BA 510 International ManagementDoha 2011Class 4

TODAY

Globalization Drivers Globalization vs. Localization Global vs. Multi-domestic Strategies International Strategy: Value Chain

Perspective Canada Solar Case Study – Strategic

Framing Finalize 5 minute pitches Make 5 minute pitches

GLOBALIZATION DRIVERS

Market Drivers Cost Drivers Government Drivers Competitive Drivers

Low

Multidomestic

High

Global

GLOBALIZATION DRIVERS

Low High

Baked Goods

Book Publishing

Retail Banking

Toothpaste

Soft Drinks

AutomobilesComputers

Aircraft

Multi-domestic Global

Strength of Market Drivers

High

GLOBALIZATION DRIVERS

Low High

Baked Goods

Retail Banking

Toothpaste

Soft Drinks

Automobiles

Computers

Aircraft

Pharmaceuticals

Multi-domestic Global

Strength of Cost Drivers

High

GLOBALIZATION VS. LOCALIZATION

Globalization: Operating with relative constancy in a number of

markets -- as if the entire world (or major regions of it) were a single entity; selling the same things in the same way everywhere (Levitt 1983)

Examples? Localization:

Operating in a number of countries, adjusting products and practices in each -- at a high relative cost, with a committed operating presence in the markets of other nations.

Examples?

Managing Differences (Ghemawat) Most of modern global strategy focuses on

minimizing differences But, correctly choosing how much to adapt

a business model is important to extract full value from a business

Employ a strategy of differences (arbitrage) and exploitation of scale economies

GLOBALIZATION VS. LOCALIZATION

Managing Differences (Ghemawat) Strategy of differences: arbitrage

Cultural Arbitrage: Exploiting of culture to gain advantage. Ex: food, clothing, US fast-food chains

Administrative Arbitrage: Exploiting legal, institutional and political differences from country to country. (ex: tax differentials)

GLOBALIZATION VS. LOCALIZATION

Managing Differences (Ghemawat) Strategy of differences: arbitrage (cont)

Geographic Arbitrage: Not as important now due to reductions in transportation costs, but can be used in areas such as telecommunications (local vs. long-distance) and distribution networks

Economic Arbitrage Includes exploitation of differences in costs of labor and capital, variations in knowledge or availability of complementary products, technologies or infrastructure

GLOBALIZATION VS. LOCALIZATION

Managing Differences (Ghemawat) Globalization allows for:

focus on market similarities upward spiraling of market share, leading to

greater economies of scale lower costs through greater economies of scale lower prices for consumers

GLOBALIZATION VS. LOCALIZATION

Managing Differences (Ghemawat) Localization allows for:

winning specific buyers and maximizing sales not over-designing products for some countries

and under-designing them for others not undermining some company networks

which already exist not dampening entrepreneurial spirit

GLOBALIZATION VS. LOCALIZATION

GLOBAL V. MULTI-DOMESTIC STRATEGIES

Slide 8-12

Global Strategies •System-wide approach to competing worldwide• Mutually interdependent subsidiaries• Centralized control and reporting of activities• Facilitates cross-subsidization policies across markets

HQHQ

Global Strategies Standard products Global economies of scale in key

components and activities Leverage technology across many

markets Global coordination of marketing and

sales system-wide Cross-subsidization policies to

respond to competitive moves by other global strategy firms

Slide 8-13

GLOBAL V. MULTI-DOMESTIC STRATEGIES

Slide 8-14

Multi-Domestic Strategies •Competitive advantage is built in each separate national or regional market.• Markets and subunits are treated independently from one another.• Decentralized controls of activities, reporting back to headquarters.

HQHQ

GLOBAL V. MULTI-DOMESTIC STRATEGIES

Multi-Domestic Strategies Customization or frequent adaptation

of products for each separate market Few systemwide opportunities for

economies of scale Value-adding activities performed and

duplicated in each market Coordination of marketing and sales

within each market Quality and image across markets are

important sources of competitive advantage

Slide 8-15

GLOBAL V. MULTI-DOMESTIC STRATEGIES

Benefits of Global Strategies Market growth and expansion

opportunities Recovery of R&D and investment

costs Creation of a distinct image Accelerated learning and transfer of

new skills

Slide 8-16

GLOBAL V. MULTI-DOMESTIC STRATEGIES

Costs of Global Strategies Strategic Leverage

• Sustained investment required• Preserving and extending image

(In)Flexibility• High interdependence of subsidiaries (and

businesses)• Change or development affecting all markets

Cooperation• Compromise• Accountability

Slide 8-17

GLOBAL V. MULTI-DOMESTIC STRATEGIES

Pre

ssure

s fo

r G

lob

al Effi

ciency

Pressures for Local Responsiveness

High

Low

HighLow

GLOBAL V. MULTI-DOMESTIC STRATEGIES

INTERNATIONAL STRATEGY: VALUE CHAIN PERSPECTIVE

Infrastructure

Technology Development

Procurement

Human Resource Management

InboundLogistics Operations

OutboundLogistics Marketing Service

ProfitMargin

Infrastructure

Technology Development

Procurement

Human Resource Management

InboundLogistics Operations

OutboundLogistics Marketing Service

ProfitMargin

Headquarters

INTERNATIONAL STRATEGY: VALUE CHAIN PERSPECTIVE

Infrastructure

Technology Development

Procurement

Human Resource Management

InboundLogistics Operations

OutboundLogistics Marketing Service

ProfitMargin

Upstream

Headquarters

INTERNATIONAL STRATEGY: VALUE CHAIN PERSPECTIVE

Infrastructure

Technology Development

Procurement

Human Resource Management

InboundLogistics Operations

OutboundLogistics Marketing Service

ProfitMargin

Upstream Downstream

Headquarters

INTERNATIONAL STRATEGY: VALUE CHAIN PERSPECTIVE

Infrastructure

Technology Development

Procurement

Human Resource Management

InboundLogistics Operations

OutboundLogistics Marketing Service

ProfitMargin

Advertising Pricing Distrib. Packaging

INTERNATIONAL STRATEGY: VALUE CHAIN PERSPECTIVE

Geographic location of value chain activities Concentrated/centralized vs.

dispersed/decentralized Decision on modes of entry into

new country markets (Class 5)

INTERNATIONAL STRATEGY: VALUE CHAIN PERSPECTIVE

Cross-border linkages between dispersed value-creating units

Coordination = Flows of: $ Product (finished and intermediate) Technology People Information (market data, strategic

direction, etc.) Highly coordinated vs. only money

flows

INTERNATIONAL STRATEGY: VALUE CHAIN PERSPECTIVE

CASE STUDY: CANADA SOLAR

What are the key market and cost drivers in this industry?

What arbitrage opportunities, if any, exist in this industry and, specifically, for Canada Solar?

To what extent are there tensions between globalization and localization for Canada Solar as it consider international expansion of its manufacturing?

Create a “Pressures” matrix that characterizes where Canada Solar and your target company reside.

5 MINUTE PITCH

Preparation Cluster Assessment + “Fit-1” (Solar PV Mfg

and Qatar) 1.5 page outline plus presentation No longer than 5 minutes Three “C’s”: Concise, Clear, Contextual