Gbs All

8
Chapter 8
Managing
chapter
Global
Competitive
Dynamics
Global Strategy
Global Strategy
Mike W. Peng
Mike W. Peng
Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Strategy as Action
Source: C. M. Grimm & K. G. Smith, 1997, Strategy as Action: Industry

Figure 8.1
Rivalry and Coordination (p. 62), Cincinnati: Thomson South-Western.
Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
Strategy as Action
Strategy is interaction
Firms, like militaries, often compete aggressively
Military principles cannot be completely applied in
business (Killed or be killed not applicable)
Business is simultaneously war and peace
Militaries fight over geography, firms compete in markets
Markets involve products and geography
Multimarket competition: Firms engaging the same
rivals in multiple markets
Multimarket competition may result in mutual
forbearance
Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Industry-based considerations Resource-based considerations
Concentration Valuable capabilities to attack,
deter and retaliate
Industry leader
Product homogeneity Rarity of certain assets
Stability of demand and supply Imitability of competitive actions
Entry barriers Organizational skills for actions
Market commonality with rivals Resource similarity with rivals
Competitive
A Comprehensive dynamics
Model of Global Attack/Counterattack

Cooperation
Competitive Dynamics
Institution-based considerations
Domestic competition: Primarily

competition/antitrust policy
International competition: Primarily
trade/antidumping policy
Industry-Based Considerations
Collusion and prisoners dilemma
https://www.youtube.com/watch?v=t9Lo2fgxWHw
A Prisoners Dilemma for Airlines and Payoff Structure

(assuming a total of 200 passengers)
Industry Characteristics and Possibility
of Collusion
COLLUSION POSSIBLE COLLUSION DIFFICULT (COMPETITION LIKELY)
Few firms (high concentration) Many firms (low concentration)
Existence of an industry price leader No industry price leader

Homogeneous products Heterogeneous products
High entry barriers Low entry barriers

High market commonality (mutual forbearance) Lack of market commonality (no mutual
forbearance)
Copyright 2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part. Table 8.1
Resource-Based Considerations: VRIO
Value
Rarity
Imitability
Organization
Market Commonality
Resource Similarity

A Framework for Competitor Analysis
Between a Pair of Rivals
Sources: Adapted from (1) M. Chen, 1996, Competitor analysis and interfirm rivalry: Toward a theoretical integration (p. 108), Academy of
Management Review, 21: 100134 and (2) J. Gimeno & C. Y. Woo, 1996, Hypercompetition in a multimarket environment: The role of
strategic similarity and multimarket contact in competitive de-escalation (p. 338), Organization Science, 7: 322341.
Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or Figure 8.4
posted to a publicly accessible website, in whole or in part.
Institution-based Considerations
FREE MARKET IS NOT NECESSARILY FREE
It is not easy to agree on what is fair or unfair in different
countries
Controversial practices:
collusive price setting (domestic)
predatory pricing (domestic)
dumping (international markets)
Some policies may help:
Antitrust policy
Three Main Types of Attack
Thrust Feint
Attacks
Gambit

Thrust
Source: Adapted from R. G. McGrath, M. Chen, & I. C. MacMillan, 1998, Multimarket maneuvering in uncertain
spheres of influence: Resource diversion strategies (p. 729), Academy of Management Review, 23: 724740.
Feint
spheres of influence: Resource diversion strategies (p. 731), Academy of Management Review, 23: 724740.
Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or Figure 8.8
duplicated, or posted to a publicly accessible website, in whole or in part.
Gambit
spheres of influence: Resource diversion strategies (p. 733), from Academy of Management Review, 23: 724740.
Copyright 1998. Reprinted by permission of Academy of Management Review via Copyright Clearance Center.
Counterattacks
Three drivers command counterattacks:
Awareness
Is the attack so subtle that rivals are not aware of it?
Blue and red ocean strategies
https://www.youtube.com/watch?v=8ExRnpy4rPE
Motivation
Is the attacked market of marginal value?
Chinas Haier in the US mini-bars
Capabilities
Strong capabilities are required for counterattacks

