Global Strategy Mike W. Peng c h a p t e r I I Copyright © 2005 South-Western. PowerPoint Presentation by David Ahlstrom, Chinese University of Hong KongAll.

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)


HSBC (One of the world’s largest and most global banks): The World’s Local Bank

Figure 1.1Source: Issued by HSBC Holdings, plc


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


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


The Essence of Strategy

Figure 1.2


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?


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.


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.


Three Leading Perspectives on Strategy

Figure 1.3


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?


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.


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


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


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.


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.


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.


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.


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


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.


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.

Global Strategy Mike W. Peng c h a p t e r I I Copyright © 2005 South-Western. PowerPoint Presentation by David Ahlstrom, Chinese University of Hong KongAll.

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