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Chapter 2 Strategies in the global economy

Chapter 2 Strategies in the global economy. What is strategy?. A coherent set of choices guiding investment decisions. Regional strategy. Regions. Global business strategy. Countries. Businesses. Different strategic levels in global firms. Global corporate strategy.

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Chapter 2 Strategies in the global economy

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  1. Chapter 2Strategies in the global economy

  2. What is strategy? A coherent set of choices guiding investment decisions

  3. Regional strategy Regions Global business strategy Countries Businesses Different strategic levels in global firms Global corporate strategy

  4. Different strategic levels in global firms cont.

  5. Different strategic levels in global firms cont.

  6. Market/ resource driven • Relative importance of region and key countries in corporate portfolio • Geographical positioning • Competitive • positioning • Degree of • standardization • Decomposition of the value chain • Global logistics • Alliance & acquisitions • Development paths • Degree of autonomy and integration • Global structure and systems • Global HRM

  7. Global ambition: market driven/ resources driven Capture resources (natural, human, knowledge) for global competitiveness Capture growth opportunities of the region to expand global sales Market driven Resources driven

  8. Global ambition: the world in 2010

  9. 27% GDP 22% PPP 24% GDP 20% PPP 3% GDP 5% PPP 3% GDP 3% PPP 28% GDP 33% PPP 3% GDP 4% PPP 7% GDP 8% PPP

  10. Global ambition: countries life cycle Average growth yearly rate (1990-2010) GDP /Capita (2010) Bubbles proportional to GDP 2010

  11. Global ambition: global distribution of markets (2005) Europe North America Asia Pacific Rest of the world (%) (%) (%) (%) Advertising 19 57 23 1 Clothing & footwear 32 27 25 15 Computer hardware 27 27 39 7 Construction materials 18 9 63 10 Consumer electronics 30 23 38 9 Cosmetics 37 22 27 14 Data processing services 29 52 14 9 Electrical appliances 28 27 34 10 23 20 42 15 Electrical equipment Environment services 31 39 23 7 Healthcare equipment 34 46 18 2 Home furnishings 44 22 18 15 34 38 25 3 Insurance Mobile phones 30 25 42 3 Paint & coatings 26 27 35 12 Pharmaceuticals 28 48 18 6 32 30 23 15 RetaiI Specialty chemicals 45 39 11 4

  12. Global ambition: Ciba fine chemicals

  13. Ciba fine chemicals

  14. Global ambition: what kind of global player? Global companies mapping Production and supplies Sales Number of countries

  15. Global ambition: Global companies mapping cont. 100% 90% NORTEL 80% 70% NOKIA 60% Ratio of foreign assets/ total assets MOTOROLA ALCATEL 50% 40% 30% ERICSSON 20% 10% 0% 0% 20% 40% 60% 80% 100% Circle proportional to total sales Ratio of foreign sales/ total sales

  16. Global ambition: countries portfolio KEY COUNTRIES: Have to be there EMERGING COUNTRIES(WINDOW OF OPPORTUNITIES) : It’s time to go there PLATFORM COUNTRIES: Entry and support MARKETING COUNTRIES: No need to invest/only sales SOURCING COUNTRIES: Manufacturing base/source of raw materials or purchasing office

  17. Market/ resource driven • Relative importance of region and key countries in corporate portfolio • Geographical positioning • Competitive • positioning • Degree of • standardization • Decomposition of the value chain • Global logistics • Alliance & acquisitions • Development paths • Degree of autonomy and integration • Global structure and systems • Global HRM

  18. Global positioning: countries choice H Business opportunities Market size Market growth Market quality Resources quality Resources costs Geographical facilities Infrastructures Ease of doing business L H L Risks of doing business Operational Political Economical Competitive

  19. Global positioning: Foreign Direct Investments 2000-2008 Inflows in billions USD

  20. Global positioning: the 3 dimensions of global competitive positioning Global standardization Multiple segments Single segment Local adaptation Compete on costs/price advantages Compete on differentiated/value advantages

