* Corporations

7/24/2019 * Corporations

1/36

Regional&

Global Strategy

Khurram Zafar


2/36

Objectives1. Defne the terms International

BusinessandMNC.2.Discuss the2primary ways in whichinternational business occurs:a)Trade &

b)Foreign Direct Investment (FDI).3.Examine the impact o the TRIAD

on international trade and

investment..Descri!e the current state o world

economies and the role o

government and trade regulations


3/36

Objectives".Discuss the importance o

technology and the role o #MEs inthe international business arena.

$.Examine how MNCs use triad !regional strategies to compete

e"ectively in the internationalmar#et place.%.Discuss the determinants o

national competitive advantage.


4/36

Introduction International $usiness: the study of

transactions taking place across nationalborders for the purpose of satisfying theneeds of individuals and organiations!

%ultinational orporations (%'s): acompany head"uarter in one country buthaving operations in other countries!


5/36

#ultinational Strategies & Structuresressures or ost eductions and *ocal esponsiveness

Four strategic choices or %'s

+.,ome eplication -trategy emphasies theinternational replication of home country$basedcompetencies

.*ocali/ation (multidomestic) strategy is an e%tension

of the home replication strategy focusing on a number offoreign countries'regions each regarded as a stand$alonelocal market (orthy of signi)cant attention and adaptation

0.1lobal standardi/ation strategy is the opposite of the

localiation strategy2.Transnational strategy aims to capture *the best of

both (orlds+ by endeavoring to be both cost e,cient andlocally responsive

2 - Lecture - MNC - by Khurram Zafar--$-.$/an$-012 3


6/36

#ultinational Strategies and Structures45he Integration6Responsiveness 7rame(ork

--$-.$/an$-012 2


7/36

7our Organiational StructuresFour organi/ational structures that

are appropriate or the our strategicchoices:

1! International division

-! Geographical area

.! Global product division

8! Global matri%



8/36

1! International :ivision

International Division

5ypically set up (hen )rms initially e%pandabroad often (hen engaging in a homereplication strategy

roblems:

7oreign subsidiary managers in theinternational division are not given su,cientvoice relative to the heads of domestic divisions

5he *SI;O+ e


9/36

-! Geographic >rea Structure1eographic 3rea -tructure

Organies the #?@ according to di


10/36

.! Global Eroduct :ivision Structure

1lobal roduct Division -tructure

Supports a global strategy in treating eachproduct division as a stand$alone entity (ith full(orld(ideFas opposed to domesticFresponsibilities for its activities

7acilitates attention to pressures for coste,ciencies in allo(ing for consolidation on a(orld(ide Aor regionalB basis and reduction of

ine,cient duplication in multiple countriesroblems:

It is the opposite of the geographic area

structure4 ;ittle local responsiveness2 - Lecture - MNC - by Khurram Zafar--$-.$/an$-012 10


11/36

8! Global #atri%

1lobal %atri4

Is often used to alleviate the disadvantagesassociated (ith both geographic area andglobal product division structures

Is intended to support the goals of thetransnational strategyFin practice it is oftendi,cult to deliver

roblems

#ay add layers of management slo( do(ndecision speed and increase costs (hile notsho(ing signi)cant performance improvement



12/36

A Comprehensive Model ofMultinational Structure,

Learning, and Innovation

2 - Lecture - MNC - by Khurram ZafarFigure 10.6--$-.$/an$-012 1-


13/36

Industry$ased @onsiderationsIndustry characteristics

Industrial products )rms4 7avor global product divisions

@onsumer goods )rms4 7avor geographic areas

orter5s orces

Inter)rm rivalry increasingly focuses on learning and

innovation

?eed to heighten entry barriers4 ehind some recentmoves to phase out multi$domestic strategy and to erect(orld$scale facilities to deter entrants

argaining po(er of suppliers and buyers4 5hey also haveto internationalie if the focal #?H goes overseas

#?H R&: often generates competing substitute products

2 - Lecture - MNC - by Khurram Zafar--$-.$/an$-012 1.


14/36

Resource$based @onsiderations

6alue :oes any ne( structure Asuch as matri%B really add value

:oes innovation really add value ?ot al(aysJ

arity Chen all rivals adopt a *global strategy+ it is not rare

Imitability It is easier to imitate formal structure! ut ho( to imitate an

elusive informal matri% (hich is a *philosophy+

7rgani/ation Some #?@s are better able to take advantage of comple%organiational structures such as matri% than others



15/36

Institution$ased @onsiderationsFormal and inormal e4ternal institutions

Formal Institutions

H%ternally #?Hs are subject to the formal institutionalframe(orks erected by various home$ and host$countrygovernments

ost$country governments often encourage or coerce #?Hsinto undertaking certain activities

Inormal Institutions Strategists (eigh the informal backlash against activities (hich

result in domestic job losses

Formal and inormal internal institutions

7ormal organiational charts do not necessarily reveal theinformal rules of the game

5hree choices4 A1B a home$country national as the head of asubsidiary A-B a host$country national or A.B a third countrynational



16/36

#ost #?@Ls activity can be classi)ed into

t(o major categories4+. Trade (e4ports and imports):

#ore than 30M of all trade is made by

the (orldLs largest 300 #?@s!. Foreign Direct Investment (FDI):

=0M of all 7:I is made by the (orldLs

largest 300 #?@s!

