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Global Enterprise and Competition66.511.202Fall 2007
Ashwin Mehta, Visiting Faculty
Microsoft launches Vista worldwide
After five years of marketing blitz, the largest software maker unveils the new computer operating system Tuesday.January 30 2007: 9:21 AM EST
NEW YORK (Reuters) -- Microsoft Corp. rolled out Windows
Vista at retailers in 70 countries Tuesday, delivering a new computer operating system that aims to better manage the explosion of digital media and protect users from the dangers of the Internet.
What are key planning elements?
The Forbes Global 2000, April 2006
Boeing is soaring on orders for its new 787 - Global Gamble
Global markets and operations in global terms,
more diverse organization in terms of culture,
few core values that are its major unifying force.
It has a headquarters but is often managed from diverse locations
EnterpriseBusiness entity, profit motivation, growth, any size, any industry, B2B and B2C
CompetitionLocal, National, International and Global
Global Enterprise and Competition
TESCO - #3 retailer in the World2X Wal-Mart in the UKEntering the US market
2006
Group sales 25,401 28,280 33,557 36,957 43,137
UK 19,821 21,309 24,760 27,146 29,990Rest of Europe 2,181 2,664 3,385 3,818 5,095Asia 1,398 2,031 2,669 2,902 4,369
Operating profit
UK 1,215 1,289 1,486 1,556 1,788Rest of Europe 90 134 171 243 263Asia 17 69 121 153 229
Total Group 1,322 1,492 1,778 1,952 2,280Return on capital employed
10.80% 10.20% 10.40% 11.80% 12.70%
Number of stores - Group
979 2,291 2,318 2,334 2,672
Number of stores -UK 729 1,982 1,878 1,780 1,898
2002 2003 2004 2005
TESCO - A Very Successful Retailer
Reasons for success?
LeadershipClubcardEmployeesCultureSupply chainInnovationGlobal markets
CATALOG DESCRIPTION:
To be taken as last course in foundation core.
Is an integrated investigation of global competitive issues to help students understand the processes of organization and technological innovation which permit businesses to achieve competitive advantages in a global environment.
This course also deals with the nature and techniques of industry analysis necessary to the formulation of effective global strategy for the firm.
•understand challenges and issues in operating across national boundaries
•develop analytical ability to formulate strategic options
•understand integration of key functional areas, including marketing, manufacturing, R&D and customer support
•use “strategy analysis” tools to develop scenarios, impact and select appropriate set of strategies
•improve research capability to gather and interpret key environmental data that define critical parameters for a global strategy
Course Objectives:
COURSE REQUIREMENTS:
1. Text Book: Global Competitive Strategy, by Daniel Spulber, Cambridge University Press ISBN: 978-0-521-88081-7
2. Instructor’s NotesYou can download class notes as shown in Class Schedule.
3. Other reading materialsSee Syllabus
4. Assignments.
Group Projects:Group Projects: Each student will be assigned to a group to develop a strategic analysis of a company .
Assigned cases: a written case analysis for three(3) cases, to be submitted via email as attachments. 3 – 5 students will present their assignments in the class.
Students are expected to participate in class discussions. You are expected to arrive at class fully prepared to discuss the material assigned for that day.
Assignments also include presentations
What is a Modern Global Enterprise?*
Focused on Enterprise-wise objectives, not local initiatives/priorities
Aligning subsidiaries around a common strategic vision
Managing from CenterIntegration of operations globallySharing local innovations around the world
Common Corporate culture, while managing sub cultures
Fortune, February 2006
Considerations
Coverage
Local, National, Regional, Global
Str
ateg
y &
In
teg
rati
on
Co
rp,
Bu
sin
ess
, F
un
ctio
nal
Organization
Functional, Divisional, Matrix
Op
erat
ing
Mo
de
Ow
n,
JV
’s,
Par
tner
ing
, T
ran
sac
tio
na
l
Adaptation
Market-specific
, Regional, G
lobal
Internatio
nalizatio
n
Organic, M
&A’s
Business Processes
Local, Global, Mixed
Other Issues
Control, Management/skills,
Cultures, Institutional, Ethics
What is beingSatisfied?
