Datasheet
Year, pagecount:2014, 6 page(s)
Language:English
Downloads:2
Uploaded:March 11, 2019
Size:530 KB
Institution:
-
Comments:
Attachment:-
Download in PDF:Please log in!
Comments
No comments yet. You can be the first!
Content extract
Source: http://www.doksinet Global Business – 2014 – Ranim Helwani Chapter 2 – Understanding the International Context Responding to Conflicting Environmental Forces Continual change in the international business environment – shifts in political, social, economic and technological forces create management challenges for today’s MNEs. à Require managers to respond to three simultaneously yet often conflicting external demands: The need for cross-‐market integration, national responsiveness and worldwide innovation and learning. Forces for Global Integration and Coordination à Globalization was not
a sudden or discontinuous development, but a change continuously brought about by economic, technological and competitive factors. Forces of Change: Scale, Scope, Factor Costs and Tree Trade Economies of Scale: -‐ Industrial Revolution created pressures for larger plants that developed large-‐batch or continuous-‐process technologies to achieve low-‐cost volume production. -‐ Volume and intensity increased even further during 20th century, so that volumes often exceeded domestic demand and firms were pushed to seek markets abroad in order to benefit from economies of scale. Economies of Scope:
-‐ facilitated by more efficient, worldwide communication and transportation networks. -‐ Lower unit costs by producing several products together by sharing resources and higher efficiency Factor Costs: -‐ expand into new industry segments when no home-‐country key inputs were available -‐ Cheaper labor and much lower production costs o But the more educated, the more labor got expensive: typical life cycle of a country as source of cheap labor is 5 years à those three were the initial motivations for global coordination Liberalization of World Trade à Opening of world markets
à Trend towards reduction of barriers to international trade through formation of the General Agreement on Tariffs and Trade (GATT), European Union (EU), North America Free Trade Agreement (NAFTA), World Trade Organization (WTO) à Plus agreements with emerging markets like Asia and South America à growing opportunities for MNE investment, not only as a source for low-‐cost labor but increasingly important as a source for revenue growth and global scale efficiency. Driving an Expanding Spiral of Globalization Other drivers of globalization: -‐ technological innovations -‐ external
discontinuities also facilitated change process, ie. oil price increase triggered worldwide demand for smaller more fuel-‐efficient energy cars. Source: http://www.doksinet Global Business – 2014 – Ranim Helwani Global Competitors as Change Agents Competitor-‐driven forces: à Apart from these external forces of change, other industries transformed though company-‐ initiated, internal restructuring efforts by competitors who recognized that by doing so they would gain a competitive advantage. 1. Rationalizing product lines, standardizing parts, specializing manufacturing operations beyond national markets –
to achieve scale economies and advantage over local companies à Structure of industries even changes different behaviors that were not susceptible to global convergence – ie. Coca Cola transformed culturally linked preferences about drinks 2. Global Chess / Cross-‐Subsidization of markets à Global competitive games that assumed that a company’s competitive position in all markets was linked and that funds generated in one market could be used to subsidize the position in another. à also poses entry barriers Global standardization and homogeneity of demand(Global village) might be
long-‐term trends but there are also important short-‐term and medium-‐term impediments and countertrends that have to be taken into account. Forces For Global Differentiation and Responsiveness Despite the global trend, there is an important strategic task for managers of all MNEs: how to sense, respond to and even exploit differences in the environments of the many different countries in which their company operates. National differences in GNP, technological capabilities, political systems, government regulations, social norms, cultural values à requires mangers to be sensitive and responsive
to host country Cultural Differences à nationality plays an important and enduring role in shaping the assumptions, beliefs and values of individuals. à Companies need to modify their quest for global efficiency through standardization and find ways to respond to the needs and opportunities created by cultural differences. Ie. local preferences for tea Hofstedes Cultural Dimensions Theory: Describes national cultural differences along four key dimensions: power distance, uncertainty avoidance, individualism and “masculinity” à distinct cultural differences across countries result in wide variations in
social norms and individual behavior. à Cultural differences are also relected in consumption patterns Source: http://www.doksinet Global Business – 2014 – Ranim Helwani Government Demands à diverse demands and expectations of home and host governments are the most severe constraint to global strategies of many MNEs 1. Economic Issues: à Love-‐hate Relationship between MNEs and host governments. Benefits: -‐ To host government: MNE as important source of funds, technology and expertise to help regional development, employment, import substitution and export