#?@s >ctivity


17/36

Trade & Investment

Tradeconsists of e%ports and imports4

84ports:goods and services producedin one country and then sent toanother country!

Imports:goods and services producedin one country and bought in anothercountry!

Foreign Investment: consists ofcompanies investing funds to start orimprove operations in another country!


18/36

5he 5riad

#ost global transactions take place (ithin

and bet(een three key regions41! 5he Nnited States

-! 5he Huropean Nnion and

.! /apan5hese are referred to as4

5he *5R>I:+

h i d h i d A B


19/36

5he 5riad4 5he Nnited States ANSB1! 5he NS has the largest economy in the (orld

(ith a G:E of over P10 trillion!

-! 5he NS is part of the ?orth >merican 7ree5rade >greement A?>75>B (ith @anada and#e%ico!

.! 5he NS economy is signi)cantly larger thanthat of its t(o trading partners and is thereforea triad member on its o(n!


20/36

AHNB1! 5he HN Aor HN-9B is composed of the

countries in the HN13 A>ustria elgium:enmark 7inland Germany Greece7rance Ireland Italy ;u%embourg the?etherlands Eortugal Spain S(edenand the NKB and t(elve ne( mainly@entral Huropean countries that joinedin -008 and -009!

-! 5he collective G:E of the HN is greaterthan that of the NS and /apan!

.! 5he HN-9 is the (orldLs largest importer

and e%porter!

5h 5 i d /


21/36

5he 5riad4 /apan /apan is the ;argest economy in >sia!

/apan is the 8

th

;argest importer and 8

th

;argeste%porter in the (orld!


22/36

5odayLs

International

Hnvironment

I t ti l i


23/36

5he international business environment has

changed rapidly in recent years as a resultof4

1! >n overall slo(do(n of triad

economies-! Increased trade liberaliation throughtrade agreements

.! Improvements in technology8! 5he emergence of S#Hs!

International usinessHnvironment

Sl d f 5 i d H i


24/36

Slo(do(n of 5riad HconomiesIn the late 1DD0s and in -000s the Nnited

States the HN and /apan all e%perienced areduction in economic activity (hich inturn decreased international businessactivity!

I t ti l 5 d R l ti


25/36

International 5rade Regulation>n important international business trend hasbeen the emergence of regional and global tradeand investment liberaliation and internationalregulation!

1! 5he Corld 5rade Organiation AC5OB!

-! General >greement on 5ari55B!


26/36

5he Corld 5rade Organiation

1! Hstablished on /anuary 1 1DD3!

-! >n international organiation that deals (ithrules of trade among member countries!

.! Hnforces the provisions of the General>greement on 5ari55B!

8! >cts as a dispute$settlement mechanism!

G l > t 5 i< &


27/36

General >greement on 5ari55B

1! Hstablished in 1D89 to liberalie tradeand to negotiate trade concessionsamong member countries!

-! 5oday the C5O is enforcing theprovisions of the G>55!

I d 5 h l


28/36

Improved 5echnology#ore po(erful and a


29/36

Small & #edium Sie HnterprisesAS#HsB

1! 5he de)nition of S#Hs varies accordingto the nation! In general it refers tocompanies (ith bet(een 11 and 300

employees (ith sales of less than P3million!

-! #?@s often purchase from S#Hs! 5his is

because their specialied (orkforcesinnovation and technology allo(s S#Hsto provide goods and services moree,ciently than if the #?@ (ere to sourcethese internall !


30/36

Globaliation andStrategic

#anagement

egional Triad

#i ti b t #?@s


31/36

#isconceptions about #?@sommon misconce&tionsabout %'s:

1! #?@s have far$Qung operations or earnmost of their revenues overseas!

-! #?@s are globally monolithic and

e%cessively po(erful in political terms!.! #?@s produce homogeneous products

for the (orld market and through their

e,cient techni"ues are able to dominatelocal markets every(here!

sconcep ons a ou s


32/36

In 'act9

8! #?@s earn most of their revenues intheir home regions!

3! 5he largest 300 #?@s are not spread

around the (orld but clustered aroundthe triad!

2! 5hese #?@s engage not in global

competition but in triad ' regionalcompetition this rivalry e


33/36

Globaliation and strategicmanagement

%aintaining

8conomic

Globaliation andStrategic

#anagement

E t L : t i t f


34/36

EorterLs :eterminants of?ational @ompetitive >dvantage

hy are some ;rms able to innovateconsistently while others are not

Documents

* Corporations