WORLDWIDE COMPETITORS WORLDWIDE COMPETITORS 8 8
Jan 03, 2016
WORLDWIDE WORLDWIDE COMPETITORSCOMPETITORS
88
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WorldwideWorldwide
Internationalregional
International market entry and
development
Restricted national market scope
Internationalisation Retrenchment
Phase 1 Phase 2 Phase 3 Phase 4
Figure 8.1. The phase model and worldwide strategies
Restricted national market scope
International market entry and development
International regional
Worldwide competitor
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““Think globally and act locally”Think globally and act locally”
Balance between • responsive and and flexible local approach
• effective global co-ordination
No company achieved satisfactory solution!• few: flexible local and central mgnt capabilities
• attempted link them
Globalisation:Globalisation:• problematic strategic spatial imperatives
• practical implementation challenges
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Demand:Demand:
FUNDAMENTAL CHANGE IN FUNDAMENTAL CHANGE IN INTERNATIONAL BUSINESS INTERNATIONAL BUSINESS
PRACTICEPRACTICEAutonomy - integration
Organizational learning
Knowledge transfer
Global ≠ multi-local
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Dimensions tayloring organization:
PProductroduct – – geography geography - - people/procespeople/proces
• organizational complexity • how to develop global vision • differing organizational structures (US, EU, Japan)• consider: relative strengths + weaknesses of
competitors• resource interdependencies among units
How to integrate into transnational organization to exploit global
competition advantage?
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OUR FOCUS:
1. 1. DDeveloping a global strategyeveloping a global strategy
2. 2. GGlobal strategy assessment and lobal strategy assessment and competitive movescompetitive moves
3. 3. IInternational strategic alliancesnternational strategic alliances
4. 4. OOrganizational forms for worldwide rganizational forms for worldwide competitorscompetitors
5. 5. RReconciling the irreconcilable: the econciling the irreconcilable: the search for the transnational companysearch for the transnational company
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1.1. Developing a global strategyDeveloping a global strategy““Global chess”Global chess”
• advantage of lowest nat’l factor cost• tailoring organization along three
dimensionproduct
geography
people/process
• examine carefullyorganizational structure
systems
value
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ProductProduct GeographyGeographyPeople and People and processesprocesses
Global Global strategystrategy
Configure product/ Configure product/ service operations in service operations in
order to:order to:
(a) supply chosen market segments
(b) achieve economies of scale
(c) avoid unnecessary duplication of resources
Achieve geographical Achieve geographical coverage to encompass coverage to encompass strategically important strategically important
countriescountries
Determined by:Determined by:(a) current and future
sales potential
(b) the need to match competitors
(c) have access to low factor costs and/or expertise
Develop people and Develop people and process in order to:process in order to:
(a) achieve a global vision/mindset
(b) leverage cross-unit skills and competences worldwide
(c) ensure strong coordinating and linking mechanisms between organisational sub-units
Figure 8.2 Developing and/or reshaping the worldwide competitor
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EnvironmentEnvironment (external triggers)
• more open trading environment• falling transport cost (containers, large
carriers, deregulation)• new technologies require global scale• converging customer preferences
(communication)• customized core products - global scale
efficiency - flexible manufacturing systems
• growth of global customers
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Capture competitive advantages:Capture competitive advantages:
• visionvision– visionary leader (anticipate/shape future)– catalyst : change existing mindset => world
mindset needed– realization: 5 components required
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Widely shared
INTERNATIONAL INTERNATIONAL
VISION/MINDSETVISION/MINDSET
Time Business anywhere
Leverage Insiderisation
Figure 8.3 The world vision/mindset
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Widely sharedWidely shared: clearly articulated
foster cohesiveness what to do, how to do the business
Business anywhereBusiness anywhere: transparent to needs of local customers
(communication+logistic network)Insideration:Insideration:
respond to local needs (no replication of domestic organizational systems)
LeverageLeverage: fundamental organizational innovation => replace old
mindsetcreating a system of shared value: 1 + 1 = 3
Time:Time: building shared values takes time => establish
priorities, monitoring (BSC)
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Established mindsetEstablished mindset
• Deeply embedded, difficoulkt to change
• It makes the need to change periodically
• If no longer appropriate: organizational risk
• Firm need to seek constant renewal
““a journey without destination”a journey without destination”
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2. Global strategic assessment and 2. Global strategic assessment and competitive movescompetitive moves
RivalsRivals current position, likely competitive moves» analyze competitive
strength
» possible strategic options
Questions to identify competitors’ position:
Product: •Market segments: narrow/broad focus?•Economies of scale: nat’l-worldwide?•Where is necessary to contrentrate to reach economies of scale? (R&D, production)
Geography:•Cover important markets?•Match rivals market coverage?•Access to low factor cost, skill, expertise, locations?
