Global Enterprise and Competition 66.511.202

Global Enterprise and Competition66.511.202Fall 2007

Ashwin Mehta, Visiting Faculty

Microsoft launches Vista worldwide

After five years of marketing blitz, the largest software maker unveils the new computer operating system Tuesday.January 30 2007: 9:21 AM EST

NEW YORK (Reuters) -- Microsoft Corp. rolled out Windows

Vista at retailers in 70 countries Tuesday, delivering a new computer operating system that aims to better manage the explosion of digital media and protect users from the dangers of the Internet.

What are key planning elements?

The Forbes Global 2000, April 2006

Boeing is soaring on orders for its new 787 - Global Gamble

Global markets and operations in global terms,

more diverse organization in terms of culture,

few core values that are its major unifying force.

It has a headquarters but is often managed from diverse locations

EnterpriseBusiness entity, profit motivation, growth, any size, any industry, B2B and B2C

CompetitionLocal, National, International and Global

Global Enterprise and Competition

TESCO - #3 retailer in the World2X Wal-Mart in the UKEntering the US market

2006

Group sales 25,401 28,280 33,557 36,957 43,137

UK 19,821 21,309 24,760 27,146 29,990Rest of Europe 2,181 2,664 3,385 3,818 5,095Asia 1,398 2,031 2,669 2,902 4,369

Operating profit

UK 1,215 1,289 1,486 1,556 1,788Rest of Europe 90 134 171 243 263Asia 17 69 121 153 229

Total Group 1,322 1,492 1,778 1,952 2,280Return on capital employed

10.80% 10.20% 10.40% 11.80% 12.70%

Number of stores - Group

979 2,291 2,318 2,334 2,672

Number of stores -UK 729 1,982 1,878 1,780 1,898

2002 2003 2004 2005

TESCO - A Very Successful Retailer

Reasons for success?

LeadershipClubcardEmployeesCultureSupply chainInnovationGlobal markets

CATALOG DESCRIPTION:

To be taken as last course in foundation core.

Is an integrated investigation of global competitive issues to help students understand the processes of organization and technological innovation which permit businesses to achieve competitive advantages in a global environment.

This course also deals with the nature and techniques of industry analysis necessary to the formulation of effective global strategy for the firm. 

•understand challenges and issues in operating across national boundaries

•develop analytical ability to formulate strategic options

•understand integration of key functional areas, including marketing, manufacturing, R&D and customer support

•use “strategy analysis” tools to develop scenarios, impact and select appropriate set of strategies

•improve research capability to gather and interpret key environmental data that define critical parameters for a global strategy

Course Objectives:

COURSE REQUIREMENTS:

1. Text Book: Global Competitive Strategy, by Daniel Spulber, Cambridge University Press ISBN: 978-0-521-88081-7

2. Instructor’s NotesYou can download class notes as shown in Class Schedule.

3. Other reading materialsSee Syllabus

4. Assignments.

Group Projects:Group Projects: Each student will be assigned to a group to develop a strategic analysis of a company .

Assigned cases: a written case analysis for three(3) cases, to be submitted via email as attachments. 3 – 5 students will present their assignments in the class.

Students are expected to participate in class discussions. You are expected to arrive at class fully prepared to discuss the material assigned for that day.

Assignments also include presentations

Syllabus:

http://faculty.uml.edu/amehta

What is a Modern Global Enterprise?*

Focused on Enterprise-wise objectives, not local initiatives/priorities

Aligning subsidiaries around a common strategic vision

Managing from CenterIntegration of operations globallySharing local innovations around the world

Common Corporate culture, while managing sub cultures

Fortune, February 2006

Considerations

Coverage

Local, National, Regional, Global

Str

ateg

y &

In

teg

rati

on

Co

rp,

Bu

sin

ess

, F

un

ctio

nal

Organization

Functional, Divisional, Matrix

Op

erat

ing

Mo

de

Ow

n,

JV

’s,

Par

tner

ing

, T

ran

sac

tio

na

l

Adaptation

Market-specific

, Regional, G

lobal

Internatio

nalizatio

n

Organic, M

&A’s

Business Processes

Local, Global, Mixed

Other Issues

Control, Management/skills,

Cultures, Institutional, Ethics

What is beingSatisfied?

