STRATEGIZING AROUND THE GLOBE

© 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.1

CHAPTER 1

STRATEGIZING AROUND THE GLOBE

CHAPTER OUTLINE

• OPENING CASE: Emerging Markets: Samsung’s Global Strategy Group
• Samsung is South Korea’s leading conglomerate
• Samsung Electronics Corporation (SEC)—flagship company
• Higher profits than five rivals combined
• Trouble attracting and keeping non-Korean talent at SEC
• Created Global Strategy Group—recruited non-Korean MBA graduates of top

Western business schools

2. Three goals:

(1) develop a pool of global managers, (2) enhance Samsung’s business performance, and (3) globalize Samsung.

C. Global Strategy Teams:

• Project leader, one or two global strategists, and project coordinator (senior

Korean manager)

• The average project lasts three months; after 2 years, global strategists graduate

and are assigned to subsidiary in their home country.

D. Success has been mixed:

1. Before: no non-Korean lasted more than three years at SEC

• After: of the 208 non-Koreans at inception, 135 still with company in 2011, but

most successful take pains to fit into Korean culture

• As more non-Koreans assigned to SEC, Korean colleagues are challenged to

change to accommodate Western practices

II. A GLOBAL GLOBAL STRATEGY BOOK

• The text itself is an example of a real global product that leverages its strengths, engages

rivals, and competes around the world

• It departs from the traditional understanding of global strategy, which is characterized by

the production and distribution of standardized products and services on a worldwide basis

• However, managers have been unable to successfully market a “world car” or a “world

drink”

• Multinational enterprises (MNEs), defined as firms that engage in foreign direct

investment (FDI), are adapting their strategies, products, and services for local markets

• It is imperative for a product to respond to local needs in order to avoid customer

rejection

• Examples of products that have been rejected by foreign markets
• Ford Mondeo and Volkswagen Golf—strong in Europe, little visibility in North

America or Asia

• Coke Classic tastes different around the world due to the varying sugar content

(Global Strategy 4e Mike Peng) (Instructor Manual) 1 / 4

Chapter 1 Strategizing Around the Globe © 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2

• Coca-Cola’s commercial featuring polar bears met with indifference from consumers

living in hot climatic conditions

• A newer understanding of global strategy involves
• An understanding that a one-size-fits-all strategy is often incomplete and unbalanced

as it:

(a) Sacrifices local responsiveness (b) Ignores how domestic companies compete with each other and with other foreign entrants

• The importance of emerging economies (or emerging markets)

(a) They command half of the worldwide FDI inflow and nearly half of the global gross domestic product (GDP) measured at purchasing power parity (b) The BRICS (Brazil, Russia, India, China, and South Africa) countries have emerged as powerful challengers to western nations (c) A quarter of the worldwide FDI outflows are generated by emerging multinationals from emerging economies (d) They cater to the vast majority which comprise the base of the economic pyramid—a segment ignored by traditional “global strategy”

• MNEs from developed countries must realize that many opportunities exist at the

BOP level and capitalize on them

• New competitors from emerging economies can go after the second- and top-tier

market overseas and can pose a serious challenge to MNEs from developed countries

III. WHY STUDY GLOBAL STRATEGY?

• To enhance job and career opportunities
• To help you deal with foreign-owned suppliers and buyers, compete with foreign-

invested firms in your home market, and perhaps even sell and invest overseas

• To avoid the negative aspects of globalization, especially the loss of jobs due to

outsourcing

IV. WHAT IS STRATEGY?

• Origin
• Derived from the Greek word strategos, which referred to the art of generalship

(a) The application of the principles of military strategy to business competition is known as strategic management. This phenomenon developed in the 1960s (b) Sun Tzu, Chinese military strategist in 500 BC; definition of strategy: “Know yourself, know your opponents; encounter a hundred battles, win a hundred victories.”

• The definition of strategy has been a topic of debate. Three schools of thought have

emerged to understand this concept. They are:

(a) Strategy as plan (b) Strategy as action (c) Strategy as theory

• Plan Versus Action
• The strategy of plan school believes that strategy is embodied in the same rigorous

formal planning as military strategy 2 / 4

Chapter 1 Strategizing Around the Globe © 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.3

• The action school believes that strategy is a set of flexible goal-oriented actions.

