DO USE! Logelademaden Flashcards
Strategy according to (Mintzberg 1987; S)
Plan:
1) Consciously intended course of action
2) “How to deal with a situation”
3) Made in advance
Example: (SWOT, Scenario planning, Regional strategies)
Slide definition: An intended course of actions which results in an explicit strategy. Formulation before implementation.
Ploy: 1) Maneuver that outwits opponent 2) all warfare is based on deception 3) Intended Example: Threat of price war (game theory)
Pattern:
1) Stream of actions
2) Consistency
3) Focus on core competency (intention to consistency)
4) Uncovering the core
5) Emergent and realised
Example: Uppsala (empiric study pattern)
Slide: Actual actions of an organization and the consistency of these. Intended or not.
Position:
1) May overlap with preceding P’s
2) Compete in the niche that generates rent (niche=a place with economic profits according to Mintzberg)
3) Linking internal competencies with external environment (based on core competencies and environment, where do we want to play?)
4) Playing in a niche to avoid competition
5) Don’t get stuck in the middle
6) Outside-in view on strategy
7) Intended and Realised
Example: 5 forces and Generic strategies
Perspective:
1) Inside-out view on strategy: how and where do we fit in the environment
2) Individuals united to common thinking/behavior (ingrained way of viewing the world)
3) Collective and consistent behavior
Example: Sense-making for strategy
Strategy as configuration / learning (S)
o Organization is viewed as a configuration of its characteristics
o Company’s strengths or weaknesses are determined in the context of a problem
• Thus, whether competencies are good/bad for a particular strategy is relative to the problem
o Strategy maintains stability and recognizes the need for change (major transformations)
o Close link between formulation and implementation
• Centralized power, flexible organization (start-ups as an example: founders create and implement strategy
o Framework for instance resource-based view
o Dynamic capabilities!!!!!!!!!!!
Multinational company (S)
o A firm that owns and controls operations in several countries and/or any public company that engages in international activities.
o Why care? – Global FDI increases exponentially
Drivers of company internationalization (Hitt et al. 2016; S).
Emil’s Hitt et al. notes:
o Need of specialized assets (resources)
o Capability building (capability to build new capabilities to compete)
o Intense competition at home (retaliation?)
o Economic growth
o Globalisation (respond to competition)
o Diversification (reduce risk)
o Economies of scale/scope
o Location advantages
o Experimental learning
o Techonology (scalability – born global)
o Internationalisation experience
o Target country culture and institutions: Distance between home and target countries (culture and institution)
Drivers of globalization (S).
Emil’s notes:
o Ease of communication
o Transportation time dramatically reduced
o Market liberalization (which goes in the other direction now)
o World Wide Web
o Convergence of tastes
Slides:
Technology - increased use and expansion
Liberalization - of trade and resource movements
Global products and customers (developing countries increasingly consume)
Global competition
Political changes
-In Eastern Europe, China etc.
Semi-globalization / regionalism (S)
o We’re not global, we are regional (emergence of regional blocs stalls globalization, cross-border economic integration is regional)
o Local adaptation – advantages of scale and scope without global exposure
Relationship between digitization and globalization* (Ghemawat 2017).
Digitalization can facilitate globalization in certain respects (e.g., by making it easier for small firms to export).
8 reasons for why digital technologies are insufficient in driving globalization forward. These include:
- Language differences, and national borders (flow on social media heavier national)
- E-commerce depends on physical barriers to trade
- Governments can interfere with digital flows: Net Neutrality revoked in US
- Positive correlation, environment is enabling and technology advancement. However, no need for China because of 3D printing. (Text: “Another common error is to conflate digitization with technology and to assert that all technological change is pushing in the direction of increased globalization. “
Difference between product and competitive strategies (S).
o Product strategy: Choices regarding company’s products in different geographical market
• Product mix and product adaptation in given markets
• Local responsiveness (customer tastes/needs differ)
• Global integration (Standardize, international strategy, cost-saving)
o Competitive strategy: Analysing source of competitive advantage, and locating parts of value chain in markets that can best enhance competitive position
• Sources of competitive advantage:
- Location advantage
- World-scale volume
- Global brand
- Access to supply and distribution channels
Product adaptation vs. product mix (S).
