Revision Topics Value Chain Configuration amp Coordination Internal amp External Triggers More CSR Some Modes of Entry Why is Value Chain Design Relevant in IBS planning Core competencies are the ID: 731540
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Slide1
Value Chain in International Strategy Planning
Revision Topics
Value Chain
Configuration & Coordination
Internal & External Triggers
More CSR
Some Modes of EntrySlide2
Why is Value Chain Design Relevant in IBS planning?
Core competencies are the
value adding
capabilities
& resources that enable a firm to be competitive.Think of CC as services, which are an encapsulation of:Functional processesTalented peopleOther resources (which can be physical goods & services)that are combined in manners that make the strategic services:Difficult to duplicate (barrier to competition)Provide sustainable customer value (always attract customers)Reusable in many products/services (has extensive market uses / reach)
Encapsulation of
Specialised ProcessesTalented PeopleOther Resources
Are the value adding capabilities & resources
that enable a firm to be competitiveSlide3
In other words, CC is
Encapsulation of
Specialised Processes
Talented People
Other ResourcesGenerates Customer sustainable ValueFit for Purpose ExtrasExperience DelightConvenienceAppropriate pricingetc
Its component mix/design is difficult to duplicate by competitors
Can be reused by many products/services,
ie
a CC is an essential component of other products / services
always in demand
Complexly
designed
Essential design component of other P/SSlide4
Examples of CC in IB strategies
IB strategies that:
Leverage customer intelligence to keep close to customers
building strategic customer relationship management capacity
Innovate unique new & continuously improve products/services that:Customers always need & want; Are hard to duplicate;Are reusable as components in many other products & services
Enterprise capacity building* that is:
Agile, hence time/quick to market product/service delivery
C
ustomisable
(flexible), hence market responsive
Q
uality
driven hence gives product/service reliability
Time to Market , Market Responsive &
Quality OutcomesSlide5
Why is Value Chain Design Relevant in IBS planning?
This is how strategic services aka CC are designed
Process
People
Other ResourcesPeople /
Process Interaction = Product + Service Experiences
Resource/ Process Interaction = Product + Service ExperiencesPeople / Resource Interaction = Product + Service ExperiencesSlide6
Why is Value Chain Design Relevant in IBS planning?
Is part of the firm’s VC
Inputs/Outputs
Inputs/Outputs Slide7
Why is Value Chain Design Relevant in IBS planning?
Spread the VC activities (
processes
) strategically around the world
Strategically harness
people
talents around the worldStrategically harness best value for money
resources talents around the worldSlide8
Putting the Concepts into Words
Global Value Chain
Configuration
is about where and in how many nations each value activity is performed, to leverage global, regional and local competitive advantageGlobal Value Chain Coordination is about the seamless integrated management of an IB firm’s value activities dispersed across different nations . It is like managing the whole value chain efficiently & effectiveness to meet the IB firm’s global, regional & local market requirementsSlide9
IB Competitive Advantage via CC
VC (location) configuration & integrated management coordination are unique capabilities that an IB firm can use to create core competencies that are:
Even harder to duplicate by
competitors
Strategically enabled demand by global, regional and local marketsHow do CCs create IB competitive advantage? 3. Strategically made available for other IB firms to use as components in their product/service design and packaging, further expanding & deepening IB markets reachSlide10
Designing IB Value Chain
Design Decisions
Decision: How to integrate & manage multi-location value activities
Design challenge
Benefit/Advantage of VC coordination
Two design concepts of VC – Configuration & Coordination
Where to locate Value activities?Slide11
Up & Down Streams Design Options of Value Chain
Upstream
strategies deal with
being close to R&D component of the model. (influences strategy orientation)When a company follows a global strategy its focus is upstream, concentrating on the development of economies of scale. Downstream strategies relate to being close to the customer eg marketing and sales and after sales service. (influences strategy orientation)When it follows a multi-domestic strategy its focus is downstream means being close to the customer and responding quickly to their changing needsIn
IBS planning, there are 2 approaches in designing IB Value ChainsSlide12
Upstream Design of Value Chain
Upstream
strategies deal with
being close to R&D component of the model. When a company follows a global strategy its focus is upstream, concentrating on the development of economies of scale. Design DirectionsDesign Strengths & WeaknessesSlide13
Downstream Design of Value Chain
Downstream
strategies relate to being close to the customer
eg
marketing and sales and after sales service. When it follows a multi-domestic strategy its focus is downstream means being close to the customer and responding quickly to their changing needsDesign DirectionsDesign Strengths & WeaknessesSlide14
Regional Design of Value Chain
Upstream
Global Design
Downstream
Multi-domestic DesignRegional DesignSlide15
The Choice of Value Chain Design Affects Product,
Control, Diversity Mgt & R&D choicesSlide16
Control Design Structure of IB Value Chain
Centralised IB Operations
Decentralised IB Operations
Regionally controlled IB Operations
Mix of the 3 Transnational OperationsSlide17Slide18
The choice of Value Chain Design will result one of the following IB organisation types
Multi-Domestic (also called Multi-national)
International
Global
Strategic approach
Key strategic capability
National responsiveness
World-wide transfer of home country innovations
Global-scale efficiency
Configuration of assets and capabilities
Decentralised and nationally self-sufficient
Sources of core competencies centralised others decentralised
Centralised and globally scaled
Role of overseas operations
Sensing and exploiting local opportunities
Adapting and leveraging parent company competencies
Implementing parent-companyDevelopment and diffusion of knowledgeKnowledge developed and retained within each unitKnowledge developed at the centre and transferred to overseas unitsKnowledge developed and retained in the centreCombination Transnational OrganisationSlide19
What’s special about Transnational Organisations?