Along with the intended strategy there is also the emergent strategy that is the outcome of a series of smaller decisions from the “bottom up”

• The essence of strategy is likely to be a combination of both, thus leading to a

“strategy of integration” school

• Strategy as Theory
• Defines strategy as a firm’s theory about how to compete successfully
• Borrows the idea of strategy formulation from the planning school and the idea of

strategy implementation from the action school, giving rise to a “strategy as integration” theory

• Advantages of the “strategy as theory” definition

(a) It capitalizes on the insights of both the planning and the action schools (b) It emphasizes the idea of “theory,” which helps to explain the past and to predict the future (c) Allows the possibility of replication—repeated testing of theory under a variety of conditions to establish its applicable boundaries (d) If enough failures in testing a strategy are reported, managers will gradually drive out failed theories and introduce better ones (e) The top management team led by the chief executive officer (CEO) must exercise leadership by making strategic choices

V. FUNDAMENTAL QUESTIONS IN STRATEGY

• Why Do Firms Differ?
• Most knowledge about firms comes from experiences in Western capitalist countries,

but the business landscape is very different in Eastern countries like Japan

• In countries like China, interpersonal networks and relationships (guanxi), cultivated

by managers, may serve as informal substitutes for formal institutional support

• How Do Firms Behave?
• Industry-based view—focuses on the external opportunities and threats faced by the

organization

• Resource-based view—focuses on the internal strengths and weaknesses of an

organization

• Institution-based view—argues that firms also need to take into account the

influences of formal and informal rules

• What Determines the Scope of the Firm?
• Growth is an important objective for all firms
• Growth beyond a certain limit is not possible—downsizing, downscoping, and

withdrawals are often necessary

• The scope of a firm pertains to growth as well as contraction
• Product scope and geographic scope are important to an institution
• What Determines the Success and Failure of Firms around the Globe?
• Each component of the strategy tripod offers different answers

(a) Industry-based view—the degree of competitiveness in the industry determines firm performance (b) Resource-based view—firm-specific differences in capabilities create performance differences 3 / 4

Chapter 1 Strategizing Around the Globe © 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.4 (c) Institution-based view—institutional forces contribute to differences in firm performance

• The true determinants of firm performance probably involve a combination of these

three forces—industry-based competition, firm-specific resources and capabilities, and institutional conditions and transitions

• Certain firms adopt a triple bottom line, which consists of economic, social, and

environmental dimensions

• A balanced scorecard—a performance evaluation method from the customer, internal,

innovation and learning, and financial perspectives—can also be used to gauge success or failure

VI. WHAT IS GLOBAL STRATEGY?

• Definitions of “global strategy”
• Providing standardized products and/or services on a worldwide basis (i.e. traditional

view), usually relevant to large Triad-based MNEs

• Can also refer to any strategy outside one’s home country
• The definition used in this book: Global strategy is defined as strategy of firms

around the globe—essentially various firms’ theories about how to compete successfully

VII. WHAT IS GLOBALIZATION?

• Defining
• It is the close integration of countries and peoples of the world.
• Supporters view it as resulting in greater economic growth, better standards of living,

increased technology sharing, and extensive cultural integration

• Critics argue that it is responsible for the global recession, undermines wages in rich

countries, exploits workers in poor countries, and gives MNEs too much power

• Three Views on Globalization
• A new force that has developed in recent times

(a) It is a new phenomenon which can be traced to the beginning of the 20 th century (b) It is driven by Western ideology, focused on exploiting and dominating the world (c) The arguments against globalization focus on an ideal world free of environmental stress, social injustice, and sweatshops

• A phenomenon that has existed since the dawn of human history

(a) The earliest example of MNEs can be traced back to Phoenician, Assyrian, and Roman times (b) International competition from low-cost countries is not new

• A pendulum that swings from one extreme to another from time to time

(a) It is an integration of the countries and peoples of the world brought about by the enormous reduction of the costs of transportation and communication (b) It signifies the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders (c) It is not recent or one-directional

• The Pendulum View on Globalization

1) It gives a balanced and more realistic understanding of globalization, because it can help us understand the ups and downs of globalization 2) It suggests that globalization is unable to keep going in one direction

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