promotion -‐ To MNE: host government as key to local market and resource access, opportunities for profit, growth and improvement of competitive position. Hate: à Differences in the motivations and objectives of the two partners. à conflict à Although both parties might be partners in search for global competitiveness, the MNE typically tries to achieve that objective within its global system, whereas the host government strove to capture it within its national boundaries. MNEs objectives: -‐ unrestricted access to resources throughout the world -‐ freedom to integrate manufacturing across
national boundaries -‐ unimpeded right to coordinate and control company on worldwide basis Government objective: -‐ develop economy that could survive and prosper in a competitive international environment à ie. supporting a national champion à supporting the MNE only for a price 2. Social, Political and Cultural Issues: à MNE as a social disruption: break down of traditional community structures à MNE as political threat: power, size and influence, trying to manipulate host government structures MNE-‐host government relationship = “Zero-‐Sum Game” à outcome depends on the
balance between the government’s power (from control over local market and competition among MNEs to access it) and the MNEs power (from financial, technological and managerial resources and competition among governments for those) . UNVOLLSTÄNDIG Growing Pressures of Localization National consumer differences have been reduced through globalization but worldwide tastes, habits and preferences have become anywhere near homogenous. à more and more consumers have emerged that reject homogenized product design and performance of standardized global products. à Reasserting traditional preferences for more
differentiated products can be a new profitable source. Source: http://www.doksinet Global Business – 2014 – Ranim Helwani à Competitive advantage in these anti-‐standardization consumer trends lies not in scale-‐ efficiency but more in sensitivity and responsiveness to local requirements. Further barriers to globalization: -‐ administrative and coordination costs that come along with scheduling worldwide demand through global-‐scale plants Flexible manufacturing technologies: little difference in unit cost between 1000 or 100000 units à enable to respond to localized customer preferences and
national political constraints without compromising their economic efficiency. -‐ intra-‐country variance in infrastructure development, industry, demographics, consumer characteristics à firm can prioritize several clusters or sequence the order in which they are targeted to boost effectiveness of distribution networks, supply chains, sales forces and media and marketing strategies. Forces for Worldwide Innovation and Learning à only those firms that have been able to adapt to the often-‐conflicting forces for global coordination and national differentiation have been able to survive and prosper.
à But also the ability to develop worldwide innovation and learning is a vital strategic capability for MNEs today -‐ increased cost of R&D, shorter life cycles of new technologies à need to seek global volume as quickly as possible -‐ technology diffusing rapidly around the globe -‐ Transfer new technology voluntarily: licensing, strategic alliances à Innovations are springing up worldwide, and companies are recognizing that they can gain competitive advantage by sensing needs in one country, responding with capabilities located at a second and diffusing the resulting innovation to
markets around the globe. à First mover advantage have increased and has provided strong incentives not to only focus on internal task of rapidly creating and diffusion innovations but also on the external task of establishing the new product as an industry standard. Responding to the Diverse Forces Simultaneously Up to the late 80s industries presented unidimensional environmental requirements à led to the development of industries with different characteristics which have consequences for companies’ strategies 1. Global Industries à economic forces of globalization strong enough
to dominate other environmental demands. à success belongs to companies that adopt the classic global strategies of capitalizing on highly centralized, scale-‐intensive manufacturing and R&D operations and leveraging them through worldwide exports of standardized global products. à example: electronics industry Source: http://www.doksinet Global Business – 2014 – Ranim Helwani 2. Multinational Industries à localizing forces of national, cultural, social and political differences dominate the development of industry characteristics. àallows multiple national industry structures to flourish
à success belongs to companies with multinational strategies of building strong and resourceful national subsidiaries that are sensitive to local market needs and opportunities and allow them to manage their local business by developing or adapting products and strategies to respond to the powerful localization forces à example: laundry detergents 3. International Industries à technological forces are central and the need for companies to develop and diffuse innovations is the dominant source of competitive advantage. à success lies in a company’s ability to exploit technological forces by creating