Who is beingSatisfied

How are customer needs being satisfied

The beginning …

BusinessDefinitionVision/Mission

The Theory of the Business*

*: Peter Drucker

How do we make money

Making the Difference

Required to maintain Leadership

Assumptions about Environment, Mission and Core Competencies Must Fit Reality

The Theory of the Business*

*: Peter Drucker

The assumptions in all Three Areas Have to Fit One Another

The Theory of the Business Must be Known and Understood Throughout the Organization

The Theory of the Business has to be Tested Constantly

Session 1

Moneymaking Basics*

*: The Basics of Moneymaking, Ram Charan, http://finance.yahoo.com/expert/article/companyknow/35703

Cash

Margin

Velocity

Return

Growth

Change in “money making model” impacts all of these ---Dell selling through retailers Vs Direct only

Outside In* --- External Environment

*: See Your Business Outside In, Ram Charan, http://finance.yahoo.com/expert/article/companyknow/30421

Recognize changes and patterns (lifestyle, technology, competition

Failures have consequences

Build External PerspectiveOpportunitiesThreats

Repositioning Business**Decision making process

**: When – and How – to Reposition Your Business, ram Charan http://finance.yahoo.com/expert/article/companyknow/31627

What is Strategy?

StrategyUse of scarce resource to achieve vision/mission

and objectives

Collection of actions:Corporate (what business/industry)Business (how to compete)Organization/function (where to allocate resources)

At IBM, we strive to lead in the invention, development and manufacture of the industry's most advanced information technologies, including computer systems, software, storage systems and microelectronics.

We translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide.

Example IBM Vision/Mission

Session 1

Example: IBM Strategies

IBM’s strategy is to pursue an innovation agenda with its clients, partners and in other relationships, and

to continue refining its portfolio to achieve higher value.

Through its understanding of where technology, client requirements and global business are headed,

the company continually makes strategic decisions to

maintain its leadership of this rapidly changing business by focusing on high-value innovation-based solutions and services while consistently generating high returns on invested capital for its

shareholders.

The company utilizes its entire portfolio — hardware, software,

services, technology and research to maintain its leadership.

Session 1

Business successes and failures

Always point to Strategy

Strategy and Strategic Positioning

Sustainable

Session 1

McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

11

15/e PPT15/e PPT

Introduction to Global Competitive Strategy

© Professor Daniel F. Spulber

Global Competitive Strategy

Introduction

Global Competitive Strategy

Outline of introduction

The global challenge

The global mosaic

The global strategy “Star Analysis”

The Global Challenge Globalization changes nature of competition

-- Competitors can be very different! Innovative entrants, including emerging market firms Global 500 Companies*: 2005 2006 2007

US 176 170 162

Japan 81 70 67

France/Germany/UK 111 111 108

China 15 20 24

Canada 13 14 14

India 5 6 6

Global Competitive Strategy

*: Fortune

Global competitive advantageBest sources of products, global brands World-class cost efficienciesGlobal pool of innovationsGlobal mix of transactions

Global Competitive Strategy

The Global Challenge

The Global Challenge

To serve large-scale global market

To address market differences across countries

Global Competitive Strategy

Size of Global BusinessCurrent $ (Source: World Bank)

• World GDP: $ 41.3 trillion

(Gross Domestic Product) US: $ 11.7 trillion EU (25): $ 12 trillion Japan $ 4.6 trillion Latin America and Caribbean $ 2 trillion Middle East and Africa $ 1 trillion India $ 0.7 trillion China $ 1.9 trillion

High growth rate of emerging markets

Size of International BusinessTotal exports of goods and services

World Trade $ 11 trillion

Merchandise $9 trillion

Agriculture, fuels and mining, manufactured goods

Services $2 trillion

Transportation, travel, commercial services

Growing importance of trade to US economy

Increases in:

