INDEX

INDEX
1.
The Uruguay Round Agreements
1.
Uruguay Round
Agreements
2.
AThe
Comprehensive
Model
of Global Competitive Dynamics
A Comprehensive
Model
of Global
Competitive
Dynamicsmodel
3.2.
Global
business growth
model
in SE Asia:
A market-driven
3.
Global
business
growth
model
in
SE
Asia:
A
market-driven
model
4.
4.
Potential
Sources of Economies of Scope for Firms Pursuing Global Strategies
Potential
Economies
of Scope for Firms Pursuing Global Strategies
Tariff and Sources
NontariffofTrade
Barriers
Tariff
and
Nontariff
Trade
Barriers
5.
Industry Globalization Potential
Globalization
6.5.
AIndustry
Framework
for Global Potential
Strategy
6.
A
Framework
for
Global
Strategy
7.
How Global Strategy Levers
Achieve Globalization Benefits
How Global
Strategy
Levers Achieve Globalization Benefits
8.7.
Global
Competitive
Moves
Global
Competitive
Moves Strategy
9.8.
The
Dimension
of International
9.
The Dimension
of International
10.
Types
of International
Strategy Strategy
Types of Corporate
International
Strategy
11.10. Assessing
Globality
11. AAssessing
Corporate
Globality
Framework for Choice of Products
FrameworkforforChoice
ChoiceofofMarkets
Products
12.
AA
Framework
12. Alternative
A Framework
for
Choice
of
Modes of Entry Markets
Alternative
Modes
of Entry Acquisition
13.
Greenfield
Versus
Cross-Border
13. What
Greenfield
Versus
Cross-Border Acquisition
14.
Is a Global
Mindset?
14.
What
Is
a
Global
Mindset?
How a Global Mindset Differs from a Parochial or a Diffused Mindset
a Global
Differs from
a Parochial
or a Diffused
Mindset
15.HowTo
convertMindset
global presence
into global
competitive
advantage,
the
15.
To
convert
global
presence
into
global
competitive
advantage,
the
16.
Drivers of Global Value: The Star Framework
16. Scope
Drivers
of GlobalinValue:
The
Star
Framework
17.
Economies
Product
and
Market
17. Worldwide
Scope Economies
in Product
andMeans
Market
18.
Advantage:
Goals and
18.
Worldwide
Advantage:
Goals
and
Means
19.
Strategic Orientation and Configuration
of Assets
19.
Strategic
and Configuration of Assets
20. Elements
of GlobalOrientation
Organization
20. 21.
Elements
of Global
Organization
Desired
Organization
Features for Types of Geographic Strategies
21. Different
Desired Organization
Features fortoTypes
of Geographic
Strategies
22.
Corporate Approaches
Worldwide
Strategy
22. Match
Different
Corporate Approaches
to Worldwide
Strategy
23.
of Organizational
and Strategic
Logic
23.
Match
of
Organizational
and
Strategic
Logic
24.
Structural Options for Firms Pursuing Global Strategies
24. Local
Structural
Options forGlobal
Firms Integration,
Pursuing Global
28.
Responsiveness,
and Strategies
Organizational Structure
28.
Local
Responsiveness,
Global
Integration,
and
Organizational Structure
29.
29. Influencing the Propensity of a Firm to Enter into Strategic Alliances
Factors
Factors
Influencing
the Propensity
of a Firm to Enter into Strategic Alliances
30.
The
ICV Decision
Tree

The Uruguay Round Agreements

(concluded in Geneva, Dec 15, 1993 and signed as a declaration in Marakesh, Marocco, April 15, 1994)

1. Agreements on Trade in Agricultural Products, Textiles, Garments and Other

Manufactured Products.
2. Agreements on Trade in Services
3. Agreements on Trade-Related Investment Measures (TRIMs)
4. Agreements on Trade-Related Intellectual Property Rights (TRIPs)