People, processes:•Who operates with global vision? agressively?•Leverage key skill and competencies? Good basis of global competitive advantage?•Strong links and co-ordination between sub-units?
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Company EU Japan NAFTA Asian'Tigers'
EasternEurope
LatinAmerica
Rest ofWorld
Thorntons UK andFrance
Hershey Germany Jointventure
Nestlé Allmarkets
Allmarkets
Allmarkets
Allmarkets
Allmarkets
Allmarkets
Allmarkets
Table 8.2 Assessing global marketglobal market coverage
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Company EU Japan NAFTA Asian'Tigers'
EasternEurope
LatinAmerica
Rest ofWorld
Thorntons Manufacturesin UK andBelgium
Hershey Manufacturesin Germany
Jointventure
Homecountry;majorfacilities
Nestlé CorporateHQ inSwitzerland;productionfacilitiesin mostcountries
All keymarkets
All keymarkets
All keymarkets
All keymarkets
All keymarkets
Table 8.3 Location of key value-adding activities
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World chocolate confectionery industryWorld chocolate confectionery industry
ThorntonsThorntons• limited market coverage, focused on UK, France• Production: UK, Belgium• Niche player selling chocolate specialities (no global
ambitions)
HersheyHershey• strong presence in US, joint venture in Japan, weak in EU• Ambition to develop greater market coverage
NestléNestlé• Extensive world coverage, acquiring national players• Production: in strategically important countries• Global brands, but recognizing local tastes• Overall strategyOverall strategy formed by the center (acquisitions), locallocal
autonomy
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1. Product-market segments1. Product-market segments
Narrow product focus Broad based competitor
2. Products/service offer2. Products/service offer
Costumised for local/national market Standardised globally
3. Competitive moves. Competitive moves
Based on a country by country approach Co-ordinated globally
Key: ThorntonsThorntons HersheyHershey NestléNestlé
Figure 8.4 Assessing product-market competitors
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After examining competitors,
further questions:
• Is it important to operate with global market coverage and scale?
• Are there surviving competitive niches?
• Competitive strategies of individual companies are realistic and sustainable?
