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Unit 3: Organizational Design & Strategy
Lesson 6: International Strategies
+                                                                                                             2

    Major Drivers of Globalization

          Technology                      • Extended reach & Communication



                                          • Transitioned from few bankers to many individuals
              Finance                       who hold sovereign debts of many countries



          Information                     • Bridged countries, people, products & services



                                          • Growth of trade has been accelerated by expansion of
         Recognition                        new areas of expertise that are being created


                                          • Faster decision making through telecommunication,
    Decision-Making                         computerization, digitization



RIMS, Bangalore | PGDM 2nd Year, Strategic Management                                              April 23, 2012
3




RIMS, Bangalore | PGDM 2nd Year, Strategic Management   April 23, 2012
+                                                                                                              4

    Porter’s Diamond Model for
    Competitive Advantage
       Firm Strategy                                      Demand Conditions
           World is dominated by dynamic                      More demanding the
            conditions | Direct competition                     customers, higher the pressure
            drives organizations to increase                    to constantly improve
            innovation & productivity                           competitiveness via innovative
                                                                products & superior quality


       Related Supporting Industries                      Factor Conditions
         Proximity of upstream or                             ‘Key Factors’ of production
          downstream industries                                 (skilled labor, capital, &
          facilitates exchange of                               infrastructure) are created &
          information & promotes
          continuous exchange of ideas                          difficult to duplicate leading to
          &innovations                                          competitive advantage


RIMS, Bangalore | PGDM 2nd Year, Strategic Management                                               April 23, 2012
5


                                                               Local
         Cost Reduction
                                                           Responsiveness
• For commodity type                                    • Consumer tastes &
  products – price is                                     preferences,
  main competitive                                        infrastructure,
  weapon                                                  distribution channel,
• When competitors                                        and demands of
  are based in low-                                       host government
  cost locations                                        • Difficult to transfer
• Liberalization of                                       distinctive
  world trade – greater                                   competencies
  international                                           between countries
  competition
RIMS, Bangalore | PGDM 2nd Year, Strategic Management                      April 23, 2012
+                                                                  6

     Strategic Choices to Compete in
     International Markets
    Global Strategy: standardized product,
     economies of scale, cross-cultural
     learning.
        Examples : Texas Instruments,
         Caterpillar, and Otis Elevator

    Transnational Strategy : move material,
     people, ideas, across national
     boundaries; economies of scale; and
     cross-cultural learning.
        Examples : Coca-Cola, and Nestle.

    International Strategy : import/export, or
     license existing product.
        Examples : US steel, and Harley
         Davidson.

    Multi-domestic Strategy : use existing
     domestic model globally, Franchise, JV
        Examples : Heinz, McDonald’s, The
         Body Shop, and Hard Rock Cafe.
RIMS, Bangalore | PGDM 2nd Year, Strategic Management   April 23, 2012
+                                                                                                                 7

    Strategic Choices to Compete in
    International Markets
       International Strategy                              Multi-Domestic Strategy
           Valuable skills & products transferred to
            foreign markets where local competitors             Oriented towards achieving maximum
            lack this skills & products                          local responsiveness
           Centralized product development                     Extensively customize the product
            functions; HQ retain tight control on                offering & marketing strategies
            marketing & product strategy
           Low pressure for local responsiveness &             High pressures for local responsiveness
            cost reductions                                      & low pressure for cost reduction


       Global Strategy                                     Transnational Strategy
           Increase profitability through benefits of          Operations not confined to any
            cost reduction (experience-curve) &                  country/region; Low cost & product
            location economies                                   differentiation strategy
           Production, Marketing, & R&D are based              Operate globally while maintaining high
            in few favorable locations                           level of local responsiveness
           Standardized product to reap benefits of            High pressure for cost reductions & local
            economies of scale                                   responsiveness


RIMS, Bangalore | PGDM 2nd Year, Strategic Management                                                  April 23, 2012
+                                                                                    8

    Strategies for Indian Companies
    Learn to Compete
       Sony's slogan to articulate its competitive spirit was BMW:
        "Beat Matsushita Whatever”

       Ford Motor Company ridiculed the "GM-Toyota" alliance as a
        way to kindle competitiveness in its personnel and used "Beat
        Toyota" as a rallying theme.

       Indian businesses are low on both substance and spirit relating
        to competition.There is a genuine need for change in the
        internal environment of Indian firms that can foster hyper-
        competitive thinking and behavior.

       An enduring competitive culture should be nurtured through on-
        going formal training

RIMS, Bangalore | PGDM 2nd Year, Strategic Management                     April 23, 2012
+                                                                                       9

    Strategies for Indian Companies
    Imitate Leaders
       Komatsu patterned its dealer network after Caterpillar’s | Seiko
        imitated Rolex's styling | Canon copied Xerox's features | Fuji
        followed Kodak's marketing techniques

       Imitation is the logical alternative when pioneering is not on the
        cards.

       Indian businesses can imitate the functional strategies of
        successful U.S. firms in product design (style, features),
        packaging (aesthetics, convenience), marketing (branding,
        promotions, advertising themes), and sales (pre and post-sales
        customer contact).