Changing Paradigms
A Poli-centric
Nation-state growth
Domestic
Passive

An Econ-centric
Market-driven growth
Global
Dynamic

A Comprehensive Model of Global Competitive Dynamics

Industry-based considerations

Resource-based considerations
Valuable abilities to attack,
deter, and retaliate
Rarity of certain assets
Imitability of competitive actions
Organizational skills for actions
Resource similarity with rivals

Concentration
Industry leader
Product homogeneity
Entry barriers
Market commonality with rivals

Competitive
dynamics
Attack / Counterattack /
Cooperation

Institution-based considerations
Domestic competition: Primarily
competition / antitrust policy
International competition;
Primarily trade / antidumping policy

Source: Peng, 2009:254

Global business growth model in SE Asia:

A market-driven model
Foreign
investment
Markets
Home markets
Existing markets
Emerging markets

Host
economies

Regional
integration

Exports

Source: Reynolds, 2002:13

TNC
industrialisation

Potential Sources of Economies of Scope for Firms Pursuing Global Strategies

1.
2.
3.
4.
5

To gain access to new customers for current products or services

To gain access to low-cost factors of production
To develop new core competencies
To leverage current core competencies in new ways
To manage corporate risk

Source : Barney, 2007:478

Tariff and Nontariff Trade Barriers

Tariffs: taxes levied
on imported goods
or services

Quotas: quantity limits

on the number of products
or services that can be
imported

Nontariff barriers: rules,

regulations, and policies that
increase the cost of importing
products or services

Import duties

Voluntary quotas

Supplemental duties

Involuntary quotas

Variable levies

Restricted import licenses

Government policies
Government procurement policies
Government-sponsored export
subsidies
Domestic assistance programs

Border levies

Minimum import limits

Countervailing duties

Embargoes

Custom policies
Valuation systems
Tariff classifications
Documentation requirements
Fees
Quality standards
Packaging standards
Labeling standards

Source : Barney, 2007:481

COST
DRIVERS

Cost Drivers
Global scale economies
Steep experience curve effect
Sourcing efficiencies
Favorable logistics
Differences in country costs
(including exchange rates)
High product development cost
Fast changing technology

Source: Yip, 1992:12,31-32; cf. 2003:11-12

INDUSTRY
GLOBALIZATION
POTENTIAL

COMPETITIVE
DRIVERS

Market Drivers
Common customer needs
Global customers
Global channels
Transferable marketing
Lead countries

MARKET
DRIVERS

Industry Globalization Potential

Government Drivers
Favorable trade policies
Compatible technical standards
Common marketing regulations
Government-owned competitors
and customers
Host government concerns

GOVERNMENT
DRIVERS

Competitive Drivers
High exports and imports
Competitors from different
continents
Interdependence of countries
Competitors globalized

A Framework for Global Strategy

Position and
Resources
of Business
and Parent Company
Appropriate
Setting for Global
Strategy Levers
Industry
Globalization
Drivers

Organizations
Ability to Implement
a Global Strategy

Source: Yip, 2003: 6

Benefits/
Costs of
Global
Strategy

How Global Strategy Levers Achieve Globalization Benefits

Benefits

Global
Strategy
Levers

Global Market
Participation

Global
Location
of Activities

Improved Quality

Enhanced Customer
Preference

Increases volume for

economies of scale.

Via exposure to demanding

customers and innovative
competitors.

Via global availability,

global serviceability, and
global recognition.

Advantage of early entry.

Provides more sites for
attack and counterattack
hostage for good behavior,

Earlier or greater
commitment to a market
than warranted on own
merits.

Focuses development and

management resources.

Allows consumers to use

familiar product while
abroad.

Basis for low-cost invasion

of markets.

Less responsive to local

needs.

Reduces purchasing,
production, and inventory
costs.

Reduces duplication of
activities.
Helps exploit economies of
scale.
Exploits differences in
country factor costs.
Partial concentration allows
flexibility versus currency
changes and versus
bargaining parties.

Global
Marketing

Global
Competitive
Moves

Source: Yip, 1992:20; 2003: 17

All Levers incur

Coordination Costs, Plus

Cost Reduction

Reduces duplication of
development efforts.