Adapt following tactics, strategies
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Strategies to be followedStrategies to be followed
a) Cross-subsidiation of countriesCross-subsidiation of countries• against indigenous national players or
• large competitor dependent on specific market
b) Globally co-ordinated movesGlobally co-ordinated moves fragmented country-by-country strategy: a set of competitive
strategies
– Price competitionPrice competition:
– Non-price (hidden) competitionNon-price (hidden) competition
– Co-operation/cCo-operation/coollaboratllaboratiionon
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– Price competitionPrice competition:
excess capacity, new aggressive player => imbalance, discontinuity» against a weak national player: it leaves the industry» against a global one: risky, more expensive, uncertain
– Non-price (hidden) competitionNon-price (hidden) competition:
Less direct way of competition, “hidden”» advertising, promotion: expensive» answer: differentiate products if it is a global competitors
– Co-operation/cCo-operation/coollaboratllaboratiionon instead of competition» mutual need» final form: acquisition (large/small, national/global)» few have universal coverage => try extend geographically =>
emerging countries (China)» complete global network
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3. Intern’l strategic alliances3. Intern’l strategic alliances
Motives:• Access to knowledge, expertise and skills
possessed by another organization– key driver: possess different configuration of core
competencies and resources,
– offering attractive option
• Access to new geographical markets (Honda-Rover)
• Spreading financial or political risk
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Honda and RoverHonda and Rover
1978: similar size, began developing strategic alliance
HondaHonda: profit making, gaining access to Europe market
partner with EU market experiences
EU: protectionism, overcapacity
RoverRover: dealer network in UK, EU, spare capacity
losses, struggling for reestablish after reconstruction,
govm’t support, likelihood of change of gov’t
develop new product range: resource needed
1978: limited agreement => Triumph AcclaimTriumph Acclaim with HondaHonda kit
Developments:with HondaHonda platform renewing RoverRover models
joint venture: developing new platform
co-production, cross-sourcing
Honda acquiring 20% of RoverRover equity stake
RoverRover: back to profit, improvement in quality and reputation, organizational learning
Retained distinctive identities
Early 1994: Rover is sold by British Aerospace to BMW
Rover-HondaHonda alliance at risk - hard joint development broken
They do not wish to see the alliance continueThey do not wish to see the alliance continue
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Generic types of int’l strategic alliencesGeneric types of int’l strategic alliences
• Joint venturesJoint ventures– separate legal entity, free-standing organization
– partners: equity share holders, providing resources
– difficulties: one partner wishes acquire full control
• Non-joint venturesNon-joint ventures (collaboration)– no separate legal entity collaborative agreements
– may be cross-company shareholdings
– limited in scope, scale
– initial phase, later can be extended
• ConsortiumConsortium• (cont.)
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• ConsortiumConsortiumEach company individually unable to completely fund R$D,
necessary volume
Believe: pooling resources they can compete
Number of partners to undertake a large-scale activity (Exp.:
Airbus)
Factors contributing to the success:Factors contributing to the success:– strategic need: each has a continuing need for the other
– shared objectives (otherwise: conflict at future direction)
– shared risk and commitment (otherwise no more investments)
– agrred procedures for resolving disputes (strengthen/undermine) => personal relationship
– trust: most critical (builds up slowly - eroding quickly by an action)
Advisable: understanding circumstances in which alliance can Advisable: understanding circumstances in which alliance can be terminatedbe terminated
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F. SATO, Toshiba’s president:F. SATO, Toshiba’s president:
even the largest and best resourced organizations are likely to seek develop some form of int’l strategic alliance in some respect of their business.
“Strategic alliancesStrategic alliances are attractive for a number of reasons:are attractive for a number of reasons:
“For example, the digital revolution and the development of multimedia can only reach fruition through their cross-fertilization of technologies, bringing together partners from the media, communication and computing. We are contributing here through our links with Time WarnerTime Warner and other companies.”
•“Another consideration is cost. New technologies require enormous investments in research, plant and equipment. Alliance like ours with IBMIBM and SiemensSiemens for development of 256-megabit DRAMs allow partners to maximise the use of their resources, realise cost of advantages and speed up development. Moreover, the diffusion of the developed technology also encourages competition at the production stage.”
•“Finally, the dynamic pace and vast extent of modern technology is just too much for a single company. Today, no company can avoid incorporating technology from other companies in its products. The best way to do that is by building up trustbuilding up trust and working togetherworking together in design-in and similar projects.”
