Global Strategic Management Second Edition \ J^drzej George Frynas Professor of CSR and Strategic Management, Middlesex University Business School Kamel Mellahi Professor of Strategic Management, Warwick Business School, University of Warwick OXFORD UNIVERSITY PRESS
Preface v Acknowledgements vii List of exhibits xxi List of cases xxiv How to use this book xxvi How to use the Online Resource Centre xxviii PART I Introduction 1 1 Introduction to global strategic management 3 Learning outcomes 3 Opening case study: IKEA 4 1.1 Introduction 6 1.2 Defining the strategic management field -6 1.3 Phases of global strategy 8 1.3.1 Single-country strategy 8 1.3.2 Export strategy 11 1.3.3 International strategy 11 1.3.4 Global strategy 11 1.4 International strategy and global strategy: what is the difference? 12 1.5 Defining global strategic management 13 1.6 Drivers for a global strategic perspective 15 1.6.1 Macro globalizing drivers 16 1.6.2 Industry globalizing drivers 27 1.6.3 Internal globalizing drivers 29 1.7 Organization of the book 30 Key readings 31 Discussion questions, 31 Closing case study: Walmart v. LVMH two retailers, two different global strategies 31 References 35 PART II Global strategic analysis 37 2 Global business environment: the external macro environment 39 Learning outcomes 39 Opening case study: The Brazilian Embraer and the external business environment 40 2.1 Introduction 41 2.2 The external business environment 42
2.2.1 Identifying threats and opportunities 43 2.2.2 Strategic fit and firm performance 43 2.3 PEST analysis 44 2.4 The political environment 47 2.4.1 Regional integration 47 2.4.2 Government legislation 49 2.4.3 Political risk 50 2.4.4 Corruption 51 2.5 The economic environment 52 2.5.1 Cost of production 52 2.5.2 Currency exchange rates 54 2.5.3 Cost of capital 55 2.6 The social environment 56 2.6.1 Social change 56 2.6.2 Global convergence 56 2.7 The technological environment 57 2.7.1 Global technology scanning and technology clusters 57» 2.7.2 The knowledge-based economy. 58 2.7.3 The spread of the Internet 59 2.8 National environmental influences and the Diamond Model 60 2.8.1 Factor conditions 63 2.8.2 Demand conditions 63 2.8.3 Related and supporting industries 63 2.8.4 Firm strategy, structure, and rivalry 64 2.9 Criticisms of the Diamond Model 64 2.9.1 The Diamond Model for small nations 65 2.9.2 The Diamond Model and globalization 65 2.9.3 Response to criticisms 66 2.10 Summary 66 Key readings 67 Discussion questions 67 Closing case study: Lockheed Martin from conquering Russia to 68 conquering space References 70 3 Global business environment: the industry environment 73 Learning outcomes 73 Opening case study: Global economic recession and super luxury cars 74 3.1 Introduction 75 3.2 Understanding and adapting to industry environment 76 3.2.1 Market segmentation analysis 76 3.2.2 Strategic group analysis * 77
3.3 The Five Forces Model 80 3.3.1 Barriers to entry 83 3.3.2 Bargaining power of buyers and suppliers 86 3.3.3 Threat of substitutes 88 3.3.4 Rivalry 89 3.4 Criticisms of the Five Forces Model 90 3.4.1 Static v. dynamic competition 91 3.4.2 Industry profitability 91 3.4.3 Response to criticisms 91 3.5 Industry evolution 92 3.5.1 The five phases of the International Product Life Cycle (IPLC) 94 3.5.2 Criticisms of the IPLC model 96 3.6 Anticipating the future 97 3.6.1 Forecasting 98 3.6.2 Scenario analysis 99 3.6.3 Anticipating the future and globalization 101 3.7 Summary 101 Key readings 102 Discussion questions 102 Closing case study: The rise oflinux the battle for the operating system market 103 References 106 4 Global business environment: analysis of the internal environment 109 Learning outcomes 109 Opening case study: Google.com 110 4.1 Introduction 112 4.2 Positioning perspective v. resource-based perspective 112 4.2.1 The positioning perspective 113 4.2.2 The resource-based perspective 113 4.2.3 Industry profitability v. firm profitability 114 4.3 Analysing firm resources and capabilities 115 4.3.1 Resources 115 4.3.2 Capabilities 116 4.3.3 Core competencies 116 4.3.4 The VRIO framework 117 4.3.5 Resources and capabilities in multinational firms 120 4.3.6 Changing global markets and dynamic capabilities 122 4.4 Global value chains and value systems 122 4.4.1 Value added 123 4.4.2 Value chain analysis 125 4.4.3 Value system analysis 126 4.4.4 Value analysis and cost advantages 128
