global strategy mike w. peng c h a p t e r i i copyright © 2005 south-western. powerpoint...
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Global StrategyGlobal StrategyMike W. PengMike W. Peng
Copyright © 2005 South-Western. PowerPoint Presentation by David Ahlstrom, Chinese University of Hong KongAll rights reserved. and Charlie Cook, The University of West AlabamaCopyright © 2005 South-Western. PowerPoint Presentation by David Ahlstrom, Chinese University of Hong KongAll rights reserved. and Charlie Cook, The University of West Alabama
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Strategizing Around the Globe
Strategizing Around the Globe
Part I: Foundations of Global StrategyPart I: Foundations of Global Strategy
Copyright © 2005 South-Western. All rights reserved. 1–2
What Global Strategy?
• Traditional “global strategy” is treating different countries as one worldwide or “global” market. World car: Ford Contour (as the Mondeo in Europe)
World drink: Coke Classic
World advertising commercial: Polar bear ads
• But that strategy has backfired repeatedly There is no world car, no world drink, no world MTV
Toyota Camry: Best-selling car in the US, but not even top-5 best-selling car in Japan (Honda Fit is #1 in Japan)
• A more balanced view—covering both global and local (non-global) aspects—is necessary (Figure 1.1)
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HSBC (One of the world’s largest and most global banks): The World’s Local Bank
Figure 1.1Source: Issued by HSBC Holdings, plc
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A Global Global-Strategy Book
• Traditional global strategy books Only dealing with MNEs from developed economies
which practice “one-size-fits-all” “global strategy”
• Traditional international business booksOnly dealing with foreign entrants (usually MNEs)
and ignoring local/domestic firmsLocal/domestic firms are not necessarily passive
• This is a global global-strategy bookStrategies of firms around the globe Both international and non-international (domestic)From both developed and emerging economies
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What is Strategy?
• From military strategy to strategic management
• Strategy as plan (as in classic military planning)
SIA 1.2: A 250-year plan at Matsushita
• Strategy as action – emergent strategy
• Strategy has elements of both plan and action (Figure 1.2)
• Strategy as integration – combination of plan and action
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The Essence of Strategy
Figure 1.2
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Fundamental Issues in Strategy Around the Globe
• Why do firms differ?
• How do firms behave?
• What determines the scope of the firm?
• What determines the international success or failure of firms?
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Why Do Firms Differ?
• Western firms (US/UK vs. German/French)Have different (shorter- versus longer-term)
planning horizons.
• Japanese firmsAre different from Western firms.
• Firms from emerging economies (e.g., China, Korea, Russia)Are also different.
• The challenge is to understand the roots of these differences when trying to compete globally.
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How Do Firms Behave?
• Three Views (Figure 1.3) Industry-based view
Resource-based view
Institution-based view
• Firms’ strategic behaviors are influenced by all three factors.
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Three Leading Perspectives on Strategy
Figure 1.3
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What Determines the Scope of the Firm?
• In the West In the 1960s and 1970s: ConglomerationSince the 1980s: Diversification that focused
on core competencies
• In developing economies in the 1990sChina, India, Indonesia, Peru, South Africa, and
South KoreaConglomeration is still in vogue.Some changes?
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What Determines the International Success or Failure
of Firms?• Acquiring and leveraging competitive advantage
• The Key: Sustaining such an advantage over time and across countries (regions) through replication and innovation.
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How About Global Strategy?
• Traditional “global strategy” Only relevant for MNEs from developed
economies
• The same as “international” (non-U.S.) strategyWal-Mart went to Mexico in 1991: Did it go
“global”? Everything becomes “global”?
• Our definition of global strategy:Strategies of firms around the globe
Both international and non-international (domestic)Both developed and emerging economies
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A Glance at the World Economy
• A $30 trillion economy (official GDP)
• What will happen in 2020: assuming 4% annual growth for US, EU, and Japan and 9% for China ($ trillion) – see Figure 1.4
2003: US (10), EU (9.5), Japan (4), China (1.3)
2020: US (21), EU (19), Japan (8), China (5)
• 51 of top 100 economic entities (countries or companies) are MNEs
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Estimates of Gross Domestic Products (GDP), 2003–2020
Figure 1.4
Based on estimates from Economist, 2003, Bergernomics, in The World in 2003 (p. 30), London: The Economist. 2020 GDP estimates are based on 4 percent annual growth for the US, EU, and Japan, and 9 percent for China. The size of food items is proportional to the size of the economies.
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The Top 10 Economies (GDP) and Firms (Sales), 2003
Table 1.2
• USA
• Japan
• Germany
• UK
• France
• China
• Italy
• Canada
• Spain
• Mexico
•Wal-Mart
•BP
•ExxonMobil
•Royal Dutch/Shell
•General Motors
•Ford Motor
•DaimlerChrysler
•Toyota Motor
•General Electric
•Total
Sources: Adapted from (1) World Bank, 2004, World Development Indicators database (http://www.worldbank.org, accessed July 25, 2004), and (2) Fortune, 2004, The Fortune Global 500, July 26: F1–F2.
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Changes in the Fortune Global 500, 1990–2003
Table 1.3Sources: Based on data from various issues of Fortune Global 500. Finland and Sweden are included as “others” prior to 1996 and as European Union after 1996.
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The 20 Largest Firms (by Sales) Headquartered in Emerging Economies, 2003
Table 1.4Source: Adapted from Fortune, 2004, The Fortune Global 500, July 26: F1–F10.
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Three Defining Events• Anti-globalization protests
Since Seattle, 12/1999 (Table 1.5) B-school students: More in favor of globalization (Table
1.6)
• Terrorist attacks 9/11 and the war on terror
• Corporate governance crises Asia: Financial crisis (1997) US: Enron, WorldCom, Arthur Andersen (2002) EU: Royal Ahold (2003)
• The post-Seattle, post-9/11, post-Enron world More uncertainties, but also more potential opportunities
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Anti-Globalization Protests
Table 1.5Source: Adapted from (1) Business Week, 2001, When demonstrations turn violent, August 6: 8 and (2) Economist, 2003, Cancun’s charming outcome, September 20: 11.
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Views on Globalization: American General Public versus
Business Students
Table 1.6
Sources: Based on (1) A. Bernstein, 2000, Backlash against globalization, Business Week, April 24: 43; (2) M. W. Peng & H. Shin, 2003, How do future business leaders view globalization? Working paper, Fisher College of Business, The Ohio State University, http://fisher.osu.edu/mhr/faculty/peng. All differences are statistically significant.