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Global Strategy. Global Strategy. Strategy: “the action managers take to attain the goals of a firm” General purpose: maximize/make profit Differentiate products, increase price: add value, features, quality, service Achieve low cost Key means: allocation of scarce resources to attain goals.

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Global strategy2 l.jpg
Global Strategy

  • Strategy: “the action managers take to attain the goals of a firm”

    • General purpose: maximize/make profit

      • Differentiate products, increase price: add value, features, quality, service

      • Achieve low cost

    • Key means: allocation of scarce resources to attain goals


Activity value chain l.jpg
Activity Value Chain

  • Firm as a chain of discrete value creating activities

    • Primary

      • upstream activities, manufacturing

      • downstream activities: marketing, sales, after sales service

    • Support

      • infrastructure (general and administrative)

      • human resources

      • research and development


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Global Expansion Benefits

  • Earn greater return from distinctive skills, core competences

    • Inimitable or difficult to imitate skills in value chain

  • Realize location economies

    • Choice of FDI location

    • Create multinational network of activities (global web)

  • Realize greater experience curve economies, which reduce the cost of value creation

    • Learning effects, economies of scale

Unit costs

Experience curve

B

A

Accumulated output


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Pressures forGlobal Integration & Local Responsiveness

High

Ball bearings,

wheat

Cost Reduction

(Global Integration)

Pressures

Cosmetics, food,

household goods

Low

Low

High

Local Responsiveness Pressures

Differences in

- consumer tastes/preferences

- infrastructure/practices

- distribution channels

- host government needs/requirements


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Strategic Choice

“Transnational”

Strategy

High

“Global”

Strategy

Cost Reduction

(Global Integration)

Pressures

“International”

Strategy

“Multidomestic”

Strategy

Low

Low

High

Local Responsiveness Pressures


Multidomestic mnc l.jpg
Multidomestic MNC

HK

UK

Chile

USA

India

Japan

Mexico

Decentralized Federation - Many key assets, responsibilities

and decisions localized

Personal Control - Informal HQ-Sub relationship, simple financial controls

Multidomestic Mentality - Management sees overseas operations as portfolio of independent businesses


International mnc l.jpg
International MNC

HK

UK

Chile

USA

India

Japan

Mexico

Coordinated Federation - Key assets, responsibilities decisions localized

Administrative Control - Centralized HQ control, formal planning and control, tight HQ-Sub linkage

International Mentality - Management sees overseas operations as appendages to a domestic operation


Global mnc l.jpg
Global MNC

HK

Chile

UK

USA

India

Japan

Mexico

Centralized Hub - Most strategic assets, resources, responsibilities

and decisions centralized

Operational Control - Tight HQ control of decisions, resources, information

Global Mentality - Management sees overseas operations as delivery pipelines to a unified global market


Transnational mnc l.jpg
Transnational MNC

HK

Chile

UK

USA

Japan

India

Mexico

Networked Organization - Distributed, specialized resources and capabilities

Interdependent Units - large flows of components, products, resources, people, and information

Transnational Mentality - Complex process of coordination and cooperation in an environment of shared decision making


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International Strategic Alliances

  • Cooperative agreements between competitors from different countries

    • Advantages

      • Facilitate entry into a foreign country

      • Allow fixed costs of new products and processes to be shared

      • Bring together complementary skills and assets

      • Help establish industry standards in technology

      • Allow reduction of operating costs,e.g., shared training, purchasing

    • Disadvantages

      • Give competitors a low cost route to new technology / markets

      • Disproportional benefit accrual to partners


Making alliances work which partner l.jpg
Making alliances work which partner?

  • A suitable partner

    • Helps achieve strategic goals

      • Adds needed, valuable capabilities

    • Shares the firm’s vision for purpose of the alliance

    • Is not likely to exploit the alliance to its own ends

  • Steps to select a partner

    • Thorough background check via public sources

    • Advice from third parties who have personal experience with likely partner(s)

    • A lot of face-to-face time with likely partner(s) in their environment


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Making alliances work - What Structure?

  • Protect technology/know-how that is not intended to be transferred

  • Draw a solid contract with safeguards against opportunism

  • Achieve equitable gain through agreed swaps of technology the other wants

  • Seek creditable, clearly articulated commitment to partner “behavior” a-priori


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Making alliances work - How to manage?

  • Show sensitivity to cultural differences that explain different managerial styles

  • Build trust

    • Set up framework for formal and informal face-to-face meetings to create a common value system

    • Build informal network of personal relationships

  • Learn from partners

    • Apply the knowledge within your own organization

    • Brief your employees on partner strengths


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