Topic 1:

Global Strategy
Strategizing Around the
Mike W. Peng

Globe
 Outline

• Why study global strategy?

• What is strategy? What is global strategy?
• Fundamental questions in strategy
• Global strategy and globalization at a
crossroads
 Light Quiz (a)
 Which of the following countries has a larger
number of Fortune Global 500 company
headquarters?
 United States
 Japan
 China
 Germany

 Fortune Global 500 HQ (2012 data from Fortune)

 US (132)
 Japan (68)
 China (73)
 Germany (32)
 Light Quiz (b)
 Which of the following ASEAN countries has
a larger number of Fortune Global 500
company headquarters?
 Malaysia
 Indonesia
 Singapore
 Thailand

 Fortune Global 500 HQ (2012 data from Fortune)

 Malaysia (1, PETRONAS)
 Indonesia (nil)
 Singapore (2, Wilmar & Flextronics)
 Thailand (1, PTT)
 Why Study Global Strategy?

• Job and career aspiration opportunities

Expertise in global strategy is highly sought after

• Awareness of what is going on in the world

 Preparation for international assignments

• Avoid downside risks of globalization

 Necessary knowledge for people working in smaller
companies
What is Strategy?
 What is Strategy?
• Origin-Greek word (strategos)-art of the general
 Sun Tzu, Chinese military strategist in 500 B.C.

 Modern-day application to business and competition dates to the

1960s
 What is Strategy?
• Plan versus Action - strategy is “explicit, rigorous formal
planning” versus “a set of flexible, goal-oriented actions”
• Strategy as Theory-how to compete successfully
 Firms have both intended and emergent strategies
 One firm’s strategies may not work in all situations
 Past success does not guarantee future success
 It is often difficult to change strategy
 What is Strategy? Cont’d

 Strategy should give coherence to

decisions and actions

 Managers must exert effective

strategic leadership
 Strategy
STRATEGY AS PLAN
 “Concerned with drafting the plan of war and shaping the individual
campaigns and, within these, deciding on the individual
engagements” (Von Clausewitz, 1976)1
 “A set of concrete plans to help the organization accomplish its goal”
(Oster, 1994)2

STRATEGY AS ACTION
 “The art of distributing and applying military means to fulfill the
ends of policy” (Liddel Hart, 1967)3
 “A pattern in a stream of actions or decisions” (Mintzberg, 1978)4
 “The creation of a unique and valuable position, involving a different
set of activities ... making trade-offs in competing ...creating fit
among a company’s activities” (Porter, 1996)5
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 Strategy, Cont’d.
STRATEGY AS INTEGRATION
 “The determination of the basic long-term goals and objectives of
an enterprise, and the adoption of courses of action and the
allocation of resources necessary for carrying out these goals”
(Chandler, 1962)6
 “An integrated and coordinated set of commitments and actions
designed to exploit core competencies and gain a competitive
advantage” (Hitt, Ireland, and Hoskisson, 2003)7

Sources:
Based on (1) K. Von Clausewitz, 1976, On War, vol. 1 (p. 177), London: Kegan Paul; (2) S. Oster,
1994, Modern Competitive Analysis, 2nd ed. (p. 4), New York: Oxford University Press; (3) B.
Liddell Hart, 1967, Strategy, 2nd rev. ed. (p. 321), New York: Meridian; (4) H. Mintzberg, 1978,
Patterns in strategy formulation (p. 934), Management Science, 24: 934–948; (5) M. Porter, 1996,
What is strategy? (pp. 68, 70, and 75), Harvard Business Review, 74(6): 61–78; (6) A. Chandler,
1962, Strategy and Structure (p. 13), Cambridge, MA: MIT Press; (7) M. Hitt, D. Ireland, & R.
Hoskisson, 2003, Strategic Management, 5th ed. (p. 9), Cincinnati: Thomson South-Western

1–11
The Essence of Strategy

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 Strategy as theory

• Integrating both planning and action schools

• Leveraging the concept of “theory”
 A theory serves two purposes: Explanation and
prediction
• Requiring replications and experimentations
 To establish the temporal (time-related) and
geographic limits of an existing theory
• Understanding the difficulty of strategic change
 What is Global Strategy?

 Provide standardized products and/or services

on a worldwide basis (i.e., traditional view)
 Any strategy outside one’s home country (???)
 Our definition of global strategy:
• Strategies of firms around the globe
 Both international and non-international (domestic)
 Both developed and emerging economies
 Global Strategy

• Traditional “global strategy”

 Only relevant for MNEs from developed economies
• The same as “international” (non-U.S.) strategy
 Wal-Mart went to Mexico in 1991: Did it go “global”?
 Everything becomes “global”?

1–15
 What is Globalization?

• A new phenomenon since the late 20th century?

• A part of long-run human history?
• A pendulum view: Transportation and
communication revolutions + breakdown of
artificial barriers in trade and investment
A process similar to the swing of a pendulum:
Postwar history
 Semi globalization?
 Fundamental Questions in Strategy

• Why do firms differ?

 Cultural differences between Western firms and Japanese
companies
 Networks of relationships have powerful effect - keiretsu,
guanxi, chaebol
• How do firms behave?
 Industry-based view - focus on competitive forces within an
industry that impact all firms
 Resource-based (capabilities) view - focus on internal strengths
and weaknesses, firm specific resources and capabilities
 Institution-based view - focus on government and societal forces
 Why Do Firms Differ?

• Western firms (US/UK vs. German/French)

 Have different (shorter- versus longer-term) planning
horizons.
• Japanese firms
 Are different from Western firms.
• Firms from emerging economies (Brazil, Russia,
India, and China—BRIC)
• The challenge is to understand the roots of these
differences when trying to compete globally.
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 Fundamental Questions in Strategy
(..cont’d)

• What determines the scope of the firm?

• What determines the international success or
failure of firms?
 Industry-based view - degree of competitiveness in
the industry
 Resource-based view - firm specific differences in
capabilities
 Institution-based view - institutional forces, such as
economic reforms and government policy
What Determines the Success or Failure of
Firms around the Globe?

 Acquiring and leveraging competitive

advantage
 Strategy is about performance, about making
a difference
 The Key: Sustaining such an advantage over
time and across countries (regions) through
replication and innovation.

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 The “Strategy Tripod”
Three Leading Perspectives on Strategy
 Global Strategy and Globalization at a
Crossroads

 Three Defining Events - have brought corporate

social responsibility, ethics, and governance to
the forefront of strategic decisions
• Anti-globalization protests - lost jobs, downward
pressure on wages for unskilled labor, environmental
destruction
• Terrorist attacks
• Corporate governance crisis (Asian financial crisis,
U.S. scandals)
 Global Strategy and Globalization at a
Crossroads, Cont’d.

 Know Yourself, Know Your Opponents

 Understand strengths AND limitations
 Recognize the social, political, and environmental costs
associated with globalization
 Current business school students exhibit values and
beliefs different from the general public
 Be aware of bias and strategic blind spots
 Do not ignore non-government organizations (NGOs)-
view them as partners
Blind Spot
© 2010 Cengage Learning.
All rights reserved.
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