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LN11 – Corporate Strategy - Geographical Expansion, G7 (5 Julia 112212023,…
LN11 – Corporate Strategy - Geographical Expansion
4.Growth Scope & Globalization
Growth Scope
Horizontal Product Diversification
Related
Un-related
Vertical Integration
Upstream/Backword
Downstream/Forward
Geographical Expansion
Regional
International or Global
Globalization
Definition
Demand/Markets
Supply/Production
Causes
Removal of barriers
Technological change
Impact
Prosperity
Impoverishment
Strategic Choices
Achieving economic benefits
Core competence
Location economies
Experience curve economies
Competitive pressures
Cost reduction
Local responsiveness
Porter’s Diamond Model
Factor endowments
Demand conditions
Related and supporting industries
Firm strategy, structure, and rivalry
5.Foreign Market Entries
A Comprehensive Model of Foreign Market Entries
Resource-based considerations
R
arity
I
mitability
V
alue
O
rganization
Institution-based considerations
Trade barriers
Currency risks
Regulatory risk
Cultural distances
Institutional norms
Industry-based considerations
Bargaining power of suppliers
Bargaining power of buyers
Entry barriers/scale economies
Substitute products/services
Rivalry among firms
Choice of entry modes
Non-equity modes
Exports
Direct
Indirect
Contractual agreements
Turnkey projects
R&D contracts
Licensing/franchising
Co-marketing
Equity / FDI modes
Joint ventures - JVs
Minority
50/50
Majority
Wholly owned subsidiaries - WOS
Green-fields
Acquisitions
Advantages & Disadvantages
Licensing
Pros
Low Development Costs & Risks
Cons
Lack of Location/Experience Economies
Lack of Global Strategic Coordination
Lack of Control over Technology
Franchising
Pros
Low Development Costs & Risks
Cons
Lack of Global Strategic Coordination
Lack of Control over Quality
Exporting
Pros
Location Economies
Experience Curve Economies
Cons
High Transport Costs
Trade Barriers
Problems with Local Marketing Agents
Joint ventures
Pros
Access to Local Partner's Knowledge
Shared Costs & Risks
Political Acceptance
Cons
Lack of Global Strategic Coordination
Lack of Location/Experience Economies
Lack of Control over Technology
Wholly owned subsidiaries
Pros
Protection of Technology
Global Strategic Coordination
Location & Experience Economies
Cons
High Costs & Risks
6.Multinational Strategies & Debates
Integration–Responsiveness Framework
Home Replication
International division
Low cost/local pressures
Multidomestic Strategy
Geographic area structure
High local responsiveness
Global Strategy
Global product division
High cost reduction pressure
Transnational Strategy
Global matrix
High responsiveness and cost pressures
Strategy-Structure Relationships
Horizontal Differentiation
Global-area structure
Global-division structure
Global-product-group structure
Global-matrix structure
Organizational Culture
Not important (Localization)
Important (Global Standardization)
Very important (Transnational)
Centralization of Authority
Decentralized to national units
Centralized at optimal global location
Simultaneously centralized and decentralized
Knowledge Management
Knowledge Development
Developed at center and transferred
Developed and retained within subsidiary
Jointly developed and shared worldwide
Flow of Knowledge
Headquarters to subsidiaries
Limited flow in both directions
Multiple directions
Interdependence
Moderate (Home Replication/Global)
High (Transnational)
Low (Multidomestic)
Strategic Debates
Liability vs. Asset of Foreignness
Global vs. Regional Triad Concentration
Cyberspace vs. Conventional Entries
Corporate Controls vs. Subsidiary Initiatives
Centralization: Coordination and Consistency
Decentralization: Speed and Innovation
Integrated network (N-form) model
Case Study: eBay vs. Alibaba
Successful Expansion
Europe and Latin America
Joint ventures and acquisitions
Adaptation to local needs
Asia/China Struggles
Limited local market know-how
Lack of innovative local processes
Centralized management style
G7
5 Julia 112212023
1 Tina Lin 113212016
Tina Wang 112212015
6.Angela 112212082
3.Alex Yang 112212007
Miranda 111212022
LN1b – The Basics of Strategy & Corporate [Governance]
1.The Basics of Strategy
Superior Performance
A firm’s ability to earn a rate of return above the average of its industry over a sustained period
Measured by
Accounting metrics
ROIC, ROA, ROE
Economic metrics
EVA, NPV
Shareholder value
Stock returns
Sources of Performance Variance
Industry Effects (~20%)
Which industry it in
Firm-Specific Effects (~30-45%)
Resources, capabilities, organizational design, and execution
Other Effects (~35-50%)
eg.corporate parent, year, unexplained
What is strategy?
