10 CHAPTER McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill
Companies, Inc. All rights reserved. Global Strategy: Competing
Around the World Instructor: Dr.Gehan Shanmuganathan Slide 2 10-2
LO 10-1 Define globalization, multinational enterprise (MNE),
foreign direct investment (FDI), and global strategy. LO 10-2
Explain why companies compete abroad and evaluate advantages and
disadvantages. LO 10-3 Explain which countries MNEs target for FDI,
and how they enter foreign markets. LO 10-4 Describe the
characteristics of and critically evaluate the four different
strategies MNEs can pursue when competing globally. LO 10-5 Explain
why certain industries are more competitive in specific nations
than in others. LO 10-6 Evaluate the relationship between location
in a regional cluster and firm-level competitive advantage. Slide 3
ChapterCase 10 Hollywood Goes Global Hollywood movie: The
quintessential American productHollywood movie: The quintessential
American product However, non-US sales increased: 50% in 2000, AND
70% in 2010 AND 70% in 2010 Altered global strategic focus Movies
that fit the global market by adapting foreign scripts, hiring
international actors/actressesetc. Treat emerging markets as focal
targetsTreat emerging markets as focal targets Not just filmmaking
industries, but also the electronics industry (ex: Korea, China),
and auto industry (ex: India) Key questions: How can a company
compete effectively in a global market place? 10-3 Slide 4 What Is
Globalization? Globalization is a process of closer integration and
exchange between different countries and peoples worldwide. Made
possible by: Falling trade and investment barriers Advanced
telecommunications Reduced transportation costs Importance of MNEs
and FDIs 10-4 Slide 5 Why Global? Gain access to a larger market
Capitalize on market potential, such as China, India, and emerging
economies Gain access to low-cost input factors Labor, natural
resources, technology, logistics Develop new competencies Location
economies Unique locational advantages 10-5 Slide 6 16 STRATEGY
HIGHLIGHT 10.2 Does GMs Future Lie in China? Market opportunity in
ChinaMarket opportunity in China 1.4 billion population, only 1 in
100 people owns a vehicle GM entered China in 1997GM entered China
in 1997 Joint venture with Shanghai Automotive Industrial Corp
China is 25% of GMs revenues and GROWING fast GM China factories
are more productive than U.S. plants GMs future relies on China and
other emerging economies!GMs future relies on China and other
emerging economies! $ 250 million on a state-of-the-art R&D
centerin Shanghai Future of GM likely decided in their
international HQin Shanghai!! 10-6 Slide 7 Global Expansion: Where
How does an MNE decide where to go? National institutions:
Well-established legal and ethical pillars as well as well-
functioning economic institutions such as capital markets, banks,
and infrastructures National culture: "Programming of the mind"
Geert Hofstedes Cultural Dimensions 1. 1.Power distance 2.
2.Individualism 3. 3.Masculinity/femininity 4.
4.Uncertainty-avoidance 5. 5.Long-term orientation 10-7 Slide 8
Global Expansion: How Exporting: producing goods in one country to
sell in another Acquisition, strategic alliance are also popular
vehicles for entry into foreign markets MNEs sometime prefers
greenfield operations or wholly owned subsidiaries Greenfield is
building new factories/offices from scratch Physically and
organizationally building from the "ground up". 10-8 Slide 9
Strategy around the World: Cost Reduction vs. Local Responsiveness
Local responsiveness: Local responsiveness: Tailor product and
service offerings to fit local consumer preferences and
host-country requirements Higher cost Ex: McDonalds uses mutton in
India Cost reduction: Cost reduction: MNEs enter global marketplace
with the intention to reduce operation cost Ex: Toyota Prius 10-9
Slide 10 EXHIBIT 10.6 The Integration-Responsiveness Framework
10-10 Slide 11 111 STRATEGY HIGHLIGHT 10.3 Walmart Retreats from
Germany Walmart entered GermanyWalmart entered Germany Acquisition
of 21 stores and 74 hypermarkets Walmart duplicated its U.S.
policies and applied them in GermanyWalmart duplicated its U.S.
policies and applied them in Germany Employees refused to accept
those policies Walmart faced significant cultural
differencesWalmart faced significant cultural differences Walmart
could not develop efficient economies of scale and distribution
centers to drive cost downWalmart could not develop efficient
economies of scale and distribution centers to drive cost down The
result is a defeated Walmart that sold its stores to Metro,
Walmarts key rival in Germany!The result is a defeated Walmart that
sold its stores to Metro, Walmarts key rival in Germany! ALDI,
another of Walmarts competitors in Germany, is now expanding
aggressively in the U.S.ALDI, another of Walmarts competitors in
Germany, is now expanding aggressively in the U.S. 10-11 Slide 12
National Competitive Advantage Framework Factor conditions A
nations endowments in terms of national, human, and other resources
Demand conditions Specific characteristics of demand in a firms
domestic market Competitive intensity Highly competitive
environments tend to stimulate firms to outperform others Related
and supporting industry leadership in related and supporting
industries can also foster world-class competitors in downstream
industry Complementarity 10-12 Slide 13 Regional Clusters Regional
cluster A group of interconnected companies and institutions in a
specific industry, located near each other geographically and
linked by common characteristics Knowledge spillover Positive
externalities that are regionally constrained Exchange of ideas
among firms in a cluster 10-13 Slide 14 EXHIBIT 10.9 Mapping a
Regional Cluster: Research Triangle 10-14 Slide 15 CHAPTERCASE
10/Consider This Hollywood film industry enters global market to
explore new revenue stream!Hollywood film industry enters global
market to explore new revenue stream! Will we see a decrease in the
production of regional and U.S.-centered movies? Or will small
independent movie producers pick up a higher share of the domestic
U.S. market?Will we see a decrease in the production of regional
and U.S.-centered movies? Or will small independent movie producers
pick up a higher share of the domestic U.S. market? Will piracy
become a significant concern when Hollywood filmmakers go global?
How to combat the piracy?Will piracy become a significant concern
when Hollywood filmmakers go global? How to combat the piracy? How
would you prioritize which nations to expand distribution into if
you were working for a major Hollywood movie studio?How would you
prioritize which nations to expand distribution into if you were
working for a major Hollywood movie studio? 10-15
