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Chapter 8: Strategy in the Global Environment

Chapter 8: Strategy in the Global Environment. Text by Charles W. L. Hill Gareth R. Jones. Multimedia Slides by Milton M. Pressley Univ. of New Orleans. Preview. Profiting From Global Expansion Pressures for Cost Reductions and Local Responsiveness Strategic Choice

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Chapter 8: Strategy in the Global Environment

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  1. Chapter 8: Strategy in the Global Environment Text by Charles W. L. Hill Gareth R. Jones Multimedia Slides by Milton M. Pressley Univ. of New Orleans

  2. Preview • Profiting From Global Expansion • Pressures for Cost Reductions and Local Responsiveness • Strategic Choice • The Choice of Entry Mode • Global Strategic Alliances • Making Strategic Alliances Work

  3. Profiting From Global Expansion • Transferring Distinctive Competencies • Realizing Location Economies • Lower Costs • Differentiation and Premium Pricing • Moving Down the Experience Curve • Global Expansion and Business Level Strategy

  4. Pressures for Cost Reduction and Local Responsiveness • Pressures for Cost Reductions • Pressures for Local Responsiveness

  5. Figure 8.1: Pressures for Cost Reduction and Local Responsiveness High Cost Pressures Low Low High Pressures for Local Responsiveness

  6. Figure 8.1: Pressures for Cost Reduction and Local Responsiveness High CompanyA Cost Pressures Low Low High Pressures for Local Responsiveness

  7. Figure 8.1: Pressures for Cost Reduction and Local Responsiveness High CompanyA Cost Pressures Company B Low Low High Pressures for Local Responsiveness

  8. Figure 8.1: Pressures for Cost Reduction and Local Responsiveness High CompanyA Company C Cost Pressures Company B Low Low High Pressures for Local Responsiveness

  9. Pressures for Cost Reduction and Local Responsiveness (Continued) • Pressures for Cost Reductions • Pressures for Local Responsiveness • Differences in Consumer Tastes and Preferences • Differences in Infrastructure and Traditional Practices • Differences in Distribution Channels • Host Government Demands • Implications

  10. Strategic Choice • International Strategy • Multidomestic Strategy • Global Strategy • Transnational Strategy

  11. Figure 8.2: Four Basic Strategies High Cost Pressures Low Low High Pressures for Local Responsiveness

  12. International Strategy Figure 8.2: Four Basic Strategies High Cost Pressures Low Low High Pressures for Local Responsiveness

  13. Multi- domestic Strategy Figure 8.2: Four Basic Strategies High Cost Pressures International Strategy Low Low High Pressures for Local Responsiveness

  14. Multi- domestic Strategy Figure 8.2: Four Basic Strategies High Global Strategy Cost Pressures International Strategy Low Low High Pressures for Local Responsiveness

  15. Figure 8.2: Four Basic Strategies High Trans- national Strategy Global Strategy Cost Pressures Multi- domestic Strategy International Strategy Low Low High Pressures for Local Responsiveness

  16. Figure 8.3: Cost Pressures and Pressures for Local Responsiveness Facing Caterpillar High Caterpillar, Inc. Cost Pressures Low Low High Pressures for Local Responsiveness

  17. Table 8.1: Advantages and Disadvan-tages of Different Global Strategies Continued . . .

  18. Table 8.1: Advantages and Disadvantages of Different Global Strategies (Continued)

  19. The Choice of Entry Mode • Exporting • Licensing • Franchising • Joint Ventures • Wholly Owned Subsidiaries • Choosing Among Entry Modes • Advantages and Disadvantages (Table 8.2)

  20. Entry Advantages Disadvantages Mode Exporting · Ability to realize location · High transport costs and experience-curve Trade barriers · economies · Problems with local marketing agents Licensing · Low development costs · Lack of control over and risks technology · Inability to realize location and experience-curve economies · Inability to engage in global strategic coordination Franchising · Low development costs · Lack of control over quality and risks · Inability to engage in global strategic coordination Table 8.2: Advantages and Disadvan-tages of Different Entry Modes

  21. Entry Advantages Disadvantages Mode Joint · Access to local partner’s · Lack of control over knowledge technology Ventures · Sharing development · Inability to engage in global costs and risks strategic coordination Political acceptability Inability to realize location · · and experience economies Wholly Protection of technology High costs and risks · · · Ability to engage in global Owned strategic coordination Subsidiaries · Ability to realize location and experience economies Table 8.2: Advantages and Disadvantages of Different Entry Modes (Continued)

  22. The Choice of Entry Mode (Continued) • Choosing Among Entry Modes • Advantages and Disadvantages (Table 8.2) • Distinctive Competencies and Entry Mode • Pressures for Cost Reduction and Entry Mode

  23. Global Strategic Alliances • Advantages

  24. Global Strategic Alliances • Advantages • Disadvantages

  25. Making Strategic Alliances Work • Partner Selection

  26. Making Strategic Alliances Work (Continued) Characteristics of a Good Partner: • Helps Firm Achieve Its Strategic Goals • Shares Firm’s Vision for the Purpose of the Alliance • Unlikely to Opportunistically Exploit the Alliance for Its Own Ends

  27. Making Strategic Alliances Work (Continued) • Alliance Structure • Partner Selection

  28. Probability of Opportunism by Alliance Partner Reduced by: Figure 8.4: Structuring Alliances to Reduce Opportunism

  29. Walling Off Critical Technology Probability of Opportunism by Alliance Partner Reduced by: Figure 8.4: Structuring Alliances to Reduce Opportunism

  30. Walling Off Critical Technology Establishing Contractual Safeguards Probability of Opportunism by Alliance Partner Reduced by: Figure 8.4: Structuring Alliances to Reduce Opportunism

  31. Walling Off Critical Technology Establishing Contractual Safeguards Probability of Opportunism by Alliance Partner Reduced by: Agreeing to Swap Valuable Skills and Technologies Figure 8.4: Structuring Alliances to Reduce Opportunism

  32. Walling Off Critical Technology Establishing Contractual Safeguards Probability of Opportunism by Alliance Partner Reduced by: Agreeing to Swap Valuable Skills and Technologies Seeking Credible Commitments Figure 8.4: Structuring Alliances to Reduce Opportunism

  33. Making Strategic Alliances Work (Continued) • Managing theAlliance • Partner Selection • Alliance Structure

  34. PROFITING FROM GLOBAL EXPANSION PRESSURES FOR COST REDUCTIONS AND LOCAL RESPONSIVENESS STRATEGIC CHOICE THE CHOICE OF ENTRY MODE GLOBAL STRATEGIC ALLIANCES MAKING STRATEGIC ALLIANCES WORK Chapter Summary

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