Global
Products

Major Drawbacks

Reduces design and

production costs of
marketing programs.

Allows organizations to use

same product across
country units.

Competitive Leverage

Offsets disadvantage of low

market share.

Allows maintenance of cost

advantage independent of
local conditions

Focuses effort.
Allows more consistent
quality control.

Provides flexibility on
where to base competitive
advantage.

Distances activities from

customer.
Increases currency risk.
Increases risk of creating
competitors.
More difficult
to manage value chain.

Focuses talent and resources.

Leverages scarce, good
ideas.

Reinforces marketing
messages by exposing
customer to the same mix in
different countries.

Reduces adaptation to local

customer behavior and
marketing environment

Magnifies resource
available to any country.
Provides more options and
leverage in attack and
defence

Local competitiveness may

be sacrificed.

Global Competitive Moves

A global strategy approach to competitive moves means integrating competitive
moves across countries rather than making moves one country at a time.

Type of Move

Definition

Cross-country
subsidization

Using profits from one country in which a business participates

to subsidize competitive actions in another country.

Counterparry

Defending against a competitive attack in one country by countering in another country.

Globally coordinated Simultaneous or planned sequence in which competitive moves
sequence of moves are made in different countries in the same business.
Targeting of global
competitors

Identifying actual and potential global competitors and selecting

an overall posture - attack, avoidance, cooperation, or acquisition - for each.
Developing country- Analyzing strengths and weaknesses, opportunities and threats
competitor plans
for each global competitor in each major country and developing
a competitive plan of action for each country-competitor
combination.
Preemptive use of
Being the first competitor to make use of a particular element of
global strategy
global strategy - global market participation, global products,
global activity location, and global marketing.

The Dimension of International Strategy

High
Value
Activities
Coordination
of Activities

Low
Geographically
Dispersed

Geographically
Concentrated

Configuration of Activities

Source: Porter (1986) as edited by Wortzel & Wortzel, 1997:134.

Types of International Strategy

High

Coordination
of Activities

Low

High Foreign
Investment with
Extensive Coordination
among Subsidiaries

Country-Centered
Strategy by
Multinationals
with a Number of
Domestic Firms
Operating in
Only One Country

Source: Porter (1986) as edited by Wortzel & Wortzel, 1997:134.

Purest Global
Strategy
Value
Activities
Export-Based
Strategy with
Decentralized
Marketing

Globalization
of Capital
Base

Assessing Corporate Globality

Globalization
of Corporate
Mindset

Globalization
of Market
Presence

Globalization
of Supply
Chain
Source: Govindarajan & Gupta, 2001:8

A Framework for Choice of Products

Low
Required
Degree
of Local
Adaptation
High

Moderately
attractive

Most
attractive

Least
attractive

Moderately
attractive

Low
High
Expected Payoffs from Globalization
Source: Govindarajan & Gupta, 2001:24

A Framework for Choice of Markets

High
Strategic
Importance
of Market

Phased-in
entry (create
beachhead
first)

Ignore for
now

Low

Rapid
entry

Opportunistic
entry

Low
High
Firms Ability to Exploit the Market
Source: Govindarajan & Gupta, 2001:29

Alternative Modes of Entry

100%

Degree of
Ownership
Control Over
Activities
Performed in
the Foreign
Market

Hondas initial
entry into the
U.S. market

Bridgestones
acquisition of
U.S. Based Firestone
Ford-Mazda
Genentech-Hoffman
LaRoche

0%

Champion
Internationals
paper exports
through
independent
brokers
100%
Exports

Exports Versus Local Production

Source: Govindarajan & Gupta, 2001:31

KFCs
franchisees
in India
100%
Local
Productions

Greenfield Versus Cross-Border Acquisition

High
Growth

Greenfield
operations
or cross-border
acquisitions

Greenfield
operations

Mature or
Declining

Cross-border
acquisitions

Greenfield
operations
or cross-border
acquisitions

Market
Growth
Rate

Low

High

Uniqueness of Corporate Culture

Source: Govindarajan & Gupta, 2001:35

What Is a Global Mindset?