new products in home market and effectively diffuse those innovations to foreign affiliates à example: telecommunications Transition to Transnationality à demands mentioned above are oversimplified and rather show the center of gravity – the most significant impact on industry’s strategic tasks demands. By 20th century, external demands were going through changes and have become more complex: à forces were becoming strong simultaneously -‐ Economies of scale, scope and intensified competition (Globalizing Forces) increased global integration in multinational and international industries. – potential
for standardization -‐ Host government pressures and renewed customer demand for differentiated products (Localizing forces) forced global strategies to differentiate and emphasize local design, flexibility and responsiveness -‐ In industries including firms with comparable capabilities in global-‐scale efficiency and nationally responsive strategies, the ability to innovate and exploit resulting developments globally has become increasingly important to sustain a competitive advantage. à with help of minimum scale efficiency, government relationships and consumer understanding Emerging international environment: fewer examples of
pure global, multinational or classic international industries à companies are driven by simultaneous demands for global efficiency, national responsiveness and worldwide innovation. à characteristics of a transnational industry à cannot defend competitive position on basis of one dominant capability à need to respond effectively to all forces at the same time to manage the open-‐conflicting demands for efficiency, responsiveness and innovation without sacrificing any one for the other. Emergence of transnational industry: -‐ simultaneous need of efficiency, responsiveness and innovation Source: http://www.doksinet
Global Business – 2014 – Ranim Helwani -‐ more demanding tasks to achieve these capabilities à Need new strategic capabilities next to world-‐scale economies -‐ global chess – leverage existing strengths in order to cross-‐subsidize weaker products and market positions; high risk investments that force out rivals, form alliances and coalitions à Responsiveness through differentiation not necessary anymore -‐ customers demand sensitivity not differentiation to their needs, along with the level of cost and quality standards for global products to which they have become accustomed. -‐ Host
government desire for national competitiveness and using MNE as key instruments in the implementation; changes in regulations, tastes, exchange rates become more frequent -‐ à Flexibility to change product designs, sourcing patterns and pricing policies to remain responsive to continually changing national environments has become essential for survival. à exploiting centrally developed technologies is no longer enough. -‐ need to learn from many environments; use access to multiple centers of technology and knowledge from different countries to create truly transnational innovations. -‐ Must become part of the
companys shared knowledge base and provide input to future strategies
a sudden or discontinuous development, but a change continuously brought about by economic, technological and competitive factors. Forces of Change: Scale, Scope, Factor Costs and Tree Trade Economies of Scale: -‐ Industrial Revolution created pressures for larger plants that developed large-‐batch or continuous-‐process technologies to achieve low-‐cost volume production. -‐ Volume and intensity increased even further during 20th century, so that volumes often exceeded domestic demand and firms were pushed to seek markets abroad in order to benefit from economies of scale. Economies of Scope:
-‐ facilitated by more efficient, worldwide communication and transportation networks. -‐ Lower unit costs by producing several products together by sharing resources and higher efficiency Factor Costs: -‐ expand into new industry segments when no home-‐country key inputs were available -‐ Cheaper labor and much lower production costs o But the more educated, the more labor got expensive: typical life cycle of a country as source of cheap labor is 5 years à those three were the initial motivations for global coordination Liberalization of World Trade à Opening of world markets
à Trend towards reduction of barriers to international trade through formation of the General Agreement on Tariffs and Trade (GATT), European Union (EU), North America Free Trade Agreement (NAFTA), World Trade Organization (WTO) à Plus agreements with emerging markets like Asia and South America à growing opportunities for MNE investment, not only as a source for low-‐cost labor but increasingly important as a source for revenue growth and global scale efficiency. Driving an Expanding Spiral of Globalization Other drivers of globalization: -‐ technological innovations -‐ external
discontinuities also facilitated change process, ie. oil price increase triggered worldwide demand for smaller more fuel-‐efficient energy cars. Source: http://www.doksinet Global Business – 2014 – Ranim Helwani Global Competitors as Change Agents Competitor-‐driven forces: à Apart from these external forces of change, other industries transformed though company-‐ initiated, internal restructuring efforts by competitors who recognized that by doing so they would gain a competitive advantage. 1. Rationalizing product lines, standardizing parts, specializing manufacturing operations beyond national markets –
