Presented by:-Presented to:- RampalChitwan Mam Gautam Dhanda(Faculty member) Ankit Paul
Global strategy:- Organizations strategic guide to globalization. A sound global strategy should address thesequestions:o what must be (versus what is) the extent of marketpresence in the worlds major markets?o How to build the necessary global presence?o How to run global presence into global competitiveadvantage?
Contd.. It is appropriate in industries where firms are faced with strong pressures for cost reduction. Global strategies require firms to tightly coordinate their product and pricing strategies across international markets and locations. Firms that pursue a global strategy are typically highly centralized.
Why globalize? Expand global market share Restructure value chain on a global scale. Ultimate goal. Diversification. Expansion.
Types of global strategies: •Global strategy Multi-domestic strategy Transnational strategy
Multi-domestic vs. Global Strategy:- Multi-domestic Strategy Product customized for each market Decentralized control - local decision making Effective when large differences exist between countries Advantages: product differentiation, minimized political risk, minimized exchange rate. Global Strategy Product is the same in all countries. Centralized control - little decision-making authority on the local level Effective when differences between countries are small Advantages: cost, coordinated activities, faster product development
Philips followed multidomestic strategy:- Innovation from local R&D Entrepreneurial spirit Products tailored to individual countries High quality due to backward integrationMatsushita followed a global strategy :- Strong global distribution network Financial control More applied R&D Ability to get to market quickly
Sources of Competitive Advantage from a Global StrategyEfficiency Economies of scale from access to more customers and markets Exploit another countrys resources - labor, raw materials Extend the product life cycle- Operational flexibility - shift production as costs, exchange rates, Strategic First mover advantage and only provider of a product to a market Cross subsidization between countries Transfer price
Contd…Risk Diversify macroeconomic risks (business cycles not perfectly correlated among countries) Diversify operational risks (labor problems, earthquakes, wars)Learning Broaden learning opportunities due to diversity of operating environmentsReputation Crossover customers between markets - reputation and brand identification
Globalization & Global Strategy —• GLOBALIZATION ? --Something to do with increasing interdependence between countries.• GLOBAL STRATEGY --At simplest level: Treating the world as a single market E.g. Japanese companies during the 1970s & 1980s, (YKK, Honda) standard products, developed & manufactured within Japan. --At more sophisticated level: Strategy that recognizes and exploits linkages between countries (e.g. exploits global scale, national resource differences, strategic competition) World as World as World as inter- separate single mkt. related mkts. national mkts. global strategy multidomestic strategy
Sumantra Ghoshal of INSEAD proposed a framework comprising threecategories of strategic objectives and three sources of advantage thatcan be used to achieve them. Sources of Competitive Advantage Strategic Objectives National Scale Economies Scope Economies Differences Sharing Efficiency in Exploit factor cost Scale in each investments and Operations differences activity costs Balancing scale Market or policy Flexibility with strategic & Portfolio induced changes operational risks diversification Societal Experience – cost Innovation and differences in Shared learning reduction and Learning management and across activities innovation organization
GLOBAL STRATEGIES Four basic avenues that companies can take to market their products or services globally: Foreign Direct Investment Joint ventures Contractual agreements. Licensing (includes franchising)
Joint venture :-- Moscow, June 8, 2011 – Ford Motor Company and Sollers OJSC have signed agreements to establish a 50-50-owned joint venture in Russia. The new business, named Ford Sollers, is scheduled to start operations later this year.
BENEFITS FROM JOINTVENTURE :-- New technology used :- Basically it replaces the very expensive batteries with much smaller and inexpensive ones. This affords to position a car at much lower price. In any case it is a new product. It would help ford to increase the sales and production to regain the no.1 position in U.S or other markets.
Mergers and Acquisitions:- In 1999, Global Crossingacquired Frontier Corporation, theformer Rochester TelephoneCorporation Renamed the company GlobalCrossing North America, Inc. It sold the local telephoneoperations it owned, including theFrontier name, to CitizensCommunications in 2001, whichrenamed itself FrontierCommunications in 2008.