MANAGING GLOBAL MANAGING GLOBAL STRATEGIESSTRATEGIES

Multinational / International Multinational / International / Global /Transnational / Global /Transnational CompaniesCompanies

Consumer Electronics Business :Consumer Electronics Business :

How could How could Matsushita( Panasonic)Matsushita( Panasonic) evolve in just two decades and become the evolve in just two decades and become the undisputed leader in the consumer undisputed leader in the consumer electronics industry ?electronics industry ?

Of the companies it overtook, why has Of the companies it overtook, why has

Philips Philips found it so difficult to adjust to the found it so difficult to adjust to the industry changes ? Yet it has survived .industry changes ? Yet it has survived .

While While General ElectricGeneral Electric was eventually was eventually forced to sell off its consumer electronics forced to sell off its consumer electronics business ?business ?

Branded packaged productsBranded packaged productsIn branded packaged products like soaps and In branded packaged products like soaps and

detergents how has detergents how has Unilever Unilever defended defended its dominant world position for more than half its dominant world position for more than half a century ?a century ?

How was How was Procter &Gamble Procter &Gamble able to able to mount thrust into international markets in mount thrust into international markets in the postwar era ?the postwar era ?Why was the internationalization thrust of Why was the internationalization thrust of

Kao,Kao, the dominant Japanese competitor in the dominant Japanese competitor in this industry, been stalled in various markets, this industry, been stalled in various markets, despite Kao’s formidable technological despite Kao’s formidable technological capabilities, its highly efficient plants, and its capabilities, its highly efficient plants, and its demonstrated marketing muscle ?demonstrated marketing muscle ?

Telecommunications / Telecommunications / Switching EquipmentSwitching EquipmentHow has Sweden’s How has Sweden’s Ericsson Ericsson enhanced enhanced its position as a leader in the dynamic its position as a leader in the dynamic telecommunications switching business ? telecommunications switching business ?

What is behind What is behind NEC’sNEC’s gains in this highly gains in this highly competitive global industry ?competitive global industry ?

Why was Why was ITTITT, the most international of all , the most international of all the telecommunication companies,forced to the telecommunication companies,forced to abandon its planned entry into the US abandon its planned entry into the US switching market , and then to sell its switching market , and then to sell its formidable European telecommunication formidable European telecommunication business ?business ?

The disappointments and failures The disappointments and failures of some of those companies were of some of those companies were not due to inappropriate strategic not due to inappropriate strategic analysis, but to organizational analysis, but to organizational deficiencies.deficiencies.

The challenge was how to develop The challenge was how to develop the organizational capability to do the organizational capability to do it.it.

The Nine CompaniesThe Nine CompaniesIndustry American European Japanese

Branded Packaged Goods

Procter &Gamble

(P& G)

Unilever Kao

Consumer Electronics

GE Philips Matsushita

Telecommunications/ Switching

ITT Ericsson NEC

Key strategic Capabilities: Key strategic Capabilities: Multinational Global International

Building strong local presence through sensitivity and responsiveness to national differences

Building cost advantages through centralized global- scale operations

Exploiting parent company knowledge and capabilities through worldwide diffusion and adaptation

Unilever

Philips

ITT

Kao

Matsushita

NEC

P&G

GE

Ericsson

Multinational Multinational Organizational ModelOrganizational Model

Multinational Mentality : Management regards overseas operations as a portfolio of independent businesses

Decentralized Federation : Many key assets, responsibilities and decisions decentralized

Personal Control : Informal HQ-subsidiary relationships overlaid with simple financial controls

International International Organizational ModelOrganizational Model

International Mentality: Management regards overseas operations as extension to a central domestic corporation

Coordinated Federation : Many assets, resources, responsibilities and decisions still decentralized, but controlled from headquarters

Administrative Control : Formal management planning and control systems allow tighter HQ- subsidiary linkage

Global Organizational Global Organizational ModelModelGlobal Mentality: Management treats overseas operations as delivery pipelines to a unified global market

Centralized Hub : Most strategic assets, resources, responsibilities and decisions centralized

Operational Control : Tight central control of decisions, resources and information

Each of these nine companies had Each of these nine companies had become a large worldwide become a large worldwide corporation by exploiting its corporation by exploiting its particular strategic capability.particular strategic capability.

However environmental forces had However environmental forces had dramatically changed the nature of dramatically changed the nature of the strategic demands in a wide the strategic demands in a wide range of businesses and the range of businesses and the traditional approaches of the traditional approaches of the multinational, global and multinational, global and international companies could no international companies could no longer yield an adequate response.longer yield an adequate response.The challenges required a new The challenges required a new solutionsolution

Understanding of the problems-Understanding of the problems- In the past GE, Kao and ITT was characterized by a In the past GE, Kao and ITT was characterized by a single dominant strategic demand. As a result , a single dominant strategic demand. As a result , a company could compete effectively as long as its company could compete effectively as long as its capability fit the strategic demand of the business.capability fit the strategic demand of the business.

To compete effectively , a company had To compete effectively , a company had to develop global competitiveness, to develop global competitiveness, multinational flexibility and worldwide multinational flexibility and worldwide learning capability simultaneously.learning capability simultaneously.

This is where P& G , Unilever , NEC had responded This is where P& G , Unilever , NEC had responded effectively as they broke away from their traditional effectively as they broke away from their traditional models very early. models very early.

This break away to a new organizational model is This break away to a new organizational model is termed as termed as Transnational CorporationTransnational Corporation..

A transnational A transnational organization is perhaps organization is perhaps the necessary response to the necessary response to the changes in the the changes in the international operating international operating environment as it links environment as it links environmental complexity , environmental complexity , strategic demands and strategic demands and organizational capabilities.organizational capabilities.

e.g.- Unilever as a Transnational Companye.g.- Unilever as a Transnational Company

Multinational strategyMultinational strategy- acquiring identity - acquiring identity of its own through sensitivity and of its own through sensitivity and responsiveness in the countries in which it responsiveness in the countries in which it operates.operates.

Global Strategy Global Strategy –Taking advantages of global –Taking advantages of global economies of scale in exporting from low- cost economies of scale in exporting from low- cost countries.countries.

International Strategy International Strategy : Developing and : Developing and transferring parent company knowledge transferring parent company knowledge through diffusion to its subsidiaries across the through diffusion to its subsidiaries across the world.world.