It builds and legitimizes multiple diverse internal perspectives able to sense the complex environmental demands and opportunities
Its physical assets and management capabilities are distributed internationally but are interdependent
It has developed a robust and flexible internal integrative process. Slide20
VC Configuration & Coordination Issues
Value activity
Configuration Issues
Coordination Issues
Operations
Location of production facilities for components and end products
Networking of international plants
Transferring process technology and production know-how among plants
Marketing and Sales
Product line selection
Country (market) selection
Commonality of brand name worldwide
Coordination of sales to MNCs accounts
Similarity of channels and product positioning worldwide
Coordination of pricing in different countries
ServiceLocation of service organisationSimilarity of service standards and procedures worldwide
Technology DevelopmentNumber and location of R&D centresInterchange among dispersed R&D centresDeveloping products responsive to market needs in many countriesSequence of product introductions around the worldProcurementLocation of the purchasing functionManaging suppliers located in different countriesTransferring market knowledgeCoordinating purchases of common itemsSlide21
Summary
VC Configuration
– WHERE to locate value activities
VC Coordination
HOW to integrate & manage multi-site value activitiesVC Design Options:Upstream Configuration global strategies Coordination driven by centralised control of mult-site value activitiesDownstream Configurationmulti-domestic strategies
Coordination driven by common process & information exchange via decentralised multi-site value activities
Regional configurationRegional strategiesCoordination driven by regional control of multi-site value activities
Transnational configuration – mix of 2 or 3 of the above
Influences:
Product offers by location
Resources, Roles & Responsibilities & Control Methods by Location
Groupthink & Cultural Diversity Mgt by Location
R&D location choice/s
Configuration
Iss
uesCoordinationSlide22
HRM Perspectives of Value ChainSlide23
The People Drivers of IB Value Chain Configuration
1
Establishing a
common leadership
culture is Important to focus everyone & seamlessly coordinate and harness their contributions for global, regional or local competitive advantage2Managing team diversity is important because teams performing value activities are composed of different individuals with different cultures, multi language capabilities, functional backgrounds, experience and education Slide24
The People Drivers of IB Value Chain Configuration
1
Establishing a
common leadership
culture is Important to focus everyone & seamlessly coordinate and harness their contributions for global, regional or local competitive advantageWhat makes good global leaders?What are the critical success factors of global leadership?
1
Possess these skills & values
2
I
s cross culturally
intelligent & possess these cross cultural capabilities or characteristicsSlide25
The People Drivers of IB Value Chain Configuration
1
Establishing a
common leadership
culture is Important to focus everyone & seamlessly coordinate and harness their contributions for global, regional or local competitive advantageWhat makes good global leaders?What are the critical success factors of global leadership?
