Global Environment & Strategy
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Transcript of Global Environment & Strategy
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7/21/2019 Global Environment & Strategy
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The Global Environment&
Strategy
- Dr. Sandeep Vij
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Projected Economic Growth
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Labor o!t! and Location Deci!ion!
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o"ntervailing #orce!$ Global
%ntegration v!. Local e!pon!ivene!!
Pressures for global integration
Globalization of markets: the convergence of customerpreferences for similar products, minimal costs, and maximumvalue
[A commodity serves a universal need across countries and cultures and istraded strictly on the basis of price.]
Globalization of production: efficiency gains via stan-dardization, ie, the maximization of location economies
Pressures for local responsiveness !ustomer divergence: differences in culture, national attitudes,and economic and usage conditions
"ost government policies: economic freedom, #ork-place andproduct regulation, buy-local legislation, etc
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The Global %ntegration' Local
e!pon!ivene!! Grid
$he integration%responsiveness grid &'() profiles theinteraction of the pressures for global integration andpressures for local responsiveness
Integration: the process of combining differentiated parts intoa standardized #hole
Responsiveness: the process of disaggregating a standardized#hole into differentiated parts
$he '( grid reveals ho# a firm*s choice of strategy is afunction of the relationship bet#een its idea of value creationand the pressures for integration and%or responsiveness as itlooks to international markets for gro#th opportunities, costreductions, and risk diversification
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The %ntegration' e!pon!ivene!! Grid
and %nd"!try Type!
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The %ntegration' e!pon!ivene!! Grid
and Strategy Type!
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Strategic (lternative!$ The
%nternational Strategy
International strategy: opportunistic expansion intoforeign operations that leverages the firm*s core&domestic) competencies
+ltimate control and decision-making reside at headuarters alue is created by transferring core competencies and uniue
offerings from headuarters into foreign markets #here rivalsare unable to develop, match, or sustain them
'nternational activities are generally secondary to the prioritiesof the domestic marketHeadquarters ethnocentric orientation i.e. its home country focus may
lead to significant missed mar!et opportunities.
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Strategic (lternative!$ The
)"ltidome!tic Strategy
"ultidomestic strategy: expansion into foreign opera-tionsthat grants decision-making authority to local managersand emphasizes responsiveness to local conditions
.ecision-making is decentralized so that offerings can be ad/usted tomeet the needs of individual countries or regions
alue is created by giving local managers the authority to respond touniue local cultural, legal, and economic environments
$he polycentric vie# holds that people #ho are close to the market
both physically and culturally can best run a business#he distribution of decision$ma!ing authority to local managers may
lead to duplication in activities significantly higher costs andunusually po%erful &autonomous' local subsidiaries.
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Strategic (lternative!$ The Global
Strategy
(lobal strategy: expansion into foreign operations thatchampions #orld#ide consistency, standard-ization, andcost competitiveness
0lthough activities are dispersed to the most favorable globallocations, decision-making remains highly cen-tralized atheaduarters
alue is created by designing products for a #orld market andmanufacturing and marketing them as effectively and
efficiently as possible Global firms strive to convert global efficiency into price
competitiveness via production and location economies
In mar!ets %here demand for local responsiveness remains high global strategiesare largely ineffective and mar!et opportunities are missed.
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Strategic (lternative!$ The
Tran!national Strategy
#ransnational strategy: expansion into foreign opera-tions thatexploits location economies, leverages core competencies,and responds to key local conditions
$he causes of interactive global learning and #orld#ide informationsharing are championed
alue is created by the relentless rene#al, enhancement, andexchange of ideas, products, and processes across functions andborders
$he transnational 123 differentiates capabilities and contribu-tions#hile finding #ays to systematically learn and ultimately integrateand diffuse kno#ledge, thus developing more po#erful corecompetencies
Realistically the transnational firm faces serious challenges to its attempts toefficiently and effectively configure and coordinate its activities.
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profsandeepvi/6gmailcom