Who is beingSatisfied
How are customer needs being satisfied
The beginning …
BusinessDefinitionVision/Mission
The Theory of the Business*
*: Peter Drucker
How do we make money
Making the Difference
Required to maintain Leadership
Assumptions about Environment, Mission and Core Competencies Must Fit Reality
The Theory of the Business*
*: Peter Drucker
The assumptions in all Three Areas Have to Fit One Another
The Theory of the Business Must be Known and Understood Throughout the Organization
The Theory of the Business has to be Tested Constantly
Session 1
Moneymaking Basics*
*: The Basics of Moneymaking, Ram Charan, http://finance.yahoo.com/expert/article/companyknow/35703
Cash
Margin
Velocity
Return
Growth
Change in “money making model” impacts all of these ---Dell selling through retailers Vs Direct only
Outside In* --- External Environment
*: See Your Business Outside In, Ram Charan, http://finance.yahoo.com/expert/article/companyknow/30421
Recognize changes and patterns (lifestyle, technology, competition
Failures have consequences
Build External PerspectiveOpportunitiesThreats
Repositioning Business**Decision making process
**: When – and How – to Reposition Your Business, ram Charan http://finance.yahoo.com/expert/article/companyknow/31627
What is Strategy?
StrategyUse of scarce resource to achieve vision/mission
and objectives
Collection of actions:Corporate (what business/industry)Business (how to compete)Organization/function (where to allocate resources)
At IBM, we strive to lead in the invention, development and manufacture of the industry's most advanced information technologies, including computer systems, software, storage systems and microelectronics.
We translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide.
Example IBM Vision/Mission
Session 1
Example: IBM Strategies
IBM’s strategy is to pursue an innovation agenda with its clients, partners and in other relationships, and
to continue refining its portfolio to achieve higher value.
Through its understanding of where technology, client requirements and global business are headed,
the company continually makes strategic decisions to
maintain its leadership of this rapidly changing business by focusing on high-value innovation-based solutions and services while consistently generating high returns on invested capital for its
shareholders.
The company utilizes its entire portfolio — hardware, software,
services, technology and research to maintain its leadership.
Session 1
Business successes and failures
Always point to Strategy
Strategy and Strategic Positioning
Sustainable
Session 1
McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
11
15/e PPT15/e PPT
Introduction to Global Competitive Strategy
© Professor Daniel F. Spulber
Global Competitive Strategy
Introduction
Global Competitive Strategy
Outline of introduction
The global challenge
The global mosaic
The global strategy “Star Analysis”
The Global Challenge Globalization changes nature of competition
-- Competitors can be very different! Innovative entrants, including emerging market firms Global 500 Companies*: 2005 2006 2007
US 176 170 162
Japan 81 70 67
France/Germany/UK 111 111 108
China 15 20 24
Canada 13 14 14
India 5 6 6
Global Competitive Strategy
*: Fortune
Global competitive advantageBest sources of products, global brands World-class cost efficienciesGlobal pool of innovationsGlobal mix of transactions
Global Competitive Strategy
The Global Challenge
The Global Challenge
To serve large-scale global market
To address market differences across countries
Global Competitive Strategy
Size of Global BusinessCurrent $ (Source: World Bank)
• World GDP: $ 41.3 trillion
(Gross Domestic Product) US: $ 11.7 trillion EU (25): $ 12 trillion Japan $ 4.6 trillion Latin America and Caribbean $ 2 trillion Middle East and Africa $ 1 trillion India $ 0.7 trillion China $ 1.9 trillion
High growth rate of emerging markets
Size of International BusinessTotal exports of goods and services
World Trade $ 11 trillion
Merchandise $9 trillion
Agriculture, fuels and mining, manufactured goods
Services $2 trillion
Transportation, travel, commercial services
Growing importance of trade to US economy
Increases in:
Exports:- Capital goods (mainly
semiconductors, computer accessories)
- Industrial supplies- Consumer goods
Imports:- Industrial supplies
and crude oil- Auto industry- Capital goods
Shares of Exports and Imports in GDP
0.02.04.06.08.0
10.012.014.016.0
37 46 55 64 73 82 91
Year
in %
export-share
import-share
Size of International Business
$1.5 trillion in international currency
transactions per day! 63,000 multinational corporations Major source of economic growth and investment for
developed and developing countries Source of global technological innovation Earnings growth for many companies (Wal-Mart, GE,
Carrefour, Nestlé, Unilever, Cemex, Toyota, Samsung)
Why was Nokia so successful?