3
Has mindset4Possess these IB HR recruiters seek to find in candidatesSlide26
The People Drivers of IB Value Chain Configuration
2
Managing
team diversity
is important because teams performing value activities are composed of different individuals with different cultures, multi language capabilities, functional backgrounds, experience and education How to harness team diversity?Why harness team diversity?Leverage: different insights in operational & mgt workStronger competitive actionsThat can lead toCreating new & deepening market shares
Bring about above Average ReturnsSlide27
The People Drivers of IB Value Chain Configuration
2
Managing
team diversity
is important because teams performing value activities are composed of different individuals with different cultures, multi language capabilities, functional backgrounds, experience and education How to harness team diversity?Why harness team diversity?Leverage: different insights in operational & mgt workStronger competitive actionsMore innovation that leads to strategic changesThat can lead toCreating new & deepening market shares
Bring about above Average Returns
Challenges of team diversity:Implementation complexity
Varying people qualitySlide28
The People Drivers of IB Value Chain Configuration
People enable strategic change
People talents are part of CC Slide29
Internal & External Triggers
Influencing the choice of internationalisation direction and strategiesSlide30
External Triggers
Meta Level Triggers
Industry Level Triggers
Firm Level Triggers
Global & regional PESTLE Drivers
–
the broad trends that shape the competitive environment of the world economy
eg
world trade environmental factors including trade blocks and trade flows
Globalise or Localise
Globalisation versus localisation depending on
Competitive forces – market drivers (customers, distribution, marketing issues)
Cost (new product development, scale, transport costs)
Competition structures (competitive interdependence, entry of new competitors)
Country influences
eg
trade barriers, technical standards, cultural and institutional normsBipolarisation of products/services driverGlobal and offer broad based / common products/services orLocalise and offer multi-domestically responsive aka niche products/servicesSlide31
External triggers
Discontinuity
New international strategic thrust
Internal triggers
Next phase
I
NTERNATIONALISE
Current
phase
Domestic
Global PESTLE
Industry IB Direction
Firms’ IB Direction
Leaders’ & Org Mindset Readiness
Org Dynamics – CC, learning & admin capabilities
Org Change Readiness/Capacity: org change mgt abilities cultural change abilities; business improvement abilitiesProduct Development CapacitySlide32
Internal Drivers
+ Org Mindset
There is no correct mindset
A domestic bias
will be reinforced where the Board of Directors are chosen from the home countryAim is to promote a creative and innovative perspective. Need balance between left-brain thinking (facts) and right-brain thinking (opinions based on feelings) - cultural differences exist.Vision must be articulated clearly and widely disseminated Organisational DynamicsFormed from three interrelated areas:Core Competence - aspects of the organisation in which it is uniquely advantaged over its competitive rivals. Hamel (1994) defines core competences as a bundle of constituent skills and technologies
eg Honda “small engine manufacturing”Three sets of core competence:
Customer intelligence capabilities: to be close to customerMarket integrity : quick to market, flexible, reliable
functionally related: uniquely functional products/services
Organisational learning
-
the ability to continuously update itself and learn from past experiences.
single loop “first order” learning means reviewing performance against targets and taking corrective action
second loop “second order” learning questions the existing framework in which decisions take place, questions mindset, routines, norms
.Administrative heritage - company history and willingness to adapt. Includes tangible and non-tangible assets.12Slide33
Internal Drivers – Change Capacity Level
Change
Management
Fundamental change requires major discontinuity with the past.
Involves change to corporate culturecreating a shared mindsetbuilding competences/capabilitiesAssessing and changing corporate cultureCorporate culture change34
Business performance improvement Can the firm identify and manage the dynamics between business performance and the management of change, to ensure its business performance and continuous improvement post first internationalisation? To do that, a firm
may:Identify mismatch between performance and aspirationsFormulate initial change strategiesIdentify its business performance mgt plan
Revise change strategies as when and where requiredTake on a continual improvement process: re-examine match of performance & aspirations
5
Can the
cultural web
(Johnson , 1992) of the org change?Slide34
Internal Drivers
Product Dev - Resource & competitive advantage capabilities
The firm’s product research and development capability includes
Building and having the ability to craft a sustainable competitive advantage that reflects on how the organisation seeks to shape the five competitive dimensions (Ellis and Williams, 1995):
Defining the appropriate scope - narrow (niche) or broad-based competitorConsidering differentiation -uniqueness eg brand, technologyDeciding strategic costing direction -low cost or value for money “quality”Developing time-based competition ability to develop new products quickly from concept to market launchDeveloping competitive linkages -network of business relationships
6Slide35
External triggers
INTERNATIONALISATION
Product development
Organizational dynamics
Vision mindset
Meta trends
Industry competition
RETRENCHMENT
Internal triggers
Product extension
Restricted national market scope
Intern’l business development
Geographic Expansion
Market PenetrationSlide36
More CSR
What CSR strategies IB firms can take?Slide37
What CSR strategies IB firms can take?
Implement its current global corporate and social responsibility program.