Cooperation and Signaling
Signaling
Market entry: MNEs chase each other entering one

country after another, seeking mutual forbearance,
not just challenging
Truce seeking: times for peace
Communication via governments: China & USA for

Cisco vs. Huawei
Strategic alliances for cost reduction (legal)

Local Firms vs. Multinational Enterprises
Local firms strategies
Defender
Extender
Dodger
Contender
Adoption of one of these strategies
depends on the industry conditions
and the nature of competitive assets
How Local Firms in
Emerging Economies
Respond to
MNE Actions
Source: Adapted from N. Dawar & T. Frost, 1999, Competing with giants: Survival strategies for
local companies in emerging markets (p. 122), Harvard Business Review, March-April: 119129.
The Savvy Strategist
Implications for action:
Thoroughly understand the nature of your industry. It
might facilitate competition or cooperation.
Strengthen capabilities that more effectively compete
and/or cooperate: subtlety, frequency, complexity,
unpredictability or mutual forbearance.
Understand the rules of the game governing competition:
what is legal domestically may be illegal elsewhere.
Business is simultaneously war and peace. Apply the
winning formula of Look ahead, reason back

8
Chapter 9
Diversifying,
chapter
Acquiring, and
Restructuring
Global Strategy
Global Strategy
Mike W. Peng
Mike W. Peng
Diversification
Adding new businesses to the firm that are
distinct from its existing operations
Product diversification: entering different industries

Geographic diversification: entering different
countries
We will focus on M&As and restructuring (No

greenfield investments or strategic alliances)

Product Diversification
Start-up as SINGLE BUSINESS STRATEGY
Product-related diversification
Emphasis on operational synergy
Product-unrelated diversification
Conglomeration
Emphasis on financial synergy

Product Diversification and Firm Performance
Source: Adapted from R. E. Hoskisson, M. A. Hitt, & R. D. Ireland, 2004,

Competing for Advantage (p. 228), Cincinnati: Cengage South-Western. Figure 9.1
Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or
Geographic Diversification
We focus on International diversification

Limited international scope
Geographically and culturally adjacent countries
Extensive international scope
Beyond geographically and culturally neighboring
countries

Geographic Diversification and Firm Performance:
An S Curve
Source: Adapted from F. Contractor, S. K. Kundu, & C.-C. Hsu, 2003, A three stage
theory of international expansion: The link between multinationality and performance in
the service sector (p. 7), Journal of International Business Studies, 34: 518. Figure 9.2
Combining Product and Geographic Diversification
A Comprehensive
Model of
Diversification
Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned,
Figure 9.4
copied or duplicated, or posted to a publicly accessible website, in whole or in part.
What Determines the Scope of the Firm?
The Evolution of the Scope of the Firm in the
United States: 19501970 and 19701990
The Optimal Scope of the Firm: Developed versus
Emerging Economies at the Same Time
Source: M. W. Peng, S.-H. Lee, & D. Wang, 2005, What determines the scope of the firm over
time? A focus on institutional relatedness, Academy of Management Review (in press). Figure 9.7
Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or
Acquisitions
Setting the terms straight

Acquisition
Merger
Three categories of M&As: horizontal, vertical,
conglomerate
Friendly and hostile M&As

The Variety of Cross-Border Mergers and Acquisitions
Source: Adapted from United Nations, 2000, World