From Greek word “strategia”
the art of the general.
≠ Tactics
Sun Tzu, “The Art of War” (500 BC)
Strategy determines survival or extinction.
Chandler (1962)
Setting long-term goals
Taking action
Allocation of resources
Andrews (1971)
2 Types
Corporate strategy
Decision pattern
Define Goals
Range of business
Stakeholder contribution
Business strategy
Choice of product/service and market
How to compete and position
NOT
Detailed plan or program
Doing things better
BUT Ding things
Differently
A unifying theme that guides actions and decisions.
Components of Successful Strategies
Long-term, simple
objectives
Understanding of the
competitive
environment
Assess resources and capabilities
2.Strategy Analysis & Formation
Sources of superior profitability
Corporate Strategy
Where
to compete
Configuration
Vertical integration
Horizontal diversification
Geographical expansion
Business Strategy
How
to compete
Inside-out vs. Outside-in
Inside-out
Strategic Fit
Internal Fit
External Fit
Dynamic Fit
Strategy Tripod
In addition to considering "industrial competition" and "resource capabilities," particular emphasis is placed on
"institutional conditions"
.
identify your own resources and strengths, then find a market where you can leverage them.
Outside-in
look out what opportunities are available outside, then examine whether you possess the corresponding abilities.
How is Strategy Made?
Realized Strategy = Deliberate + Emergent
Successful strategies are subject to time and space limitations; there is no single best strategy
flexibility
3.Corporate Governance & Sustainability
🎯
Key Question
Who should the firm serve?
Defines whose interests matter.
How can strategy be controlled over time?
Governance keeps strategy accountable.
🏢
Goal of the Firm
Not only short-term profit
Short-term results may hurt long-term value.
Shareholder value
Owners’ returns matter.
Long-term profitability
Supports sustainable firm value.
Broader social change
Firms also affect society.
💰
Shareholders
Legal owners
They own the company.
Providers of risk capital
They bear investment risk.
Returns
Dividends
Capital appreciation
Long-term profit growth
Can also support other stakeholders.
👥
Stakeholders
Main groups
Employees
Managers
Customers
Suppliers
Creditors
Governments
Communities
General public
Zero-sum relationship
One side gains, another loses.
Symbiotic relationship
Different groups support each other.
Creates long-term value.
⚠️
Agency Problem
Principals
Shareholders
Agents
Managers
Main issues
Different goals
Managers may not fully serve shareholders.
Information asymmetry
Managers know more than shareholders.
Difficult performance measurement
Monitoring becomes harder.
🛡️
Governance Mechanisms
Board of Directors
Monitors managers.
Stock-based compensation
Links rewards to firm value.
Financial statements & auditors
Improve transparency.
Takeover pressure
Disciplines poor management.
Strategic control systems
Set standards → measure → correct.
Employee incentives
Encourage efficiency, quality, innovation, responsiveness.
🌍
Sustainable Strategy
Triple Bottom Line
Profit
Economic outcome.
People
Social outcome.
Planet
Ecological outcome.
Sustainable Competitive Advantage
Performance must be maintained over time.
Economic outcomes
Social outcomes
Ecological outcomes
to figure out which business to enter