  21. Global positioning: the 3 dimensions of global competitive positioning cont. Apple (stores) Wal-Mart Global standardization Hermes Ikea Dairy Farm (in Asia) Multiple segments Carrefour Single segment Local adaptation Compete on costs/price advantages Compete on differentiated/value advantages

  22. Standardized or Localized ? GLOBAL POSITIONING High MODULAR GLOBAL (Global Scale) STANDARDISATION And MULTIBRANDS STANDARDISATION Aircraft Elevators IT Services Handphones Microprocessors BasicChemicals Pulp and paper Electronic Components Example: Intel, Dell Example: Otis, Nokia Minimum Size Of Production PROCESS LOCAL STANDARDISATION ADAPTATION Consumer Banking Consulting Services Mobile Telephone Services Low Cement (Local Scale) Example: Cemex Example: Vodafone Little Difference across the World Countries specific (Global Segments) (Local Segments) Customers Requirements and Competitive Contexts

  23. Market/ Resource Driven • Relative importance of region and key countries in corporate portfolio • Geographical positioning • Competitive • positioning • Degree of • standardization • Decomposition of the value chain • Global logistics • Alliance & Acquisitions • Development paths • Degree of autonomy and integration • Global structure and systems • Global HRM

  24. Capabilities and sources of competitive advantages Investments in a global business system Marketing General management Sales and distribution R & D Procurement Manufacturing Resources based Assets based Competencies based

  25. Investments in a global business system Building global competitive advantages Transerability of competitive advantages • What is the value of our existing advantages on local markets? • To what extent do we need to adapt our products and management approaches? • What new capabilities need to be acquired and how? Our competitive advantages To what extent are they transferable? Which new capabilities to create and how?

  26. How do a firm’s capabilities apply to regional/local markets? Transfer, Adapt, Create Model General management R & D Procurement Manufacturing Marketing Investments in a global business system What capabilities are needed to compete? What capabilities do we need to create? What capabilities do we bring but need to adapt? What capabilities do we bring and can transfer?

  27. Transferability of competitive advantages and business model ? Investments in a global business system Technical TRANSFER with Little or No adaptation TRANSFER and ADAPT Source of competitive advantages Example: Dell, Intel Example: Unilever TRANSFER and do Relevant ADAPTATION ADAPT and RECREATE Social, cultural political, contextual Example: KFC Example: McDonald’s Country specific Little difference across the world (global segments) (local segments) Customers’ requirements and competitive contexts

  28. Market/ resource driven • Relative importance of region and key countries in corporate portfolio • Geographical positioning • Competitive • positioning • Degree of • standardization • Decomposition of the value chain • Global logistics • Alliance and acquisitions • Development paths • Degree of autonomy and integration • Global structure and systems • Global HRM

  29. Sourcing Research Development Customers Services Marketing Finances H.R.M Production - Policies - Procedures - Information system - Regional customers support - Logistics - Maintenance - After sales services - Corporate Finance - Global Treasury - Control - Regional Debt financing - Regional Control - Local borrowing - International H.R.M - Regional careers - Training - Local careers - Local Global - Global marketing strategy - Global communication - Global products Management - Regional Accounts - Regional Bidding Regional: - Distribution - Promotion - Sales • Central R & D • Technology • Strategy • Core Technology • Core Products • - Technology • conferences • - Technological • intelligence • - Regional Products • development • - Regional • intelligence • - Regional seminars • - Local Laboratories - Global factories - Global materials flow - Process Engineering - Central sourcing - Regional factories - Regional sourcing - Local production - Local sourcing Regional Local GIS 35 Components of a global value chain Global organization

  30. Structures Global organization PRODUCT FUNCTIONAL HQ HQ Business A Business B Business C R & D Production Marketing Countries Countries MATRIX GEOGRAPHICAL HQ HQ Business B Business C Business D Business A Business E Region Region Region Region Region Countries Countries Countries

  31. Local Managers Local Managers Local Managers CORE International Managers Local Managers Local Managers Local Managers Local Managers Local Managers Local Managers Local Managers The global human resources wheel Global organization

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