CHAPTER 1 – Strategizing Around the Globe
Opening Case – Zoom
▪ Growth during crisis
o Zoom thrived during Covid-19 pandemic while most businesses collapsed
o Daily users surged form 10 million (Dec 2019) to over 300 million (April 2020)
o Share price jumped from $68 (Dec 2019) to $169 (April 2020), market cap
(=total value of company’s shares of stock) hit $46 billion.
▪ Founder & Origins
o Founded in 2011 by Eric Yuan
o Yuan left previous job after his mobile-first idea was rejected
o Zoom became a ‘unicorn (= startup company valued at over US$1 billion which is
privately owned and not listed on a share market) ’ by 2017 and went public in
April 2019
▪ Strategy
o Mission: ‘Make video communications frictionless’
o Originally targeted corporate IT departments
o Free for <100 participants & <40 minutes; $19.99/month for up to 1,000
participants.
▪ Infrastructure & Challenges
o Operated via 17+ data centers; added more during crisis.
o Partnered with Oracle & AWS for cloud capacity.
o Faced security issues (“Zoombombings = unwanted, disruptive intrusion, by
internet trolls, into an video-conference call”) → introduced passwords &
improved protections.
o “Zoom fatigue = the feeling of depletion and exhaustion after a long video call
because of excessive amount of close-up eye contact,….” became a global
phenomenon
Black Swan Scenario (=unpredictable events with massive impact). For Zoom, Covid
pandemic became the basis for rapid global expansion. However, it slowed down
because of surging traffic and security issues
Global strategy
Global strategy = strategy around the globe – practiced by small and big firms
Doesn’t stick to the old idea of global strategy, which was about making one standard
product and selling it the same way everywhere (= global strategy old definition)
Why the shift? Because the world might be moving away from globalization (=
deglobalization), that old one-size-fits all strategy isn’t as effective anymore
• MNEs have tried using a standardized global strategy. But in reality, they often need
to adapt to local markets
• Examples: Coca-Cola had to change its ads and even its drink formula to suit different
countries (polar bear did not resonate with viewers in warmer weather countries)
, • Zoom, though a young MNE, runs data centers worldwide (US, Brazil, Canada,…)
(FDI). To address privacy concerns, it lets users choose which regions their data goes
through, balancing global performance with local control.
One size does not fit all: A smarter approach is to “think global, act local.”
Why is global strategy important?
Why is profit to sales steeper than profit to
assets?
• Sales = revenue flow
• Assets = long-term investments
Steeper profit-to-sales:
• Early gains from scale-effect (efficiency
through volume)
• Learner-effect: cumulative learning
boosts productivity
• Profit rises faster than asset base initially
Profit-to-assets flattens:
• At high profit levels → need for complex investments
• More assets = slower relative profit growth (because assets increase immediately;
your investments, however the profit from those assets take time to materialize)
Fundamental Questions in Strategic Management
What determines the scope of the firm?
In which activities do we want to be active?
- Firms decide how much to grow, diversify, and internationalize.
- Conglomerates destroy value in developed economies but may perform well in
emerging economies due to institutional conditions.
- Geographic expansion must be deliberate; not all firms should globalize
Why do firms differ?
- Firms vary widely in management quality across and within countries.
- Emerging economies have more poorly managed firms but also some world-class
exceptions (ex. Huawei China)
- Institutional differences partly explain these gaps, but the puzzle remains.
The least efficient firm sets the price of the market => customer experienced the lowest
value of the product sets the tone for the customer value. Even if I am prepared to pay 700
,euros for a product, I would not be satisfied if there is someone else that is only willing to
pay 500 euro for the same product
The equilibrium price consists of the customer with the lowest customer value and the player
with the lowest production efficiency of the production
Value = all the value that is in the experience to the customer in regard to the product
• Value does not equal price
• Profit much lower than the value you create as a business
• Value is most important in LT
If the price would go up for some reason, you would not be in trouble (much more value
than the money you make)
Strategy much more resilient (LT)
Don’t only focus on revenue, and don’t confuse revenue with value
The more value you create, the more resilient your strategy
Best indicator of resilience is the value you create above the price
How do firms behave?
