I Introduction

The term international, multinational, transnational, and global business are often used interchangeably.

It is important to define and distinguish between them in order to avoid serious confusion.

A spectrum of international business activity can be identified depending on the nature and extend of a business’s involvement in international markets and the degree of co-ordination and integration of geographically dispersed operation.

International Business: An organization is operating in more than one country. It is a generic term.

Multinational Business: Conduct international business; in addition, it implies some decentralization of strategy and management decision making to overseas subsidiaries, with little co-ordination of activities and subsidiaries across national boundaries. Subsidiaries own considerable autonomy in terms of their strategies, largely determined by local condition.

Global Business: Conduct activities in a large range of countries across the world with a single strategy that is highly co-ordination and integrated throughout the world.

Company strategy is determined centrally and subsidiaries have little autonomy in their operation.

Transnational Business: Conduct activities across boundaries with varying degrees of co-ordination, integration and local differentiation of strategy and operations, depending on market and business conditions.

Four Basic Strategies

Figure 12.5

High

Cost pressures

Low

Low High

GlobalStrategy

TransnationalStrategy

MultinationalStrategy

InternationalStrategy

Pressures for local responsiveness

Definition of GlobalizationIn general term, globalization refers to the

development of global or worldwide business activities, competition and markets and the increasing global interdependence of national economies.

Globalization of economies: Increasing interdependence between national economies throughout the world.

Globalization of markets: Increasing homogenization of consumer tastes and product preferences in certain markets.

Globalization of industries: Increasing globalization of the productive process, with firms choosing to concentrate or disperse value-adding activities around the world according to the locational advantages to be obtained

Globalization of strategy: the extend to which an international business configures and co-ordinates its strategy globally.

Which factors can be attributed to recent developments of globalization?

Manufacturing technology

Transportation technology

Information and communications technology

Trade liberation (GATT and WTO)

Rising real term incomes

Globalization consists of two main components: The globalization of markets and the globalization of production.

The globalization of markets refers to merging distinct and separate national markets into one huge global marketplace. A global strategy must be based on standardization of product, branding, and advertising.

The globalization of production means that firms distribute their production processes to different locations around the globe in order to take advantage of regional differences in the cost and quality of the production factors

Is globalization a blessing or curse?

The Blessing Consumers have access to

a much wider range of products and at relatively low prices.

Increased global trade has made people wealthier

Companies benefit from low cost production in developing countries

Developing countries benefit from increasing employment and wage levels

The curses The already impoverished countries a

re becoming even poorer. Employ child labor, condoning inhu

man working conditions and paying slave wages in developing countries

There have been huge job loses among unskilled workers in developed countries.

Bring threats to the national cultures and identities alike.

Huge international companies have the greater economic power than the government of the developing countries where they are operating.

Damage the ecological environment.

Globalization cannot be prevented but can be managed by governments, international bodies and global businesses to raise living standards for all.

The reduction of poverty is not simply a social and moral issue it is also economic and political.

Transnational Businesses can gain reputation and productivities by investing and setting standards in poor countries.

Developed countries “aid” the poorer nations.

Prescriptive or Deliberate Approach to Strategy

Focus on long-term planning aimed at achieving a fit between an organization’s strategy and its environment.

Advantage: It structures complex information, defines and focuses business objectives, establishes controls, and sets targets that performance can be measured.

Disadvantage: It is overly prescriptive because the business environment can be very chaotic and complex.

Emergent or Learning Approach to Strategy

The complexity and dynamism of modern business organizations and their environments suggest that strategy will emerge and evolve incrementally over time.

Strategy evolves rationally in response to changes in the environment.

Competitive positioning approach to strategy

Begins with analysis of the competitive environment using the five-forces framework.

Followed by value chain analysis, which examines the value-adding activities of the organization and the linkages between them.

Finally, select a generic strategy, supported by the appropriate configuration of value-adding activities.

It is termed outside-in.

CriticismsIt is prescriptive and static.Differences in industry profitability do not

necessarily determine the profitability of the organizations within them.

It highlights (and presupposes) competition rather than collaboration.

It emphasizes the environment rather than the competences of the corporation.

Resource, Competence and Capability Approach to Strategy

Emphasized how to manage resource inputs in developing core competences and distinctive capabilities.

It is termed inside-out.It also emphasizes the potential advantages

of collaboration between organizations whose competences are mutually complementary.

Criticisms

It suffers from a lack of well-developed analytical frameworks.

It tends to overlook and even neglect the importance of the competitive environment

Knowledge-Based Approach to Strategy

Knowledge is viewed as being the only sustainable source of competitive advantage.

Knowledge can be categorized as: Know-how (practical Knowledge) Know-why (theoretical Knowledge) Know-what (strategic Knowledge)

Organizations must seek to create new knowledge that is grounded in organizational learning and that underpins core competences and value-adding activities, through which competitive advantage is achieved.

The Approach to Global Strategy1. Competitive advantage arises from

new and superior knowledge.2. Organizational learning and

knowledge management are vital to creating and sustaining competitive advantage.

3. Strategy is both planned and emergent.

4. It is important to distinguish between industries and markets.

The Approach to Global Strategy

5. Competitive advantage results from both internal knowledge-based core competence development and from changing conditions in the business environment.

6. Competitive advantage results from both competitive and collaborative behavior.

The global strategic management process is both “inside-out” and “outside-in” as strategy is inevitably shaped by both the environment and by the resources, competences and capabilities of the organization.

Hence, the process forms a matrix; in other words, there are two dimensions, internal and external environments, to construct the global strategy.

Major Elements in the Process Matrix

Globalization and the need for a global mission (or version) and objectives.

Organization learning Analysis of global resources, competences and value-adding activities.

Organization learning Analysis of the global business environment.

Developing knowledge-based global and transnational competences and strategies.