– International Business activities strategic analyses Lecture 4

International Business activities –
strategic analyses
Lecture 4
David Litteljohn
Events in a Globalising World
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REFERENCES
Abdela, R and Tedlow, 2003, R Theodore Levitt's 'The Globalization of Markets': An Evaluation
after Two Decades,
Harvard NOM Working Paper No. 03-20; Harvard Business School Working Paper No.
03-082. The paper can be downloaded free of charge from:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=383242
Segal-Horn S, 2002, Global firms – heroes or villains? How and why companies
globalize?, European Business Journal, 14: 1 pp 8-19
http://find.galegroup.com/itx/retrieve.do?contentSet=IACDocuments&resultListType=RESULT_LIST&qrySerId=Locale%28en%2C%2C%29%3AFQE%3D
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l%3AAnd%3ALQE%3D%28DA%2CNone%2C10%29%3E+20020101%24&sgHitCountType=No
ne&inPS=true&sort=DateDescend&searchType=AdvancedSearchForm&tabID=T002&prodId=SP
J.SP00&searchId=R1&currentPosition=1&userGroupName=gcal_itc&docId=A85103346&docTyp
e=IAC
(NB a synopsis will be posted on the BB site)
Rugman A and Verbeke A, 2004, A perspective on regional and global strategies of
multinational enterprises, Journal of International Business Studies, Vol 35 pp 3-18
http://proquest.umi.com/pqdweb?RQT=572&TS=1202461288&clientId=6297&VType=PQD&V
Name=PQD&VInst=PROD&PMID=22140&PCID=9090061&SrtM=0&SrchMode=3&aid=2
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Aims of the session
•To ground notions of international business
and globalisation within a strategic a set of
business frameworks:
– Generic (Levitt)
– Industry (Segal-Horn)
– National competitiveness (Porter)
•International business and concentrated flows
In order a start a debate on the application of
business market globalisation for events
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Levitt’s (1983) globalisation
strategies
HOME MKT
GLOBAL MKTS
From
• Home/(foreign) adaptation
To
• Mass-market/ Specialisation/niche
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What did Levitt (1983) say ..?
• Levitt approached the need to ensure that companies
were efficient and developed their competitive
advantage
• He saw the main drivers for global, homogenised
markets coming from communications and
technological development
• He says at one point: do we give customers what
they say they want rather than trying to
understand exactly what they would like ?
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Consumer Homogenisation; Implication
•
•
•
•
•
•
•
•
•
•
Consumer standardisation
Coca Cola
TV
Cigarettes
Digital watches
Electronic goods
Rock music
Pizza
Chinese food
Cosmetics
Companies
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Local adaptation
• It costs money (see example on washing
machines) - should minimise costs
• People’s preferences are dynamic (German
demand for smaller washing machines)
• They may respond to clear messages
(Revlon in Japan): a clear MES important,
also communication/advertising
• Its good! ‘Cosmopolitanism is no longer the
monopoly of the intellectual and leisure class’
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Segal Horn 2002 - corporate issues
globalisation
• Not all globalisation is successful
– IBM - problems in the past and currently
– Japanese investment in Hotels (1980s)
– BMW/Rover
• Big is not always beautiful!
• Need to ensure there is a
sustainable strategy
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High
Scale economies, homogeneous tastes,
deregulation …
GLOBAL
INDUSTRIES
Strong Local Tastes and Preferences
Local regulation, high transport costs
Low
Low
High
NATIONAL/LOCAL
INDUSTRIES
Source: Segal Horn, 2002
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High
Batteries
Razor
blades
Consumer electronics
Telecommunications
Construction
GLOBAL
Insurance
Utilities
Low
Corrugated cardboard
Low
Food
Drink
High
NATIONAL/LOCAL
Source: Segal Horn, 2002
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Porter’s firm value chain
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Michael Porter’s FIVE FORCES model
Source: M. Porter, 1985, Competitive Advantage, New York, Free Press
and M. Porter, 1980 Competitive strategy : techniques for analyzing industries
and competitors, New York : Free Press
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Michael Porter’s Diamond - determinants
of national advantage
CHANCE
Firm strategy,
structure &
rivalry
Factor
conditions
Factors:
•Physical resources
•Knowledge resources
•Capital resources
•Infrastructure resources
Demand
conditions
Related &
supporting
industries
ROLE OF GOVT
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Stopford & Wells (1972) international
structure stage model
Worldwide
products division
Global or grid
Matrix
Alternate
paths of
Development
International
Division
Area
Division
Foreign sales as a %
of total sales
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Organisational types
• ethnocentric
• polycentric
Regiocentric
• geocentric
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What is a firm in a globalised world?
•
•
•
•
Franchise
Management Contract
Alliance
Joint venture
• In addition to subsidiaries, cross
national investments (sovereign
investment companies)
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Rugman and Verbeke, 2004
• Triad nations (TNs) rather than
individual companies
• Uses a mass of secondary details at
firm (not subsidiary) level
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TRIAD Economics
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Triad areas (Ohmae, 1985)
• Low economic growth
• Similar technological base
• Presence of large, capital and knowledge
intensive firms
• Homogenisation of demand (convergence
required by key product attributes)
• Proctectionism (N.B. Role of WTO)
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Rugman and Verbeke, 2004
• Concentrated on large companies Fortune 500 (430 of these have HQs in
TNs, 2000)
• The had detailed information on 380 365 companies inter-regional sales
• Wanted to test Ohmae’s observation
that there were few companies with any
real global reach
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Rugman and Verbeke
conclusions re Top 500
• Home region orientated (50% and + sales) in
home region - 325 MNEs
• Bi-regional (at least 20% in each region, but
less than 50% in any one region) - 25 MNEs
• Host region orientated (50% of sales in a triad
market other than home region) - 11 MNEs
• Global (20% or more in each region, but less
than 50% in any one region) - 9 MNEs
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TRIAD Economics
Flows of FDI
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Rugman and Verbeke
conclusions - top 500
•Global companies include
– Coca-Cola
– LVMH
•Bi-regional
– Diageo
– McDonald’s
i.e. few tourism/travel companies in this analysis and no
global (but airlines and methods may have understated
international money flows)
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But below the 500
• Different trends
• E.g. Nike - outsourcing of production
• Other different types of companies - non
capital intensive
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Question
• To what extent do you feel that the
business approaches discussed in the
lecture either
– Reflect general attitudes to the nature or
process of globalisation
OR
– Shape attitudes of executives and societies
to the nature of globalisation
?
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