Chapter 1

Strategizing
Around the
Globe

Global
Global Strategy
Strategy
Mike W. Peng
Mike W. Peng

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Outline

A global global-strategy book

Why study global strategy?
What is strategy?
Fundamental questions in strategy
What is global strategy?
What is globalization?
Global strategy and globalization at a
crossroads

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
 Quiz
Which of the following two cities has a larger
number of Fortune Global 500 company
headquarters?
Beijing
New York

Fortune Global 500 HQ (2011 data from Fortune, July 23, 2012)
Beijing (43 out of 73 from China)
New York (18 NYC + 3 NYS out of 132 from the US)
FYI: Texas 13 (Houston 6, DFW 4, San Antonio 1,
Austin/Round Rock 1); Shanghai 6

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
 Global Strategy: One Size Fits All?

Traditional global strategy is treating different

countries as one worldwide or global market.
World car: Ford Contour (as the Mondeo in Europe)
World drink: Coke Classic?
World advertising commercial: Polar bear ads
But that strategy has backfired repeatedly
There is no world car, no world drink, no world MTV
A more balanced viewcovering both global and
local (non-global) aspectsis necessary

14
M. W. Peng (www.mikepeng.com)
 A Global Global-Strategy Book
Text departs from traditional view of global
strategy
Important to respond to local needs
Traditional view of global strategy is incomplete
and unbalanced
Sacrifices local responsiveness and global learning
Ignores how domestic firms compete with each other
and with foreign entrants
Traditional global strategy is only appropriate for
large MNEs in developed countries
It is dangerous to ignore less developed economies

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
 Why Study Global Strategy?
Job and career aspiration opportunities
Expertise in global strategy is highly sought after

Awareness of what is going on in the world

Preparation for international assignments

Avoid downside risks of globalization

Necessary knowledge for people working in smaller companies

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
 2010 Cengage Learning.
All rights reserved.
7
 What is Strategy?
Origin-Greek word (strategos)-art of the general
Sun Tzu, Chinese military strategist in 500 B.C.
Modern-day application to business and competition dates to the
1960s
Plan versus Action - strategy is explicit, rigorous formal
planning versus a set of flexible, goal-oriented actions
Strategy as Theory-how to compete successfully
Firms have both intended and emergent strategies
One firms strategies may not work in all situations
Past success does not guarantee future success
It is often difficult to change strategy

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
 What is Strategy? Contd
Strategy should give coherence to decisions and
actions
Managers must exert effective strategic leadership

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
 The Essence of Strategy

Copyright 2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly Figure 1.3
accessible website, in whole or in part.
 Our definition: Strategy as theory

Integrating both planning and action schools

Leveraging the concept of theory
A theory serves two purposes: Explanation and
prediction
Requiring replications and experimentations
To establish the temporal (time-related) and
geographic limits of an existing theory
Understanding the difficulty of strategic change

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
 Fundamental Questions in Strategy

Why do firms differ?

Cultural differences between Western firms and Japanese
companies
Networks of relationships have powerful effect - keiretsu,
guanxi, chaebol, blat
How do firms behave?
Industry-based view - focus on competitive forces within an
industry that impact all firms
Resource-based (capabilities) view - focus on internal strengths
and weaknesses, firm specific resources and capabilities
Institution-based view - focus on government and societal forces

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
 Why Do Firms Differ?

Western firms (US/UK vs. German/French)

Have different (shorter- versus longer-term) planning
horizons.
Japanese firms
Are different from Western firms.
Firms from emerging economies (Brazil, Russia,
India, and ChinaBRIC)
EM 1.1. Foxconn
The challenge is to understand the roots of these
differences when trying to compete globally.

113
 Fundamental Questions in Strategy contd

What determines the scope of the firm?

What determines the international success or
failure of firms?
Industry-based view - degree of competitiveness in
the industry
Resource-based view - firm specific differences in
capabilities
Institution-based view - institutional forces, such as
economic reforms and government policy

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
 The Strategy Tripod
Three Leading Perspectives on Strategy

Copyright 2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly Figure 1.4
accessible website, in whole or in part.
 What Is Global Strategy?

Provide standardized products and/or services

on a worldwide basis (i.e., traditional view)
Any strategy outside ones home country
Our definition of global strategy:
Strategies of firms around the globe
Both international and non-international (domestic)
Both developed and emerging economies

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
 How About Global Strategy?

Traditional global strategy

Only relevant for MNEs from developed economies
The same as international (non-U.S.) strategy
Wal-Mart went to Mexico in 1991: Did it go global?
Everything becomes global?
Our definition of global strategy:
Strategy of firms around the globe
Both international and non-international (domestic)
Both developed and emerging economies

117
 What is Globalization?

A new phenomenon since the late 20th century?

A part of long-run human history?
A pendulum view: Transportation and
communication revolutions + breakdown of
artificial barriers in trade and investment
A process similar to the swing of a pendulum:
Postwar history
Semiglobalization?

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
 Global Strategy and Globalization at a
Crossroads
Three Defining Events - have brought corporate
social responsibility, ethics, and governance to
the forefront of strategic decisions
Anti-globalization protests - lost jobs, downward
pressure on wages for unskilled labor, environmental
destruction
Terrorist attacks
Corporate governance crisis (Asian financial crisis,
U.S. scandals)

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
 Global Strategy and Globalization at a
Crossroads, Contd.
Know Yourself, Know Your Opponents
Understand strengths AND limitations
Recognize the social, political, and environmental
costs associated with globalization
Current business school students exhibit values and
beliefs different from the general public
Be aware of bias and strategic blind spots
Do not ignore non-government organizations (NGOs)-
view them as partners

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
What Determines the Success or Failure of
Firms around the Globe?

Acquiring and leveraging competitive advantage

Strategy is about performance, about making a
difference
The Key: Sustaining such an advantage over
time and across countries (regions) through
replication and innovation.

121
 Organization of the Book
Part I: Foundations of Global Strategy
Chapter 1: Strategizing Around the Globe
Chapter 2: Managing Industry Competition
Chapter 3: Leveraging Resources and Capabilities
Chapter 4: Emphasizing Institutions, Cultures, and Ethics
Part II: Business-Level Strategies
Chapter 5: Growing and Internationalizing the Entrepreneurial Firm
Chapter 6: Entering Foreign Markets
Chapter 7: Making Strategic Alliances and Networks Work
Chapter 8: Managing Global Competitive Dynamics
Part III: Corporate-Level Strategies
Chapter 9: Diversifying, Acquiring, and Restructuring
Chapter 10: Strategizing, Structuring, and Learning Around the World
Chapter 11: Governing the Corporation Around the World
Chapter 12: Strategizing with Corporate Social Responsibility

Copyright 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.