Investment Report 2000 (p. 100), New York: UN
Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied Figure 9.8
or duplicated, or posted to a publicly accessible website, in whole or in part.
Motives Behind Mergers and Acquisitions
INDUSTRY-BASED ISSUES RESOURCE-BASED ISSUES INSTITUTION-BASED ISSUES
Synergistic motives Enhance and consolidate Leverage superior Respond to formal institutional
market power managerial capabilities constraints and transitions
Overcome entry barriers Access to complementary Take advantage of market

resources opening and globalization
Reduce risk
Scope economies Learning and developing
new skills
Hubris motives Managers over-confidence Herd behavior-following norms and

in their capabilities chasing fads of M&As
Managerial motives Self-interested actions such as

empire-building guided by
informal norms and cognitions

Symptoms of Merger and Acquisition Failures
PARTICULAR PROBLEMS FOR

PROBLEMS FOR ALL M&As CROSS-BORDER M&As
Pre-acquisition: Overpayment Managers overestimate their ability Lack of familiarity with foreign cultures,
for targets to create value institutions, and business systems
Inadequate pre-acquisition screening Inadequate number of worthy targets

Poor strategic fit Nationalistic concerns against foreign
takeovers (political and media levels)
Post-acquisition: Failure in Poor organizational fit Clashes of organizational cultures

integration compounded by clashes of national cultures
Failure to address multiple Nationalistic concerns against foreign
stakeholder groups concerns takeovers (firm and employee levels)
https://www.youtube.com/watch?v=sQ6xACl8hJk

Stakeholders Concerns During Mergers and Acquisitions

accessible website, in whole or in part. Figure 9.9
Restructuring
Setting the terms straight (Restructuring)

Downsizing
Downscoping
Refocusing
Motives for restructuring
Perspectives: Industry, resource, institution
Not widely embraced around the world

8
Chapter 10
Strategizing,
chapter
Structuring,
and Learning
Around the
World
Global Strategy
Global Strategy
Mike W. Peng
Mike W. Peng
TWO PRESSURES FOR MNE
MNEs confront two sets of pressures:
Cost reduction calls for global integration.

Local responsiveness calls for local
adaptation.
These two sets of pressures

are dealt with in the integration-
responsiveness framework.
MULTINATIONAL STRATEGIES AND
STRUCTURES
MULTINATIONAL STRATEGIES
Home replication strategy duplicates home-

based competencies in foreign countries.
Easy to implement
Makes sense when most customers are
domestic.
Lacks local responsiveness.
Foreign customers might be alienated
International Division Structure at Starbucks

Multinational Strategies and Structures:
Organizational Structures (contd)
International Division
Typically set up when firms initially expand abroad, often when
engaging in a home replication strategy
Problems:
Foreign subsidiary managers in the international division are not
given sufficient voice relative to the heads of domestic divisions
The silo effect: International division activities are not
coordinated with the rest of the firm, which focuses on domestic
activities
Firms often phase out this structure after their initial overseas
expansion

STRUCTURES
Localization strategy focuses on a number of

countries/regions, each one regarded as a stand-alone
market.
Maximizes local responsiveness.

Effective when differences among markets
are clear and pressures for cost reduction are
low.
High costs due to duplication of efforts in
multiple countries.
Too much local autonomy.
Geographic Area Structure at Avon Products
Avon
Avon
Avon Avon Avon Western Europe
Central & Eastern
North America Latin America Asia Pacific Middle East
Europe
Africa
Source: Adapted from avoncompany.com. Headquartered in New York, Avon Products, Inc. is the
company behind numerous Avon ladies around the world. Figure 10.3
Organizational Structures (contd)
Geographic Area Structure

Organizes the MNE according to different geographic
areas (countries and regions)
Is the most appropriate for a localization strategy
Its ability to facilitate local responsiveness is both a
strength and a weakness
Problems:
While being locally responsive can be a virtue, it may
also encourage the fragmentation of the MNE into
highly autonomous, hard-to-control fiefdoms
STRUCTURES
Global standardization strategy development and

distribution of standardized products worldwide.
Best when pressure for cost reduction is high

and local responsiveness is low.
Too much centralized control.
Not limited to major operations at homemay

designate centers of excellence.
Global Product Division Structure at
European Aeronautic Defense and Space Company
(EADS)
Source: Adapted from www.eads.com. Headquartered in Munich, Germany, and Paris, France,
EADS is the largest commercial aircraft maker and the largest defense contractor in Europe.
Figure 10.4
Organizational Structures
Global Product Division Structure
Supports a global strategy in treating each product division as a
stand-alone entity with full worldwideas opposed to
domesticresponsibilities for its activities
Facilitates attention to pressures for cost efficiencies in allowing
for consolidation on a worldwide (or regional) basis and
reduction of inefficient duplication in multiple countries
Problems:
It is the opposite of the geographic area structure: Little local
responsiveness

