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STRATEGY
Process, Content, Context
Chapter 10 The International Context

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The International Context

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Agenda
I. The Issue of International Configuration
    Dimensions of Globalization Levels of Globalization International Composition International Management

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II.

The Paradox of Globalization and Localization

    The Demand for Global Synergy The Demand for Local Responsiveness

III. Perspectives on the International Context

The Global Convergence perspective The International Diversity Perspective

IV. The Debate and Readings

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I.

International Configuration
The Issue of International Configuration
How should the firm organize its activities across borders?

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International Composition and International Management

Dimension of Globalization
What is global?

Levels of Globalization
What is the subject of globalization?

International Composition
In which countries does a company want to be active in and how much involved do they want to be?

International Management
How should a company organize itself in order to deal with its border-spanning nature?

International Scope Which countries are selected to do business in?

International distribution How are the value adding activities distributed across the selected countries? 1. 2. 3.

Three Integration Mechanisms Standardization Coordination Centralization

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Dimensions of Globalization
Various Elements Worldwide scope
Spatial dimension: Global used as a geographic term.

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Worldwide similarity

Variance dimension: Global used as a term to refer to homogeneity around the world.

Worldwide integration
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Linkages dimension: Global used as a term to refer to the world as one tightly linked system.

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Dimensions of Globalization
Internationalization and Globalization of the Firm

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Levels of Globalization
Macro, Meso and Micro Level Globalization of Economies

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Macro level: Are the worlds economies in general experiencing a convergence trend?

Globalization of Businesses

Meso level: Are customer demands similar around the world? Do producers compete with one another on a global scale?

Globalization of Companies
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Micro level: Do individual firms compete with one another on a global scale?

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International Composition
International Growth Options

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International Composition
International Scope and Distribution

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International Composition
In which countries does a company want to be active in and how involved is it?

International Scope
Geographic spectrum: In how many countries does the company want to be active in, and which countries should these be?

International distribution
Distribution of value adding activities: How can resources and activities best be divided across the various countries?

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International Composition
Example of Foreign Sales Market Portfolio

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International Management
Integration Mechanisms

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Centralization

Integrating activities at one central location in order to gain economies of scale or using the competitive advantage of a particular country

Coordination

Aligning activities in different countries in order to serve border-crossing clients or to respond or attack competitors

Standardization

Equalizing activities in each country, in order to achieve economies of scale or to serve border crossing customers

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International Management
Generic Organizational Models for International Firms

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Barlett and Ghoshal, 1995

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International Management
Characteristics of Generic Organizational Models
Decentralized Federation
 Organized along geographic lines  Subsidiaries are self-sufficient (autonomous)  Level of standardization is low  Multinational

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Coordinated Federation
 Organized along geographic lines  Close HQ-subsidiary relationship  Core competences are developed centrally  International

Centralized Hub
 National units relatively unimportant  Level of standardization/ centralization is high  Coordination is directed by HQ  Global

Integrated Network
 Close HQ-subsidiary relationships  Close subsidiary-subsidiary relationships  Low level of centralization  Transnational

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II. Globalization and Localization

Dealing with the Paradox

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Global Synergy
The ability to create value by leveraging resources, integrating activities and aligning product offerings across two or more countries

Local Responsiveness
The ability to remain attuned to specific national market demands, responding adequately and timely to unique characteristics

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Global Synergy
Forms of Cross-Border Synergies

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Global Synergy
Sources of Cross-Border Synergies
I. Achieving resource reallocation II. Achieving resource replication Leveraging Resources

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Integrating Activities

III. Reaping scale advantages IV. Reaping location advantages

Aligning Positions

V. Dealing with cross-border customers VI. Dealing with cross-border competition

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Local Responsiveness
Most Important Differences between Countries

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Market Structure Substitutes

Infrastructure

Customer Needs Distribution Channel

Supply Structure

Buying Behavior Media Structure

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Government Regulations

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III. Overview of the Perspectives

Global Convergence vs. International Diversity
GLOBAL CONVERGENCE PERSPECTIVE
Globalization over localization Growing international similarity Growing integration of international linkages Technology and communication Diversity is costly; convergence can be encouraged Global synergy focus Standardize/centralize unless Center-for-global innovation Global structure (centralized hub)

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INTERNATIONAL DIVERSITY PERSPECTIVE

Localization over globalization Fostering international diversity Cultivating fragmentation of international linkages Cultural and institutional identity Diversity is reality; divergence can be exploited Local responsiveness focus Adapt/decentralize unless Locally leveraged innovation Transnational structure (integrated network)

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