Foundations of Strategy Chapter 8: Global Strategies and the Multinational Corporation

1. Foundations of Strategy Chapter 8: Global Strategies and the Multinational Corporation Team 4 10:00am Ford Motor Company 423110 Brooks Garner Alex Mills Grayson Watson

2. Implications of International Competition for Industry Analysis • Sheltered Industries • Trading Industries • Multidomestic Industries • Global Industries

3. Implications for Competition • Porter’s Five Forces (Three to focus on) • Competition from Potential Entrants • Rivalry Among Existing Firms • Increasing the bargaining power of buyers • US Automakers (Ford, GM) domestic market share reduced from 84% in 1976 to 35.7% in 2011

4. Analysing Competitive Advantage Globally • Availability of resources • Internal resources and capabilities • National environment

5. Comparative Advantage • Recognizing your company’s advantages compared to competitors • Recognizing the advantages of the country you are operating in • Natural resource endowments, labour supply, and capital stock • Technology, human skills, and management capability

6. Porter’s National Diamond • Factor Conditions • Related and Supporting Industries • Demand Conditions • Strategy, Structure, and Rivalry

7. Ford’s Global Strategy • Cost Leadership • Divides the world into regions • Different models in different regions • Five basic, inexpensive chassis to build off of (Except F-series and Mustang) • Plants all over the world, primary source of profits is in the US • Toyota: Kaizen • GM: Electric Cars, GM plans at least 20 new electric, fuel cell vehicles globally by 2023

8. Ford Vehicles Sold per Country Units Produced FY 2017 Battery-Operated Cars Sold

9. The International Location of Production Choosing Where To Locate Production • Natural resource availability • Firm-Specific competitive advantage • Tradability • Political considerations Location and Value Chain • Most goods and services are comprised of a vertical chain • Cost and quality are most heavily considered (Outsourcing)

10. Ford Value Chain https://corporate.ford.com/microsites/sustainability-report-2017-18/strategy-governance/value-chain-impacts.html

11. How Should Firms Enter Foreign Markets? 5 KEY Factors to consider • Is the firm's competitive advantage based on firm specific resources • Is the product tradable? What are the barriers? • Does the firm have the resources and capabilities to go overseas? • Can the firm directly appropriate the returns to its resources? • What transaction costs are involved

12. International Alliances and Joint Ventures Strategic International Alliance • Companies from different countries join forces • Increasingly popular way to reach foreign markets Joint Venture • A cooperative enterprise entered into by two or more business intenties for the purpose of a specific project or other business activity

13. Global Integration VS. National Differentiation Global Strategy-One that views the world as a single market National Differentiation- is the strategy that aims to distinguish a product or service, from other similar products, offered by the competitors in the market.

14. Strategy and Organization within the Multinational Corporation Greatest Challenge- aligning organizational structures and management systems and their fit with the strategies being pursued.

15. The Evolution of Multinational Strategies and Structures • International firms have adopted different strategies and structural configurations, but these changes can be very slow, difficult and costly. Especially when governments get involved. • Captives of their history

16. Era of the European Multinational- Early 20th Century • Pioneers of multinational expansion: Unilever, Shell, ICI, and Phillips • Created “multinational federations” because of the conditions at the time.

17. Era of the American Multinational- Post WWII • U.S. economic dominance for Ford, GM, IBM, Coca-Cola, Caterpillar, and P&G. • Overseas subsidiaries allowed considerable autonomy. • U.S. based resources and capabilities were primary competitive advantage in world markets.

18. The Japanese Challenge- 70’s and 80’s • Japanese multinational corporations pursued global strategies from centralized domestic bases. • R & D and manufacturing were concentrated in Japan. • Overseas subsidiaries were responsible for sales and distribution. • Globally standardized products in large scale plants provided unrivalled cost and quality advantages. • R & D and manufacturing eventually dispersed.

19. Strengths of the Multinationals • Europe • Adapting to the conditions and requirements of individual national markets. • America • Ability to transfer technology and proven new products from domestic strongholds to national subsidiaries. • Japan • Efficiency of global production and new product development.

20. Challenges of the Multinationals • Europe • Achieve greater integration of their sprawling international empires. • America • Nurturing the ability to tap their foreign subsidiaries for technology, design and new product ideas. • Japan • To become true insiders in the overseas countries where they do business.

21. The Transnational • Changes in responsibilities, decision making powers, and modes of coordination are more important than formal changes in structure. • Costs of research and new product development are rising. • Transnational Organization- an integrated network of distributed and interdependent resources and capabilities. Necessitates that…

22. Transnational Organization • Each national unit is a source of ideas, skills, and capabilities that can be harnessed for the benefit of the total organization. • National units access global scale economies by designating them the company’s world source for a particular product, component, or activity. • The centre must establish a new, highly complex managing role that coordinates relationships among units but does so in a highly flexible way.

23. Ford succeeding in the International Environment Internationally- 5th largest automobile company (Behind GM, Volkswagen, and Toyota) U.S. - 2nd largest in the U.S. (Behind GM)

24. Summary • Competitive advantage not by resources and capabilities, but by the national environment. • Determining whether to enter an overseas market by whether or not a firm can create value from it. • Knowing how to be successful in the international market, not just in their home market. • Senior managers still have trouble being successful in determining strategies and organizational structures internationally.