WORLDWIDE COMPETITORS

1. WORLDWIDE COMPETITORS 8

2. Worldwide International regional Internationalisation Retrenchment International market entry and development Restricted national market scope Phase 4 Phase 1 Phase 2 Phase 3 Restricted national market scope International market entry and development International regional Worldwide competitor Figure 8.1. The phase model and worldwide strategies

3. “Think globally and act locally” Balance between • responsive and and flexible local approach • effective global co-ordination No company achieved satisfactory solution! • few: flexible local and central mgnt capabilities • attempted link them Globalisation: • problematic strategic spatial imperatives • practical implementation challenges

4. Demand: FUNDAMENTAL CHANGE IN INTERNATIONAL BUSINESS PRACTICE Autonomy - integration Organizational learning Knowledge transfer Global ≠ multi-local

5. Dimensions tayloring organization: Product – geography -people/proces • organizational complexity • how to develop global vision • differing organizational structures (US, EU, Japan) • consider: relative strengths + weaknesses of competitors • resource interdependencies among units How to integrate into transnational organization to exploit global competition advantage?

7. OUR FOCUS: 1. Developing a global strategy 2. Global strategy assessment and competitive moves 3. International strategic alliances 4. Organizational forms for worldwide competitors 5. Reconciling the irreconcilable: the search for the transnational company

8. Developing a global strategy “Global chess” • advantage of lowest nat’l factor cost • tailoring organization along three dimension product geography people/process • examine carefully organizational structure systems value

9. People and processes Global strategy Product Geography Configure product/ service operations in order to: (a) supply chosen market segments (b) achieve economies of scale (c) avoid unnecessary duplication of resources Achieve geographical coverage to encompass strategically important countries Determined by: (a) current and future sales potential (b) the need to match competitors (c) have access to low factor costs and/or expertise Develop people and process in order to: (a) achieve a global vision/mindset (b) leverage cross-unit skills and competences worldwide (c) ensure strong coordinating and linking mechanisms between organisational sub-units Figure 8.2 Developing and/or reshaping the worldwide competitor

10. Environment (external triggers) • more open trading environment • falling transport cost (containers, large carriers, deregulation) • new technologies require global scale • converging customer preferences (communication) • customized core products - global scale efficiency - flexible manufacturing systems • growth of global customers

11. Capture competitive advantages: • vision • visionary leader (anticipate/shape future) • catalyst : change existing mindset => world mindset needed • realization: 5 components required

12. Widely shared Business anywhere Time INTERNATIONAL VISION/MINDSET Insiderisation Leverage Figure 8.3 The world vision/mindset

13. Widely shared: • clearly articulated • foster cohesiveness • what to do, how to do the business • Business anywhere: • transparent to needs of local customers (communication+logistic network) • Insideration: • respond to local needs (no replication of domestic organizational systems) • Leverage: • fundamental organizational innovation => replace old mindset • creating a system of shared value: 1 + 1 = 3 • Time: • building shared values takes time => establish priorities, monitoring (BSC)

14. Established mindset • Deeply embedded, difficoulkt to change • It makes the need to change periodically • If no longer appropriate: organizational risk • Firm need to seek constant renewal “a journey without destination”

15. 2. Global strategic assessment and competitive moves Rivals current position, likely competitive moves • analyze competitive strength • possible strategic options Questions to identify competitors’ position: • Product: • Market segments: narrow/broad focus? • Economies of scale: nat’l-worldwide? • Where is necessary to contrentrate to reach economies of scale? (R&D, production) • Geography: • Cover important markets? • Match rivals market coverage? • Access to low factor cost, skill, expertise, locations? • People, processes: • Who operates with global vision? agressively? • Leverage key skill and competencies? Good basis of global competitive advantage? • Strong links and co-ordination between sub-units?