to achieve scale economies and advantage over local companies à Structure of industries even changes different behaviors that were not susceptible to global convergence – ie. Coca Cola transformed culturally linked preferences about drinks 2. Global Chess / Cross-‐Subsidization of markets à Global competitive games that assumed that a company’s competitive position in all markets was linked and that funds generated in one market could be used to subsidize the position in another. à also poses entry barriers Global standardization and homogeneity of demand(Global village) might be
long-‐term trends but there are also important short-‐term and medium-‐term impediments and countertrends that have to be taken into account. Forces For Global Differentiation and Responsiveness Despite the global trend, there is an important strategic task for managers of all MNEs: how to sense, respond to and even exploit differences in the environments of the many different countries in which their company operates. National differences in GNP, technological capabilities, political systems, government regulations, social norms, cultural values à requires mangers to be sensitive and responsive
to host country Cultural Differences à nationality plays an important and enduring role in shaping the assumptions, beliefs and values of individuals. à Companies need to modify their quest for global efficiency through standardization and find ways to respond to the needs and opportunities created by cultural differences. Ie. local preferences for tea Hofstedes Cultural Dimensions Theory: Describes national cultural differences along four key dimensions: power distance, uncertainty avoidance, individualism and “masculinity” à distinct cultural differences across countries result in wide variations in
social norms and individual behavior. à Cultural differences are also relected in consumption patterns Source: http://www.doksinet Global Business – 2014 – Ranim Helwani Government Demands à diverse demands and expectations of home and host governments are the most severe constraint to global strategies of many MNEs 1. Economic Issues: à Love-‐hate Relationship between MNEs and host governments. Benefits: -‐ To host government: MNE as important source of funds, technology and expertise to help regional development, employment, import substitution and export
promotion -‐ To MNE: host government as key to local market and resource access, opportunities for profit, growth and improvement of competitive position. Hate: à Differences in the motivations and objectives of the two partners. à conflict à Although both parties might be partners in search for global competitiveness, the MNE typically tries to achieve that objective within its global system, whereas the host government strove to capture it within its national boundaries. MNEs objectives: -‐ unrestricted access to resources throughout the world -‐ freedom to integrate manufacturing across
national boundaries -‐ unimpeded right to coordinate and control company on worldwide basis Government objective: -‐ develop economy that could survive and prosper in a competitive international environment à ie. supporting a national champion à supporting the MNE only for a price 2. Social, Political and Cultural Issues: à MNE as a social disruption: break down of traditional community structures à MNE as political threat: power, size and influence, trying to manipulate host government structures MNE-‐host government relationship = “Zero-‐Sum Game” à outcome depends on the
balance between the government’s power (from control over local market and competition among MNEs to access it) and the MNEs power (from financial, technological and managerial resources and competition among governments for those) . UNVOLLSTÄNDIG Growing Pressures of Localization National consumer differences have been reduced through globalization but worldwide tastes, habits and preferences have become anywhere near homogenous. à more and more consumers have emerged that reject homogenized product design and performance of standardized global products. à Reasserting traditional preferences for more
differentiated products can be a new profitable source. Source: http://www.doksinet Global Business – 2014 – Ranim Helwani à Competitive advantage in these anti-‐standardization consumer trends lies not in scale-‐ efficiency but more in sensitivity and responsiveness to local requirements. Further barriers to globalization: -‐ administrative and coordination costs that come along with scheduling worldwide demand through global-‐scale plants Flexible manufacturing technologies: little difference in unit cost between 1000 or 100000 units à enable to respond to localized customer preferences and
national political constraints without compromising their economic efficiency. -‐ intra-‐country variance in infrastructure development, industry, demographics, consumer characteristics à firm can prioritize several clusters or sequence the order in which they are targeted to boost effectiveness of distribution networks, supply chains, sales forces and media and marketing strategies. Forces for Worldwide Innovation and Learning à only those firms that have been able to adapt to the often-‐conflicting forces for global coordination and national differentiation have been able to survive and prosper.