Benefits
Builds your team commitment/loyalty to the companyEnables a global response to key issuesCan enhance customer satisfaction and loyalty Can enhance brand valueEnables staff to diversity their skills and understand ChallengesShould it be directly related to the company operations or aimed at a higher level e.g. save the children fund etcShould it be driven by the centre so can utilise greater resources, or be country by country so local staff can relate more and are more committed to the CSR programHow committed are senior executives – are they leading by example?What resources are being allocated (both human and financial) – is it enough or really a token gesture?
How are the results being measured – financial, health and welfare, goodwill, and are the measures both internal and external (preferred) and against what benchmark are we comparing?Slide38
What CSR strategies IB firms can take?
2. Focus
on a local program that reflects local needs
This
has obvious advantages but needs to be monitored centrally to ensure in reflects overall company philosophy. The danger is exploitation3. Commitment of Staff To be successful all programs have to have employee commitment and involvement. This means discovering what staff believe are important issues to be addressed, gaining their commitment, training them on CSR and allowing them time to be involved.4. Ensuring program linked to reward system Staff should see such a program as a part of their employment requirements. This means ensuring staff are rewarded for undertaking such activities through performance evaluation, promotion opportunities, time off to run CSR programs etc. 5. Demonstrate commitment at the top level This means having a Director in China responsible for CSR programs; writing clear policies and procedures around CSR etc.6. Promoting
success of CSRMake sure the staff internally and Chinese people and other stakeholders know about this programs and ensuring their successes are promoted widely to enhance the company name. Slide39
MoESlide40
Choosing Mode Of Entry
Part of IB Implementation Planning
All Entry Modes
Evaluate External & Internal Factors in Country
Narrow to viable Entry Modes
Apply Decision Making to rank modes & choose best one
Execute Country Implementation PlanBus Objectives
Risk ToleranceSlide41
Another Perspective to understand how the appropriate
MoE
is chosen
Source:
http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=1345895&fileOId=2434540 Slide42
Some MoE
Advantages & Disadvantages
Licensing
Benefits
Less risk to environmental influencesLess need for capital, personnel and other resourcesAvoids barriers to exportingMay create opportunities for long-run penetration of foreign marketsOften leads to associated exportsMay contribute to effectiveness of other foreign operation methodsCan be used to service residual marketsCan lead to cross-licensing dealsCan assist in funds transfer and lower taxation ChallengesHard to control qualityLoss of control over foreign market
May create a competitorHard to maintain secrecy and control technologyProblems with payments such as currency, timing and basis
Often considered short-term rather than long-term strategy (if successful usually replaced with own people)Contracts often limit flexibilitySlide43
Some MoE
Advantages & Disadvantages
Exporting
Benefits
Avoids cost of establishing operations overseasHelps build experience and knowledgeCan enter markets more rapidlyGreater control over sale of products and associated marketing and distributionLess risky than FDIOpportunity to utilise excess capacityCan diversify sales ChallengesCosts associated with finding right distributors/ agentsMay be cheaper in some cases to produce abroadBarriers to trade can make it uneconomical or difficult to sell abroadHigh transport costs can reduce profitabilityDistributors/agents may sell competitor’s products so question of loyaltySlide44
Some MoE
Advantages & Disadvantages
Master franchising
BenefitsBetter local market knowledge when Master is a localFaster entry as Master usually knows local conditionsLower direct cost as Master usually pays for rights to the territoryMaster should have better understanding of location requirements, local cultural differences, marketing and promotional strategies and requirements etc (many of these points could be listed separately) ChallengesThis might not be the best way to control the overseas marketFinding interested local operators to take on the role of master franchiseesOverly standardised products or services may not satisfy the needs of the foreign market.Insufficient domestic penetration, low management depth and little capital base may mean not ready for internationalisation
Finding appropriate Master Franchisee – skills, interest and understanding
Ability to maintain quality and to ensure correct royalties are paid.Ensuring the goals of the Master Franchisee and owner are compatibleControls have to be right for local decision-makingMatching corporate cultures and strategic goals for the country is challenging
Defining roles for Master Franchisee clearly is hard from a distanceSlide45
Listing Versus Comparing Advantages & Disadvantages
Below is listing Advantages & Disadvantages
X Below is NOT comparing Modes of Entry
Deciding which comparison attributes depends on the purpose of comparison, which is often implied in the Q. If the Q is vague about this purpose, make an assumption of the purpose for comparing the
MoEs
This a matrix for comparing Modes of EntrySlide46Slide47
Comparing some MoE