16. Table 8.2 Assessing global market coverage

17. Table 8.3 Location of key value-adding activities

18. World chocolate confectionery industry Thorntons limited market coverage, focused on UK, France Production: UK, Belgium Niche player selling chocolate specialities (no global ambitions) Hershey strong presence inUS, joint venture in Japan, weak in EU Ambition to develop greater market coverage Nestlé Extensive world coverage, acquiring national players Production: in strategically important countries Global brands, but recognizing local tastes Overall strategy formed by the center (acquisitions), local autonomy

19. 1. Product-market segments Narrow product focus Broad based competitor 2. Products/service offer Costumised for local/national market Standardised globally 3. Competitive moves Based on a country by country approach Co-ordinated globally Key: Thorntons Hershey Nestlé Figure 8.4 Assessing product-market competitors

20. After examining competitors, further questions: Is it important to operate with global market coverage and scale? Are there surviving competitive niches? Competitive strategies of individual companies are realistic and sustainable? Adapt following tactics, strategies

21. Strategies to be followed a) Cross-subsidiation of countries • against indigenous national players or • large competitor dependent on specific market b) Globally co-ordinated moves fragmented country-by-country strategy: a set of competitive strategies • Price competition: • Non-price (hidden) competition • Co-operation/collaboration

22. Price competition: excess capacity, new aggressive player => imbalance, discontinuity • against a weak national player: it leaves the industry • against a global one: risky, more expensive, uncertain • Non-price (hidden) competition: Less direct way of competition, “hidden” • advertising, promotion: expensive • answer: differentiate products if it is a global competitors • Co-operation/collaboration instead of competition • mutual need • final form:acquisition (large/small, national/global) • few have universal coverage => try extend geographically => emerging countries (China) • complete global network

23. 3. Intern’l strategic alliances Motives: Access to knowledge, expertise and skills possessed by another organization key driver: possess different configuration of core competencies and resources, offering attractive option Access to new geographical markets (Honda-Rover) Spreading financial or political risk

24. Honda and Rover 1978: similar size, began developing strategic alliance Honda: profit making, gaining access to Europe market partner with EU market experiences EU: protectionism, overcapacity Rover: dealer network in UK, EU, spare capacity losses, struggling for reestablish after reconstruction, govm’t support, likelihood of change of gov’t develop new product range: resource needed 1978: limited agreement => Triumph Acclaim with Honda kit Developments:with Honda platform renewing Rover models joint venture: developing new platform co-production, cross-sourcing Honda acquiring 20% of Rover equity stake Rover: back to profit, improvement in quality and reputation, organizational learning Retained distinctive identities Early 1994: Rover is sold by British Aerospace to BMW Rover-Honda alliance at risk - hard joint development broken They do not wish to see the alliance continue

25. Generic types of int’l strategic alliences Joint ventures separate legal entity, free-standing organization partners: equity share holders, providing resources difficulties: one partner wishes acquire full control Non-joint ventures (collaboration) no separate legal entity collaborative agreements may be cross-company shareholdings limited in scope, scale initial phase, later can be extended Consortium (cont.)

26. Consortium Each company individually unable to completely fund R$D, necessary volume Believe: pooling resources they can compete Number of partners to undertake a large-scale activity (Exp.: Airbus) Factors contributing to the success: strategic need: each has a continuing need for the other shared objectives (otherwise: conflict at future direction) shared risk and commitment (otherwise no more investments) agrred procedures for resolving disputes (strengthen/undermine) => personal relationship trust: most critical (builds up slowly - eroding quickly by an action) Advisable: understanding circumstances in which alliance can be terminated

27. F. SATO, Toshiba’s president: even the largest and best resourced organizations are likely to seek develop some form of int’l strategic alliance in some respect of their business. “Strategic alliancesare attractive for a number of reasons: “For example, the digital revolution and the development of multimedia can only reach fruition through their cross-fertilization of technologies, bringing together partners from the media, communication and computing. We are contributing here through our links with Time Warner and other companies.” • “Another consideration is cost. New technologies require enormous investments in research, plant and equipment. Alliance like ours with IBM and Siemens for development of 256-megabit DRAMs allow partners to maximise the use of their resources, realise cost of advantages and speed up development. Moreover, the diffusion of the developed technology also encourages competition at the production stage.” • “Finally, the dynamic pace and vast extent of modern technology is just too much for a single company. Today, no company can avoid incorporating technology from other companies in its products. The best way to do that is by building up trust and working together in design-in and similar projects.”