Exports:- Capital goods (mainly

semiconductors, computer accessories)

- Industrial supplies- Consumer goods

Imports:- Industrial supplies

and crude oil- Auto industry- Capital goods

Shares of Exports and Imports in GDP

0.02.04.06.08.0

10.012.014.016.0

37 46 55 64 73 82 91

Year

in %

export-share

import-share

Size of International Business

$1.5 trillion in international currency

transactions per day! 63,000 multinational corporations Major source of economic growth and investment for

developed and developing countries Source of global technological innovation Earnings growth for many companies (Wal-Mart, GE,

Carrefour, Nestlé, Unilever, Cemex, Toyota, Samsung)

Why was Nokia so successful?

Why did Daimler-Chrysler have

problems?

The Global Mosaic Vast economic differences across countries

GDP per capita, prices, wages

Underlying geographic differences – Geography matters

Large “economic distances” between countries

“Sticky borders” preserve these differences

• The arbitrage principle – economic differences evidence of sticky borders, many strategic opportunities remain

Global Competitive Strategy

The world is bumpy!

Language Culture, customs, and history Social institutions Demographic differences: health, education Public policies Legal and regulatory systems Business practices Currencies Technology

Business must bridge critical differences between countries

The costs of trade: The Four T’s Transaction costs Tariff and non-tariff barriers Transportation costs Time costs

Borders are “sticky”

Global Competitive Strategy

Business must navigate the World Trade System

NAFTA

Caribbean Basin InitiativeProposed

Business strategy must account for changes in political relationships

and trade deals between countries

The Arbitrage Principle

Country borders: Restrict movement of inputs – capital, labor, technology,

resources Limit trade in goods and services Create persistent differences in technology and information Preserve economic differences -- prices and wages Arbitrage reduces economic differences Innovative transactions find arbitrage opportunities

Country borders provide opportunities and competitive advantage to international business

Globalization challenges business strategy in a fundamental way

Trade costs are high resulting in economic differences between countries

The global mosaic offers opportunities for generating gains from trade

The successful global business develops innovative international transactions to gain global competitive advantage

Global competitive advantage

NEXT SESSION:Analytical framework!

Recap … Introduction to Global Business

Competition

Globalization4T’s, GATT, WTO, Technology, …

OpportunitiesMarkets, Resources

Analysis and StrategyTraditional (home country-based) to Global

STAR Analysis

Global Added Value

Value Connection

G5 Strategies

Platform, Network, Intermediary,

Entrepreneur, Investment

Assignment 1 Due November 15, 2007

GO TO THIS LINK (http://knowledge.wharton.upenn.edu/createpdf.cfm?articleid=719&CFID=2411127&CFTOKEN=34070626),

REVIEW THE ARTICLE, DO A WEB RESEARCH ON COMPANIES DISCUSSED IN THE ARTICLE, AND ADDRESS THESE QUESTIONS:

(YOU SHOULD WRITE AN INTRODUCTION/CONTEXT BEFORE ADDRESSING THESE QUESTIONS)

How many stores do Wal-Mart, Home Depot and IKEA have in various countries/regions?

Describe Wal-Mart and Home Depot’s International expansion strategies (i.e. acquisition, JV’s, organic growth) and comment on their results (successes/failures/challenges)

Review Wal-Mart and Home Depot’s revenues over the last five years and analyze revenues from US Vs International.

What has been the main thrust of IKEA’s International expansion strategy and how has it performed (review their financial and other data of past few years)?

YOUR REPORT MUST BE BETWEEN 1000 AND 1500 WORDS AND MUST INCLUDE SOURCES REFERENCED.

Group Projects

Group Formation

Company Assignments

Templates Review

1. Company Financials(see Excel spreadsheet in “Group Project and Assignments Files”). Summarize key financial data (growth rates, major ratios, etc.)

Group Project Template