Module 1: Globalisation and global strategy 27 July 2020 UTS - - PowerPoint PPT Presentation

UTS CRICOS 00099F

Module 1: Globalisation and global strategy

27 July 2020

Overview

• What is strategy?
• Global strategy and globalisation
• Global strategy and globalisation at the crossroads

Opening case: Is a global strategy real?

Source: www.hungerartist.co Source: https://mcdonaldsblog.in/

• 1. What is strategy?

What is Strategy?

• Strategic management or strategy –

the application of the principles of military strategy to business competition (dates to the 1960s)

• Three schools defining strategy:
• Strategy as plan
• Strategy as action
• Strategy as theory

Strategy Plan, Action and Integration

Sources: Peng, M., Global Strategy, 4th Edition, 2017, North Ryde NSW: Cengage Chandler, A., 1962, Strategy and Structure, Cambridge, MA: MIT Press

Strategy as plan Strategy as action Strategy as integration “explicit, rigorous formal planning” (Peng, 2017) “a set of flexible, goal-oriented actions” (Peng, 2017) “The determination of the basic long-term goals and objectives of an enterprise, and the adoption

• f courses of action and the

allocation of resources necessary for carrying out these goals” (Chandler, 1962:13)

Strategy as Theory

• Firms have both

intended and emergent strategies – strategy as integration

• How to compete

successfully

• Allows replication
• One firm’s strategies

may not work in all situations

• Past success does not

guarantee future success

• It is often difficult to

change strategy

Whic ich of

• f t

these ese statem ements a are e strateg egie ies? s?

• “We want to be the number one or number two in all the markets in

which we operate”

• “We want to increase operational efficiency; we will target Europe,

the Middle East, and Africa; and we will divest business X.”

• Dan Murphy Liquor store: “Lowest liquor price guaranteed. In the

unlikely event that a customer finds a lower price, we’ll beat it on the spot.”

• “Our strategy is to move from defense to industrial applications.”

Sources: Hambrick, D. C., Fredrickson J. W., 2005:51. Are you sure you have a strategy? Academy of Management Executive, Vol. 19, No. 4; Vermeulen, F., 2017, Many Strategies Fail Because They’re Not Actually Strategies, Harvard Business Review, November 8; Kenny, G., 2018, Your Strategic Plans Probably Aren’t Strategic, or Even Plans, Harvard Business Review, April 6

Actions and resources Goals and objectives Strategy

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, 1962:13)

Source: http://www.englandtouch.org.uk/

Fundamental questions in strategy

• Why do firms differ?
• How do firms behave?
• What determines the scope of the firm?
• What determines the international success or failure of firms?

Why do firms differ?

• Cultural differences between Western firms and Japanese companies
• Networks of relationships have powerful effect - keiretsu, guanxi,

chaebol, blat

How do firms behave? – Introducing strategy tripod

Industry-based competition Firm-specific resources and capabilities Institutional conditions and transitions Strategy Performance

What determines the scope of the firm?

• Related not only to the growth of the

firm, but also to its contraction

• Example of product scope: Does

conglomerate strategy destroy the value of the firm? - General Electrics (USA) vs. TATA (India)

• Example of geographic scope: global

presence vs. emerging markets vs. regional scope

What determines the international success or failure of firms?

• Acquiring, leveraging and sustaining

competitive advantage

• 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

• 2. Global strategy and globalisation

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

Globalisation

• The term “globalisation” was made popular by Theodore

Levitt (1983).

• The idea of one global marketplace:
• The merging of distinctly separate national markets into a global marketplace
• Falling barriers to cross-border trade have made it easier to sell

internationally

• Tastes and preferences converge into a global norm
• Firms offer standardized products worldwide creating a world market

Source: Levitt, Theodore (1983), “The Globalization of Markets”, Harvard Business Review, May-June.

What is globalisation?

Long-run historical evolution since the dawn

• f history?

Pendulum view New force sweeping through the world in recent times?

Semi-globalization & regionalisation

• Market barriers are high but not high enough to completely

insulate countries

• Is free trade and investment still global or is it becoming more

regional and bilateral?

• Free trade agreements (FTAs): agreements between nations to

promote free trade.

• Regional trade agreements (RTAs): usually refers to the creation of a

trading bloc within a specific geographic region.

Source: Baldwin, R. E. 2008. Managing the Noodle Bowl: The Fragility of East Asian Regionalism. Singapore Economic Review, 53(3): 449-478.; Panagariya, A. 2002. E.U. Preferential Trade Arrangements and Developing Countries. The World Economy, 25(10): 1415-1432; Sajid, O. (2015): Youth Voices: Effects of The Spaghetti Bowl on South Asia-East Asia Trade Relations, World Bank Blogs, available online: https://blogs.worldbank.org/endpovertyinsouthasia/youth-voices-effects-spaghetti-bowl- south-asia-east-asia-trade-relations

Semi-globalization as spaghetti bowl effect

• Referred to as the

“spaghetti bowl effect” and, in Asia, as the “noodle bowl effect” (Baldwin, 2008; Panagariya, 2002)

Source: blogs.worldbank.org

Note: Notifications of RTAs: goods, services and accessions to an RTA are counted separately. The cumulative lines show the number of RTAs/notifications currently in force Source: WTO Secretariat (21 July 2020), available online: https://www.wto.org/index.htm

Source: WTO Secretariat (21 July 2020), available online: https://www.wto.org/index.htm

• 3. Global strategy and globalisation at a

crossroads

Events require making strategic choices in this complex, rapidly moving world

• Anti-globalization protests (job losses, downward pressure on wages for unskilled

labor, environmental destruction)

• Terrorist attacks (9/11, ISIS)
• Economic crises (Great Recession, Euro crisis)
• Corporate governance crisis (Asian financial crisis, US scandals, 2008 global

financial crisis)

• Trade wars (Russia versus EU, China versus US)
• COVID-19 (and other pandemics) and accompanied humanitarian crises

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), but view them

as partners