Global Strategy Chapter 1 Strategizing Around the Globe

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Outline

• A global global-strategy book

• Why study global strategy?

• What is strategy?

• Fundamental questions in strategy

• What is global strategy?

• What is globalization?

• Global strategy and globalization at a crossroads

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Quiz

•Which of the following two cities has a larger

number of Fortune Global 500 company

headquarters?

• Beijing

• New York

•Fortune Global 500 HQ (2011 data from Fortune, July 23, 2012)

•Beijing (43 out of 73 from China)

•New York (18 NYC + 3 NYS out of 132 from the US)

•FYI: Texas 13 (Houston 6, DFW 4, San Antonio 1, Austin/Round Rock 1); Shanghai 6

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© M W Peng (www.mikepeng.com)

1–4

Global Strategy: One Size Fits All?

• 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

• A more balanced view—covering both global and

local (non-global) aspects—is necessary

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A Global Global-Strategy Book

• Text departs from traditional view of global strategy

• Important to respond to local needs

• Traditional view of global strategy is incomplete

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Why Study Global Strategy?

• Job and career aspiration opportunities

• Awareness of what is going on in the world

• Avoid downside risks of globalization

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What is Strategy?

• Origin-Greek word (strategos)-art of the general

 Sun Tzu, Chinese military strategist in 500 B.C.

 Modern-day application to business and competition

dates to the 1960s

• Plan versus Action - strategy is “explicit, rigorous formal planning” versus “a set of flexible, goal-oriented actions”

• Strategy as Theory-how to compete successfully

 Firms have both intended and emergent strategies

 One firm’s strategies may not work in all situations

 Past success does not guarantee future success

 It is often difficult to change strategy

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What is Strategy? Cont’d

 Strategy should give coherence to decisions

and actions

 Managers must exert effective strategic

leadership

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The Essence of Strategy

Figure 1.3

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Our definition: Strategy as theory

• Integrating both planning and action schools

• Leveraging the concept of “theory”

 A theory serves two purposes: Explanation and prediction

• Requiring replications and experimentations

 To establish the temporal (time-related) and

geographic limits of an existing theory

• Understanding the difficulty of strategic change

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Fundamental Questions in

Strategy

• Why do firms differ?

 Cultural differences between Western firms and Japanese

companies

 Networks of relationships have powerful effect - keiretsu,

guanxi, chaebol, blat

• How do firms behave?

 Industry-based view - focus on competitive forces within an

industry that impact all firms

 Resource-based (capabilities) view - focus on internal strengths and weaknesses, firm specific resources and capabilities

 Institution-based view - focus on government and societal

forces

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Why Do Firms Differ?

• Western firms (US/UK vs German/French)

 Have different (shorter- versus longer-term)

planning horizons.

• Japanese firms

 Are different from Western firms.

• Firms from emerging economies (Brazil, Russia, India, and China—BRIC)

 EM 1.1 Foxconn

• The challenge is to understand the roots of these differences when trying to compete globally.

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Fundamental Questions in

Strategy cont’d

• What determines the scope of the firm?

• What determines the international success or

failure of firms?

 Industry-based view - degree of

competitiveness in the industry

 Resource-based view - firm specific differences

in capabilities

 Institution-based view - institutional forces,

such as economic reforms and government policy

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accessible website, in whole or in part.

The “Strategy Tripod”

Three Leading Perspectives on

Strategy

Figure 1.4

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What Is Global Strategy?

• Provide standardized products and/or services

on a worldwide basis (i.e., traditional view)

• Any strategy outside one’s home country

• Our definition of global strategy:

 Strategies of firms around the globe

 Both international and non-international (domestic)

 Both developed and emerging economies

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How About Global Strategy?

• Traditional “global strategy”

 Only relevant for MNEs from developed

economies

• The same as “international” (non-U.S.) strategy

 Wal-Mart went to Mexico in 1991: Did it go

“global”?

 Everything becomes “global”?

• Our definition of global strategy :

 Strategy of firms around the globe

 Both international and non-international (domestic)

 Both developed and emerging economies

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What is Globalization?

• A new phenomenon since the late 20th century?

• A part of long-run human history?

• A pendulum view: Transportation and

communication revolutions + breakdown of

artificial barriers in trade and investment

 A process similar to the swing of a pendulum:

Postwar history

 Semiglobalization?

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Global Strategy and Globalization

at a Crossroads

• Three Defining Events - have brought corporate social responsibility, ethics, and governance to the forefront of strategic decisions

downward pressure on wages for unskilled

labor, environmental destruction

crisis, U.S scandals)

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Global Strategy and Globalization

at a Crossroads, Cont’d.

• Know Yourself, Know Your Opponents

environmental costs associated with

globalization

and beliefs different from the general public

(NGOs)-view them as partners

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What Determines the Success or

Failure of Firms around the

Globe?

• Acquiring and leveraging competitive advantage

• Strategy is about performance, about making a difference

• The Key: Sustaining such an advantage over

time and across countries (regions) through

replication and innovation.

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Organization of the Book

• Part I: Foundations of Global Strategy

• Part II: Business-Level Strategies

• Part III: Corporate-Level Strategies

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