RIMS, Bangalore | PGDM 2nd Year, Strategic Management                        April 23, 2012
+                                                                                     10

    Strategies for Indian Companies
    Enter Niche Markets
       Curried food (canned, frozen) and spicy dry snacks are in high
        demand among U.S. urbanites

       Canned mango, guava, papaya, coconut, and fruit juices.
        Exotic fruits such as jack fruit and chiku in cans and iced tea in
        spicy flavors (example, cardamom)

       Rising health concerns are making U.S. consumers avoid
        personal care products that use synthetics and animal tallow
        and, instead, opt for those that use natural ingredients such as
        herbs, grains, and vegetable tallow.




RIMS, Bangalore | PGDM 2nd Year, Strategic Management                        April 23, 2012
+                                                                                 11

    Strategies for Indian Companies
    Band Together Domestically
       Alliances with domestic firms are an effective way to meet the
        threats of a common, but bigger, foreign enemy with deep
        pockets.

       Cooperation with suppliers/competitors in product
        development, production, and marketing enhances
        competence through shared learning

       U.S. electronic firms banded together during the 1960s and
        formed Sematech (an R&D consortium) that helped to fight
        subsidized competition from Japan and South Korea

       Chrysler partnered with parts suppliers to reduce product
        development time as a way to respond to foreign competition.



RIMS, Bangalore | PGDM 2nd Year, Strategic Management                    April 23, 2012
+                                                                                     12

    Strategies for Indian Companies
    Seek Cross Border Alliances
       Cross-border alliances foster vital international ties that a firm
        can use to enhance its technical competence, market image,
        financial viability, and overall prestige.

       Increasing market share internationally is a much better
        strategy than defending one's turf locally because the latter is
        comparatively more expensive in the long-run




RIMS, Bangalore | PGDM 2nd Year, Strategic Management                        April 23, 2012
+                                                                                13

    Strategies for Indian Companies
    Learn to Adapt
       In a complex and dynamic global competitive environment,
        adaptive capability is the key to survival and growth.

       Adaptation requires accepting change, creating several change
        scenarios, and developing an internal competency that will
        introduce the necessary change rapidly.

       Indian businesses will find themselves on the road to rapid
        growth when they have learned to think and act adaptively.




RIMS, Bangalore | PGDM 2nd Year, Strategic Management                   April 23, 2012
Hardy Alexander
 Founder & Director | Triune Global
 Bangalore – 560077
 Contact: +91 96864 48698
 Email: halexander@triuneglobal.com
 My Blog: dayscore.wordpress.com
                     +



Thank you
    April 23, 2012       RIMS, Bangalore | PGDM 2nd Year, Strategic Management   14

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Organizational Design & International Strategies

