国际商务 查尔斯希尔IM_Chapter_12

The Strategy of International Business12

?With this chapter we switch our emphasis from the environment

of business to the strategies of

firms. Students should be able to more directly understand how

firms handle the complex

international environment

previously described.

?Suggest the reasons why firms may decide to enter

international business, and

identify the benefits from

international strategies

?Outline the basic strategies

undertaken by MNEs, and

specifically focus on how they

relate to the needs for local

responsiveness and cost

minimization In this chapter the focus shifts from the environment to the firm itself and, in particular, to the actions managers can take to compete more effectively as an international business. This chapter looks at how firms can increase their profitability by expanding their operations in foreign markets, the different strategies that firms pursue when competing internationally, and the various factors that affect a firm’s choice of strategy.

Subsequent chapters build on the framework established here to discuss a variety of topics including the design of organization structures and control systems for international businesses, strategies for entering foreign markets, the use and misuse of strategic alliances, strategies for exporting, and the various manufacturing, marketing, R&D, human resource, accounting, and financial strategies that international businesses pursue.

OUTLINE OF CHAPTER 12: THE STRATEGY OF INTERNATIONAL BUSINESS

Opening Case: Wal-Mart’s Global Expansion

Introduction

Strategy and the Firm

Value Creation

Strategic Positioning

Operations: The Firm as a Value Chain

Global Expansion, Profitability and Growth

Expanding the Market: Leveraging Products and Competencies

Location Economies

Experience Effects

Leveraging Subsidiary Skills

Summary

Cost Pressures and Pressures for Local Responsiveness.

Pressures for Cost Reductions

Pressures for Local Responsiveness

Choosing a Strategy

Global Standardization Strategy

Localization Strategy

Transnational Strategy

International Strategy

The Evolution of Strategy

Chapter Summary

Critical Thinking and Discussion Questions

Closing Case: The Evolution of Strategy at Procter & Gamble

Appendix: Profitability, Growth and Value

TEACHING SUGGESTIONS

A good way to begin the discussion of international strategy is to ask class members to discuss a recent public event that had a global strategy. Possible topics are the tsunami relief efforts, the Bob Geldhof and Bono efforts to create public pressure to forgive debt in Africa, Aids and cancer cure research efforts such as the one Armstrong’s yellow wristband supports. What strategy do you think each of these efforts had for going international or global? Was it successful?

TRANSITION

The Opening Case on Wal-Mart shows that even a giant can stumble in executing a strategy in an international setting. A good place to begin might be with a discussion of the errors Wal-Mart made going into Mexico, and how quickly they learned from these experiences. Note that the Wal-Mart system learned from the errors, not simply individuals.

LECTURE OUTLINE FOR CHAPTER

This teaching outline follows the PowerPoint presentation provided along with this

in structor’s manual. The PPT slides include extensive notes that are printable under view—notes page. What follows is a summary.

Slide 12-3, 12-4 Wal-Mart’s Global Expansion

Wal-Mart entered global markets and learned quickly about global operations.

Slides 12-5, 12-6 Strategy and the Firm

A firm’s strategy can be defined as the actions that managers take to attain the goals of the firm.

Slides 12-7, 12-8 Value Creation

If consumers perceive the value of a good to be much higher than the actual cost of producing that good, profit margins will be higher. Porter emphasizes two basic strategies to create value and attain competitive advantage: low cost and differentiation strategy. Slide 12-9 Strategic Positioning

Not all positions on the efficiency frontier are viable. As shown on figure 12.2, in the international hotel industry, there might not be enough demand to support a chain that emphasizes very low cost and strips all of the value out of its product offering. This is because international travelers are relatively affluent and expect a degree of comfort (value) when they travel away from home. Thus, a firm must also chose a strategic position that is viable.

Slide 12-10 Strategic Choice in the International Hotel Industry

Slide 12-11 The Value Chain

Slide 12-12 Global Expansion, Profitability, and Profit Growth

Slide 12-13 The Value Chain

Slide 12-14 Expanding the Market: Leveraging Product and Competencies

Slide 12-15 Location Economies

A product might be designed in France, manufactured in Mexico and marketed using skills of American managers.

Slide 12-16 Experience Effects

Experience effects are systematic reductions in production costs over the life of the product. The speed with which a firm moves down the Experience Curve will determine how much advantage it has over its competitors

Slide 12-17 Leveraging Subsidiary Skills

A global corporation can find vital skills developed in one foreign subsidiary and leverage them in another part of the world. In order to take advantage of subsidiary skills the company must have sophisticated processes that identify new skills that could be of interest. Once these skills are identified, managers must have the capability to transfer them elsewhere.

