The Myth of Global Strategy

THE MYTH OF THE MYTH OF GLOBAL GLOBAL

STRATEGYSTRATEGY(ALAN M. RUGMAN, 2001)(ALAN M. RUGMAN, 2001)

Presented by Sharandeep K Nijher, Siddharth Sanghai and Yi Ping Shieh

INTRODUCTION: THE MYTH INTRODUCTION: THE MYTH OF GLOBAL STRATEGYOF GLOBAL STRATEGY

Business activity in large firms takes place in ‘regional blocks’

Global markets are neither homogenising, nor becoming dominated by US market capitalism

Government regulations and cultural differences have

divided the business world into the triad blocks Multinational national firms are

competing for regional market share within

Global strategies suit very few sectors; for the majority integration strategies are required

Concept of globalisation is driven by network managers, but strategies tend to be triad/regional, not global and unvarying

Only the ‘unsuccessful’ multinationals pursue global strategies further

EUEU

N. AmericaN. America

JapanJapan

SOME COMMON GLOBAL SOME COMMON GLOBAL MISUNDERSTANDINGSMISUNDERSTANDINGS

1. Globalisation is providing the same output to countries everywhere.

Business professionals claim to recognise the emergence of globalisation by MNE’s that sell uniform productsYet little emphasis that the majority of revenue is

generated from the ‘triad-region’Over 90% of cars produced in the EU are sold there tooOver 90% of paint, steel, heavy electrical equipment,

energy and transportation are made and used within triad-based MNE’s

Services sector, 70% employed within triad, are essentially local or regional activity based

SOME COMMON GLOBAL SOME COMMON GLOBAL MISUNDERSTANDINGSMISUNDERSTANDINGS

2. That MNE’s are globally monolithic and excessively powerful in politic terms

Research does not support Such process of regional competition reduces chances

of sustainable long- term profits, and ability to build a strong, sustainable political advantage

500500

156156

198198

125125

NAFTANAFTA

EUEU JapanJapan

SOME COMMON GLOBAL SOME COMMON GLOBAL MISUNDERSTANDINGSMISUNDERSTANDINGS

3. That MNE’s develop homogenous products for the world market, and can dominate local markets everywhere through their efficient production techniques.

Truth: products are adapted to local markets. Hence, no standardised global car for allTriad-based factories, with support system from local

suppliersWhat is popular in one geographic region may be

rejected in anotherEven ‘universal products’ are modified to satisfy

different laws and marketsIncreasing the economic difficulty of centralised production and worldwide distribution

WORLD TRADE IS HIGHLY WORLD TRADE IS HIGHLY REGIONALREGIONAL

Accounts for 57.3% of world exports

Accounts for 56.5% of world imports

Despite growth, continues to be dominated by the triad

The core triad members do not rely on each other, they rely on other members of their own triad.

WORLD TRADE IS HIGHLY WORLD TRADE IS HIGHLY REGIONALREGIONAL

EUIntra-EU:

60.6%

NAFTAIntra-NAFTA:

49.1%

ASIAIntra- Asia:

53.1%

‘Core’ Triad consists of- NAFTA; USA, Canada and Mexico-ASIA; Japan, Australia, New Zealand, Hong Kong...- EU

Confirms that the World’s trade is controlled by the triad.

Majority of trade in the European and Asian triads is within their internal markets

Nearly half of North America’s trade is intra-regional

Thus, what strategies are appropriate for individual multinationals?

8.7%

15.4%

21.1%22.4%

9.4%

14.7%

CONCLUSIONSCONCLUSIONS Ultimately examining from a business perspective, not philosophical. Ultimately examining from a business perspective, not philosophical.

1. Do not assume an integrated global market. Deeper than worldwide economies of scale, strategies should consider

regional trade and investment agreements Adapt to different culture, recognising when to become ‘nationally

responsive’

2. Organisation structures should acknowledge triad-based capabilities and competencies Less reliance on international divisions or global product divisions

3. Develop research and knowledge of triad-based networks, clusters, attributes and competitors. Foreign markets will have varying behaviours from home markets Make alliances and deploy cross-cultural awareness in managerial levels

4. Develop analytical methods for assessing regional drivers of success May prove useful to gain and hold market share in the future

5. Encourage managerial levels to ‘think regional, act local’.