CHAPTER 1 – STRATEGIZING AROUND THE GLOBE
CHAPTER OUTLINE
1. OPENING CASE: HOW DID GLOBAL STRATEGY ENTER AND COMPETE IN CHINA?
a. The text’s publisher
1) Cengage does business in 39 countries
2) The company’s name and ownership have changed over time. It has become the number
one publisher of business and economics texts
3) The first edition of this text achieved an intersection of strategic management and
international business with inputs from multiple countries around the world and (unlike
other texts) was initially published in multiple languages
b. A global strategy focusing on one market at a time
1) China is an example
2) In China, three versions were published to meet language and other needs
3) The text required an understanding of formal and informal rules as well sensitivities and
censorship
4) The result has been a widespread acceptance at Chinese universities
2. A GLOBAL GLOBAL STRATEGY BOOK
a. Text departs from traditional view of global strategy
b. Important to respond to local needs – avoid customer rejection
c. Examples of firms whose products have been rejected in some foreign markets
1) Toyota Camry – best-seller in the US but poor sales in Japan
2) Ford Mondeo and Volkswagen Golf – strong in Europe, little presence in North America
or Asia
3) Coke Classic – tastes different around the world
4) Lack of success in Coca-Cola’s use of the polar bear in its “world commercials”
d. Traditional view of global strategy is incomplete and unbalanced
1) Sacrifices local responsiveness and global learning
2) Ignores how domestic firms compete with each other and with foreign entrants
3) Traditional global strategy is only appropriate for large MNEs in developed countries
, 4) It is dangerous to ignore less developed economies
(a) Abundance of FDI
(b) Outsourcing by Western companies to local firms in emerging economies
(c) High saturation levels at the top of the economic pyramid – many opportunities to
serve those at the bottom of the pyramid
3. WHY STUDY GLOBAL STRATEGY?
a. Job and career aspiration opportunities
b. Awareness of what is going on in the world
c. Avoid downside risks of globalization
4. WHAT IS STRATEGY?
a. Origin – Greek word (strategos) – art of the general
1) Sun Tzu, Chinese military strategist in 500 BC – “Know yourself, know your opponents;
encounter a hundred battles, win a hundred victories.”
2) Modern-day application to business and competition dates to the 1960s
b. Plan versus Action – strategy is “explicit, rigorous formal planning” versus “a set of flexible,
goal-oriented actions.”
c. Strategy as Theory – strategy is a firm’s theory about how to compete successfully
1) Firms have both intended and emergent strategies
2) One firm’s strategies may not work in all situations
3) Past success does not guarantee future success
4) It is often difficult to change strategy
5) Strategy should give coherence to a company’s decisions and actions
6) Managers must exert effective strategic leadership – managers play an important role
5. FUNDAMENTAL QUESTIONS IN STRATEGY
a. Why Do Firms Differ?
1) Cultural differences between Western firms and Japanese companies
2) Networks of relationships have powerful effect – keiretsu, guanxi, chaebol, blat
b. How Do Firms Behave?
, 1) Industry-based view – focus on competitive forces within an industry that impact all
firms
2) Resource-based (capabilities) view – focus on internal strengths and weaknesses, firm-
specific resources and capabilities
3) Institution-based view – focus on government and societal forces in the institutional
environment that affect (and can be utilized strategically) by companies
c. What Determines the Scope of the Firm?
1) Scope pertains to growth as well as contraction
2) Many firms are interested in growth
d. What Determines the International Success and Failure of Firms Around the Globe?
1) Each view of strategy offers different answers
(a) Industry-based view – degree of competitiveness in the industry determines firm
performance
(b) Resource-based view – firm-specific differences in capabilities creates performance
differences
(c) Institution-based view – institutional forces, such as economic reforms and
government policy, contribute to differences in firm performance
6. WHAT IS GLOBAL STRATEGY?
a. Clarify ambiguous ways “global strategy” is defined and used
1) First popular definition: Provide standardized products and/or services on a worldwide
basis (i.e. traditional view)
2) Second popular definition: Any strategy outside one’s home country
3) The definition used in this book: Strategy of firms around the world – each firm’s theory
about how to compete successfully in whatever country markets the firm chooses to
compete
7. WHAT IS GLOBALIZATION?
a. Recent phenomenon driven by technological innovations in communication and
transportation
b. Early historical roots in the Assyrian, Phoenician and Roman empires
c. Pendulum swinging from one extreme to the other
d. Semiglobalization chooses a middle ground between opposition and unconditional acceptance
of globalization
8. GLOBAL STRATEGY AND GLOBALIZATION AT A CROSSROADS
, a. Three Defining Events – have brought corporate social responsibility, ethics and governance
to the forefront of strategic decisions
1) Anti-globalization protests – lost jobs, downward pressure on wages for unskilled labor,
environmental destruction
2) Terrorist attacks
(a) Reduced freedom of international movement
(b) Enhanced security checkpoints reduce transit speed and efficiency
(c) Cancelled or scaled down FDI projects and trade deals, especially in high risk regions
(e.g. Middle East)
3) Corporate governance crisis
(a) Triggered by Asian financial crisis (1997)
(b) Scandals of Enron and WorldCom in the US
b. Know Yourself, Know Your Opponents
1) Understand strengths AND limitations
2) Recognize the social, political, and environmental costs associated with globalization
3) Current business school students exhibit values and beliefs that favor globalization –