4.4.5 Value analysis and strategic linkages 130 4.4.6 Value analysis and global location decisions 131 4.5 Comparative analysis 132 4.5.1 Competitor intelligence 133 4.5.2 Benchmarking 134 4.5.3 Internal comparative analysis 135 4.5.4 Comparative analysis in global markets 137 4.6 Summary 137 Key readings 138 Discussion questions 138 Closing case study: Clothing industry supply chains and Zara's business model 139 References 141 PART ill Global strategic development 145 5 Managing the internationalization process 147 Learning outcomes 147 Opening case study: Internationalization of a French retailer Carrefour 148 5.1 Introduction 150 5.2 Decision and motives to internationalize 150 5.2.1 Organizational factors 150 5.2.2 Environmental factors 152 5.2.3 Motives for foreign investment 153 5.3 The internationalization process 154 5.3.1 Timing of market entry 154 5.3.2 Obstacles to internationalization 155 5.3.3 Perceptions of managers 157 5.3.4 Psychic distance and internationalization 157 5.3.5 The Uppsala Model 158 5.4 Criticisms of the Uppsala Model 159 5.4.1. Firms not following Uppsala Model 160 5.4.2 The Born Global firm. 160 5.4.3 Response to criticisms 161 5.5 Entry mode strategies 164 5.5.1 Export 164 5.5.2 Licensing 165 5.5.3 International franchising 168 5.5.4 Wholly-owned ventures 169 5.6 Entry modes and risk v. control 171 5.7 De-internationalization 173 5.8 Summary 174
Key readings 174 Discussion questions 175 Closing case study: Internationalization of a Chinese firm the Haier Group 175 References 178 6 International strategic alliances: partnership and cooperation 183 Learning outcomes " 183 Opening case study: Fiat the quest for global leadership 184 6.1 Introduction 186 6.2 The concept of international strategic alliances 186 6.3 International strategic alliances: external drivers and internal motives 188 6.3.1 External drivers of alliance formation 188 6.3.2 Internal motives for alliances 188 6.4 Types of alliance 189 6.4.1 International expansion alliance 189 6.4.2 Vertical integration alliance 190 6.4.3 Diversification alliance 192 6.4.4 Complementary alliance 192 6.4.5 Shared supply alliance 192 6.4.6 Quasi-concentration alliance 192 6.5 Selecting partners 193 6.5.1 Partner selection criteria 193 6.5.2 Optimal business partner 195 6.5.3 Strategic alliances in emerging economies 197 6.6 Control in strategic alliances 198 6.6.1 Control mechanisms 198 6.6.2 Focus of control 200 6.6.3 Control and performance 200 6.7 International strategic alliances: balancing risks and trust 201 6.7.1 Risks in strategic alliances 202 6.7.2 Trust in strategic alliances 202 6.8 Summary, 205 Key readings 206 Discussion questions 206 Closing case study: Tyrian Diagnostics dancing with the big pharmas 206 References 208 7 The subsidiary-level strategy 211 Learning outcomes 211 Opening case study: Dell in China: will the direct sales model crack in China? 212 7.1 Introduction 214 7.2 Global strategy levels 216
7.3 Strategic role of subsidiaries 217 7.4 Types of subsidiary-level strategy 218 7.4.1 Support and implementation. 218 7.4.2 Autonomous subsidiaries 220 7.5 Global generic strategies 222 7.5.1 Cost leadership strategy 224 7.5.2 Differentiation strategy 227 7.5.3 Focused low-cost strategy 228 7.5.4 Focus differentiation strategy 228 7.5.5 Integrated strategy or 'stuck in the middle' 229 7.5.6 Criticisms of generic strategies 230 7.6 Summary 230 Key readings 231 Discussion questions 231 Closing case study: Managing the melamine contamination crisis by Nestle China 232 References 234 8 Headquarter-level strategy 237 Learning outcomes 237 Opening case study: The house of Tata 238 8.1 Introduction 240 8.2 The role of the corporate parent 240 8.3 Headquarter-level control strategies 242 8.3.1 Types of control 243 8.3.2 Focus of control 243 8.3.3 Control and global values 244 8.3.4 Barriers and challenges to headquarter-level control 247 8.4 Diversification strategies 248 8.4.1 Industrial diversification 249 8.4.2. Types of industrial diversification 252 8.4.3 Global diversification 256 8.5 Global sourcing strategies. 259 8.5.1 Vertical integration 260 8.5.2 Outsourcing 262 8.6 Managing global portfolios 266 8.7 Summary 270 Key readings 271 Discussion questions 271 Closing case study: Lufthansa's diversification strategy 272 References 273
