DEFINING THE GLOBAL FIRM Chapter 3 Lecture 1 From Local to Global Domestic – Local firms Individual Organizational International Multinational Partially to almost or fully global Global Business is Important to Economic Development About 1/3 of world GDP is generated by business activities. Growth also is generated by business activities. Characteristics of the Global Enterprise 1. DRAWS RESOURCES FROM A GLOBAL POOL capital, labor, materials 2. VIEWS THE WORLD AS ITS HOME 3. ESTABLISHES A WORLDWIDE PRESENCE IN ONE OR MORE BUSINESSES but may go global by chance or design 4. PURSUES A GLOBAL BUSINESS STRATEGY 5. TRANSCENDS EXTERNAL AND INTERNAL BOUNDARIES Let’s Look at Some Global Firms Web Links to Explore These Coca-Cola www.coca-cola.com Benetton www.benetton.com Doc Martens www.drmarten.com Global Enterprise Characteristic 1 – DRAWS RESOURCES FROM A GLOBAL POOL capital, labor, materials Global Enterprise Characteristic 2 VIEWS THE WORLD AS HOME – Reduces existing links Moves its headquarters for all or some functions, e.g., Boeing, Alcatel to be ―stateless‖ Creates a perception that it is not place bound, e.g., a name that has no meaning or an ad campaign that makes it more ―local‖ Goes virtual so it has no fixed ―place‖ – Undertakes activities that make it a world citizen, e.g., Royal Dutch Shell Global Enterprise Characteristic 3 – ESTABLISHES A WORLDWIDE PRESENCE IN ONE OR MORE BUSINESSES but may go global by chance or design Global Enterprise Characteristic 4 – PURSUES A GLOBAL STRATEGY via an INTEGRATIVE APPROACH Global Enterprise Characteristic 5 – TRANSCENDS EXTERNAL AND INTERNAL BOUNDARIES VERTICAL/HORIZONTAL – Vertical—customers, suppliers – Horizontal—competitors TANGIBLE/INTANGIBLE – Tangible—something we can measure – Intangible—how people think or perceive Five Levels of Strategy Enterprise Strategy—why do we exist as an organization? Corporate Strategy—what businesses should we be in now and in the future? Business Strategy—what is the source of our advantage? – Dependent on existing competencies – And on the nature of the industry in deciding – How shall we position ourselves in the industries and businesses where we choose to operate? Operational Strategy—how shall we coordinate among PPS to meet enterprise, corporate, and business level strategies? Individual Strategy—what must each individual do daily at work to meet organizational goals consistent with other levels of strategy? Enterprise Strategy usually is articulated by top management often is vague or abstract; can be described as vision, mission, values, etc. varies from country to country and from organization to organization within the same country can change over time, e.g., – Boeing 1990 Mission: to be the number one aerospace company in the world and among the premier industrial concerns of quality, profitability, and growth – Boeing Vision 2016: people working together as one global company for aerospace leadership informs (or should inform) all other strategy levels Compare These Statements of Enterprise Strategy The objective of the enterprise is to make money and to have fun doing so. WL Gore and Associates Our goal is to provide superior returns to our shareholders. Profitability is critical to achieving superior returns, building our capital, and attracting and keeping our best people. Goldman Sachs It is our mission to improve the lives of customers and communities where we all live, work and play. Honda Corporate Strategy Defines What’s in the Corporate Portfolio: Businesses to be in Now and Into the Future Corporate strategy is reflected by portfolio decisions – Expansion, bottled water for Pepsi – Contraction or exchange, sell off a unit, e.g., Corus sold its aluminum holdings – Exchange, Boeing exchanges for Internet services. Corporate strategy is a view of the overall corporate portfolio of businesses Business Strategies are (Almost Always) Industry Specific and Answer Two Questions: What are sources of distinctive advantage? – This can be based on many attributes or a combination of physical, human or capital advantages financial, physical, legal, human, organizational, information, or relational – Usually concentrate on 3–5 core competencies Examples are price advantage, product advantage, innovation, quality, ease of access How shall we position in the industry? – Competition on a head-to-head basis – Collaboration – Coopetition May be articulated for the business or for a single subunit, e.g., commercial airlines Operational Strategy Decisions which people, processes, and structures are needed to satisfy enterprise, corporate, and business strategies Decisions About Enterprise, Corporate, Business and Operational Strategies Define individual objectives, job assignments, employee activities And they are interconnected with organizational culture, efficiency, and other activities So we return to this point: Organizations are interconnected internally, so action begins with enterprise strategy: why do we exist as an organization? Ford’s Global Strategy Video: Making Globalization Succeed be looking for vision/statement of values and how these values are embedded in people, processes, and structures for Levi, Motorola, and Sony Argus Computers--India Asyou watch this, be looking for these points: what is the founder’s purpose? how are people developed? how is the organization structured?
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