STRUCTURES
Transnational strategy endeavors to be both

cost effective and locally responsive.
Global learning and diffusion of

innovations.
Organizationally complex, difficult to

implement.
Organizational Structures
Global Matrix
Is often used to alleviate the disadvantages
associated with both geographic area and global
product division structures
Is intended to support the goals of the transnational
strategyin practice, it is often difficult to deliver
Problems
May add layers of management, slow down decision
speed, and increase costs while not showing
significant performance improvement
A Hypothetical Global Matrix Structure

AND STRUCTURES
The relationship between strategy and structure is

reciprocal.
Usually strategy drives structure

The relationship is two-way (ABB example)
Neither strategy nor structure is static.
It is often necessary to change one,
the other, or both. (Dow example).
STRUCTURES
Worldwide Learning, Innovation
and Knowledge Management:
Knowledge Management in MNEs
Knowledge management can be defined as the

structures, processes, and systems that actively
develop, leverage, and transfer knowledge.
Explicit knowledge: codifiable.Transferred with little

loss of richness.
Tacit knowledge (implicit): non-codifiable. Transfer

requires hands-on practice.

KNOWLEDGE MANAGEMENT IN FOUR
TYPES OF MNEs
Worldwide Learning, Innovation
and Knowledge Management:
Globalizing Research and Development
Globalizing R&D
Only recently has R&D started to be internationalized

(innovation-seeking investment)
A fundamental basis for competitive advantage is

innovation-based firm heterogeneity: decentralized R&D
in different locations around the world virtually guarantees
persistent heterogeneity.

Problems and Solutions in Knowledge Management
Knowledge acquisition: Prefer to invent in-house => diminishing

returns for R&D. A new model, called open innovation, is
emerging. This model relies on more collaborative research among
internal units, external firms and universities.
Knowledge retention: employee turnover which => knowledge
leakage. Compensation? Recognition? Means?
Knowledge outflow: Knowledge is power
Knowledge transmission: Global virtual teams, remotely
connected, may have communication and relationship barriers.
Face-to-face meetings still necessary.
Knowledge inflow: The not invented here syndrome causes some
managers to resist accepting ideas from other units

Problems and Solutions in Knowledge Management
Individual and organizational incentives (bonus)

Investing in codifying tacit knowledge
MNEs often must rely on a great deal of informal integrating
mechanisms
Some try to develop informal social capital (getting to know each
other)
Overall, the micro, informal interpersonal relationships among
managers of various units may create a micro-macro link

8
Chapter 11
Governing the
chapter
Corporation
Around the
World
Global Strategy
Global Strategy
Mike W. Peng
Mike W. Peng
Owners
Concentrated versus Diffused ownership
Concentrated: Founders start up and control firms
Diffused: Numerous small shareholders, none with
complete control
Family ownership - Founding family and
descendants maintain controlling interest
State ownership - Means of production owned by
the government. Managers employed by the
state; firm governed by the state

Managers
Principal-Agent conflicts: The relationship

between shareholders and professional
managers is a relationship between principals
and agents
Principal-Principal conflicts: Such conflicts are
between two classes of principals: controlling
shareholders and minority shareholders

Principal-Agent Conflicts
Principal-Agent Relationship
One example: The relationship between shareholders
and professional managers
Agency Theory
Because the interests of principals and agents do not
completely overlap, there will inherently be principal-
agent conflicts, which result in agency costs
Conflicts persist because of information asymmetries
between principals and agents (agents always know
more about their tasks than principals)