PART IV Global strategic implementation 277 9 Global structures and designs 279 Learning outcomes 279 Opening case study: Procter & Gamble (P&G) 280 9.1 Introduction 283 9.2 Organizational structures: what are they? 284 9.3 Domestic organizational structures 285 9.4 Strategy and structure of multinational firms 288 9.4.1 Functional structures 290 9.4.2 International division structure 291 9.4.3 Area or geographical division structure 292 9.4.4 Product division structure 293 9.4.5 The matrix structure 295 9.5 Balancing integrations and local responsiveness: broad forms of international strategy 297 9.5.1 The export firm 297 9.5.2 The multi-domestic firm 298 9.5.3 The global firm 299 9.5.4 The transnational firm 300 9.6 Summary 303 Key readings 304 Discussion questions 305 Closing case study: Restructuring Sony 305 References 312 10 Global management of change 315 Learning outcomes 315 Opening case study: Shanghai Volkswagen 316 10.1 Introduction 318 10.2 Types of change 318 10.2.1 Incremental change 318 10.2.2 Transformational change 319 10.2.3 Types of change and national cultures 320 10.2.4 Organizational change and national culture 321 10.3 People involved in the change process 325 10.3.1 The change agent 325 10.3.2 The role of subordinate and subsidiary managers 327 10.4 The change process 328 10.4.1 A model of the change process, 328 10.4.2 People's reaction to change 329 10.5 Appropriate styles of change management 331
10.6 Implementing change 333 10.6.1 Project teams 333 10.6.2 Moving people 334 10.6.3 Expatriates 335 10.7 Communication issues 335 10.7.1 Difficulties in discussing issues linked to change 335 10.7.2 The role of language 336 10.7.3 Business implications 336 10.7.4 Overcoming language problems 337 10.8 Negotiation with outside parties 338 10.9 Summary 339 Key readings 340 Discussion questions 340 Closing case study: LG global rebranding 341 References 343 PARTV Global strategic innovation 345 11 Global management of innovation and knowledge 347 Learning objectives 347 Opening case study: Innovating the Google way 348 11.1 Introduction 349 11.2 What is innovation? 350 11.2.1 Innovation within the life cycle 352 11.2.2 Innovation and competitive advantage 354 11.3 Competing in technological markets 356 11.4 Managing knowledge ' 361 11.4.1 Knowledge creation 362 11.4.2 Knowledge transfer within multinationals 363 11.5 Global R&D networks 366 11.5.1 Outsourcing innovation globally 371 11.6 Summary 371 Key readings 372 Discussion questions 372 Closing case study: Outsourcing innovation in the pharmaceutical industry 373 References 375 12 Corporate Social Responsibility (CSR) and innovation 377 Learning outcomes 377 Opening case study: Two crises influence the strategy ofroyal Dutch/Shell 378 12.1 Introduction 379 12.2 Corporate Social Responsibility (CSR) and corporate objectives. 380
12.2.1 Companies and profit maximization 380 12.2.2 Changing views on the role of companies in society 381 12.2.3 National differences 381 12.3 Corporate Social Responsibility (CSR) and stakeholders 383 12.3.1 Stakeholder view of the firm 383 12.3.2 Stakeholder mapping 384 12.3.3 Problems in stakeholder mapping 386 12.3.4 Which stakeholders should the firm focus on? 386 12.3.5 Critique of stakeholder mapping 387 12.3.6 Issue analysis 388 12.4 CSR strategies and innovation 390 12.4.1 Generic strategies of social responsiveness 390 12.4.2 Benefits of CSR strategies 391 12.4.3 CSR strategies and innovation 392 12.4.4 Innovation and core competencies 392 12.4.5 Levels of social innovation 393 12.4.6 Non-traditional partnerships and innovation 395 12.5 Summary 396 Key readings 397 Discussion questions 397 Closing case study: BP tackles climate change and innovation 398 References 400 Index 403