Open to Diversity
Across Cultures and
Markets?

No

Lack of
Global Mindset

No

Lack of
Global Mindset

No

Lack of
Global Mindset

Yes

Knowledgeable About
Diversity Across
Cultures and Markets?
Yes

Able to Integrate
Diversity Across
Cultures and Markets
Yes

Global Mindset
Source: Govindarajan & Gupta, 2001:112

How a Global Mindset Differs from a Parochial or a Diffused Mindset

Able to Integrate Diversity Across
Cultures and Markets

Closed to
Diversity
Across
Cultures and
Markets

Source: Govindarajan & Gupta, 2001:113

Parochial
Mindset
(Low D - High I)

Parochial
Mindset
(Low D - Low I)

Golbal
Mindset
(High D - High I)

Diffused
Mindset
(High D - Low I)

Unable to Integrate Diversity Across

Cultures and Markets

Open to
Diversity
Across
Cultures and
Markets

To convert global presence into global competitive advantage, the company

must pursue six value creation opportunities as follows:
1. Adapting to local market differences
Benefits

: - Increased market share

- Improved price realization
- Neutralizing local competitors

2. Exploiting economies of global scale

Benefits

: -

Spreading fixed cost over larger volume

Reducing capital and operating costs per unit
Pooling global purchasing power over suppliers
Creating requisite critical mass in selected activities

3. Exploiting economies of global scope

Benefits

: - Providing coordinated services to global customers

- Market power vis-a-vis competitors

4. Tapping the most optimal locations for activities and resources

Benefits

: - Performance enhancement
- Cost reduction
- Risk reduction

5. Maximizing knowledge transfer across locations

Benefits

: - Faster product and process innovation

- Lower cost of innovation
- Reduced risk of competitive preemption

6. Playing the global chess game

Source: Govindarajan & Gupta, 2001:75-93

Drivers of Global Value: The Star Framework

Activity architecture
(concentration, differentiated center, or dispersion ? )
A

- Ensuring critical mass and full

exploitation of economies of scale
- Optimizing both the quality
and cost competitiveness
- Eliminating unnecessary
duplication

C
D
F
D
C
B

Changes ?
Shifts in factor cost differences
Changes in tariff regimes
Trends in demand patterns
Variations in product design
Adoption of new manufacturing
technologies

D
C
B
A

Locational competencies

Global coordination

(building world-class competencies)

(ensuring frictionless coordination)

- Using an incentive system
- Instituting a bench-marking system
- giving high visibility to outstanding
individuals

Upstream
: world-class competencies
Downstream : world-class market sensing
and selling competencies

A
B
C
D
F

Adapted from Gupta & Govindarajan, AME, Vol. 15, No.2, pp.51-55.

Best in industry (Ideal)

Above average (Good)
Industry average (Satisfactory)
Below average (Poor)
Worst in industry (Totally unsatisfactory)

Mapping of Global Ambition

Source: Philippe Lasserre (2012), Global Strategic Management, 3rd ed.,

New York: Palgrave Macmillan, p.35.

The Global Revenue Index (GRI) is calculated by taking the ratio of the comp
of sales in the major world regions to the industry distribution of demand in the
It is calculated with the formula:

GRI = {Ixn(cum RXn + cum RX(n-1))}

Goodyear: calculation of the global revenue index (GRI)
Distribution of sale
Asia (%) Rest of the World (%) Europe (%)North America
(%)

Industry
30
13
31
26
Goodyear RX
11
12
34
43
Cum RX
11
23
57
100
Cum RX-n
0
11
23
57
Cum RX + cum RX-n
11
34
80
157
Ix *(cum RX + cum RX-n)
3.3
4.42
24.80
40.82
Then Goodyears GRI (%) = 3.3 + 4.42 + 24.80 + 40.82 = 73.34

The Global Capability Index (GCI) is calculated in a similar way, but instead
distribution of sales, one takes the distribution of assets for capital-intensive in
else of personnel.
Source: Philippe Lasserre (2012), Global Strategic Management, 3rd ed.,
New York: Palgrave Macmillan, pp.64-66.