different from the general public
4) Be aware of bias and strategic blind spots
5) Do not ignore non-government organizations (NGOs) – view them as partners
CHAPTER OUTLINE
1. OPENING CASE: HOW DID GLOBAL STRATEGY ENTER AND COMPETE IN CHINA?
a. The text’s publisher
1) Cengage does business in 39 countries
2) The company’s name and ownership have changed over time. It has become the number
one publisher of business and economics texts
3) The first edition of this text achieved an intersection of strategic management and
international business with inputs from multiple countries around the world and (unlike
other texts) was initially published in multiple languages
b. A global strategy focusing on one market at a time
1) China is an example
2) In China, three versions were published to meet language and other needs
3) The text required an understanding of formal and informal rules as well sensitivities and
censorship
4) The result has been a widespread acceptance at Chinese universities
2. A GLOBAL GLOBAL STRATEGY BOOK
a. Text departs from traditional view of global strategy
b. Important to respond to local needs – avoid customer rejection
c. Examples of firms whose products have been rejected in some foreign markets
1) Toyota Camry – best-seller in the US but poor sales in Japan
2) Ford Mondeo and Volkswagen Golf – strong in Europe, little presence in North America
or Asia
3) Coke Classic – tastes different around the world
4) Lack of success in Coca-Cola’s use of the polar bear in its “world commercials”
d. Traditional view of global strategy is incomplete and unbalanced
1) Sacrifices local responsiveness and global learning
2) Ignores how domestic firms compete with each other and with foreign entrants
3) Traditional global strategy is only appropriate for large MNEs in developed countries
, 4) It is dangerous to ignore less developed economies
(a) Abundance of FDI
(b) Outsourcing by Western companies to local firms in emerging economies
(c) High saturation levels at the top of the economic pyramid – many opportunities to
serve those at the bottom of the pyramid
3. WHY STUDY GLOBAL STRATEGY?
a. Job and career aspiration opportunities
b. Awareness of what is going on in the world
c. Avoid downside risks of globalization
4. WHAT IS STRATEGY?
a. Origin – Greek word (strategos) – art of the general
1) Sun Tzu, Chinese military strategist in 500 BC – “Know yourself, know your opponents;
encounter a hundred battles, win a hundred victories.”
2) Modern-day application to business and competition dates to the 1960s
b. Plan versus Action – strategy is “explicit, rigorous formal planning” versus “a set of flexible,
goal-oriented actions.”
c. Strategy as Theory – strategy is a firm’s theory about how to compete successfully
1) Firms have both intended and emergent strategies
2) One firm’s strategies may not work in all situations
3) Past success does not guarantee future success
4) It is often difficult to change strategy
5) Strategy should give coherence to a company’s decisions and actions
6) Managers must exert effective strategic leadership – managers play an important role
5. FUNDAMENTAL QUESTIONS IN STRATEGY
a. Why Do Firms Differ?
1) Cultural differences between Western firms and Japanese companies
2) Networks of relationships have powerful effect – keiretsu, guanxi, chaebol, blat
b. How Do Firms Behave?
, 1) Industry-based view – focus on competitive forces within an industry that impact all
firms
2) Resource-based (capabilities) view – focus on internal strengths and weaknesses, firm-
specific resources and capabilities
3) Institution-based view – focus on government and societal forces in the institutional
environment that affect (and can be utilized strategically) by companies
c. What Determines the Scope of the Firm?
1) Scope pertains to growth as well as contraction
2) Many firms are interested in growth
d. What Determines the International Success and Failure of Firms Around the Globe?
1) Each view of strategy offers different answers
(a) Industry-based view – degree of competitiveness in the industry determines firm
performance
(b) Resource-based view – firm-specific differences in capabilities creates performance
differences
(c) Institution-based view – institutional forces, such as economic reforms and
government policy, contribute to differences in firm performance
6. WHAT IS GLOBAL STRATEGY?
a. Clarify ambiguous ways “global strategy” is defined and used
1) First popular definition: Provide standardized products and/or services on a worldwide
basis (i.e. traditional view)
2) Second popular definition: Any strategy outside one’s home country
3) The definition used in this book: Strategy of firms around the world – each firm’s theory
about how to compete successfully in whatever country markets the firm chooses to
compete
7. WHAT IS GLOBALIZATION?
a. Recent phenomenon driven by technological innovations in communication and
transportation
b. Early historical roots in the Assyrian, Phoenician and Roman empires
c. Pendulum swinging from one extreme to the other
d. Semiglobalization chooses a middle ground between opposition and unconditional acceptance
of globalization
8. GLOBAL STRATEGY AND GLOBALIZATION AT A CROSSROADS
, a. Three Defining Events – have brought corporate social responsibility, ethics and governance
to the forefront of strategic decisions
1) Anti-globalization protests – lost jobs, downward pressure on wages for unskilled labor,
environmental destruction
2) Terrorist attacks
(a) Reduced freedom of international movement
(b) Enhanced security checkpoints reduce transit speed and efficiency
(c) Cancelled or scaled down FDI projects and trade deals, especially in high risk regions
(e.g. Middle East)
3) Corporate governance crisis
(a) Triggered by Asian financial crisis (1997)
(b) Scandals of Enron and WorldCom in the US
b. Know Yourself, Know Your Opponents
1) Understand strengths AND limitations
2) Recognize the social, political, and environmental costs associated with globalization
3) Current business school students exhibit values and beliefs that favor globalization –
different from the general public
4) Be aware of bias and strategic blind spots
5) Do not ignore non-government organizations (NGOs) – view them as partners