The strategy tripod explains firm behavior through three lenses:
• Industry-based view → external competition
• Resource-based view → internal capabilities
• Institution-based view → formal and informal rules of the game
• Knowledge-based view (added) → being able to access knowledge (not own)
Ford Mustang manager => created an idea around a van => popular model => Board of
Directors did not recognize great idea => manager resigned and at another company went
successful with van
Steve Jobs fired from Apple because he proposed the computer, Board did not support
Why do companies do this? Most decision-makers that refused wanted resources from
themselves (invest in product that generates most revenues: for example IBM: main frames
instead of mini- computers that were proposed; from perspective from manager of main
frames not irrational cause he wanted to keep investing in his main frames => powerful
position)
Irrational from the perspective of a company, not from a perspective from an individual
Example:
Industry-based view (outside-in view: start with competitive environment, then address
questions)
, VS.
Resource-based view (start by looking internally, what are the in-house strengths? Do we
have skills to outperform competitors?)
VS.
Institution based view (does our strategy meet expectations of society?) => successful
companies = legitimate companies (high reputation, liked by customers/government, meet
societal expectations well)
VS.
Knowledge-based view (related to resource-based view => one issue: resource-based view
assumes you must own the resource, it can only be a competitive advantage then + has to be
unique) knowledge-based view (not about owning knowledge but to being able to access
knowledge => you develop the structure to have access to knowledge)
Transferred knowledge (knowledge-based view) vs. Owned knowledge (resource-based
view)
Strategy Quartet
What determines success and failure around the globe?
- Firm performance is hard to define (profit, market share, stakeholders, triple bottom
line => no consensus as all stakeholders are interested in different performance
measures)
- Not interested in only acquiring and leveraging competitive advantage, but also in
sustaining such advantage over time and across regions
Opening Case – Zoom
▪ Growth during crisis
o Zoom thrived during Covid-19 pandemic while most businesses collapsed
o Daily users surged form 10 million (Dec 2019) to over 300 million (April 2020)
o Share price jumped from $68 (Dec 2019) to $169 (April 2020), market cap
(=total value of company’s shares of stock) hit $46 billion.
▪ Founder & Origins
o Founded in 2011 by Eric Yuan
o Yuan left previous job after his mobile-first idea was rejected
o Zoom became a ‘unicorn (= startup company valued at over US$1 billion which is
privately owned and not listed on a share market) ’ by 2017 and went public in
April 2019
▪ Strategy
o Mission: ‘Make video communications frictionless’
o Originally targeted corporate IT departments
o Free for <100 participants & <40 minutes; $19.99/month for up to 1,000
participants.
▪ Infrastructure & Challenges
o Operated via 17+ data centers; added more during crisis.
o Partnered with Oracle & AWS for cloud capacity.
o Faced security issues (“Zoombombings = unwanted, disruptive intrusion, by
internet trolls, into an video-conference call”) → introduced passwords &
improved protections.
o “Zoom fatigue = the feeling of depletion and exhaustion after a long video call
because of excessive amount of close-up eye contact,….” became a global
phenomenon
Black Swan Scenario (=unpredictable events with massive impact). For Zoom, Covid
pandemic became the basis for rapid global expansion. However, it slowed down
because of surging traffic and security issues
Global strategy
Global strategy = strategy around the globe – practiced by small and big firms
Doesn’t stick to the old idea of global strategy, which was about making one standard
product and selling it the same way everywhere (= global strategy old definition)
Why the shift? Because the world might be moving away from globalization (=
deglobalization), that old one-size-fits all strategy isn’t as effective anymore
• MNEs have tried using a standardized global strategy. But in reality, they often need
to adapt to local markets
• Examples: Coca-Cola had to change its ads and even its drink formula to suit different
countries (polar bear did not resonate with viewers in warmer weather countries)
, • Zoom, though a young MNE, runs data centers worldwide (US, Brazil, Canada,…)
(FDI). To address privacy concerns, it lets users choose which regions their data goes
through, balancing global performance with local control.