o Adaptation: Altering products to fit tastes (n.b. decoupling point)
o Mix: Offering different combination of products
When to pursue global integration and when local responsiveness (S)
o Global integration pursuit: 1) when cost pressure is high (we need benefits of EOScale), no to little variation in preferences (Commodities, transportation, Apple)
o Local responsiveness pursuit: when customer tastes and preferences differ or when it is too expensive to coordinate, OR legal requirements (due to shipping costs etc., McDonalds)
Multicountry vs. global competitive strategy (Whirlpool case; S):
• Global competitive strategy(=global integration, high cost pressure)
o Same competitors in many markets
o EOS
o Competitive strategy (value chain activity where is optimal)
• Multi domestic strategy (=local responsiveness)
o Autonomous subsidiaries (support activities in subsidiaries)
o Up-stream value chain mostly in home country, and down-stream is adapted
Whirlpool:
Different tastes in home market (US), EU and China (topload/frontload washing machines)
Government interference in China, saturated market in US, recession in EU
Cost pressure high, and local responsiveness pressure high transnational strategy
Global competition vs. global business (Hamel & Prahalad 1985; S):
o Global competition:
- Battle global competitors
- companies cross-subsidise national marketshare in pursuit of global brand and distribution positions
• If you are not present on given market, global competitor cross-subsidises from that market
o Global business: Global investments are made to achieve scale &
cost efficiency not available in the home market
- Different roles of different markets: Source at low-cost; maintain minimum scale;
retaliate against a global competitor etc
3 global competitive strategies and rationales for each (Hamel & Prahalad 1985; S):
a) building global presence (Uber)
1) access volume, 2) cross-subsidise to win world, 3) redefine cost/volume relationships, 4) first-mover advantage, 5) low-cost sourcing from location advantages
b) defending domestic position (=by going global, so I can lower my price eventually),
1) Spread costs, 2) gain retaliatory capability by gaining cross-subsidising capability from other market
c) overcoming national fragmentation (open R&D in Holland to catch clever students, even though we did not have operations in Holland before = global competitive strategy)
1) Reduce costs at national subsidiary, 2) rationalize manufacturing, 3) distribute decision-making across subsidiaries
Regional strategies:
a) home base:
o Up-stream activities and support activities are in home-base (centralized), but down-stream are also internationalized (sales divisions)
o Global integration, centralization, EOS, relatively (low level of diversication vs. risk of uncertainty) low risk and high shipping costs from home region.
b) portfolio:
o Up-stream activities and support activities are in home-base (centralized), but some up-stream activities, operations (including manufacturing), and sales (down-stream) are also internationalized. Still production at home.
o Fast-to-market growth in non-home market, high risk in FDI, matching currencies (economic exposures minimized)
c) hub:
o More home-regions, some as stand-alone divisions, (up-stream activities the same in different regions) and more foreign regions (only sales divisions)
o Purest form: multi-“regional” (multi-home-base)
o Challenge: achieving balance between customization and standardization.
d) platform
o Support activities in the value chain are shared and consolidated.
o Cost-efficiency allowing customization atop common platforms (decoupling points)
o Ideally invisible to company’s customers (example: shared service center)
e) mandate
o Cousin of platform strategy (regions specialize as well as have scale)
o Centers of excellence that are responsible for making specific know-how and producing, which is available throughout the organization
• … and have decision-making power
• Need global network to succeed
o Pit-falls: 1) too much power highjacking of overall strategy, 2) specialization to the extreme creates inflexibility (disruption of single location fucks entire network)
Stages of a company’s commitment to a country (Johanson & Vahlne 1977; S)
1) Sales via agents
2) Sales subsidiary
3) Production facilities
Psychic distance (Johanson & Vahlne 1977; S).
• Theme : entry into dissimilar countries
o Factors complicating the flow of information from and to the market
o Sum of differences in 1) language, 2) education, 3) business practices, 4) culture.
Institutional distance (S).
• Regulative
o Measured in: antitrust regulation, political transparency, intellectual property protection
• Normative
o Measured in: government transparency, corruption, political risk
• Cognitive-cultural
o Based on Hofstede’s dimensions
State and change aspects of the model (Johanson & Vahlne 2009; S).
