Global strat 2 Flashcards
Outline the concepts and causes of econmies of Scale
Source of Experience Effect:
* Labour efficiency
* Process improvements
* Product redesign
* Product standardisation
* Scale effect
* Substitution in the product
* Networking effect
Economies of scope: use same parts
there have been evolving models and mindsets for business over the years, outline the most recent ones!
Customer centricity:
Firms build their business model around what the customer wants to achieve increasingly understood through Big Data
use design thinking and business model canvas
what are the key messages we should take from Micheal Porter’s strategy
- “Market” has been defined
- Firm has a differentiated value proposition (VP); 2b. positioned within the market
(firm makes trade-offs, being disciplined about what it will NOT do) - Firm’s capabilities have “fit” (aligned) to deliver the promise of its value proposition
(but operational effectiveness provides no sustained advantage as best practices can be emulated?) - Will the character, and the definition, of the ‘market’ change
Outline the design school top down framework for strategy formulation in single markets
Understand and confirm
Conduct External and Internal analysis
Formulate strategy
Operationalise Strategy
How and why do you conduct internal and external analysis
A manager only has 8 mins to make a decision
Takes with him previous exp
2x2 frameworks are used to structure thinking in a MECE way
Helps to bring out insights
Outline SWOT/PESTLE analysis and give limitations
Be aware of the limitations:
* Subjective analysis
* Adhoc contributions, known as ’laundry lists’
* Static,
* Noweightings
What frameworks must i know when conducting internal and external analysis
SWOT (internal) and PESTLE (External)
Product life cycle
BCG growth share
Porter’s 5 forces
Design thinking
MAKE YOUR OWN and develop insights
Outline the BCG share matirx, giving applications, limitations and creations
Many different applications…
* Business units in corporation (country subs can be BUs)
* Competitors within Industry
* Industry across countries
Limitations:
* synergies?
* how is market defined?
Outline Porter’s 5 forces
Competitors
Bargaining power of suppliers
Threat of substitutes
Threats of new entrant
Bargaining power of buyers
read the article again and add notes
Outline how supplier, subsitute and rivalry power changes based on factors
Greater Supplier Power if…
* Few alternative suppliers to industry
* Suppliers not heavily dependant on
focal industry for revenue
* Suppliers’ product affects value
proposition of buyers
* Supplier can credibly threaten to
integrate downstream
Greater Substitute Threat if…
* Functionality is very similar to
industry product
* Offers a better value proposition
* Switching costs for customers are low
Greater Rivalry if …
* Slow industry growth -> zero-sum competition
* Low customer switching costs between rivals
* Rapid tech development / obsolescence -> racing
* High levels of competitor commitment
* NOTE: RIVALRY CAN INCREASE MARKET SIZE
outlien how new threats and buyer power changes based on factors
Greater Barriers to New Entry if …
* High economies of scale
* High capital requirements
* High customer switching costs
* Incumbency advantages
* Constrained access to exchange partners
* High government regulation
Greater Buyer power if …
* Low switching costs for buyer
* More concentrated than industry
* Accounts for large purchase volume of
industry
* Can threaten to integrate upstream
* Can influence downstream purchase
decisions (e.g., retailer promotions) Ø Buyers highly price-sensitive when …
o They are budget constrained
o Product is undifferentiated
Apart from frameworks how else can you assess INTERNAL competencies of a frim
Value chain analysis: mapping set of activities to product or service
Resource based view (VRIO test)
* leads to competencies
* combining to capabilites
* business model emerges
check notes when case study comes out
Outlien the Desing thinking framework 2x2
Be aware of the limitations:
* Still early stages
* Considered by some academics as ‘messy
Empathy is important, need to understand how the pt feels, what they do, see, etc
Discern customer’s pain and gain and link to value proposition
Oultine the business model canvas
Business model is a tool to execute business strategy
How do you mitigate the risk of your product declining
Observe customers and competitors:
* How are they using your product
* Why are they using it?
* What else could they be doing
International strategy:
Outline the individual frameworks for formulating strategy
Same as single market but has different sub-groups
LEARN EACH sub-group
Firm Heritage, what is it comprised of and where do you look for it?
Comprised of:
* Environmental heritage
* Physical heritage
* Organisational cultural heritage
* Routines/norms/standard operating procedure
Ix:
* character of external firm when it formed
* characters of founders
* initial core competencies of firms
* additional capabilities needed to bring product into market
* any events like war or bankruptcy that changed it
* backgroud of current leaders
Outline reasons why firms may want to internationalise
PULL factors:
* Get more resources(skills, tech,etc)
* Attractive market
* Efficiency seeking( tax and cheap labour)
* Psychological infleunces (story for shareholders)
PUSH factors:
* Bad home market
* put foreign competitors on the defensive in home market
* reaction to follow clients, distributor, comp, internal advocaite
when do firms internationalise?
Traditional: home first then move due to reasons
Born global at first like HSBC, AIG, Logitech
What are the ethical principles MNC could and SHOULD follow
Could only pander to shareholders and stakeholders but should follow a multi jursidiction governance (of host country)
In terms of extending foundation, could be imperialism or relativism but should have universalism and tailor it
OECD has a code of conduct
They have to articulate the principles
why do MNCs or people succumb to unethical practices
CHQ not set the rules clearly
Lack of awareness
Innate desire to please senior
Situations where personal sacrifices exist yet consequences abdstract
what is the difference between risk and uncertainty
Risk
The presence of a known event to which a statistical probability can be assigned
Uncertainity
lack of any quantifiable knowledge about the occurrence of an event (cannot apply a probability)
But can be de-composed into:
* Contingent Uncertainty: There exists knowledge that can allow the uncertainty to become a risk
* Pure Uncertainty: No knowledge exists to reduce the uncertainty
what are the factors that affect whether internationalisation can be sustained?