One size does not fit all: A smarter approach is to “think global, act local.”
Why is global strategy important?
Why is profit to sales steeper than profit to
assets?
• Sales = revenue flow
• Assets = long-term investments
Steeper profit-to-sales:
• Early gains from scale-effect (efficiency
through volume)
• Learner-effect: cumulative learning
boosts productivity
• Profit rises faster than asset base initially
Profit-to-assets flattens:
• At high profit levels → need for complex investments
• More assets = slower relative profit growth (because assets increase immediately;
your investments, however the profit from those assets take time to materialize)
Fundamental Questions in Strategic Management
What determines the scope of the firm?
In which activities do we want to be active?
- Firms decide how much to grow, diversify, and internationalize.
- Conglomerates destroy value in developed economies but may perform well in
emerging economies due to institutional conditions.
- Geographic expansion must be deliberate; not all firms should globalize
Why do firms differ?
- Firms vary widely in management quality across and within countries.
- Emerging economies have more poorly managed firms but also some world-class
exceptions (ex. Huawei China)
- Institutional differences partly explain these gaps, but the puzzle remains.
The least efficient firm sets the price of the market => customer experienced the lowest
value of the product sets the tone for the customer value. Even if I am prepared to pay 700
,euros for a product, I would not be satisfied if there is someone else that is only willing to
pay 500 euro for the same product
The equilibrium price consists of the customer with the lowest customer value and the player
with the lowest production efficiency of the production
Value = all the value that is in the experience to the customer in regard to the product
• Value does not equal price
• Profit much lower than the value you create as a business
• Value is most important in LT
If the price would go up for some reason, you would not be in trouble (much more value
than the money you make)
Strategy much more resilient (LT)
Don’t only focus on revenue, and don’t confuse revenue with value
The more value you create, the more resilient your strategy
Best indicator of resilience is the value you create above the price
How do firms behave?
The strategy tripod explains firm behavior through three lenses:
• Industry-based view → external competition
• Resource-based view → internal capabilities
• Institution-based view → formal and informal rules of the game
• Knowledge-based view (added) → being able to access knowledge (not own)
Ford Mustang manager => created an idea around a van => popular model => Board of
Directors did not recognize great idea => manager resigned and at another company went
successful with van
Steve Jobs fired from Apple because he proposed the computer, Board did not support
Why do companies do this? Most decision-makers that refused wanted resources from
themselves (invest in product that generates most revenues: for example IBM: main frames
instead of mini- computers that were proposed; from perspective from manager of main
frames not irrational cause he wanted to keep investing in his main frames => powerful
position)
Irrational from the perspective of a company, not from a perspective from an individual
Example:
Industry-based view (outside-in view: start with competitive environment, then address
questions)
, VS.
Resource-based view (start by looking internally, what are the in-house strengths? Do we
have skills to outperform competitors?)
VS.
Institution based view (does our strategy meet expectations of society?) => successful
companies = legitimate companies (high reputation, liked by customers/government, meet
societal expectations well)
VS.
Knowledge-based view (related to resource-based view => one issue: resource-based view
assumes you must own the resource, it can only be a competitive advantage then + has to be
unique) knowledge-based view (not about owning knowledge but to being able to access
knowledge => you develop the structure to have access to knowledge)
Transferred knowledge (knowledge-based view) vs. Owned knowledge (resource-based
view)
Strategy Quartet
What determines success and failure around the globe?
- Firm performance is hard to define (profit, market share, stakeholders, triple bottom
line => no consensus as all stakeholders are interested in different performance
measures)
- Not interested in only acquiring and leveraging competitive advantage, but also in
sustaining such advantage over time and across regions
