Welcome!
Globalization impact on firms’ activities
Dr. Satyendra Singh
Professor, Marketing & International Business
Conference Chair, ABEM Conference
University of Winnipeg, CANADA
What is globalization?
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↓ Trade barrier
↑ Trust b/w governments
↑ FDI permitted
↑ Democracy
↑ Emerging markets
↑ Education
↑ Travel
↑ Technology
What are the activities: Research and Development (R&D), Production, Marketing, Services…
We need to restructure our company for ↑ Sustainable Competitive Advantage (SCA) across countries
Structure/strategy options: Export, region, product, multidomestic, global, hybrid…
Multidomestic affiliate structure/strategy…
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Multidomestic affiliate structure/strategy
Context
Affiliate is a replica or smaller version of parent
Country manager (CM) reports to CEO, Head Office
Performance is based on profit-center criteria
Geared toward satisfying local customers 🡪 highly responsiveness
Advantages
Decisions are made locally, so HO managers do not need to travel much, worry about local issues, customers, foreign markets. ↓ management turnover
Disadvantages
Duplication of activities. So does not do R&D. Tech transfer from HO.
Not competitive and efficient: multiple product lines, low volume, high costs
Does not export: does not bring FOREX so local government may not like it
HO does not learn from affiliate
Communication is complex: If CM makes $, may not like HO
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Global product divisions/strategy…
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Global product divisions/strategy
Context
Diffident affiliates perform different activities for economies of scale
Specialization and global mindset is needed
Affiliates do not have much autonomy, do not play independent strategic role
HO makes decisions for CMs because products are globally standardized
CM implements (no formulation) strategy 🡪 Thus it is a cost center, ↑efficient but ↓responsive
Advantages
Chain of vertically integrated activities
HO can instruct activities based on costs and skills across countries
Hedge against political instability, product quality, exchange rate
Flexible – options among countries
Maximize competitiveness
Disadvantage
CM lose control. Do not like it.
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Transnational (Hybrid) structure/strategy...
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Transnational (Hybrid) structure/strategy
Get advantages of both structures
Configuration and coordination of activities are mixed
Affiliates play leadership roles for some activities and supporting roles for others.
Activity assignments are based on maximizing affiliates’ capabilities, not location/nationality.
Affiliate roles shift over time and learning and sharing are emphasized.
Emphasis on extensive horizontal linkages, effective communication and extreme flexibility.
Affiliates are network of activities with multiple headquarters spread across different countries.
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Strategic role of affiliate capabilities under globalization pressure
| Low affiliate capability | High affiliate capability |
High localization pressures | Form Alliances or make Acquisitions | Take strategic Initiative |
High globalization pressures | Follow Parent Instructions | Influence Parent Strategies |
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Case Study: Strategies pursued by MNCs
In-class group activity (30 min)
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Please e-mail your findings at s.singh@uwinnipeg.ca and write “your group # and Organization of Activities” in the subject line.
Questions?�s.singh@uwinnipeg.ca
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