C.3 Developing Transnational Strategies Flashcards
Worldwide competitive advantage goals
- Efficiency
- Flexibility
- Learning
Efficiency goal
- Ratio of value of inputs to outputs
- Revenue enhancement
- Global integration of activities lead to lower costs through scale and scope economies
- Local responsiveness increases the value of outputs
Flexibility goal
Ability to manage risks and exploit opportunities arising from diversity and volatility of global environ (e.g. macro risks like changes in prices and exchange rates, political risks, comp risks, resource risks)
Requires management to
- understand and manage different types of risk
- scan and respond to discontinuities in global environ
- select the most attractive markets
Learning goal
- Exploiting its tech, brand name, or management capabilities in different countries around the world
- Capture external diversity
- leverage internal variety (true global innovations from linking sensing, response, and implementation capabilities)
Means to reach strategic objectives
- National differences (Differences in input, output, and a dynamic perspective). E.g. input costs rise, now you can sell outputs at higher prices in china bc of risen incomes
- Scale economies
- Scope economies (shared assets, shared external relations, and shared learning)
List how national differences, scale and scope economies:
Achieve efficiency in current ops
National: Benefiting from differences in factor costs- wages and cost of capital
Scale: Expanding and exploiting potential scale economies in each activity
Scope: Sharing of investments and costs across markets and businesses
List how national differences, scale and scope economies:
Manage risks through multinational flexibility
National: Manage risks arising from market or policy-induced changes in comparative advantages of diff countries
Scope: Portfolio diversification of risks and creation of options and side bets
Scale: Balancing scale with strategic and operational flexibility
List how national differences, scale and scope economies: Innovate, learn, and adapt
National: Learn from societal differences in organizational and managerial processes and systems
Scale: Benefit from experience - cost reduction and innovation
Scope: Shared learning across organizational components in different products, markets, or businesses
AAA Strategies:
List and what is their purpose (high level)
- Adaptation
- Aggregation
- Arbitrage
These strategies attempt to manage the large differences that arise at borders through global integration.
Adaptation and aggregation strategies aim to minimize the effects of distance, while arbitrage aims at exploiting opportunities from distance
Adaptation:
Comp adv, configuration, and coordination
Boost revenues and market share by maximizing a firm’s local revenue
- Comp adv: To achieve local relevance thru national focus while exploiting some economies of scale
- Config: Locate ops in foreign countries similar to home base
- Coordination: Connect with international ops by country, with emphasis on achieving local presence within borders
Aggregation
Comp adv, config, coordination
Comp adv: Deliver economies of scale by creating regional or sometimes global ops, it involves standardizing the product/service offering and grouping together the development and production processes
Config: Locate ops in foreign countries similar to home base
Coordination: By business, region, or customer, with emphasis on horizontal relationships for cross-border economies of scale
Arbitrage:
Comp adv, config, cooridnation
Exploitation of differences between national or regional markets, often by locating separate parts of the supply chain in different places (e.g. call centres in india)
Comp adv: To achieve absolute economies through international specialization
Org: In a more diverse set of countries, to exploit some elements of distance
Coordination: By function, with emphasis on vertical relationships, even across org boundaries
How to use AAA strategies
- Focus on 1 or 2 A’s
- Make sure the new elements of a strategy are a good fit organizationally
- Employ multiple integration mechanisms
- Think about externalizing integration
- Know when not to integrate
What are the traditional strategic postures
- International strategy
- Multinational strategy
- Global strategy
International strategy:
Comp adv, org, disadv
Comp adv:
- home country innovations as source of competitiveness
- Great abilities to create and leverage innovations
Org:
- HQ in tech advanced countries
Disadv:
- Suffered from deficiencies of efficiency and flexibility
