Global Strategy: Creating and Sustaining Advantage across Borders (Strategic Management)

260 Pages·2005·7.65 MB·English

by  Andrew Inkpen

Global Strategy:
Creating and sustaining
Advantage across Borders
Andrew Inkpen
Kannan Ramaswamy
OXFORD UNIVERSITY PRESS
Global Strategy
STRATEGIC MANAGEMENT SERIES
EDITORS
Michael A. Hitt, R. Duane Ireland, and Robert E. Hoskisson
Strategy as Action: Competitive Dynamics and Competitive Advantage
Curtis M. Grimm, Hun Lee, and Ken G. Smith
Global Strategy: Creating and Sustaining Advantage across Borders
Andrew Inkpen and Kannan Ramaswamy
Global Strategy
Creating and Sustaining Advantage
across Borders
Andrew Inkpen
Kannan Ramaswamy
1
2006
3
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Library of Congress Cataloging-in-Publication Data
Inkpen, Andrew C.
Global strategy : creating and sustaining advantage across borders / Andrew Inkpen and
Kannan Ramaswamy.
p. cm.—(Strategic management series)
Includes bibliographical references and index.
ISBN-13: 978-0-19-516720-7
ISBN 0-19-516720-1
1. Strategic planning. 2. Strategic alliances (Business) 3. International business
enterprises—Management. I. Ramaswamy, Kannan. II. Title. III. Strategic management series
(Oxford University Press)
HD30.28.I53 2006
658.4'012—dc22 2005004318
9 8 7 6 5 4 3 2 1
Printed in the United States of America
on acid-free paper
Preface
This book was motivated by our joint interest in the area of strategy and global-
ization. Both of us have been teaching and conducting research in the strategy
and international business area for about 15 years. Along the way we have ob-
served that much of what is written about strategic management treats interna-
tional and global strategy issues almost as an afterthought. In our view, linking
strategic management and globalization requires some new thinking, such as how
to compete in emerging markets, how to evaluate new approaches to value-chain
thinking using offshoring, and how to integrate international corporate gover-
nance practices with corporate objectives. We decided that a book devoted to
strategy and globalization could be useful both for students of strategy and for
practicing managers confronting international business challenges.
In the book we examine the issues considered central to the study of strate-
gic management in a global context. As global integration between companies
and countries continues to march forward, managers and strategy researchers
will have to find new ways to deal with globalization. The various topics exam-
ined in this book are intended to provide some guidance as to how to deal with
the realities of globalization and strategic management. While we have anchored
a substantial part of our thinking in contemporary theory, we have also attempted
to go beyond the received wisdom to examine some of the practical realities
that have yet to receive theoretical scrutiny. Thus, in many cases we blend the
theoretical insights that form the mainstay for students of strategy with the
practical relevance that international managers should find valuable. In walk-
ing that middle ground, we have had to make some tough choices. The book
that resulted from this stream of thinking is one that is neither a conventional
textbook on strategy nor a compendium of current theoretical perspectives but
vi PREFACE
rather a mélange that, we hope, will capture the attention of academic and practi-
tioner communities alike. We believe that the case studies offer significant in-
sights into many of the issues that both international strategy researchers and
practitioners are currently grappling with.
Many people helped make this project happen. Mike Hitt, Bob Hoskisson,
and Duane Ireland invited us to write the book and provided useful feedback
throughout the process. We would like to thank the research associates who
assisted in the case study research, including Simon Algar, Jennifer L. Barrett,
Chris Hormann, Vipon Kumar, Meredith Martin, and T. Hawk Sunshine. We
would also like to thank faculty colleagues Ed Barrett, Michael Moffett, Anant
Sundaram, and John Zerio, who helped us clarify some of the thinking that we
present in this book. Outside colleagues who provided assistance in shaping our