Slide 12-18 Cost Pressures and Pressures for Local Responsiveness

Slide 12-19 Pressures for Cost Reduction

Slide 12-20 Pressures for Local Responsiveness

Whether it is consumer tastes, infrastructure, distribution channels, or host government, global companies can often experience pressure to conform to the local needs.

Slide 12-21 Choosing a Strategy

Slides 12-22, 12-23 The Evolution of Strategy

Four strategies reflect varying approaches to cost pressure and local responsiveness. Slide 12-24 Looking Ahead to Chapter 13

The Organization of International Business

Slide 12-25 International Strategy

Slide 12-26 Multidomestic Strategy

Slide 12-27 Global Strategy

Slide 12-28 Transnational Strategy

ANOTHER PERSPECTIVE

These are comments or illustrations of material in the text that build from unusual applications or other views of the major concepts. You may find them useful to stimulate discussion or to help bring a concept home to your students.

Education as a Part of YOUR Value Chain

The concept of value chain can be used to examine the role your undergraduate education plays in your life plans. If you examine your personal development plans (education, internship, physical and emotional/spiritual fitness, extracurricular activities) and think about them in terms of primary and support activities, how do your choice of major and attitude toward education fit into your personal development strategy? How do your choices of how you spend your time fit into your value chain? Do you ever spend time doing things that don’t support the strategic goals of your “personal value chain”? Strategic Airline Alliances

Strategic alliances are at work in the air with many airlines. For example, Delta and Alitalia have an alliance that allows them each to offer more direct flights between more hub cities in the U.S. and in Itlay. They share booking, ground support, maintenance, and marketing. Each flight flies with either a Delta or an Alitalia crew and plane. The areas in which the alliances collaborate show us that systems (ticketing, scheduling, maintenance) can merge more easily than do people. With people, we have culture, and Italian and American cultural values can differ considerably.

Microsoft Ready to Adapt Software Programs to Foreign Cultures

Microsoft has followed a standardi zed strategy for the design of its software’s appearance on personal computer screens. This standardized strategy has kept the look and feel of the product’s interface standard, no matter what language the product uses and where the product is sold. In 2004, Microsoft announced plans to further localize their products. They will add 100 languages to the 40 they already use for MS Office and Windows, and have begun to test varying designs for screens, task bars and logos in foreign markets. Analysts suggest that MS was pushed by the threat of the open-sourced Linux operating system and its ease of local adaptation. Some developing countries, especially in Asia, have been concerned about an excessive dependence of their IT infrastructure on Microsoft.

ANSWERS TO CRITICAL THINKING AND DISCUSSION QUESTIONS FOR CHAPTER12

QUESTION 1: In a world of zero transportation costs, no trade barriers, and nontrivial differences between nations with regard to factor conditions, firms must expand internationally if they are to survive. Discuss.

ANSWER 1: The theory of comparative advantage suggests that activities should take place in the countries that can perform them most efficiently, given that different countries are endowed with different factors of production. If there are no barriers or costs to trade, then it is likely that many industries will be based out of the countries that provide the best set of factor endowments. Given location economies, a company can develop a global web of value-creation activities to take advantage of differing factor endowments in differing locations.

For firms already located in the countries with the most favorable factor endowments for their industry, however, there may not be a need to expand internationally at a certain point in time. As factor endowments evolve, the firm may want to disperse its value-creating activities to those markets that offer comparative advantages. If the firm is in a competitive market (think of the example of Clear Vision), it will benefit from international expansion that includes its value-creating activities because of the

Cost position and product differentiation opportunities such expansion can confer. A firm may be able to survive in a local market without international expansion, as long as the local market is not targeted by competitors who have taken advantage of the economies offered by dispersing their value-creation activities internationally. An example is an inefficient, high-priced locally-owned supermarket that has not yet faced the entry of Wal-Mart in its market.

QUESTION 2: Plot the position of the following firms on Figure 12.6: Procter & Gamble, Boeing, Coca Cola, Dow Chemicals, Intel, and McDonald’s. In each case justify your answer. ANSWER 2:

Proctor & Gamble follows an international strategy moving towards transnational. Most of the R&D is done centrally, while the production and marketing is done locally. Their local competition lacks the marketing skills and R&D resources P&G possess. As their local competition becomes more sophisticated, they may move into a transnational strategy. This process has already begun.

