International Business activities strategic analyses

Lecture 4 David Litteljohn Events in a Globalising World

REFERENCES
Abdela, R and Tedlow, 2003, R Theodore Levitt's 'The Globalization of Markets': An Evaluation after Two Decades, Harvard NOM Working Paper No. 03-20; Harvard Business School Working Paper No. 03-082. The paper can be downloaded free of charge from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=383242 Segal-Horn S, 2002, Global firms heroes or villains? How and why companies globalize?, European Business Journal, 14: 1 pp 8-19
http://find.galegroup.com/itx/retrieve.do?contentSet=IACDocuments&resultListType=RESULT_LIST&qrySerId=Locale%28en%2C%2C%29%3AFQE%3D %28au%2CNone%2C10%29Segal+Horn%3AAnd%3AFQE%3D%28ke%2CNone%2C6%29Globa l%3AAnd%3ALQE%3D%28DA%2CNone%2C10%29%3E+20020101%24&sgHitCountType=No ne&inPS=true&sort=DateDescend&searchType=AdvancedSearchForm&tabID=T002&prodId=SP J.SP00&searchId=R1&currentPosition=1&userGroupName=gcal_itc&docId=A85103346&docTyp e=IAC

(NB a synopsis will be posted on the BB site) Rugman A and Verbeke A, 2004, A perspective on regional and global strategies of multinational enterprises, Journal of International Business Studies, Vol 35 pp 3-18
http://proquest.umi.com/pqdweb?RQT=572&TS=1202461288&clientId=6297&VType=PQD&V Name=PQD&VInst=PROD&PMID=22140&PCID=9090061&SrtM=0&SrchMode=3&aid=2
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Aims of the session

To ground notions of international business and globalisation within a strategic a set of business frameworks:
Generic (Levitt) Industry (Segal-Horn) National competitiveness (Porter)

International business and concentrated flows In order a start a debate on the application of business market globalisation for events
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Levitts (1983) globalisation strategies

HOME MKT
GLOBAL MKTS

From Home/(foreign) adaptation To Mass-market/ Specialisation/niche

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What did Levitt (1983) say ..?

Levitt approached the need to ensure that companies were efficient and developed their competitive advantage He saw the main drivers for global, homogenised markets coming from communications and technological development He says at one point: do we give customers what they say they want rather than trying to understand exactly what they would like ?

Consumer Homogenisation; Implication

Consumer standardisation Coca Cola TV Cigarettes Digital watches Electronic goods Rock music Pizza Chinese food Cosmetics

Companies

Local adaptation
It costs money (see example on washing machines) - should minimise costs Peoples preferences are dynamic (German demand for smaller washing machines) They may respond to clear messages (Revlon in Japan): a clear MES important, also communication/advertising Its good! Cosmopolitanism is no longer the monopoly of the intellectual and leisure class
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Segal Horn 2002 - corporate issues globalisation

Not all globalisation is successful
IBM - problems in the past and currently Japanese investment in Hotels (1980s) BMW/Rover

Big is not always beautiful! Need to ensure there is a sustainable strategy

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High

Scale economies, homogeneous tastes, deregulation

GLOBAL INDUSTRIES
Low Low Strong Local Tastes and Preferences Local regulation, high transport costs High

NATIONAL/LOCAL INDUSTRIES
Source: Segal Horn, 2002 9

High

Batteries Razor blades Consumer electronics

Telecommunications Construction

GLOBAL
Insurance Utilities

Low

Corrugated cardboard

Food

Drink

Low

High

NATIONAL/LOCAL
Source: Segal Horn, 2002 10

Porters firm value chain

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Michael Porters FIVE FORCES model

Source: M. Porter, 1985, Competitive Advantage, New York, Free Press and M. Porter, 1980 Competitive strategy : techniques for analyzing industries and competitors, New York : Free Press

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Michael Porters Diamond - determinants of national advantage

CHANCE

Firm strategy, structure & rivalry

Factor conditions

Demand conditions

Factors: Physical resources Knowledge resources Capital resources Infrastructure resources

Related & supporting industries

ROLE OF GOVT

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Stopford & Wells (1972) international structure stage model

Worldwide products division

Alternate paths of Development

Global or grid Matrix

International Division

Area Division Foreign sales as a % of total sales

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Organisational types
ethnocentric polycentric geocentric

Regiocentric

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What is a firm in a globalised world?

Franchise Management Contract Alliance Joint venture

In addition to subsidiaries, cross national investments (sovereign investment companies)

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Rugman and Verbeke, 2004

Triad nations (TNs) rather than individual companies Uses a mass of secondary details at firm (not subsidiary) level

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TRIAD Economics

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Triad areas (Ohmae, 1985)

Low economic growth Similar technological base Presence of large, capital and knowledge intensive firms Homogenisation of demand (convergence required by key product attributes) Proctectionism (N.B. Role of WTO)

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Rugman and Verbeke, 2004

Concentrated on large companies Fortune 500 (430 of these have HQs in TNs, 2000) The had detailed information on 380 365 companies inter-regional sales Wanted to test Ohmaes observation that there were few companies with any real global reach
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Rugman and Verbeke conclusions re Top 500

Home region orientated (50% and + sales) in home region - 325 MNEs Bi-regional (at least 20% in each region, but less than 50% in any one region) - 25 MNEs Host region orientated (50% of sales in a triad market other than home region) - 11 MNEs Global (20% or more in each region, but less than 50% in any one region) - 9 MNEs

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TRIAD Economics

Flows of FDI
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Rugman and Verbeke conclusions - top 500

Global companies include
Coca-Cola LVMH

Bi-regional
Diageo McDonalds

i.e. few tourism/travel companies in this analysis and no global (but airlines and methods may have understated international money flows)

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But below the 500

Different trends E.g. Nike - outsourcing of production Other different types of companies - non capital intensive

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Question
To what extent do you feel that the business approaches discussed in the lecture either
Reflect general attitudes to the nature or process of globalisation

OR
Shape attitudes of executives and societies to the nature of globalisation

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