Global Strategies and

the Multinational Corporation

IMPLICATIONS OF INTERNATIONAL COMPETITION FOR INDUSTRY ANALYSIS

Patterns of Internationalization
HIGH
TRADING GLOBAL
INDUSTRIES INDUSTRIES
• shipbuilding • automobiles
• military hardware • oil
International Trade

• diamond mining • semiconductors

• agriculture • alcoholic beverages

SHELTERED MULTIDOMESTIC
INDUSTRIES INDUSTRIES
•taxi services •frozen foods
•laundries/dry cleaning • retail banking
•hairdressing • hotels
LO W

•fresh milk • wireless telephony

LOW Foreign Direct Investment HIGH

IMPLICATIONS OF INTERNATIONAL COMPETITION FOR INDUSTRY ANALYSIS

What Internationalization Means

for Industry Analysis

PROFITABILITY

COMPETITION

INDUSTRY STRUCTURE
• Lower entry barriers into national markets
• Increased industry rivalry —lower seller concentration
—greater diversity of competitors
• Increased buyer power —buyers have more potential
suppliers to choose from
COMPETITIVE ADVANTAGE WITHIN AN INTERNATIONAL CONTEXT

Porter’s National Diamond Framework

FACTOR CONDITIONS

RELATING AND
DEMAND
SUPPORTING
CONDITIONS INDUSTRIES

STRATEGY, STRUCTURE,
AND RIVALRY
Consistency between Strategy and National
Resource Conditions
In globally-competitive industries, firm strategy needs to take
account of national conditions:

Dispersion of value chain to exploit different national

environments
 MULTINATIONAL STRATEGIES

Ghemewat’s CAGE Framework

Cultural Administrative Geographical Economic
distance and Political distance differences
Distance
Distance • Different • Absence of shared • Lack of common • Different
languages, political or border, or consumer
between
ethnicities, monetary transportation incomes
two religions, social association or communication • Differences in
countries norms links
• Political hostility resources
increases
• Lack of • Weak legal and • Physical • Different
with connecting financial institutions remoteness information or
ethnic /social knowledge
networks
Industries Industries with Industries viewed Products with low Products with
high linguistic by government as value-to-weight income elastic
most affected
content (TV, strategically (cement), or demand (luxuries).
by source of publishing) or important (e.g. fragile (glass) Labor intensive
distance cultural content energy, defence, or perishable products (clothing)
(food, wine, telecom) (milk), or where
music) communication
vital (financial
services)
 Globalization & Global Strategy:
What Are They?

• GLOBAL STRATEGY
o At simplest level: Treating the world as a single market:
standard products, distributed & marketed
o At more sophisticated level: Strategy that recognizes and
exploits linkages between countries
 Global Integration v. National Differentiation
Jet engines

Autos
Consumer
electronics Telecom
equipment
Benefits
of
global
integration

Investment
banking

Retail
Cement banking
Auto Funeral
repair services

Benefits of national differentiation