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Lecture 3

Lecture 3 PM (revised).docx

17 Pages

Management Core
Course Code
MGCR 382
David Schumacher

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11/30/2013 10:55:00 AM Integrative conceptual frame world  Building a global competitive advantage depends on 2 factors: o Environmental factors  Sociocultural  Political  Legal  Economic  Technological o Organizational factors  Structures  Leadership  Systems values  The means by which you implement your global competitive advantage is through o Generic strategies:  Home replication  Multidomestic  Global  Transnational Competative advantages are:  Core competencies: o Resources  Tangible  Intangible o Capabilities o Criteria of sustainable advantages  Valuable  Rare  Costly to imitate  Nonsubstutable o Value chain analysis  Do what you do best, then outsource the rest  core comptencies give you competitive advantages which gives you strategic competitiveness by deciding what entry strategy to use 11/30/2013 10:55:00 AM Characterize the challenges of international strategic management Assess strategic alternative Distinuish and analyze the components of international strategy Know the process of international strategic management Levels of international strategies Challenges of international strategic management (aka strategic planning)  Comprehensive and on=going managemenet planning process  2 elements: o planning  done at the level of top executives of corporate head quarters o strategy  comprehensive framework for achieving the firms fundamental goals  must answer the following questions:  what products/services are we selling?  How/where will they be made?  How/where will we sell them?  Where/how will we get the resources for them?  How do we expect to outperform our competitors  4 components to creating an international strategy: o developing o implementing o monitoring o controlling  Strategic management depends on the firms competitive advantages: o Different kinds:  Global efficiencies  Requires proper internal structure  economies of scale- brings down average per unit cost (always the same product) o Ex. building new factories within market  Lowers the transportation costs of making it elsewhere and having to ship it to another rcountry  Economies of scope: average cost of production by increasing the production of related but different products o Achieve this through using distribution channels, marketing capabilities to bring it to the customers o Ex. Nissan  When it first entered N.A it sold only 1 type of car. When it established its brand name it started to make other types of cars from their NA factories which lowered the cost of production for all their models through lower distribution costs  Location efficiencies o Locating facilities anywhere that gives them the lowest production cost (labor, logistics) allowing them to improve their quality of service  more easily obtained when a single unit of a firm is given world wide responsibility for a task  i.e. you have 1 headquarters for R&D, marketing etc.  this also poses a risk of being unable to conform to the needs of customers in various markets (i.e. risk of losing multinational flexibility) o  Multinational flexibility  Being able to remain attractive in various different markets by conforming to that markets specific preferences and wants  Having investments in different markets spreads out their risks  However, presents some difficulties by having to be able to respond to change in one country by implementing changes in another  International firms are better able to exploit and respond to changes in their operating environments than domestic firms are  enhanced when firms delegate responsibilities to managers of local subsidiaries  However, you give up global efficiencies in return for multinational flexibility  World wide learning  Can tape into human resource pools around the world  Learn from the differences in operating environments and trasfer that knowledge to various other locations  centralizing power can improve global efficiencies but reduce multinational flexibility. Opposite is true for decentralization of power Strategic alternatives  Home Replication o Do whatever you do in domestic market abroad o Typically works in markets that are similar to domestic one o Uses:  Core competencies  Specific advantage  Multidomestic strategy o Functions when:  Differences among national markets is HIGH  When economies of scale is LOW  Low efficiency is important  And cost of coordination is HIGH  i.e. difficult to communicate with parent corporation (could be too expensive), it gives the responsibility of decision making to the domestic managers who will make the best choice for their specific market o Strategy where a corporation sees itself as a collection of relatively independent operating subsidiaries each of which focuses on specific domestic market  Free to customize its operations, marketing campaigns, operating techniques o Best used for brand name FOOD products  Relies on local production facilities to ensure their local consumers are getting fresh high quality products  major difference b/w home replication and multidomestic: Aspect: Multidomestic Home replication Flexibility Lots – adaptation to None- assumes what local market needs works at home will work abroad – nothing changes Domestic Managers High for domestic VERY LOW for Responsibility managers – have the domestic managers – ability to change the power of operations, authority is held at marketing etc to best headquarters of firm suit the needs of the in firms domestic domestic market market Strategies con’t  Global strategy o Looks at the world market is one single entity  Wants to attract consumers on a global level  Fundamental opposite from MD:  MD: every consumer in each market is different  GS: consumers all over the world are the same, regardless of nationalities  Similar to HR:  Conducts business the same in every market  Different than HR:  HR: domestic way of looking at business – uses domestic market as ideal strategy development  GS: no domestic market, only 1 global market to work in – no home country bias o Serves to:  Standardize goods and services  Pursues economies of scale  Through centralization of power and decision making  Centralizes power and decisions making  No customization for each market o Best suited for:  Commodities  Strong brand name corporations  Transnational strategy o Combines benefits of global scale efficiencies (GS) and local responsiveness (MD)  Dual goals of efficiencies and flexibility Table to remember:  global integration – effencies o important when:  trade barriers are present  selling of commodities  Local responsivness = flexibility o Important when:  Differences among domestic and foreign market are large  Differences in legal systems  Economic conditions, infrastructure and governments have a large role in economy Global strategy  HIGH efficiency  Low local responsiveness HR:  Low efficiency  Low flexibility MD:  Low efficiency  HIGH flexibility TN:  High efficiency  High flexibility World wide learning:  Requires transfer of information and experiences from parent company to all subsidaries o HR: parent transfer core competencies to foreign subsidaries  Doesn’t work when cost of communication if high o MD: decentralizes power so subsidaries respond to local conditions  i.e. VERY MINIMAL WORLD WIDE LEARNING  but you have HIGH multinational flexibility  again, low efficiency though o GS: all information is found within parent company because it is only looking at the global market, doesn’t have subsidari
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