Boeing follows a global strategy in that it faces high pressure on cost and exploits location economies in its relatively standardized product.

Coca-Cola follows an international strategy. Its R&D and the general market approach originate in Atlanta. Subsidiaries do have some discretion in marketing. One could also argue that because Coca Cola has been acquiring local bottlers, they are pursuing a multidomestic strategy.

Dow Chemical follows a global strategy in that most of its products are commodities, so there is no pressure for localization. Price competition is critical.

Intel follows a global strategy. R&D, production and marketing are located in favorable locations and the product is relatively standardized. Cost pressures are high.

McDonald’s has been placed in the international strategy quadrant historically. It transfers valuable skills and marketing knowledge into other markets, where it has faced limited local competition because the local firms lacked McDonald’s skill and knowledge. There is local adaptation to tastes. Increasingly McDonald’s is facing local competition in international markets from other quick service restaurants and local imitators. McDonald’s localizes marketing other than the brand positioning, its supply chain, its human resources, its real estate strategy, and its production. This place McDonald’s in the multi domestic strategy quadrant.

QUESTION 3: Read the Management Focus feature on General Motors contained in this chapter then answer the following questions:

?How would you characterize the strategy pursued by GM in the (a) developing world and (b) Europe before 1997?

?What do you think were the likely competitive effects of the pre-1997 strategy?

?How would you characterize the strategy that GM has been pursuing since 1997?

?How should this strategy affect GM’s ability to create value in the global automobile market?

ANSWER 3: Traditionally GM used the developing world for its excess inventory and dated designs. In effect, the developing world was a dumping ground for obsolete models and technology. In contrast, in Europe GM dealt with most of its operations on an arms-length basis prior to 1997. Europe developed their own brands (Opel), and GM granted most operations autonomy; they developed their own manufacturing strategies and marketing plans. Many of these operations had been independent companies when GM acquired them. Because the European countries differed markedly in their preferences (Germans value performance, for example, and Swedes, safety) a locally responsive strategy was essential.

The effects of the pre-1997 strategy were that GM was able to capture a large share of the European market, where it appealed to local preferences, while in Latin America, the consumer in this much smaller market was likely to be insulted. The European competition looked to other areas of the world for their expansion, and made considerable inroads in Eastern Europe, Latin America and Asia.

Since 1997, GM’s strategy has been to move toward a transnational strategy. They have tried to move from Detroit’s being the center of the GM universe and the source of all wisdom to an approach that recognizes centers of excellence and can benefit from comparative advantages in locations other than Detroit. GM has built four identical plants to capitalize on the efficiencies that are provided by a common global platform. Proponents of the increasing globalization can argue that cost pressures and the need to bring state of the art products to developing markets make the current strategy appear appropriate. Opponents can argue that the world still has very different consumers with different tastes and needs. (For example, American buyers need cup holders; Germans see them as silly clutter.

This strategy should allow GM to benefit from innovation that occurs in any of its locations and at the same time, learn about local markets so that they can localize as needed, especially in marketing. Integrated production will allow cost savings at the same time.

QUESTION 4: What do you see as the main organizational problems that are likely to be associated with implementation of a transnational strategy?

ANSWER 4:

This is a student judgment question. Implementation difficulties include communication issues, trust issues, multiple roles, flexibility and culture issues, among many others. For example, with GM, some European operations may need to collaborate with operations in Latin America. Actions related to such a loss of autonomy might function as a hurdle to implementation.

TEACHING SUGGESTIONS FOR THE CLOSING CASE OF CHAPTER 12

P&G is an effective summary case because students know the product line, and the strategic issues P&G has been addressing are classic as a company moves from a

multi domestic to an more integrated, global strategy.

Case Discussion Questions

QUESTION 1: What strategy was Procter & Gamble pursuing when it first entered foreign markets in the period up until the 1980s?

ANSWER 1: P&G pursued a multi domestic strategy, with much duplication among markets.

QUESTION 2: Why do you think this strategy became less viable in the 1990s?

ANSWER 2: Globalization pushed for economies. There was more competition in the local markets, both domestic and other MNCs such as Unilever. Local companies had learned how to produce and market the products P&G was offering the consumer.

QUESTION 3: What strategy does P&G appear to be moving towards? What are the benefits of this strategy? What are the potential risks associated with it?

