1
Schedule
7-31 Philips and Matsushita8-1 EuroDisney8-5 P&G 8-6 P&G Cont. Summary Evaluations 8-7 ClipIt! discussion8-8 Presentations8-12 Final in Class
CH-ZWA645-005jsmGB
Global or Local?
James OldroydKellogg Graduate School of ManagementNorthwestern University
[email protected] TNRB
3
TVs
19371932
4
Continued
1958 VCR
1939
1938
1950
1938-1950
5
Today
TYPES OF INTERNATIONAL STRATEGY
MULTI-DOMESTIC MULTI-DOMESTIC STRATEGYSTRATEGY
• Product is fully customized in each country.
• Decentralized federation of national organizations. Local decision making authority. • Effective when differences between countries are large.
• Sources of Advantage:• Differentiation• Local responsiveness• Minimize political risk• Minimize rate exchange
risk
GLOBAL STRATEGYGLOBAL STRATEGY
• Product is standardized worldwide
• Centralized organization structure. National subsidiaries possess little decision-making authority.
• Effective when differences between countries are small.
• Sources of Advantage:• Cost• Ability to coordinate
activities• Speed in new product
development
A FRAMEWORK FOR ANALYSIS
Pressuresfor GlobalIntegration
Pressuresfor LocalDifferentiation
Global Strategy
Multi-domestic Strategy
Local Strategy
A Framework: Global Integration - Local Differentiation
High
High
Low
Low
Forces f
or Global
Integration
Forces for LocalDifferentiationSource: Jeff Dyer BYU 2002
HQ
STRATEGIC INTENT: Gain/Maintain Global Leadership
POLICIES:
• Specialized Production and R&D Centers
• Break Down Value Chain and Exploit Low Cost Locations
• World Products to Build Volume and Global Product Roll-out
• Price Leadership
• Optimize Global Network at Local Expense
• Move Into Key Markets Preemptively
• International Human Resources
1. A GLOBAL STRATEGY
Source: J. de la Torre
The Extreme Global Value ChainCountry Activities
A
B
C
D
E
F
G
H
R & D
Purchasing
Manufacturing
Marketing
Selling
Distribution
Service
Design
Etc.Design Purchasing Manufacturing
THE GLOBAL MAXIMIZERSome Companies Emphasizing this Approach:
• Royal Dutch Shell
• Caterpillar
• Hewlett Packard
• Boeing
• Intel
• Coca Cola
• Matsushita
• IBM
• American Express
• LM Ericsson
• Toyota
• Sony
THERE IS RELATIVELY LITTLE ROOM FOR JOINT VENTURES IN THIS MODEL, EXCEPT FOR UPSTREAM ACTIVITIES.
ACQUISITIONS PLAY A SECONDARY ROLE VS. INTERNAL GROWTH AND GREENFIELD INVESTMENTS.
Source: J. de la Torre
2. A MULTI-DOMESTIC STRATEGY
HOLDING
STRATEGIC INTENT: Gain Key Positions in
Selected Markets
POLICIES:
• Tailor Products to National Idiosyncrasies
• Differentiated Operations
• Sacrifice Efficiency for Market Access
• Reach Economies of Scale Upstream
• Maximize Local Value Added
• Gain Government Support
• Use Join Ventures to Preempt Competition and Add Local Value
• National Human ResourcesSource: J. de la Torre
The Fully Multi-local Value ChainCountry Activities
A
B
C
****
Z
R & D Design ServiceDistrib-utionSelling
Market-ing
Manu-facturing
Purch-asing
R & D
R & D
R & D
Design
Design
Design
Purch-asing
Purch-asing
Purch-asing
Manu-facturing
Manu-facturing
Manu-facturing
Market-ing
Market-ing
Market-ing
Selling
Selling
Selling
Distrib-ution
Distrib-ution
Distrib-ution
Service
Service
Service
THE FEDERALIST
Some Companies Emphasizing this Approach:
• Unilever
• Procter & Gamble
• Federal Express
• PricewaterhouseCoopers
• KPMG
• Heineken
• Philips
• Nestlé
• BASF
• General Motors
• Carrefour
• Wal-Mart
THERE IS AMPLE ROOM FOR JOINT VENTURES AND LOCAL AFFILIATIONS IN THIS MODEL. ACQUISITIONS PLAY AN IMPORTANT ROLE TO OBTAIN DOMESTIC PRESENCE IN
IMPORTANT MARKETS
Source: J. de la Torre
Linking Market, Strategy, Structure & Processes
Analysis of the environment / market precedes choice of firmstrategy which precedes choice of firm structure and processes.
Firm Structure and Processes
Environment / Market Costs CompetitorsCustomers Government
Firm Strategy
Where Next ?
High
High
Low
Low
For
ces
for
Glo
bal
Inte
grat
ion
Forces for LocalResponsiveness
17
Matsushita’s Performance
18
New Structure
19
Philips
20
Philips