thinking include Wang Pien, Mary Crossan, Li Kou Qing, and Paul Beamish.
Andrew Inkpen is grateful to Nanyang Technological University, where he spent
a sabbatical year and wrote much of this book. We also thank the many compa-
nies, and their managers, who opened their doors to us for various research
projects that we conducted. Without firsthand access to managers actually in-
volved in global strategic management we would not have been able to credibly
discuss the various topics. These companies include General Motors, Ericsson,
Honeywell, and the Suzhou Industrial Park. Finally, Manish Gulati provided
valuable help in editing the various chapters.
Contents
Introduction 3
Does Globalization Matter to Strategy Creation? 4
Overview of the Book 5
1 Globalization and Global Strategy 10
What Does Globalization Mean? 12
What Is a Global Industry? 15
Global Industries in Action 17
Case Study: The Diamond Industry 17
Case Study: The Sushi Industry 20
Case Study: The Trash Industry 21
Insights from the Three Global Industry Cases 22
Why Do Firms Pursue Global Expansion? 23
Distance and Global Strategy 26
Managers and MNEs in a Global World 27
The Global Environment and the Global Manager 29
Conclusion 31
2 Strategic Choices in a Global Marketplace 32
Global Strategy and Country-Specific Advantage 34
Factor Conditions 35
Demand Conditions 36
Related and Supporting Industries 36
Firms, Structures, Strategies, and the Intensity of Rivalry 37
Case Study: Belgium—Location-Specific Advantage in the
Global Gourmet Chocolate Industry 37
viii CONTENTS
Where Should Value-Chain Activities Be Located? 39
Aggregation Approaches 39
Case Study: The Watch Industry 41
Localization or Standardization? 43
Case Study: Competitive Choices in the Consumer
Electronics Industry 45
Configuration, Coordination, and the Design of Strategy 46
Factors Influencing Configuration Choices 48
Coordination 48
Case Study: Trend Micro—Configuration and Coordination Choices
in the Antivirus Industry 50
The Influence of Culture on Strategy 51
Conclusion 53
3 Global Strategy and Organization 54
MNE Organizational Structures 54
Case Study: MNE Organizational Options and
Sesame Workshop 55
Patterns in Global Strategy, Organization, and Structure 58
Multinational Organization 58
Global Organization 61
From a Multinational to a Global Organization 63
Case Study: Warner-Lambert Company
and Globalization 65
The Evolution of MNE Organizations 68
The Transnational Organization 69
The Strategy and Role of the MNE Subsidiary 71
Does Globalization Always Mean Centralization? 73
Case Study: Honeywell R&D and Globalization 73
How Will the MNE Organization of the Future Manage
Complexity? 77
Reorganization as a Response to Globalization 78
Conclusion 79
4 International Strategic Alliances 80
What Is a Strategic Alliance? 80
Elements of Alliances and the Importance of Trust 81
Types of Strategic Alliances 82
Case Study: Outsourcing Alliances and Competitive Risk 83
CONTENTS ix
Why Companies Use Strategic Alliances 86
Speed of Action 86
Risk Sharing 86
Economies of Scale and Critical Mass 87
Learning New Skills 87
Exploration 87
No Choice 88
Why the Number of International Alliances Continues
to Increase 88
Competitive Risks and Problems with Alliances 89
Case Study: Alliance Life Cycle—Matra-Ericsson
Telecommunications 90
Unavoidable Issues with Alliances 92
Avoidable Issues with Alliances 93
Partner Selection Criteria and Managing the Alliance
Relationship 94
What Is Organizational Fit? 95
Why Many Companies Overlook Organizational Fit 96
Alliance Management and Design 97
Alliances and Stability 98
Managing Partner Conflict and Adjustment by the Partners 99
Cross-Cultural Dimensions and Alliance Stability 101
Alliance Performance Measurement 102
Alliance Assessment: Creating Successful Alliances 103
Conclusion 104
5 Global Knowledge Management 107
Organizational Knowledge 109
Tacit and Explicit Knowledge 110
Knowledge Management 111
How Is Organizational Knowledge Transferred? 112
Case Study: China-Singapore Suzhou Industrial Park 113
Case Study: GM, Toyota, and NUMMI 116
Insights from the Case Studies 120
Transferring Knowledge in MNEs 122
The Sharing of Best Practices 123
Case Study: Building a Best-Practice Manufacturing Plant 124
Exploiting Local Knowledge for Product Innovation 124