à But also the ability to develop worldwide innovation and learning is a vital strategic capability for MNEs today -‐ increased cost of R&D, shorter life cycles of new technologies à need to seek global volume as quickly as possible -‐ technology diffusing rapidly around the globe -‐ Transfer new technology voluntarily: licensing, strategic alliances à Innovations are springing up worldwide, and companies are recognizing that they can gain competitive advantage by sensing needs in one country, responding with capabilities located at a second and diffusing the resulting innovation to
markets around the globe. à First mover advantage have increased and has provided strong incentives not to only focus on internal task of rapidly creating and diffusion innovations but also on the external task of establishing the new product as an industry standard. Responding to the Diverse Forces Simultaneously Up to the late 80s industries presented unidimensional environmental requirements à led to the development of industries with different characteristics which have consequences for companies’ strategies 1. Global Industries à economic forces of globalization strong enough
to dominate other environmental demands. à success belongs to companies that adopt the classic global strategies of capitalizing on highly centralized, scale-‐intensive manufacturing and R&D operations and leveraging them through worldwide exports of standardized global products. à example: electronics industry Source: http://www.doksinet Global Business – 2014 – Ranim Helwani 2. Multinational Industries à localizing forces of national, cultural, social and political differences dominate the development of industry characteristics. àallows multiple national industry structures to flourish
à success belongs to companies with multinational strategies of building strong and resourceful national subsidiaries that are sensitive to local market needs and opportunities and allow them to manage their local business by developing or adapting products and strategies to respond to the powerful localization forces à example: laundry detergents 3. International Industries à technological forces are central and the need for companies to develop and diffuse innovations is the dominant source of competitive advantage. à success lies in a company’s ability to exploit technological forces by creating
new products in home market and effectively diffuse those innovations to foreign affiliates à example: telecommunications Transition to Transnationality à demands mentioned above are oversimplified and rather show the center of gravity – the most significant impact on industry’s strategic tasks demands. By 20th century, external demands were going through changes and have become more complex: à forces were becoming strong simultaneously -‐ Economies of scale, scope and intensified competition (Globalizing Forces) increased global integration in multinational and international industries. – potential
for standardization -‐ Host government pressures and renewed customer demand for differentiated products (Localizing forces) forced global strategies to differentiate and emphasize local design, flexibility and responsiveness -‐ In industries including firms with comparable capabilities in global-‐scale efficiency and nationally responsive strategies, the ability to innovate and exploit resulting developments globally has become increasingly important to sustain a competitive advantage. à with help of minimum scale efficiency, government relationships and consumer understanding Emerging international environment: fewer examples of
pure global, multinational or classic international industries à companies are driven by simultaneous demands for global efficiency, national responsiveness and worldwide innovation. à characteristics of a transnational industry à cannot defend competitive position on basis of one dominant capability à need to respond effectively to all forces at the same time to manage the open-‐conflicting demands for efficiency, responsiveness and innovation without sacrificing any one for the other. Emergence of transnational industry: -‐ simultaneous need of efficiency, responsiveness and innovation Source: http://www.doksinet
Global Business – 2014 – Ranim Helwani -‐ more demanding tasks to achieve these capabilities à Need new strategic capabilities next to world-‐scale economies -‐ global chess – leverage existing strengths in order to cross-‐subsidize weaker products and market positions; high risk investments that force out rivals, form alliances and coalitions à Responsiveness through differentiation not necessary anymore -‐ customers demand sensitivity not differentiation to their needs, along with the level of cost and quality standards for global products to which they have become accustomed. -‐ Host
government desire for national competitiveness and using MNE as key instruments in the implementation; changes in regulations, tastes, exchange rates become more frequent -‐ à Flexibility to change product designs, sourcing patterns and pricing policies to remain responsive to continually changing national environments has become essential for survival. à exploiting centrally developed technologies is no longer enough. -‐ need to learn from many environments; use access to multiple centers of technology and knowledge from different countries to create truly transnational innovations. -‐ Must become part of the
companys shared knowledge base and provide input to future strategies
Just like you draw up a plan when you’re going to war, building a house, or even going on vacation, you need to draw up a plan for your business. This tutorial will help you to clearly see where you are and make it possible to understand where you’re going.