Principal-Agent Conflicts (contd)
Reducing Agency Problems

While it is possible to reduce information asymmetries
and minimize agency problems, it probably is not
realistic to expect to completely eliminate such
problems

Principal-Principal Conflicts
Instead of between principals (shareholders) and
agents (professional managers), the primary conflicts
are between two classes of principals: controlling
shareholders and minority shareholders
The Murdoch/BSkyB case: A classic example
In 2003, the 30-year old James Murdoch became
CEO of British Sky Broadcasting (BSkyB),
Europes biggest satellite broadcaster, despite
strong minority shareholder resistance
The reason? James father is Rupert Murdoch who
Copyright 2014owned
Cengage Learning.35% ofReserved.
All Rights BSkyB May not and was chairman of the
BskyB board
Principal-Agent Conflicts and
Figure 11.2
Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to
a publicly accessible website, in whole or in part.
Principal-Principal Conflicts (contd)
Expropriation of Minority Shareholders: family

managers, who represent shareholders, may engage in
activities that enrich the controlling shareholders at the
expense of minority shareholders
Illegal activity: tunneling: divert resources for
personal or family use
Legal activity: related transactions: selling assets
of the firm to another firm they own at prices below
market or merging a profitable part of the firm with
another of their property

Board of Directors
Key features of the board
Board Composition: Otherwise known as the insider/outsider mix
Leadership Structure: Involves whether the board is led by a
separate chairman or by the CEO who doubles as a chairmana
situation known as CEO duality
Board Interlocks: When one person affiliated with one firm sits
on the board of another firm
The role of Boards of Directors: (1) control, (2) service,
and (3) resource acquisition functions
Directing strategically: Directors must strategically
prioritize

Directing Strategically
Outside Directors versus Inside Directors
PROS CONS
Outside directors Presumably more independent from Independence may be illusory

management (especially the CEO)
More capable of monitoring and Affiliated outside directors may have family or
controlling managers professional relationships with the firm or management
Good at financial control Not good at strategic control
Inside directors Firsthand knowledge about the firm Non-CEO inside directors (executives) may not be able
to control and challenge the CEO
Good at strategic control

be scanned, copied or duplicated, or posted to a publicly Table 11.2
Governance Mechanisms as a Package
Internal (Voice-based) Governance Mechanisms

- motivate managers; stock options used as (1)
carrots that transform managers from agents to
principals, or (2) sticks - CEO and top
management team turnover
External (Exit-based) Governance Mechanisms
The market for corporate control: the takeover
market
The market for private equity: going private

A Global
Perspective
on Internal
and External
Governance
Mechanisms
Source: Cells 1, 2, and 4 adapted from E. R. Gedajlovic & D. M. Shapiro, 1998,

Management and ownership effects: Evidence from five countries (p. 539), Strategic
Management Journal, 19: 533553. The label of Cell 3 is suggested by the present author. Figure 11.3
Two Primary Families of Corporate Governance Systems
CORPORATIONS IN THE UNITED STATES AND UNITED KINGDOM CORPORATIONS IN CONTINENTAL EUROPE AND JAPAN
Anglo-American corporate governance models German-Japanese corporate governance models
Market-oriented high-tension systems Bank-oriented, network-based systems
Rely mostly on exit-based, external mechanisms Rely mostly on voice-based, internal mechanisms
Shareholder capitalism Stakeholder capitalism

A Global Perspective
Overall, firms around the world are

governed by a combination of internal
and external mechanisms

A Comprehensive Model of Corporate
Governance
Industry-based considerations
Resource-based considerations
Institution-based considerations

Industry-Based Considerations
More outside directors: Boosting performance?
In fast-moving industries requiring significant R&D
(e.g., IT), outside directors are found to have a
negative impact on firm performance
Inside management ownership: Better
performance?
Only good in high-growth, turbulent industries
No such link in low-growth, stable industries
CEO duality: Always bad?
In turbulent industries, CEO duality is good! a
faster and more unified response to changing events
Resource-Based Considerations
Managerial human capital: V, R, and I?

