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2. What are the reasons for pursuing a trans-national strategy. Homogeneity of customer requirementsReduction of tariff
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1. 1 Trans-national corporate strategy Strategy & Management in the Asian Corporation
Week 1
2. 2 What are the reasons for pursuing a trans-national strategy Homogeneity of customer requirements
Reduction of tariff & trade barriers
Technology investments that are too expensive to write off in one market
Saturation of home markets (eg US)
Rise of NIEs providing viable sites for manufacturing
Multi-locational –v- globalisation
3. 3 Yip’s globalization triangle Apex 1 – industry globalisation drivers
Markets/costs/conditions providing potential
Apex 2 – global strategy levers
Global market participation
Standardised products
Globally integrated competitive moves
Global marketing approach
Apex 3 – global organisation factors
Ability to implement global strategy
Dynamic relationship between each apex
(Total Global Strategy 1992)
4. 4 Is there a typical strategy? Use of TNC/MNC/MNE interchangeably
A global strategy implies not only worldwide cross-border activities but also integrated and coordinated access to global resource advantages and exploitation of corporation’s internal potential
5. 5 Does globalisation exist? Recent research suggests that globalization is a myth.
Far from taking place in a single global market, most business activity by large firms takes place in regional blocks.
There is no uniform spread of American market capitalism nor are global markets becoming homogenized.
Government regulations and cultural differences divide the world into the triad blocks of North America, the European Union and Japan. Rival multinational enterprises from the triad compete for regional market share and so enhance economic efficiency.
The end of global strategy Rugman & Hodgetts 2001
6. 6 How do we view a TNC Is it a series of subsidiaries operating in regional markets and adapting locally to market needs?
If so to what extent do subsidiaries have autonomy?
To what extent is the corporate strategy of the parent merely a directive to react to local conditions
7. 7 What are the benefits of TNCs New market opportunities
Economies of scale and scope
Factor advantages
Learning
Flexibility
Risk reduction
8. 8 Performance measures Elango 2004 argues MNCs have higher profit margins in global rather than regional operations
3 distinct types
Regional
Global
Home Based
Defined as location where majority of Gross Profit earned
Therefore success = high Gross Profit margins
Strategic implications
Global operations offer higher profit margins
Regional approach preferred if MNC diversified in many products
Global strategies are more costly to implement in terms of administration costs
There is “fit” between firm profile and strategy
9. 9 Is profit too short term? Jalbert & Landry 2003
Need measures to suggest long term forward thinking strategic view across entire organisation
Economic Value Added
NOPAT – ( CC X IC )
Net profit after tax
Cost of capital
Invested capital
Tracking Stocks
Specific to unit of business
Balanced Scorecard
10. 10 Jalbert & LandryBalanced Scorecard
11. 11 Shareholder value Litman & Welling 2002
Argue common measure is TSR (Total shareholder return)
Share price growth
Great companies do not necessarily exhibit good TSR
Corporate strategy often founded on companies showing good TSR
Eg Dot.Com bubble
12. 12 Kumar & Petersen 2004Integrated strategy to maximize Return on Investment (ROI)
13. 13 Kumar & Petersen 2004 Develops marketing strategy on basis of ROI
Do we measure strategic success by a metric (like ROI)?
Do we use a metric to specifically determine strategy?
14. 14 Multi-faceted measures Drucker 1954 argued for multi-dimensional financial & non-financial measures
Demirag 1987 showed UK parent companies used ROI and budgeted –v- actual profit
Borkowski 1999
Suggests a range of financial measures be used to gauge performance
Methods by which company can define long/short term outlook
German & Japanese TNCs see net income as important
US & UK TNCs use cost reduction
European TNCs reward innovation (technological & product)
Argues Europeans encourage research and experimentation compared to Asian and US culture
R&D????
15. 15 R&D expenditure as % of GDP2000 - 2001
16. 16 Davis & Devinney -The essence of corporate strategy (1996) The fundamental process of corporate strategy development is rational, and
Managers and firms are bounded by human, firm, market and environmental factors that limit their actions
17. 17 Davis & Devinney -The essence of corporate strategy (1996) In the end, all strategy is about rivalry
Most popular books on strategy talk about ‘how to beat the competition’
The goal of the management of rivalry is the achieving of cooperation
Understanding rivalry requires three things:
understanding the structure of the environment
understanding the payoffs to the players in the game
knowing who knows what
In other words, rivalry is about understanding the terrain, understanding the stakeholders and their motivations and understanding the knowledge base of the stakeholders
18. 18 You also need luck Having superior resources is a necessary condition for success.
Having superior managerial skills is a necessary condition for success.
Being lucky is a necessary condition for success.
This questions how can luck be influenced?
19. 19 End of Corporate Imperialism Prahalad & Lieberthal 2003
Argue western MNCs entered emerging markets seeing them as “targets”
Means of disposal of vast amounts of western goods
MNC strategy ignored “low end” market
MNCs now adapt products to complexities of new markets
Is this swapping global for local?
West – East strategy, how applicable for East – West?
20. 20 Bad news for latecomers? Carr & Garcia 2003
Argue market concentration/domination is key strategy driver of global MNCs
General Electric (world’s most profitable company) aims to achieve top 3 position in any given market segment
How does this affect “laggard” MNCs (late entrants)?
If dominance is not feasible it must affect strategic options
(localisation/regionalisation/product range/diversification)
21. 21 Bad news for latecomers? Study of 9 vehicle component companies in Spain
Argues local companies cannot develop global presence
Constraint on strategic choices
Develop niche markets
Concentrate on core technical competencies
Get taken over
Is this inevitable? If so explain Asian MNCs!
22. 22 Carr & Garcia - summary
23. 23 East – West strategy Carney & Gedajlovic 2002
Internationalization by strategic asset purchase
Asian corporations are “laggards” on international scene
Build on merchant trading logic
Can East – West strategy be imperialistic (Japanese)
How can Asian corporations develop MNC strategies as latecomers
Is there a specific E – W strategy?
How global are Asian corporations?
Are they in fact multi-locational (regional)?
24. 24 How do we identify & measure?
Use of actual data
Use of case studies
Use of articles
Use of corporate information
25. 25 Asian ExampleMatsushita – Panasonic Worldwide, Matsushita has currently 589 consolidated companies as well as 81 companies which are reflected by the equity method.
International marketing and sales of Matsushita’s products are handled mainly through its sales subsidiaries and affiliates located in respective countries or regions.
In some countries, however, marketing and sales are handled through independent agents or distributors, depending on regional characteristics.
26. 26 5 Year income summary
27. 27 Achieving a V-shaped Recovery As part of a new business domain-based organizational structure and various management reforms implemented in fiscal 2004, overseas companies are now managed by respective business domain companies on a global consolidated basis. Matsushita also adopted two results-based standards, namely CCM and cash flows, for the evaluation of business performance.
CCM (Capital Cost Management) is a management benchmark created by Matsushita that emphasizes return on capital. A CCM of zero or above indicates that the return on invested capital meets the minimum return expected by shareholders
28. 28 Strategic products! Sales of V-products, the driving force behind the V-shaped recovery in Matsushita’s business results, surged to approximately Ą1.24 trillion in fiscal 2004, up from about Ą1 trillion in fiscal 2003.
Since fiscal 2003, Matsushita has promoted V-products that can attain top shares in high volume markets and contribute to overall earnings.
Overseas operations play a vital role as a “growth engine” in expanding business and enhancing overall earnings.