Developing transnational strategies Flashcards
What are the goals and means for worldwide competitive advantage
Goals
- Efficiency
- Flexibility
- Learning
Means
- Scale economies
- National differences
- Scope economies
What is efficiency? in global context?
- value of outputs/value of inputs
- higher value of outputs
- lower the cost of inputs
- Global integration lowers cost of inputs
- Local responsiveness increases value of outputs
What is Multinational Flexibility
- ability to manage risks and exploit opportunities arising from diversity and volatility of the global environment
What are the sources of diversity and volatility in multinational flexibility
- Macroeconomic risks
- Political risks
- Competitive risks
- Resource risks
How to build multinational flexibility
- Scanning and responding to discontinues in global environment
- Selecting most attractive markets, sensing their needs and developing adaptive resources
- Understanding and managing different forms of risk
How to build worldwide learning
- Capture external diversity
- Leverage internal variety: Leverage central and local innovations, HR leverage as a competitive advantage
What are national differences?
Differences in factor costs
- Different nations have different factor levels
- Different functions of MNE have different factor requirements
- Locate functions in countries that fit the factor requirements best!
Differences in output markets
- Countries have different customer tastes and preferences distribution systems, government regulations
What are scale and scope economies
Scale
- Cost per unit of output decreases with increasing sales
- Learning and progressive cost reduction
Scope
- Share investments and costs across the same or different value chains
- Sharing can take place across markets, or products and may involve joint use of assets
What is sources of scope economies with product and market diversification
Product Diversification
- Shared physical assets - Factory automation / multiple products
- Shared external relationships: common distribution channels for many products
- Shared learning: R&D in computer/communications business
Market Diversification
- Shared physical assets - sell multiple products
- Shared external relationships - Servicing multinational customers worldwide
- Shared learning: Pooling knowledge developed in different markets
Strategic objectives and sources of CA
National differences
- Achieving efficiency in current operations - Benefit from factor costs
- Managing risk - manage the risk of market or policy-induced changes
- Innovation learning + adaptation - shared learning across org components in different products, markets, or business
Scale economies
- Achieving efficiency in current operations - Expand/exploit potential scale economies
- Managing risk - balance scale with strategic and operational flexibility
- Innovation learning + adaptation - Benefit from experience ( cost reduction + innovation)
Scope Economies
- Achieving efficiency in current operations - share investments across markets and business
- Managing risk - Portfolio diversification
- Innovation learning + adaptation - Learn from culture nad managerial process
How a company can respond to strategic challenges?
- Depends on
1) Defend worldwide dominance
2) Challenging global leaders
3) Protecting domestic niches
Responding to strategic challenges: Defend worldwide dominance
- The competitive environment forced firms to develop new capabilities
- but this was a problematic and eroded core competency - A new balancing act is required
- re-enforce existing competencies and develop new assets and capabilities
- compensate for deficiency or approximate a competitor’s source of advantage
Responding to strategic challenges: Challenging the global leader
- Find and exploit niche
- Expand your position on both product and geographic dimensions
- Become original equipment manufacturer suppliers for competitors
- Move rapidly to convert a niche position into global business or use acquisitions
Responding to strategic challenges: Protecting domestic niches
- Defend against competitors’ global advantage
- attempt to change industry structure and market conditions - Offset competitors a global advantage
- lobby for tariff protection, gain government sponsorship - Appx competitors advantage by alliance or coalition with a viable global company
How to manage differences in global strategies
Standardization
Local responsiveness
Arbitrage
