1

Schedule

7-31 Philips and Matsushita8-1 EuroDisney8-5 P&G 8-6 P&G Cont. Summary Evaluations 8-7 ClipIt! discussion8-8 Presentations8-12 Final in Class

CH-ZWA645-005jsmGB

Global or Local?

James OldroydKellogg Graduate School of ManagementNorthwestern University

j-oldroyd@northwestern.edu801-422-7888650 TNRB

3

TVs

19371932

4

Continued

1958 VCR

1939

1938

1950

1938-1950

5

Today

TYPES OF INTERNATIONAL STRATEGY

MULTI-DOMESTIC MULTI-DOMESTIC STRATEGYSTRATEGY

• Product is fully customized in each country.

• Decentralized federation of national organizations. Local decision making authority. • Effective when differences between countries are large.

• Sources of Advantage:• Differentiation• Local responsiveness• Minimize political risk• Minimize rate exchange

risk

GLOBAL STRATEGYGLOBAL STRATEGY

• Product is standardized worldwide

• Centralized organization structure. National subsidiaries possess little decision-making authority.

• Effective when differences between countries are small.

• Sources of Advantage:• Cost• Ability to coordinate

activities• Speed in new product

development

A FRAMEWORK FOR ANALYSIS

Pressuresfor GlobalIntegration

Pressuresfor LocalDifferentiation

Global Strategy

Multi-domestic Strategy

Local Strategy

A Framework: Global Integration - Local Differentiation

High

High

Low

Low

Forces f

or Global

Integration

Forces for LocalDifferentiationSource: Jeff Dyer BYU 2002

HQ

STRATEGIC INTENT: Gain/Maintain Global Leadership

POLICIES:

• Specialized Production and R&D Centers

• Break Down Value Chain and Exploit Low Cost Locations

• World Products to Build Volume and Global Product Roll-out

• Price Leadership

• Optimize Global Network at Local Expense

• Move Into Key Markets Preemptively

• International Human Resources

1. A GLOBAL STRATEGY

Source: J. de la Torre

The Extreme Global Value ChainCountry Activities

A

B

C

D

E

F

G

H

R & D

Purchasing

Manufacturing

Marketing

Selling

Distribution

Service

Design

Etc.Design Purchasing Manufacturing

THE GLOBAL MAXIMIZERSome Companies Emphasizing this Approach:

• Royal Dutch Shell

• Caterpillar

• Hewlett Packard

• Boeing

• Intel

• Coca Cola

• Matsushita

• IBM

• American Express

• LM Ericsson

• Toyota

• Sony

THERE IS RELATIVELY LITTLE ROOM FOR JOINT VENTURES IN THIS MODEL, EXCEPT FOR UPSTREAM ACTIVITIES.

ACQUISITIONS PLAY A SECONDARY ROLE VS. INTERNAL GROWTH AND GREENFIELD INVESTMENTS.

Source: J. de la Torre

2. A MULTI-DOMESTIC STRATEGY

HOLDING

STRATEGIC INTENT: Gain Key Positions in

Selected Markets

POLICIES:

• Tailor Products to National Idiosyncrasies

• Differentiated Operations

• Sacrifice Efficiency for Market Access

• Reach Economies of Scale Upstream

• Maximize Local Value Added

• Gain Government Support

• Use Join Ventures to Preempt Competition and Add Local Value

• National Human ResourcesSource: J. de la Torre

The Fully Multi-local Value ChainCountry Activities

A

B

C

****

Z

R & D Design ServiceDistrib-utionSelling

Market-ing

Manu-facturing

Purch-asing

R & D

R & D

R & D

Design

Design

Design

Purch-asing

Purch-asing

Purch-asing

Manu-facturing

Manu-facturing

Manu-facturing

Market-ing

Market-ing

Market-ing

Selling

Selling

Selling

Distrib-ution

Distrib-ution

Distrib-ution

Service

Service

Service

THE FEDERALIST

Some Companies Emphasizing this Approach:

• Unilever

• Procter & Gamble

• Federal Express

• PricewaterhouseCoopers

• KPMG

• Heineken

• Philips

• Nestlé

• BASF

• General Motors

• Carrefour

• Wal-Mart

THERE IS AMPLE ROOM FOR JOINT VENTURES AND LOCAL AFFILIATIONS IN THIS MODEL. ACQUISITIONS PLAY AN IMPORTANT ROLE TO OBTAIN DOMESTIC PRESENCE IN

IMPORTANT MARKETS

Source: J. de la Torre

Linking Market, Strategy, Structure & Processes

Analysis of the environment / market precedes choice of firmstrategy which precedes choice of firm structure and processes.

Firm Structure and Processes

Environment / Market Costs CompetitorsCustomers Government

Firm Strategy

Where Next ?

High

High

Low

Low

For

ces

for

Glo

bal

Inte

grat

ion

Forces for LocalResponsiveness

17

Matsushita’s Performance

18

New Structure

19

Philips

                                                                                                                                                   

                                 

   

20

Philips