Why did Daimler-Chrysler have
problems?
The Global Mosaic Vast economic differences across countries
GDP per capita, prices, wages
Underlying geographic differences – Geography matters
Large “economic distances” between countries
“Sticky borders” preserve these differences
• The arbitrage principle – economic differences evidence of sticky borders, many strategic opportunities remain
Global Competitive Strategy
The world is bumpy!
Language Culture, customs, and history Social institutions Demographic differences: health, education Public policies Legal and regulatory systems Business practices Currencies Technology
Business must bridge critical differences between countries
The costs of trade: The Four T’s Transaction costs Tariff and non-tariff barriers Transportation costs Time costs
Borders are “sticky”
Global Competitive Strategy
Business must navigate the World Trade System
NAFTA
Caribbean Basin InitiativeProposed
Business strategy must account for changes in political relationships
and trade deals between countries
The Arbitrage Principle
Country borders: Restrict movement of inputs – capital, labor, technology,
resources Limit trade in goods and services Create persistent differences in technology and information Preserve economic differences -- prices and wages Arbitrage reduces economic differences Innovative transactions find arbitrage opportunities
Country borders provide opportunities and competitive advantage to international business
Globalization challenges business strategy in a fundamental way
Trade costs are high resulting in economic differences between countries
The global mosaic offers opportunities for generating gains from trade
The successful global business develops innovative international transactions to gain global competitive advantage
Global competitive advantage
NEXT SESSION:Analytical framework!
Recap … Introduction to Global Business
Competition
Globalization4T’s, GATT, WTO, Technology, …
OpportunitiesMarkets, Resources
Analysis and StrategyTraditional (home country-based) to Global
STAR Analysis
Global Added Value
Value Connection
G5 Strategies
Platform, Network, Intermediary,
Entrepreneur, Investment
Assignment 1 Due November 15, 2007
GO TO THIS LINK (http://knowledge.wharton.upenn.edu/createpdf.cfm?articleid=719&CFID=2411127&CFTOKEN=34070626),
REVIEW THE ARTICLE, DO A WEB RESEARCH ON COMPANIES DISCUSSED IN THE ARTICLE, AND ADDRESS THESE QUESTIONS:
(YOU SHOULD WRITE AN INTRODUCTION/CONTEXT BEFORE ADDRESSING THESE QUESTIONS)
How many stores do Wal-Mart, Home Depot and IKEA have in various countries/regions?
Describe Wal-Mart and Home Depot’s International expansion strategies (i.e. acquisition, JV’s, organic growth) and comment on their results (successes/failures/challenges)
Review Wal-Mart and Home Depot’s revenues over the last five years and analyze revenues from US Vs International.
What has been the main thrust of IKEA’s International expansion strategy and how has it performed (review their financial and other data of past few years)?
YOUR REPORT MUST BE BETWEEN 1000 AND 1500 WORDS AND MUST INCLUDE SOURCES REFERENCED.
Group Projects
Group Formation
Company Assignments
Templates Review
1. Company Financials(see Excel spreadsheet in “Group Project and Assignments Files”). Summarize key financial data (growth rates, major ratios, etc.)
Group Project Template