28. 4. Organizational forms for worldwide competitors Global company Co-ordinated international regional International Multi-local Figure 8.5 The overlap between different organisational forms employed by worldwide competitors

29. 1. Product Multi-local Global Localised for a national market Standardised for the global market 2. Resources, responsibilities and control Multi-local Global Decentralised to a national organisation Centralised on a global basis 3. Dominant power group and culture Multi-local Global Country-based managers; independent culture Centralised functions; dependent culture 4. Research and development and innovation Multi-local Global National facilities; ’local’ new product development Centralised R&D and new product development Figure 8.6 Distinguishing between the global company and multi-local organisation

30. Global company Key: Country-based national subsidiaries Corporate centre based in ’home’ country Dominant decision flow: centre to subsidiaries Figure 8.7 The organisation of the global company

31. Multi- local Key: Country-based national subsidiaries Corporate centre based in ’home’ country Dominant decision flow: loose control of subsidiaries by corporate centre Figure 8.8 The multi-local organisation

32. Intern’l company Key: Country-based national subsidiaries Corporate centre based in ’home’ country Dominant decision flow: largerly from corporate centre to subsidiary, but with some independence on key aspects of local strategy Figure 8.9 The organisation of the international company

33. Intrenational company Headquarter Intrernational division Home product divisions A, B, C … product divisions National subsidaries

34. Advantages • product/service offer focuses on regional preferences • avoid costly duplication of facilities by configuring functions on a regional basis • achieve regional-scale efficiences • Disadvantages • potential loss of contact with national markets • inability to gain global-scale efficiencies • organisational structures may become highly complex and potentially contradictory Table 8.4 Co-ordinated international regional strategy

35. Multi-local • Product/service offer: Developed for local markets. • Resources, responsibilities and control: Resources largely decentralised to local organisation. Local organisations highly autonomous, with little intervention from the corporate centre. • Dominant power group and elite: Country-based national managers. Independent culture based on national organisations. • R&D and innovation: National R&D facilities to support local product development. • OVERALL: Each national subsidiary managed as an independent entity. Highly responsive national organisation. Independence of subsidiaries encourages innovation and development of new products to meet local needs.

36. International • Product/service offer: Centrally developed products, customised for local needs. • Resources, responsibilities and control: Greater dependence on corporate centre than for multi-local, but more autonomy than global. Core competences centralised. Sophisticated management systems and specialist corporate staff to control subsidiaries. • Dominant power group and elite: Functional managers, especially technical and marketing. Parent company management often superior and parochial in attitude to international operations. • R&D and innovation: R&D facilities centralised and many likely to be located in the country of the corporate parent. Products developed centrally 'given' to national subsidiaries to customise. • OVERALL: Foreign subsidiaries often seen as appendages. Parent company seeks to leverage transfer of knowledge, understanding and skills to national subsidiaries.

37. Co-ordinated international regional • Product/service offer: Product, standardised for the region, with minor modifications for national markets where necessary. • Resources, responsibilities and control: Key resource areas centralised on an international regional basis, with some relatively minor functions left with country-based operations. • Dominant power group and elite: Regional product managers. Emerging culture of international regional interdependence. • R&D and innovation: At least some R&D facilities regionally based. • OVERALL: Strong co-ordination and integration of functions on a regional basis. Able to achieve regional scale. Little or no co-ordination between international regions.

38. Global company • Product/service offer: Standardised product sold worldwide, with possible cosmetic changes for local markets. • Resources, responsibilities and control: Centralisation of assets, resources and responsibilities. Overseas subsidiaries depend on corporate centre for resources and direction. • Dominant power group and elite: Centralised product divisions. Highly dependent culture based on parent company’s home location. • R&D and innovation: R&D facilities wholly centralised in 'home' location. National subsidiaries unable independently to develop new products. New ideas need to be adopted by corporate centre. • OVERALL: Role of local units is to assemble and/or sell products developed centrally. National subsidiaries largely concerned with implementing plans and policies developed by corporate centre. Strength is ability to achieve global scale.