BA 510 International Management

Doha 2011
Class 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

High

Multidomestic

Global

GLOBALIZATION DRIVERS
Aircraft
Computers
Automobiles

High
Strength
of
Market
Drivers

Soft Drinks
Toothpaste
Retail Banking
Book Publishing
Baked Goods

Low

Multi-domestic

Globa
l

High

GLOBALIZATION DRIVERS
Pharmaceuticals

High

Aircraft
Computers

Strength
of Cost
Drivers

Automobiles
Toothpaste
Retail Banking

Baked Goods
Soft Drinks

Low

Multi-domestic

Globa
l

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?

GLOBALIZATION VS. LOCALIZATION

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
focus

allows for:

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
winning

allows for:

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

GLOBAL V. MULTI-DOMESTIC
STRATEGIES

Global Strategies
System-wide approach to competing
worldwide
Mutually interdependent subsidiaries
Centralized control and reporting of activities
Facilitates cross-subsidization policies across
markets
Slide 812

GLOBAL V. MULTI-DOMESTIC
STRATEGIES

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 813

GLOBAL V. MULTI-DOMESTIC
STRATEGIES

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.
Slide 814

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 815

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 816

GLOBAL V. MULTI-DOMESTIC
STRATEGIES
Costs of Global Strategies
Strategic Leverage

(In)Flexibility

Sustained investment required

Preserving and extending image
High interdependence of subsidiaries (and
businesses)
Change or development affecting all markets

Cooperation

Compromise
Accountability
Slide 817

Pressures for Global Efficiency

GLOBAL V. MULTI-DOMESTIC
STRATEGIES

High

Low
Low

High

Pressures for Local Responsiveness

INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Infrastructure
Technology Development
Procurement
Human Resource Management

Inbound
Outbound
Operations
Logistics
Logistics

Marketing

Profit
Margin
Service

INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Headquarters
Infrastructure
Technology Development
Procurement
Human Resource Management

Inbound
Logistics

Operations

Outbound
Logistics

Marketing

Profit
Margin
Service

INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Headquarters
Infrastructure
Technology Development
Procurement
Human Resource Management

Inbound
Outbound
Operations
Logistics
Logistics

Upstream

Marketing

Profit
Margin
Service

INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Headquarters
Infrastructure
Technology Development
Procurement
Human Resource Management

Inbound
Outbound
Operations
Logistics
Logistics

Upstream

Profit
Margin

Marketing

Service

Downstream

INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Infrastructure
Technology Development
Procurement
Human Resource Management

Inbound
Outbound
Operations
Logistics
Logistics

Advertising

Pricing

Marketing

Distrib.

Profit
Margin

Service

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

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 Cs: Concise, Clear, Contextual