofof businesses businesses and and strategies strategies inin each each nation nation Social Social institutions institutions and and national national culture culture serve serve as as barriers barriers toto the the easy easy transfer transfer ofof competitive competitive advantages advantages among among countries countries © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part The National Context and Organizational Strategy: Overview and Observations Each Each nation nation must must rely rely on on its its available available factor factor conditions conditions for for developing developing industries industries and and the the firms firms within within industries industries Social Social institutions institutions and and culture culture determine determine which which resources resources are are used, used, how how they they are are used, used, and and which which resources resources are are developed developed © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part ... Strategy formulation: formulation: process process by by which which managers managers select select the the strategies strategies toto be be used used by by their their company company •• Popular Popular... and the Value Chain •• AAfirm firm can can gain gain competitive competitive advantage advantage by by finding finding differentiation differentiation or or low low costs costs inin its its activities... Support Support activities: activities: systems systems for for human human resources resources management, management, organizational organizational design design and and control, control, and and