Overoptimistic targets (3 intead of 7)
if they fail, their intial thought is they’ll outgrow it esp in emerging markets
Person who puts forward the proposition leaves
Sustaining internationlaisation, what are the 2 main forces for it and give consequences for it
Top Management Team (TMT) and the Corporate Board
have to decide if they have the fortitude to commit for the long-term (typically, beyond the tenure of the current Group CEO)
Force for persistence:
* overconfidence
* sunk cost
* denial
* admitting failure
Force for abandonment:
* aversion to loss
* opportunity cost
* intolerance for failure
* publicily stated limits
why do firms have vacillating commitments to internationlizing
TIMING OF RETURNS
Changing markets
Changing leaders and their experience
Reactions of shreholders and regulators
Effective knowledge transfer
Executive Knowlege window of CEO
How do you verify that FSAs are non location bound?
Use Porter framework to identify FSA and anaylse it
* Clearly defined market
* Postion of VP
* Business model that creates and delviers VP
* Explicit as towhat the firm will not do
How would you assess the impact on firm FROM internationalisation
it imapcts board, top management team and organisation
not relevant for exam
Conducting external analysis how will ensure a market is both attractive and accessible
Attractive: big population and big income
Accessible:
* will they steal from me
* Develop broad strategy and then funnel down
* Check McKinsey cognitive biases and check contingencies
* Apply RAT Test
External analysis how to funnel down the accessibility of the country?
Filter and start with bropad strategy
Screening
Selection
Reality
How will you beat the odds in Market entry?
Cognitive biases (avoid this)
* * Reliance on insider perspectives of the firm within the external context
* * Overestimation of value proposition, internal capabilities and their relevance
* * Overly optimistic about market potential (or anchoring on initial figures)
* * Underestimating competitor response
* * Underestimating duration and cost of market entry initiative
Contingencies (create this)
* * Create an reference class of relevant firms that attempted similar market entry
* * Estimate stage of industry life-cycle (has the shake-out occurred?)
* * Conduct gaming exercises, with executives assuming the role of competitors
* * Seek external reviews to challenge thinking and assumptions
Explain the RAT Test for market accessibility
Are FSAs:
Relevant to customers in host
Appropriate within host market
Transferrable?
Explain how you could enure your firm business model can adapt to host countries?
Map it to business model canvas, can you find equivalent in host
Timing for internationalisation! what are the relevant theories
Absolute Advantage theory :best comp
Comparative advantage theory: best country
Factor proportion theory
Paul Kreugman New Trade Theory: Eos
Timing is often driven by home market considerations! which one
Maturity in Product Life cycle
Depending on the industry, when does an internationalisation imperiative exist?
FSA: non location bound?
EoS in firms offerings
Populations of buyers in home country insufficient relative to EoS threshold
Foresight: your FSA can be replicated by firms in other countries
What factors will determine the pace of internationlisation
depends on models:
* upssala (one at a time)?
* diversify portfolio
Dispersion strategy: where do firms normally internationalise? and how does performace change overtime
Home region
it gets better up until a conceptual point when it gets too bing to manage!
Approach to Host Country entry
what are the trade offs between wholle owned v licensing and what underpins it
License: you quickly get into the market at lower cost but lose control and increase chance of getting a competitor
Wholly owned: you protect your IP and your brand but can be slower and very costly
Joint venture/alliance: access to comp assets but cost of negotiations, national laws bring up a lot of questions
* MNC may bring worse team
Underpinned by National regulations
Approach to Host Country entry:
outline the trade off between M&A and greenfield(build from scratch)
M&A quicker to access market than Greenfield
Approach to Host Country entry:
What must occur to ensure there is trust between Alliances
Identify each other goals
Go slowly
Invest in cross cultural training and direct comms
Identify right level of trust
How do you position MNC across countries
IMPORTANT
Very difficult to be transnational
How do you overcome obstacles such as:
* uncertain regulatory environment
* Talent deficit
* Overstructured infrastructure
- Entrepreneurial mind-set
- Proactive approach to shaping their surrounding business environments and ecosystems
- Localize their operations wherever they do business (influenced by internationalisation mode)
outline the different appeals of firms VP across countries, i.e how does each country segment differ in what they consider a VP
differ by country wealth
* sale pitch
* consumer desire
How do companies shift their positioning across market segments as they move across countries
scale the product down to sell the people of lower wealth
How can emerging countries MNCs outcompetes developed countries MNC
using disruptive tech
How are expats typically used by MNC? where are they picked
Ethnocentric: come from home MNC
Polycentric: choose expat in host nation (japan)
Regiocentric: choose expat from region to serve region hosts
Geocentric: chosen from worldwide to serve worldwide
the slides from Gordon’s forum
why use expatriates?
Task / position to be filled
Transfer (apply?) corporate values/knowledge/skills
Protect the parent company (formal control mechanism)
Contribute to corporate revenue/serving clients
Provide access to corporate network – language node International management development for expatriate (PCN model promotes hierarchical vs network orientation)
apply this slide to the case study
what are the optimal personaliites for expats
OCEAN
Should be high in openness
High in Conscientiousnes
Highly extroverted
High in agreeableness to an extent
Emotionally stable
explain the expats cycle of despair
Overly optimistic at first then very despondent and then mood goes up but not back to previous optimism.
When you source for an expat as a key role, how does knowledge etc differ depending on host v home