Scope Economies in Product and Market Diversification

Sources of Scope Economies
Product Diversification

Market Diversification

Shared physical assets

Factory automation with flexibility

to produce multiple products (Ford)

Global brand name (Nokia)

Shared external relations

Using common distribution channels

for multiple products (Samsung)

Servicing multinational customers

worldwide (Citibank)

Shared learning

Shared R&D in computer and

communications business (NEC)

Pooling knowledge developed in

different markets (Procter &
Gamble)

Source: Bartlett, Ghoshal & Beamish, 2008:202

Worldwide Advantage: Goals and Means

Sources of Competitive Advantage
Strategic Objectives National Differences

Scale Economies

Scope Economies

Achieving efficiency in
current operations

Benefiting from
differences in factor
costswages and
cost of capital

Sharing of investments
Expanding and
and costs across
exploiting potential
markets and
scale economies in
businesses
each activity

Managing risks
through
multinational
flexibility

Managing different
kinds of risks arising
from market- or policyinduced changes in
comparative advantages
of different countries

Balancing scale with

strategic and
operational
flexibility

Portfolio diversification
of risks and creation of
options and side bets

Innovation, learning,
and adaptation

Learning from societal

differences in
organizational and
managerial processes
and systems

Benefiting from
experiencecost
reduction and
innovation

Shared learning across

organizational
components in
different products,
markets, or businesses

Source: Bartlett, Ghoshal & Beamish, 2008:203

Strategic Orientation and Configuration of Assets and Capabilities in Multinational,

International, Global, and Transnational Companies
Multinational

International

Global

Transnational

Stategic
orientation

Building flexibility to
respond to national
differences through
strong, resourceful,
and entrepreneurial
national operations

Expoiting parentcompany knowledge

and capabilities
through worldwide
diffusion and
adaptation

Building cost
advantages
through
centralized,
global-scale
operations

Developing
global efficiency,
flexibility, and
worldwide
learning
capability
simultaneously

Configuration of
assets and
capabilities

Decentralized and
nationally selfsufficient

Sources of core
competencies
centralized, others
decentralized

Centralized
and globally
scaled

Dispersed,
interdependent,
and specialized

Source: Bartlett, Ghoshal & Beamish, 2008:206

Elements of Global Organization

Global Strategy Information System

Cross-Country Coordination
Global Knowledge Sharing
Global Strategic Planning
Global Budgeting
Global Customer Management
Global Performance Review and Compensation

Management
Processes

Global Identity
Commitment to Worldwide
(v. Domestic) Employment
Interdependence
(v. Autonomy) of Businesses

Source: Yip, 2003: 184

Organization
Structure

Integrated Global Authority

Absence of Domestic/International Split
Strong Business Dimension

Ability to Develop
and Implement
Global Strategy

Culture

People

Use of Foreign Nationals

Multicountry Careers
Frequent Travel
Statements and Actions of Leaders
Global Boards of Directors

Desired Organization Features for Types of Geographic Strategies

Geographic
Scope

Global

Organization
Structure
Centralized global
authority
No domestic-international split
Strong geographic
dimension relative
to business and function

Management
Processes
Extensive coordination
processes
Global sharing of technology

Multicountry careers

Global identity

Foreign nationals in home

and third countries

Interdependence

Global strategy
Global information system

Extensive travel

People

Culture

Global strategic planning,

budgets, performance
review, and compensation

Multilocal

Export-Based

Dispersed national authority

Transfer of technology
from headquarters out

Professional
expatriates

Multinational
identity

No domestic-international split

National information systems

Nationals run
local businesses

Autonomy

Strong geographic dimension

relative to business and
function

National strategic planning,

budgets, performance
review, and compensation

Limited travel

Centralized home country

control

Direction not coordination

Home country nationals run

local marketing subsidiaries

Separate domestic and

international divisions

One-way information
flow to headquarters

May have strong

functional dimension

No technology transfer
Focus on sales targets

Source: Yip, 2003: 185

Home country
culture

Different Corporate Approaches to Worldwide Strategy

Fragmented Multilocal Strategies

Countries

Countries

Businesses
B C D

U.S.A.
Japan
Germany
etc.