Top management team (TMT) and board
function within an organizational setting (the O in
VRIO)

Institution-Based Considerations
Formal institutional framework
Formal legal protection encourages founding families and their heirs to
dilute their equity
Large shareholders in emerging economies usually need to have a higher
percentage of shares to ensure control
Informal institutional framework: Why and how have informal norms and values
concerning corporate governance changed to such a great extent?
The rise of capitalism has affected governance
Globalization has made that companies can compare their ways of
governance
Globalization has increased FPI. Investors demand more protection
Globalization has raised the thirst for global capital, what requires
compliance with listing requirements
The global diffusion of best practices by various organizations including
the OECD
8
Chapter 12
Strategizing
chapter
with Corporate
Social
Responsibility
Global Strategy
Global Strategy
Mike W. Peng
Mike W. Peng
A Stakeholder View of the Firm
A stakeholder is any group or individual who can affect
or is affected by the achievement of the organizations
objectives
Goal for CSR is global sustainability, defined as the
ability to meet the needs of the present without
compromising the ability of future generations to meet
their needs
Three drivers related to urgency of sustainability
Rising population, poverty, and inequity
NGOs and other civil society stakeholders have begun monitoring and in
some cases enforcing social and environmental standards
Industrialization and its effects on the environment
A Stakeholder View of the Firm (contd)
Primary and secondary stakeholder groups

Primary stakeholder groups are those on whom the
firm relies for survival and prosperity
Secondary stakeholder groups are defined as those
who influence or affect, or are influenced or affected
by, the corporation, but they are not engaged in
transactions with the corporation and are not
essential for its survival

A Stakeholder View of the Firm
Source: Adapted from T. Donaldson & L. Preston, 1995, The stakeholder theory of the corporation:
Concepts, evidence, and implications (p. 69), Academy of Management Review, 20: 6591.
Figure 12.1
Managers: A Unique Group of
Stakeholders
The free market and CSR camps agree:
Not to rock the capitalistic boat
On the central role of managers
Managers, as a stakeholder group, are uniquely
positioned at the center of all stakeholder
relationships; therefore, it is important to
understand how they make decisions
concerning CSR

A Comprehensive Model
of Corporate Social
Responsibility
Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part. Figure 12.2
Rivalry Among Competitors
Mutual Interdependence
Reliance on old ways of doing business allows competitors to
resist higher CSR standards
Threat of Potential Entry

First mover experience in pollution control
technologies can create entry barriers
pollution prevention vs. pollution reduction technologies
The technologies creating the most effective entry
barriers are proactive, pollution prevention technologies.

Bargaining Power of Suppliers / Buyers
If socially and environmentally conscious
suppliers provide unique, differentiated products
with few or no substitutes, their bargaining
power is likely to be substantial
CSR conscious buyers can extract concessions
Individual buyers: Shells North Sea platform fiasco
Corporate buyers: Nike requires its suppliers to be
sweatshop-free
Buyers in great difficulties can extract CSR
concessions
Threat of Substitutes
If substitutes are superior to existing products

and costs are reasonable, they attract more
customers
Wind power, much more environmentally friendly
than fossil-fuels and safer than nuclear power, may
have great potential
Overall, the threat of substitutes requires firms to
vigilantly scan the larger environment, instead of
narrowly focusing on the focal industry

Turning Threats to Opportunities
Not all industries are equal nor are any

industries immune in terms of their exposure to
CSR challenges
Industries and firms may want to selectively but
proactively turn threats into opportunities
Treating CSR as a cost or nuisance may
underestimate strategic business opportunities
The most proactive managers are far-sighted to make
their firms CSR activities a source of differentiation as
opposed to an additional cost

Resource-Based Considerations
Value: Some CSR policies may not add to the

firms value
Rarity: CSR policies may not pay off if common
Imitability: CSR that is embedded in people is
harder to imitate
Organization: A firm needs to tie together CSR
activities