Difference between new and old model: all about relationships, psycic distance is captured in “knowledge opportunities”
• State: The now
• Change: Outcome of current activities
State: Knowledge opportunities (Market knowledge, relationships help identity opportunities) Network positions (internationalise through network in order to improve network
Change:
Relationship commitment decisions (Increase/decrease commitment, augment or develop new relationship)
Learning, creating trust-building
Psychic distance paradox: definition, causes and solutions (O’Grady & Lane 1996; S).
• Definition: overestimation of psychical closeness
o Overlooking important differences (US Canada)
- Cause: Overestimated similarity
- Solution: 1) Foreign markets are foreign. 2) Interpret market data correctly (managers with experience). 3) Check assumption.
Born globals: definition and any 2 factors affecting early internationalization (Hitt et al. 2016 from class 1; S).
o Definition: Firms that become international (resources & sales) at or shortly after inception
o 2 factors affecting early internationalization:
1) Scalability (often software, low marginal cost)
2) Small (agile/flexible)
3) Ease of communication
4 subsidiary roles (Bartlett & Ghoshal 1986; S).
Matrix: Competence of the subsidiary vs. Importance of local market
Implementer: what there is most of - Market potential is limited - Subsidiary resources are limited - Earn money in the market =Efficiency is key
Contributor:
-Unimportant market
- Subsidiary with distinctive skills
- use the subsidiary’s skills company-wide
=Often in R&D in clusters even though market is unimportant
“Black hole”:
- Important market
- Small/undeveloped subsidiary; local rivals are better.
- “Spy” on competitors: develop a full-fledged business
Strategic leader:
- Important market
- Competent subsidiary
- Not only implement, but also develop corporate strategy
Value of competencies of upstream vs. downstream subsidiaries for the organization (S)
o Upstream: “
Universal” (transferable to other markets, can be centralised), value is higher => R&D and operations
o Downstream:
Competence is local-for-local, less valued (marketing & sales)
Hierarchy vs. heterarchy (Birkinshaw & Morrison 1995; S)
Relationship between HQ and subsidiary
- Hierarchy: “Do things right” – critical resources at the top. Centralised. Brings transaction costs down.
- Heterarchy: “Do the right thing” – Autonomy/decentralized – resources are dispersed throughout the organization
Subsidiary autonomy (S).
“(…) degree to which the foreign subsidiary of the MNC has strategic and operational decision-making authority”
Potential downsides of subsidiary autonomy (S).
Centers of excellence (mandate strategy) => pitfall: rigidity and hijacking of overall strategy
Agency theory: subsidiary acts in their own benefit (rather than HQ benefit) May happen due to: o Host country laws o Customer requirements o Specidic/unique resources/capabilities
Strategic vs. operational autonomy (Birkinshaw & Morrison 1995; S).
o Strategic: Make own decisions on how and what to “go-to-market”
o Operational: has to live up to strategy and requirements from strategy. Focus is on cost efficiency (decisions on how to produce)
o (Low strategic autonomy - hierarchy) Local implementer: limited geography (adapt global to local)
o (Medium strategic autonomy) Specialized contributor: Expertise, coordinates with other subsidiaries
o (High strategic autonomy - heterarchy) World mandate: worldwide responsibility for product line/business
Relationship between the company and its environment according to the a) “traditional” and b) network views of the MNC* (S).
Traditional view: Dyadic HQ – HQ and subsidiary:
o Clear separation between MNC and its environment (suppliers, regulators etc.)
o Environment is exogenous
Network view: enmeshed
o Management of network of subsidiaries and also external environment (defined by: diverse, multi-cultural and different goals)
o Competitive advantage gained by: managing network and benefitting from scope advantages (we depend on environment for its survival)
o configuration of resources is affected by the environment … dynamic capabilities … learning and configuration ..
o State and Change (NETWORK POSITION)
Resource dependency (Luo 2003; S).
o Dependency situation arises when MNE subsidiaries rely on irreplaceable resources controlled by local possessors. Dependency translates into power for local possessor, because parent’s resource commitment is too low.
If an MNE subsidiary can therefore reduce its dependence on local resources by utilizing more internal resources coming from its parent or subsidiaries, the economic risks or transactional costs associated with resource acquisition will be substantially decreased
