Foundations of Strategy Chapter 8: Global Strategies and the ...

Foundations of Strategy Chapter 8: Global Strategies and the ...

Foundations of Strategy Chapter 8: Global Strategies and the Multinational Corporation Team 4 10:00am Ford Motor Company 423110 Brooks Garner Alex Mills Grayson Watson Implications of International Competition for Industry Analysis

1. 2. 3. 4. Sheltered Industries Trading Industries Multidomestic Industries Global Industries Implications for Competition

Porters Five Forces (Three to focus on) Competition from Potential Entrants Rivalry Among Existing Firms Increasing the bargaining power of buyers US Automakers (Ford, GM) domestic market share reduced from 84% in 1976 to 35.7% in 2011 Analysing Competitive Advantage Globally Availability of resources

Internal resources and capabilities National environment Comparative Advantage Recognizing your companys advantages compared to competitors Recognizing the advantages of the country you are operating in Natural resource endowments, labour supply, and capital stock Technology, human skills, and management capability

Porters National Diamond Factor Conditions Related and Supporting Industries Demand Conditions Strategy, Structure, and Rivalry

Fords Global Strategy Cost Leadership Divides the world into regions Different models in different regions Five basic, inexpensive chassis to build off of (Except F-series and Mustang)

Plants all over the world, primary source of profits is in the US Toyota: Kaizen GM: Electric Cars, GM plans at least 20 new electric, fuel cell vehicles globally by 2023 Units Produced FY 2017 Battery-Operated Cars Sold Ford Vehicles Sold per

Country The International Location of Production Choosing Where To Locate Production Natural resource availability Firm-Specific competitive advantage Tradability Political considerations

Location and Value Chain Most goods and services are comprised of a vertical chain Cost and quality are most heavily considered (Outsourcing) Ford Value Chain https://corporate.ford.com/microsites/sustainability-report-2017-18/strat egy-governance/value-chain-impacts.html

How Should Firms Enter Foreign Markets? 5 KEY Factors to consider 1. 2. 3. 4. 5. Is the firm's competitive advantage based on firm specific resources Is the product tradable? What are the barriers? Does the firm have the resources and capabilities to go overseas?

Can the firm directly appropriate the returns to its resources? What transaction costs are involved International Alliances and Joint Ventures Strategic International Alliance Companies from different countries join forces Increasingly popular way to reach foreign markets Joint Venture A cooperative enterprise entered into by two or more business intenties for the purpose of a specific project or other business activity

Global Integration VS. National Differentiation Global Strategy-One that views the world as a single market National Differentiation- is the strategy that aims to distinguish a product or service, from other similar products, offered by the competitors in the market. Strategy and Organization within the

Multinational Corporation Greatest Challenge- aligning organizational structures and management systems and their fit with the strategies being pursued. The Evolution of Multinational Strategies and Structures - International firms have adopted different strategies and structural configurations, but these changes can be very slow, difficult and costly. Especially when governments get involved.

- Captives of their history Era of the European Multinational- Early 20th Century - Pioneers of multinational expansion: Unilever, Shell, ICI, and Phillips

- Created multinational federations because of the conditions at the time. Era of the American Multinational- Post WWII - U.S. economic dominance for Ford, GM, IBM, Coca-Cola, Caterpillar, and P&G.

- Overseas subsidiaries allowed considerable autonomy. - U.S. based resources and capabilities were primary competitive advantage in world markets. The Japanese Challenge- 70s and 80s

- Japanese multinational corporations pursued global strategies from centralized domestic bases. R & D and manufacturing were concentrated in Japan. Overseas subsidiaries were responsible for sales and distribution. Globally standardized products in large scale plants provided unrivalled cost and quality advantages. R & D and manufacturing eventually dispersed. Strengths of the Multinationals

Europe - Adapting to the conditions and requirements of individual national markets. America - Ability to transfer technology and proven new products from domestic strongholds to national subsidiaries. Japan - Efficiency of global production and new product development. Challenges of the Multinationals

- Europe Achieve greater integration of their sprawling international empires. America Nurturing the ability to tap their foreign subsidiaries for technology, design and new product ideas. Japan - To become true insiders in the overseas countries where they do business.

The Transnational Changes in responsibilities, decision making powers, and modes of coordination are more important than formal changes in structure. Costs of research and new product development are rising. Transnational Organization- an integrated network of distributed and interdependent resources and capabilities. Necessitates that Transnational Organization Each national unit is a source of ideas, skills, and capabilities that

can be harnessed for the benefit of the total organization. National units access global scale economies by designating them the companys world source for a particular product, component, or activity. The centre must establish a new, highly complex managing role that coordinates relationships among units but does so in a highly flexible way. Ford succeeding in the International Environment

Internationally- 5th largest automobile company (Behind GM, Volkswagen, and Toyota) U.S. - 2nd largest in the U.S. (Behind GM) Summary Competitive advantage not by resources and capabilities, but by the national environment. Determining whether to enter an overseas market by whether or not a firm can create value from it. Knowing how to be successful in the international market, not just in their home market.

Senior managers still have trouble being successful in determining strategies and organizational structures internationally.

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