  • 1. + Unit 3: Organizational Design & Strategy Lesson 6: International Strategies
  • 2. + 2 Major Drivers of Globalization Technology • Extended reach & Communication • Transitioned from few bankers to many individuals Finance who hold sovereign debts of many countries Information • Bridged countries, people, products & services • Growth of trade has been accelerated by expansion of Recognition new areas of expertise that are being created • Faster decision making through telecommunication, Decision-Making computerization, digitization RIMS, Bangalore | PGDM 2nd Year, Strategic Management April 23, 2012
  • 3. 3 RIMS, Bangalore | PGDM 2nd Year, Strategic Management April 23, 2012
  • 4. + 4 Porter’s Diamond Model for Competitive Advantage  Firm Strategy  Demand Conditions  World is dominated by dynamic  More demanding the conditions | Direct competition customers, higher the pressure drives organizations to increase to constantly improve innovation & productivity competitiveness via innovative products & superior quality  Related Supporting Industries  Factor Conditions  Proximity of upstream or  ‘Key Factors’ of production downstream industries (skilled labor, capital, & facilitates exchange of infrastructure) are created & information & promotes continuous exchange of ideas difficult to duplicate leading to &innovations competitive advantage RIMS, Bangalore | PGDM 2nd Year, Strategic Management April 23, 2012
  • 5. 5 Local Cost Reduction Responsiveness • For commodity type • Consumer tastes & products – price is preferences, main competitive infrastructure, weapon distribution channel, • When competitors and demands of are based in low- host government cost locations • Difficult to transfer • Liberalization of distinctive world trade – greater competencies international between countries competition RIMS, Bangalore | PGDM 2nd Year, Strategic Management April 23, 2012
  • 6. + 6 Strategic Choices to Compete in International Markets  Global Strategy: standardized product, economies of scale, cross-cultural learning.  Examples : Texas Instruments, Caterpillar, and Otis Elevator  Transnational Strategy : move material, people, ideas, across national boundaries; economies of scale; and cross-cultural learning.  Examples : Coca-Cola, and Nestle.  International Strategy : import/export, or license existing product.  Examples : US steel, and Harley Davidson.  Multi-domestic Strategy : use existing domestic model globally, Franchise, JV  Examples : Heinz, McDonald’s, The Body Shop, and Hard Rock Cafe. RIMS, Bangalore | PGDM 2nd Year, Strategic Management April 23, 2012
  • 7. + 7 Strategic Choices to Compete in International Markets  International Strategy  Multi-Domestic Strategy  Valuable skills & products transferred to foreign markets where local competitors  Oriented towards achieving maximum lack this skills & products local responsiveness  Centralized product development  Extensively customize the product functions; HQ retain tight control on offering & marketing strategies marketing & product strategy  Low pressure for local responsiveness &  High pressures for local responsiveness cost reductions & low pressure for cost reduction  Global Strategy  Transnational Strategy  Increase profitability through benefits of  Operations not confined to any cost reduction (experience-curve) & country/region; Low cost & product location economies differentiation strategy  Production, Marketing, & R&D are based  Operate globally while maintaining high in few favorable locations level of local responsiveness  Standardized product to reap benefits of  High pressure for cost reductions & local economies of scale responsiveness RIMS, Bangalore | PGDM 2nd Year, Strategic Management April 23, 2012
  • 8. + 8 Strategies for Indian Companies Learn to Compete  Sony's slogan to articulate its competitive spirit was BMW: "Beat Matsushita Whatever”  Ford Motor Company ridiculed the "GM-Toyota" alliance as a way to kindle competitiveness in its personnel and used "Beat Toyota" as a rallying theme.  Indian businesses are low on both substance and spirit relating to competition.There is a genuine need for change in the internal environment of Indian firms that can foster hyper- competitive thinking and behavior.  An enduring competitive culture should be nurtured through on- going formal training RIMS, Bangalore | PGDM 2nd Year, Strategic Management April 23, 2012
  • 9. + 9 Strategies for Indian Companies Imitate Leaders  Komatsu patterned its dealer network after Caterpillar’s | Seiko imitated Rolex's styling | Canon copied Xerox's features | Fuji followed Kodak's marketing techniques  Imitation is the logical alternative when pioneering is not on the cards.  Indian businesses can imitate the functional strategies of successful U.S. firms in product design (style, features), packaging (aesthetics, convenience), marketing (branding, promotions, advertising themes), and sales (pre and post-sales customer contact). RIMS, Bangalore | PGDM 2nd Year, Strategic Management April 23, 2012
  • 10. + 10 Strategies for Indian Companies Enter Niche Markets  Curried food (canned, frozen) and spicy dry snacks are in high demand among U.S. urbanites  Canned mango, guava, papaya, coconut, and fruit juices. Exotic fruits such as jack fruit and chiku in cans and iced tea in spicy flavors (example, cardamom)  Rising health concerns are making U.S. consumers avoid personal care products that use synthetics and animal tallow and, instead, opt for those that use natural ingredients such as herbs, grains, and vegetable tallow. RIMS, Bangalore | PGDM 2nd Year, Strategic Management April 23, 2012
  • 11. + 11 Strategies for Indian Companies Band Together Domestically  Alliances with domestic firms are an effective way to meet the threats of a common, but bigger, foreign enemy with deep pockets.  Cooperation with suppliers/competitors in product development, production, and marketing enhances competence through shared learning  U.S. electronic firms banded together during the 1960s and formed Sematech (an R&D consortium) that helped to fight subsidized competition from Japan and South Korea  Chrysler partnered with parts suppliers to reduce product development time as a way to respond to foreign competition. RIMS, Bangalore | PGDM 2nd Year, Strategic Management April 23, 2012
  • 12. + 12 Strategies for Indian Companies Seek Cross Border Alliances  Cross-border alliances foster vital international ties that a firm can use to enhance its technical competence, market image, financial viability, and overall prestige.  Increasing market share internationally is a much better strategy than defending one's turf locally because the latter is comparatively more expensive in the long-run RIMS, Bangalore | PGDM 2nd Year, Strategic Management April 23, 2012
  • 13. + 13 Strategies for Indian Companies Learn to Adapt  In a complex and dynamic global competitive environment, adaptive capability is the key to survival and growth.  Adaptation requires accepting change, creating several change scenarios, and developing an internal competency that will introduce the necessary change rapidly.  Indian businesses will find themselves on the road to rapid growth when they have learned to think and act adaptively. RIMS, Bangalore | PGDM 2nd Year, Strategic Management April 23, 2012
  • 14. Hardy Alexander Founder & Director | Triune Global Bangalore – 560077 Contact: +91 96864 48698 Email: halexander@triuneglobal.com My Blog: dayscore.wordpress.com + Thank you April 23, 2012 RIMS, Bangalore | PGDM 2nd Year, Strategic Management 14

Editor's Notes

  1. Global Strategy: standardized product, economies of scale, cross-cultural learning. Examples : texas instruments, caterpillar, and otis elevator. Transnational strategy : move material, people, ideas, across national boundaries; economies of scale; and cross-cultural learning. Examples : coca-cola, and nestle. International strategy : import/export, or license existing product. Examples : US steel, and harleydavidson. Multidomestic strategy : use existing domestic model globally, franchise, joint venture, subsidiaries. Examples : Heinz, McDonald’s, the body Shop, and Hard Rock Cafe.