CSR Economic Performance Puzzle
Why is there no conclusive evidence on a direct,

positive link between CSR and economic
performance?
Various studies produce different results
Not every firm benefits from CSR

Institution-Based Considerations
Reactive strategy: Many cost-conscious manufacturers
ignore CSR
Defensive strategy: Argue against costs
Accommodative strategy: CSR as a worthwhile endeavor
Proactive strategy: Actively participate in policy
discussions, build alliances with stakeholders and
voluntarily go beyond what the regulations require
Making strategic choices: A strategic menu of choices
among reactive, defensive, accommodative, and
proactive strategies

CSR STRATEGY

Conclusion
Three golden rules about managing CSR


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8

Source: C. M. Grimm & K. G. Smith, 1997, Strategy as Action: Industry

Model of Global Attack/Counterattack

Domestic competition: Primarily

A Prisoners Dilemma for Airlines and Payoff Structure

COLLUSION POSSIBLE COLLUSION DIFFICULT (COMPETITION LIKELY)

Few firms (high concentration) Many firms (low concentration)

Existence of an industry price leader No industry price leader

High entry barriers Low entry barriers

Copyright 2014 Cengage Learning. All Rights Reserved. May not

Copyright 2014 Cengage Learning. All Rights Reserved. May not

Copyright 2014 Cengage Learning. All Rights Reserved. May not

Copyright 2014 Cengage Learning. All Rights Reserved. May not

Market entry: MNEs chase each other entering one

Truce seeking: times for peace

Communication via governments: China & USA for

Strategic alliances for cost reduction (legal)

Copyright 2014 Cengage Learning. All Rights Reserved. May not

Product diversification: entering different industries

We will focus on M&As and restructuring (No

Copyright 2014 Cengage Learning. All Rights Reserved. May not

Start-up as SINGLE BUSINESS STRATEGY

Copyright 2014 Cengage Learning. All Rights Reserved. May not

Source: Adapted from R. E. Hoskisson, M. A. Hitt, & R. D. Ireland, 2004,

We focus on International diversification

Copyright 2014 Cengage Learning. All Rights Reserved. May not

Setting the terms straight

Copyright 2014 Cengage Learning. All Rights Reserved. May not

Source: Adapted from United Nations, 2000, World

Overcome entry barriers Access to complementary Take advantage of market

Hubris motives Managers over-confidence Herd behavior-following norms and

Managerial motives Self-interested actions such as

Copyright 2014 Cengage Learning. All Rights Reserved. May not

PARTICULAR PROBLEMS FOR

Inadequate pre-acquisition screening Inadequate number of worthy targets

Post-acquisition: Failure in Poor organizational fit Clashes of organizational cultures

Copyright 2014 Cengage Learning. All Rights Reserved. May not

Copyright 2014 Cengage Learning. All Rights Reserved. May not

Setting the terms straight (Restructuring)

Copyright 2014 Cengage Learning. All Rights Reserved. May not

MNEs confront two sets of pressures:

Cost reduction calls for global integration.

These two sets of pressures

Home replication strategy duplicates home-

Copyright 2014 Cengage Learning. All Rights Reserved. May not

Copyright 2014 Cengage Learning. All Rights Reserved. May not

Localization strategy focuses on a number of

Maximizes local responsiveness.

Geographic Area Structure

Global standardization strategy development and

Best when pressure for cost reduction is high

Too much centralized control.

Not limited to major operations at homemay

Copyright 2014 Cengage Learning. All Rights Reserved. May not

Transnational strategy endeavors to be both

Global learning and diffusion of

Organizationally complex, difficult to

Copyright 2014 Cengage Learning. All Rights Reserved. May not

The relationship between strategy and structure is

Usually strategy drives structure

Knowledge management can be defined as the

Explicit knowledge: codifiable.Transferred with little

Tacit knowledge (implicit): non-codifiable. Transfer