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Broader Lessons

The danger in discussions about integration is that they can foat o into

the realm o the ethereal. Thats why I went into speci cs about theintegration challenges acing PMS and its why it seems li!e a good ideato wrap this article up by recapitulating the general points outlined.

Focus on one or two of the As.

"hile it is possible to ma!e progress on all three #s especially or arm that is coming rom behind companies $or% o ten more to the point%

businesses or di&isions' usually ha&e to ocus on one or at most two #s intrying to build competiti&e ad&antage. (an your organi)ation agree onwhat they are* It may ha&e to shi t its ocus across the #s as thecompanys needs change. I+M is ,ust one e-ample o a general shi ttoward arbitrage. +ut the e-amples o I+M% P /% and% in particular% PMSillustrate how long such shi ts can ta!e and the importance% there ore%o loo!ing ahead when deciding what to ocus on.

Make sure the new elements of a strategy are a good torganizationally.

"hile this isnt a -ed rule% i your strategy does embody nontri&ially newelements% you should pay particular attention to how well they wor! with

other things the organi)ation is doing. I+M has grown its sta in Indiamuch aster than other international competitors $such as #ccenture'that ha&e begun to emphasi)e India0based arbitrage. +ut 1uic!ly moldingthis wor! orce into an e icient organi)ation with high deli&ery standardsand a sense o connection to the parent company is a critical challenge23ailure in this regard might e&en be atal to the arbitrage initiati&e.

Employ multiple integration mechanisms.

Pursuit o more than one o the #s re1uires creati&ity and breadth inthin!ing about integration mechanisms. /i&en the sta!es% these actorscant be le t to chance. In addition to I+Ms algorithm or matchingpeople to opportunities% the company has demonstrated creati&ity inde&ising 4deal hubs5 to aggregate across its hardware% so tware% andser&ices businesses. It has also reconsidered its pre&ious assumption thatglobal unctional head1uarters should be centrali)ed $recently% I+Mrelocated its procurement o ice rom Somers% 6ew 7or!% to Shen)hen%(hina'. 8 course% such creati&ity must be rein orced by organi)ationalstructures% systems% incenti&es% and norms conduci&e to integration% as atP /. #lso essential to ma!ing such integration wor! is an ade1uatesupply o leaders and succession candidates o the right stripe.

hink a!out e"ternalizing integration.

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6ot all the integration that is re1uired to add &alue across borders needsto occur within a single organi)ation. I+M and other rms illustrate thatsome e-ternali)ation is a !ey part o most ambitious global strategies. Itta!es a di&ersity o orms2 ,oint &entures in ad&anced semiconductorresearch% de&elopment% and manu acturing9 lin!s to and support o :inu-and other e orts at open inno&ation9 $some' outsourcing o hardware tocontract manu acturers and ser&ices to business partners9 I+Msrelationship with :eno&o in personal computers9 customer relationshipsgo&erned by memoranda o understanding rather than detailed contracts.;efecting this increased range o possibilities% reported le&els ointernational ,oint &entures are running only one01uarter as high as theywere in the mid0s% e&en though more companies are e-ternali)ingoperations. ?-ternali)ation o ers ad&antages not ,ust or outsourcingnoncore ser&ices but also or obtaining ideas rom the outside or coreareas2 or instance% Procter /ambles connect0and0de&elop program%I+Ms inno&ation ,ams% and T(Ss in&estments in in&ol&ing customers in1uality measurement and impro&ement.

Not all the integration that is required to add value across borders needsto occur within a single organization.

#now when not to integrate.

Some integration is always a good idea% but that is not to say that moreintegration is always better. 3irst o all% &ery tightly coupled systems arenot particularly fe-ible. Second% domain selection in other words%

!nowing what not to do as well as what to do is usually considered anessential part o strategy. Third% e&en when many di&erse acti&ities arehoused within one organi)ation% !eeping them apart may be a bettero&erall approach than orcing them together in% say% the bear hug o amatri- structure. #s :afey e-plains% the reason P / is able to pursuearbitrage up to a point as well as adaptation and aggregation is that thecompany has deliberately separated these unctions into three !inds osubunits $global business units% mar!et de&elopment organi)ations% andglobal business shared ser&ices' and imposed a structure that minimi)espoints o contact and% thereby% riction.@ @ @

3or most o the past AB years% the rhetoric o globali)ation has beenconcentrated on mar!ets. 8nly recently has the spotlight turned toproduction% as rms ha&e become aware o the arbitrage opportunitiesa&ailable through o shoring. This phenomenon appears to ha&e outpacedstrategic thin!ing about it. Many academic writings remain ocused onthe globali)ation $or nonglobali)ation' o mar!ets. #nd only a tiny

raction o the many companies that engage in o shoring appear to thin!about it strategically2 8nly

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(learer thin!ing about the ull range o strategy options should broadenthe percei&ed opportunities% sharpen strategic choices% and enhanceglobal per ormance.

1. There are three generic strategies for creating value in a globalcontext: adaptation , aggregation , and arbitrage .

2. Adaptation strategies seek to increase revenues and market share b tailoringone or more com!onents of a com!an "s business model to suit localrequirements or !references. Aggregation strategies focus on achieving

economies of scale or sco!e b creating regional or global e#ciencies. Thesestrategies t !icall involve standardizing a signi$cant !ortion of the value!ro!osition and grou!ing together develo!ment and !roduction!rocesses. Arbitrage is about ex!loiting economic or other di%erences betweennational or regional markets, usuall b locating se!arate !arts of the su!!lchain in di%erent !laces.

&. 'da!tation strategies can be subdivided into $vecategories: variation , focus , externalization , design , and innovation .

(. 'ggregation strategies revolve around generating economies of scale orscope . The other nongeogra!hic dimensions of the )'*+ framework introduced

in )ha!ter 1 )om!eting in a *lobal -orldcultural , administrative , geographic , and economic also lend themselves toaggregation strategies.

/. 0ince arbitrage focuses on ex!loiting di%erences between regions, the )'*+framework also de$nes a set of substrategies for this generic a!!roach to globalvalue creation.

. ' com!an "s $nancial statements can be a useful guide for signaling which ofthe '3 strategies will have the greatest !otential to create global value.

4. 'lthough most com!anies will focus on 5ust one '3 at an given time, leading6edge com!anies such as *+, 78*, 9 ;, and Nestl. ;ost com!anies would be wise to ?a@ focus on one or two of the '3s, ?b@ makesure the new elements of a strateg are a good $t organizationall , ?c@ em!lomulti!le integration mechanisms, ?d@ think about externalizing integration, and?e@ know when not to integrate.

http://catalog.flatworldknowledge.com/bookhub/reader/5579?e=dekluyverglobstrat_1.0-ch01http://catalog.flatworldknowledge.com/bookhub/reader/5579?e=dekluyverglobstrat_1.0-ch01

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