Introduction to Global Competitive

Strategy
Professor Daniel F. Spulber

Global Competitive Strategy

Suggested Course Outline
1. Introduction

6.

Strategies for Global Value

Added: Gains

7.

Strategies for Global Value

Added: Costs of trade

8.

Competitive strategies:
Global vs local

9.

Competitive strategies:
Modes of entry and FDI

2. Home country
3. Supplier and partner
countries
4. Customer and competitor
countries
5. Strategies for Global
Value Added: Gains

Global Competitive Strategy

Main Cases
1. Introduction
2. LENOVO
3. BP/ OIL INDUSTRY
4. P&G JAPAN
5. RENAULT-NISSAN

6.
7.
8.
9.

LI & FUNG
CEMEX
ZARA
FLEXTRONICS IN
INDIA

Global Competitive Strategy

Introduction

Global Competitive Strategy

Outline of introduction
The global challenge
The global mosaic
The global strategy Star Analysis

Global Competitive Strategy

The Global Challenge

Globalization changes nature of competition
-- Competitors can be very different!
Innovative entrants, including emerging market firms
Global competitive advantage
Best sources of products, global brands
World-class cost efficiencies
Global pool of innovations
Global mix of transactions

Global Competitive Strategy

The Global Challenge

To serve large-scale global market

To address market differences across countries

Size of Global Business

Current $ (Source: World Bank)
World GDP: $ 41.3 trillion
(Gross Domestic Product)
US:
$ 11.7 trillion
EU (25):
$ 12 trillion
Japan
$ 4.6 trillion
Latin America and Caribbean $ 2 trillion
Middle East and Africa $ 1 trillion
India
$ 0.7 trillion
China
$ 1.9 trillion
High growth rate of emerging markets

Size of International Business

Total exports of goods and services

World Trade

$ 11 trillion

Merchandise

$9 trillion

Agriculture, fuels and mining, manufactured goods

Services
$2 trillion
Transportation, travel, commercial services

Growing importance of trade

to US economy
Increases in:
Exports:
- Capital goods
(mainly
semiconductors,
computer
accessories)
- Industrial supplies
- Consumer goods
Imports:
- Industrial supplies
and crude oil
- Auto industry
- Capital goods

Size of International Business

$1.5 trillion in international currency
transactions per day!
63,000 multinational corporations
Major source of economic growth and investment for
developed and developing countries
Source of global technological innovation
Earnings growth for many companies (Wal-Mart, GE,
Carrefour, Nestl, Unilever, Cemex, Toyota, Samsung)

Why did DaimlerChrysler have

problems?

Why was Nokia so

successful?

Global Competitive Strategy

The Global Mosaic

Vast economic differences across countries
GDP per capita, prices, wages

The world is bumpy!

Underlying geographic differences

Geography matters
Large economic distances between countries
Sticky borders preserve these differences
The arbitrage principle economic differences evidence of
sticky borders, many strategic opportunities remain

Differences in economic activity

Business must bridge critical

differences between countries

Language
Culture, customs, and history
Social institutions
Demographic differences: health, education
Public policies
Legal and regulatory systems
Business practices
Currencies
Technology

Differences in climate, topography,

natural resources

Global Competitive Strategy

The costs of trade: The Four Ts

Transaction costs
Tariff and non-tariff barriers
Transportation costs
Time costs

Borders are sticky

Business must navigate the

World Trade System

Proposed

Caribbean Basin Initiative

NAFTA

Business strategy must

account for changes in
political relationships
and trade deals between
countries

The Arbitrage Principle

Country borders:
Restrict movement of inputs capital, labor, technology,
resources
Limit trade in goods and services
Create persistent differences in technology and information
Preserve economic differences -- prices and wages
Arbitrage reduces economic differences
Innovative transactions find arbitrage opportunities

Country borders provide opportunities

and competitive advantage to
international business

NEXT SESSION:
Analytical framework!

Global competitive advantage

Globalization challenges business strategy in a
fundamental way
Trade costs are high resulting in economic differences
between countries
The global mosaic offers opportunities for generating gains
from trade
The successful global business develops innovative
international transactions to gain global competitive
advantage