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Multi-localInternational
Co-ordinated international
regional
Global Global companycompany
Figure 8.5 The overlap between different organisational forms employed by worldwide competitors
4. Organizational forms for worldwide 4. Organizational forms for worldwide competitorscompetitors
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1. Product1. Product
Localised for a national market Standardised for the global market
2. Resources, responsibilities and control2. Resources, responsibilities and control
Decentralised to a national organisation Centralised on a global basis
3. Dominant power group and culture3. Dominant power group and culture
Country-based managers; independent culture
Figure 8.6 Distinguishing between the global company and multi-local organisation
Multi-local Global
Multi-local Global
Multi-local Global
Centralised functions; dependent culture
4. Research and development and innovation4. Research and development and innovationMulti-local Global
National facilities; ’local’ new product development
Centralised R&D and new product development
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Global Global companycompany
Key: Country-based national subsidiaries
Corporate centre based in ’home’ country
Dominant decision flow: centre to subsidiaries
Figure 8.7 The organisation of the global company
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Key: Country-based national subsidiaries
Corporate centre based in ’home’ country
Dominant decision flow: loose control of subsidiaries by corporate centre
Figure 8.8 The multi-local organisation
Multi-
local
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Intern’lcompany
Key: Country-based national subsidiaries
Corporate centre based in ’home’ country
Dominant decision flow: largerly from corporate centre to subsidiary, but with some independence on key aspects of local strategy
Figure 8.9 The organisation of the international company
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Intrenational company
Headquarter
Intrernational divisionHome
product divisions
National subsidaries A, B, C … product divisions
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AdvantagesAdvantages
• product/service offer focuses on regional preferences
• avoid costly duplication of facilities by configuring functions on a regional basis
• achieve regional-scale efficiences
DisadvantagesDisadvantages
• potential loss of contact with national markets
• inability to gain global-scale efficiencies
• organisational structures may become highly complex and potentially contradictory
Table 8.4 Co-ordinated international regional strategy
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Multi-local
• Product/service offer: Developed for local markets.• Resources, responsibilities and control: Resources largely
decentralised to local organisation. Local organisations highly autonomous, with little intervention from the corporate centre.
• Dominant power group and elite: Country-based national managers. Independent culture based on national organisations.
• R&D and innovation: National R&D facilities to support local product development.
• OVERALL: Each national subsidiary managed as an independent entity. Highly responsive national organisation. Independence of subsidiaries encourages innovation and development of new products to meet local needs.
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International• Product/service offer: Centrally developed products, customised for
local needs.• Resources, responsibilities and control: Greater dependence on
corporate centre than for multi-local, but more autonomy than global. Core competences centralised. Sophisticated management systems and specialist corporate staff to control subsidiaries.
• Dominant power group and elite: Functional managers, especially technical and marketing. Parent company management often superior and parochial in attitude to international operations.
• R&D and innovation: R&D facilities centralised and many likely to be located in the country of the corporate parent. Products developed centrally 'given' to national subsidiaries to customise.
• OVERALL: Foreign subsidiaries often seen as appendages. Parent company seeks to leverage transfer of knowledge, understanding and skills to national subsidiaries.
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Co-ordinated international regional
• Product/service offer: Product, standardised for the region, with minor modifications for national markets where necessary.
• Resources, responsibilities and control: Key resource areas centralised on an international regional basis, with some relatively minor functions left with country-based operations.
• Dominant power group and elite: Regional product managers. Emerging culture of international regional interdependence.
• R&D and innovation: At least some R&D facilities regionally based.• OVERALL: Strong co-ordination and integration of functions on
a regional basis. Able to achieve regional scale. Little or no co-ordination between international regions.
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Global company
• Product/service offer: Standardised product sold worldwide, with possible cosmetic changes for local markets.
• Resources, responsibilities and control: Centralisation of assets, resources and responsibilities. Overseas subsidiaries depend on corporate centre for resources and direction.
• Dominant power group and elite: Centralised product divisions. Highly dependent culture based on parent company’s home location.
• R&D and innovation: R&D facilities wholly centralised in 'home' location. National subsidiaries unable independently to develop new products. New ideas need to be adopted by corporate centre.
• OVERALL: Role of local units is to assemble and/or sell products developed centrally. National subsidiaries largely concerned with implementing plans and policies developed by corporate centre. Strength is ability to achieve global scale.