902 class 7

The Future

Course Summary and Integration

Douglas Reid

[email protected]

@douglasreid

Today’s objectives

Framing a picture of the future

What does it mean for the MNE

What does it mean for you?

930-1045 Administrivia, the future

1045-1100 Break

1100-1215 Big questions for the MNE

1215-1230 Break

1230-120 You…and us

Administrivia

Grading status:

• Assignment 1 – DONE, RETURNED• Assignment 2 – Back tomorrow, R&R

September 18• Assignment 3 – DONE, RETURNED

• Assignment 4 – Due September, R&R• Assignment 5 – Due September

Virtual Office Hours:

Tuesday, 745 PM – 1000 PM Kingston time

Customer willingness to pay

Costs

Strategy

What matters to the future?

Source: Hamel, 2009

Exhaustion

Replication Supplantation

Evisceration

Even good strategies decay…

National strategies may also decay.

What world do you live in?

What will you need to know?

Likely scenario

What’s happening here?

Innovation needs to be done differently to address markets where fresh growth remains

What were today’s key ideas?

Global strategy

Course Objectives

Practical proficiencyGenerate more questionsStimulate lifelong interestPut bigger questions into perspective

Customer willingness to pay

Cost of delivering

what the customer buys

Strategy

Implementation happen primarily by changing the allocation of resourcesconsistent with objectives

Why do multinational corporations exist?

Four types of distance matter in IB

Cultural distance

Administrative distance

Geographic distance

Economic distance

Different languages

Different ethnicities

Lack of connective social networks

Different religions

Different social norms

Absence of colonial ties

Absence of shared monetary or political association

Political hostility

Government policies

Institutional weakness

Physical remoteness

Lack of common border

Landlocked

Size of country

Weak transport’n or communication links

Climatic differences

Difference in consumer incomes

Differences in costs and quality of resources: Natural Financial Human Infrastructure Intermediate input markets Information or knowledge

Attrib

utes

Cre

ating

Dis

tanc

e

Source: Ghemawat, 2001

Distance Difference Cost Risk

Liability of foreignness

Internationalization Process

Why

How

WhereWhat Locational attractiveness

ADDING Helps Answer “Why?”

• Adding volume (growth)

• Decreasing costs

• Differentiating (increasing WTP)

• Improving industry attractiveness (bargaining power)

• Normalizing (optimizing) risk

• Generating knowledge (and other resources, capabilities)

Source: Ghemawat

Source: Dunning

Resource seekers

Source: Dunning

Market seekers

Source: DunningEfficiency seekers

Strategic Asset Seekers

Volvo XC90 (Source: www.autospectator.com) Geely FC-1(Source: www.leblogauto.com)

Volvo Geely

Country of Origin Sweden China

Founding Year 1927 1986

No. of Models 10 7

Price Range 25,600-49,000 USD ~8,000-9,500 USD

Company Revenue 2009 12.4 bn USD 2.1 bn USD

Competitive Advantage Safety, Design, Quality Low Cost, ImitationsSource: Dunning

What makes a location attractive?

Relate to the Motivation for Internationalizing

Resources (inputs)

Markets

Efficiency

Strategic assets

Others?

The Value Chain

Mode

Occasional export

Licensing

Joint venture

Wholly-ownedsubsidiaryLevel of

Control over

ForeignActivities

Resources Committed to Foreign Market

Franchising

Export through agent

Source: Bartlett and Ghoshal

Escalating c

ommitment

Source: PRTM

50% of manufacturing to be done in host countries by 2010

Trends in Functional Location

Fundamental Job of Management

"… to maintain the cooperative system."

Chester BarnardThe Functions of the Executive, 1938

Global managers get things done over distances…

Critical Skills

• Developing peer relationships

• Carrying out negotiations

• Motivating subordinates

• Resolving conflicts

• Establishing information networks

• Disseminating information

• Making decisions in conditions of ambiguity

• Allocating resources

• Constant learner

• External representation

Articulation of current mindset

Exposure to diversity

Integration of old and new knowledge

Curiosity

Comfort with differences

Cultivating global mindsets…

Internal competition from new locations (e.g. East

Europe, Far East)

Competition from other subsidiaries with similar

activities

Competition from the external marketplace

The environment faced by a subsidiary…

We’ve come a long way…

You are here

What’s new here?

What will you NOT tolerate?

Be clear about your values

Seek the opportunity to lead

Seek and embrace responsibility

Choose action

Develop others

Be urgently curious.

Strategic Choice

ArbitrageAggregationAdaptation

CommitmentLevel

Wholly owned subJV, alliance,

license, export

Subsidiary Role

InnovatorImplementer

Distance Reality

CulturalAdministrative

GeographicEconomic

Context matters

Managerial Practice

New Literacies

Habits of Mind

CooperationCurationCoaching

Managerial Practice

New Literacies

Habits of Mind

CooperationCurationCoaching

Questions, not answersPattern recognitionAlternate interpretations

Result: Improved mental model

A

YX

B

Current

A

YX

B

Future

Managerial Practice

New Literacies

Habits of Mind

CooperationCurationCoaching

Questions, not answersPattern recognitionAlternate interpretations

Seeking varianceReflectionAttitude of wisdom

To become a more effective manager, I will…

Do more of…_______________________________________________________________________________________________

Do less of…_______________________________________________________________________________________________

Start doing…_______________________________________________________________________________________________

Stop doing…_______________________________________________________________________________________________

Result: Build the habit of wisdom

Belief

Sound

Unsound

Low High

Strength of Attachment to Belief

IndifferentCan’t tell

opinion from fact

OK, till circumstances

changeBest

Anything missing?

Keeping up…

Books I’d read…

(free) Strategy and IB listserv

How to make things better, forever?

Thank you!

Dr. Douglas Reid

[email protected]@douglasreid