Corporate Strategy in Europe (Subject) / International Context (Lesson)
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- CONCEPT 15: THE GLOBAL CONVERGENCE DEBATE 1.The global convergence perspective Levitt (1983) Coca Cola: Technology convergence and communications creates global markets SWATCH: Economies of scale in production, distribution, marketing and management BOEING: World-standardized products, trans-national segments 2. The international diversity perspective Douglas S., Wind Y. (1987) Local customer behaviour and market characteristics; strong local segments Limitations of global economies of scale (flexibility, fragmentation) and of product convergence Operational constraints (market conditions, organisational legacy and culture)
- CONCEPT 15: THE GLOBAL CONVERGENCE DEBATE in light of the readings Prahalad C.K., Doz Y (1986) “The dynamics of global competition” Global integration and strategic coordination vs. local responsiveness Varying levels of globalisation of industries, functions and competition Influence of competitive behaviours (cost, pricing, marketing, intent) Porter M. (1990) “The competitive advantage of nations” Home-based advantages and innovations; creative destruction National clusters (buyers, suppliers, regulation, employees, competitors) International development based on local advantages Bartlett Ch, Ghoshal S. (1995) “Trans-national Management” Balancing global efficiency, local responsiveness and worldwide learning Flexibility and culture : decentralized and coordinated federation, centralized hub Integrated networks
- CONCEPT 14: GLOBALISATION OR TRIADISATION Triadization (or triadisation) states that political, economic and socio-cultural integration have been limited to three regions of the world: Japan and the newly industrialized countries of Southeast Asia l Western Europe l North America Outside of these regions, according to the theory, the effects of so-called "globalization" have not been felt, and hence it cannot be truly called "global". Share of intraregional trade European Union 62% NAFTA 56% Asia 56% Criticism of GLOBALISATION 1. 80% of the business of the top 500 corporations is made in their home market. Exceptions: Electronics (Sony, Philips, Nokia, ...) and some branded consumer goods (Coke and LVMH) 2. 10% of European products and 5% of European services are exported outside Europe
- CONCEPT 17: MAIN OBSTACLES TO INTEGRATION IN EUROPE Administrative rules and standards Information differences, including language (23 official languages) Social and religious phenomena Economic development and infrastructure Capabilities, including geography and natural resource Global Marketing: Cultural preferences regarding consumer behavior and lifestyle Heterogeneous consumer response patterns Availability of desired advertising media Legal restrictions (service & product categories, privacy, children advertising, comparative advertising, language, ... Cultural Constraints in Management: Germany l The Engineer is the hero, apprenticeship, technical expertise Japan l Lifelong worker group, performance and maintenance France l Class traditions (cadres vs. non-cadres), status and authority China l Family or state-owned, network and reputation (Guanxi) Belgium l Pragmatic and low-profile; cultural flexibility HARMONY l Unity with Nature, World at PeaceEMBEDDEDNESS l Social Order, Obedience, Respect for TraditionHIERARCHY l Authority, HumbleMASTERY l Ambition, DaringAFFECTIVE AUTONOMY l PleasureINTELLECTUAL AUTONOMY l Broadmindedness, CuriosityEGALITATIANISM l Social Justice, Equality
- CONCEPT 18: INTERNATIONAL CORPORATE STRATEGIES International activities (vs. focus on home market)? Which countries (attractivity and accessibility; opportunities; psychological distance; networks)? How to internationaloze (greenfield, franchise, ...)? Business model in each country? + Portfolio international Management + Define Corporate Structure + Change? Local player : PROXIMUS :Focuses on home market and sees exportation as accidental opportunities International player : Deutsche Bank: Focuses on home market and tries to replicate approach in other countries Multinational player : Interbrew: Focuses on European market and tries to adapt strategy to local characteristics Global/European player : L'ORÈAL: Focuses on European market, perceived as a transnational market with segments independent from national boundaries
- CONCEPT 15: GLOBAL VS LOCAL APPROACHES Dynamic l Similarity+Integration vs. Diversity+Fragmentation Drivers l Technology+Communication vs. Culture+Institutions Diversity l a cost vs. opportunity Focus l Scale vs. Responsiveness Organizational approach l Standardize vs. Adapt Innovation process l Top-down vs. Bottom-up Organizational structure l Hub vs. Network
- CONCEPT 16: EU GLOBAL OR LOCAL? EUROPEAN MARKET DEVELOPMENT Increasing knowledge => risks and autonomy Global companies Foreign direct investments Independent subsidiaries Licensing Equity participations Distribution agreements or alliances Exportation Psychological distance (language, culture, business practices, physical distance, ...) Inter-country links International recruitments International M&A Networking and relations International competition Regulations Global agreements Local market size Born global (or regional) Digital Ambitions Technolocy niches
- CONCEPT 20: INTERNATIONAL PRODUCT DEVELOPMENT Global: PHILIPS • Interface with specialized skills and innovative opportunities at world level • Proximity allows quick, adaptative reactions to unforeseen problems • Capture scale and scope economies • Leverage knowledge management tools Local: Arcelor Position R&D activities close to production facilities (technical support) • Integrate R&D with production and marketing to share tacit knowledge • Disperse R&D close to strategically important basic research and testing procedures • Become strong members of local research networks
- CONCEPT 20: INTERNATIONAL BUSINESS STRATEGY l INTERNATIONAL SUPPLY CHAIN MANAGEMENT on GLOBAL INTEGRATION Global integration (and new communication technologies) provides access to BASF: new sources of supply = scale economies VW: locations for cheaper and specialized production facilities l Volkswagen DHL: new distribution channels LIMITATIONS: Significant administrative and physical barriers remain for global scale AMAZON: Order processing (language, customer service and regulation) Customer order management (legacy, prejudice) BASF: Manufacturing (skills variations) Sourcing (transport cost and delays, lack of global logistics player) Value Chain Management: Access to: markets, talent, suppliers (raw materials, energy, telecommunication...) Available areas and infrastructure (mobility, logistics...) Legal, tax and cultural environment