ANSWER 3: P&G seems headed towards a global strategy. The benefits include experienced curve effects and location economies. The challenge may be a need to localize products. But perhaps certain parts of the value chain (such as marketing) can be localized, while other parts (production, R&D) remain global.

globalEDGE? Exercise Questions

https://www.360docs.net/doc/902130305.html,/

Use the globalEDGE? si te to complete the following exercises:

Exercise 1

Several classifications and rankings of multinational corporations are prepared by a variety of sources. Find one such ranking system and identify the criteria that are used in ranking the top global companies. Although some of these rankings require subscriptions, find a freely available ranking and extract the list of the highest ranked 25 companies paying particular attention to the home countries of the companies.

Exercise 2

The top management of your company, a manufacturer and marketer of laptop computers, has decided to pursue international expansion opportunities in Eastern Europe. In order to achieve some economies of scale, your management is aiming towards a strategy of minimum local adaptation. Focusing on an Eastern European country of your choice, prepare an executive summary that features those aspects of the product where standardization will simply not work, and adaptation to local conditions will be essential. ANSWERS TO globalEDGE EXERCISES

Chapter 12 – Exercise 1

There are a variety of surveys that rank multinational corporations. Each of these surveys uses a slightly different method for ranking the companies, although size (assets or revenues) is typically one of the primary criteria. Some of the most influential rankings of this kind are the Financial Times FT Global 500, the Fortune Global 500, Forbes Global 2000, and the Business Week Global 1000. A full list and links to these studies can be accessed by under the “Rankings” c ategory of the globalEDGE Resource Desk. The Forbes 2000 listing, which is freely available is listed below

globalEDGE? Category: “Research: Rankings”

Resource Name: Forbes Global 2000.

Website: https://www.360docs.net/doc/902130305.html,/global2000

Chapter 12 – Exercise 2

The country specific information can be found in the Country Insights section of globalEDGE. Both summary and detailed information regarding each country can be accessed by using the drop-down menu on th e right, or by clicking the “Europe” link. For illustration purposes, we will choose Bulgaria. The synopsis information indicates that the language of the country (Bulgarian) and the voltage used (110/220V) will be two of the critical variables that have to be considered in the adaptation of the product. More

detailed analysis by following the external links, such as the Country Commercial Guide, will highlight additional aspects.

globalEDGE? Location: Resource Desk/ Country Insights/ Europe/ Bulgaria Resource Name: Bulgaria

Website: https://www.360docs.net/doc/902130305.html,/ibrd/CountryIntro.asp?CountryID=40&RegionID=2

SUGGESTED VIDEOS

In addition to the video presented below, Title 14: General Motors/Saab also fits in well with this chapter.

A comprehensive list of video notes is included with the instructors’ materials for this textbook.

VIDEO NOTES

Title 15: DHL

Summary

DHL started in 1969 in San Francisco with a $3,000 investment. Today, the company delivers packages to 120,000 destinations in 200 countries, bringing in over $50 billion in revenues. DHL is a market leader in international express delivery. In fact, the company considers itself to be the inventor of international express shipping. DHL built its global operations by slowly expanding its services over the years. The company followed a backward path around the world from its San Francisco offices into Asia, moving on to Europe and Africa, and finally into North America. Its American operations have been strengthened with its recent acquisition of Airborne.

DHL’s focus on improving its service in the U.S. prompted the company to acquire Airborne rather than take the time to build its own operations. The acquisition gave DHL the infrastructure necessary to become a serious competitor in the market. Now the acquisition is part of the company’s overall operation providing U.S.-based gateways for packages traveling to other parts of the world. All packages traveling outside the U.S. must pass through the U.S. Customs office located within the gateway sites.

This video relates well to the material in Chapter 14 on acquisition versus Greenfield investments, and also to the discussion of strategy in Chapter 12.

Discussion Questions

1. DHL provides door-to-door service for its customers using its own agents. Discuss the service. What are the advantages of having in-house handling of packages when shipping internationally rather than using agents who work for several different companies?

2. When DHL moved into the U.S. market, it made the decision to acquire Airborne rather than build its own operations. Discuss the advantages and disadvantages of this strategy.

3. DHL’s U.S. gateway system p rovides on-site customs clearance services. Does this give DHL a competitive advantage? Why or why not?

4. DHL believes that when considering international express delivery services, speed and reliability are key issues for the customer. Using the pressure for costs reduction/pressure for local responsiveness grid, consider the international shipping business. Where do the major players stand relative to one another? Is any one player better positioned to succeed?