U.S.A.
Japan
Germany
etc.

Integrated Business Global Strategies

Businesses

Integrated Corporate Global Strategy

Countries

Countries

U.S.A.
Japan
Germany
etc.

Source: Yip, 2003: 190

Businesses
B C D

Integrated Country Strategies

U.S.A.
Japan
Germany
etc.

Businesses
B C D

Match of Organizational and Strategic Logic

Organizational Logic

pt
im
al

Po
s it
io
ns

Global
Integration

National
Firms
Fragmented

Global

Strategic Logic

Source: Yip, 2003: 191

Structural Options for Firms Pursuing Global Strategies

Decentralized federation

Strategic and operational decisions are delegated to

divisions / country companies

Coordinated federation

Operational decisions are delegated to divisions / country

companies; strategic decisions are retained at corporate
headquarters

Centralized hub

Strategic and operational decisions are retained at corporate

headquartes.

Transnational structure

Strategic and operational decisions are delegated to those

organizational entities that maximize responsiveness to local
conditions and global integration

Source : Bartlett &Ghoshal (1989) as quoted by Barney, 2007:503

Local Responsiveness, Global Integration, and Organizational Structure

Importance of Local Responsiveness

High

Decentralized
federation

Transnational
structure

(The Europeans)

Coordinated
Coordinated
federation
federation
(The Americans)
(The Americans)

Centralized
hub
(The Japanese)

Low
Low

Importance of Global Integration

Source : Barney, 2007: 505; cf. Grant, 2008:385-389.

High

Factors Influencing the Propensity of a Firm to Enter into Strategic Alliances

A. Firm Characteristics
Product-market diversity of firm
Firms size and resource position (ability to mobilize
resources independently)
Prior involvement in strategic alliances
Top managements attitudes towards strategic alliances
Corporate culture

B. Industry Characteristics
Minimum efficient scale
Convergence of industries and associated costs of
product development
Importance of speed of entry into market
Cost structure
Threat of new entrants
Threat of competition from substitutes

C. Environmental Characteristics

Changes in buying patterns

Degree of market uncertainty
Rate of technological change
Breadth of competencies/skills/capabilities
required to capitalize on environmental opportunities
Political, legal and regulatory environment

Source: Varadarajan & Cunningham, 1995: 291

Propensity of Firm
to Enter
into Strategic Alliances

The ICV Decision Tree

Management
Contract
Turn-Key Plant

3
Asset Specificity
Opportunism
Tacitness of Resource

MARKET
SUCCESS

Franchise

CONTRACT
NEGOTIATED

Supplier Contract
Service Contract

CONTRACT
FAILS

MARKET
FAILURE
Decision
Makers
Worldwide
Strategy
Coalition
Politics
Decision
Context
Routine
Responses
Resource
Constraints
Stakeholders

CJV
MARKET
ICV

WOS
EJV

Resource Type
* Tacit resources
* Physical resources
Network Relations
* Trust
* Opportunism
Globalization Strategy
Cultural Similarity
* Organizational
* National

HIERARCHICAL
INEFFICIENCY

STAGE 1
HIERARCHICAL
SUCCESS

Non-Core Business
Resource Preservation
Need for Complimentary
Assets
Government Policy

STAGE 3

DEAL
FAILS

Independent EJV

EJV NEGOTIATED

STAGE 2

Resource Type
Network Position
Routines
Learning Potential
Interdependencies
Bargaining Power
* Ownership Ratio
* Relative
Dependency

Dominant EJV
Shared EJV

Source: Tallman & Shenkar in Wortzel & Wortzel, 1997: 254