AnneCaroline BERTHELOT Nomie HUBIN Janine STROH International Strategy
Anne-Caroline BERTHELOT Noémie HUBIN Janine STROH International Strategy
I. The basic directions for a firm’s strategy
1. State of mind • Perlmutter (1960) admits that there are 3 types of attitudes : - Ethnocentric - Polycentric - Geocentric.
State of mind II • Ethnocentric : Two characteristics : - National strategy - Home country reference
Organization Design ETHNOCENTRIC Complexity of organization Complex in home country, simple in subsidiaries Decision making High in headquarters Evaluation and control Home standards applied for persons and performance Rewards and punishments; incentives Communication; information flow High in headquarters, low in subsidiaries Identification Nationality of owner High volume to subsidiaries Perpetuation (recruiting, Recruit people of home country. development )
State of mind III • Polycentric : Polycentric company have : - regional strategy, - host country reference.
Organization Design POLYCENTRIC Complexity of organization Varied and independent. Decision making Relatively low in headquarters. Evaluation and control Determined locally. Rewards and punishments; incentives Communication; information flow Identification Perpetuation (recruiting, development ) Wide variation; can be high or low rewards for subsidiary performance. Little to and from headquarters. Little between subsidiaries. Nationality of host country. Develop people of local nationality.
State of mind IV • Geocentric : Two points : - Global strategy. - Goal : worldwide approach.
Organization Design Complexity of organization Decision making GEOCENTRIC Increasingly complex and interdependent Collaborative approach Find standards which are Evaluation and control universal and local International and local executives Rewards and rewarded for reaching local and punishments; incentives worldwide objectives Communication; Both ways and between information flow subsidiaries Identification Truly international company but identifying with national interest Perpetuation Develop best men everywhere
Two other notions… • EPG : Ethnocentric P : Polycentric G : Geocentric. • Regioncentric : New notion that appears in the years 1980 ies.
Nowadays… Mostly polycentric and geocentric. However there is still an ethnocentric attitude in every companies.
2. Resources and capabilities • A Resource-Based Approach to Strategy Analysis : Strategy Competitive Advantage Capabilities Resources.
Resources • - 6 major categories : Financial resources Physical resources Human resources Technological resources Reputation and Organizational resources.
Capabilities • Strategic capabilities. • Comparative advantages. Ex : Fed Ex.
Competitive advantages • Two factors provide to appraise the rentgenerating potential of resources and capabilities : - The respect of the rules (durability, transparency, transferability, replicability). - The appropriability of returns.
Strategy • The point : select a strategy. • If there are resources gap, they have to be filled.
II. Analyze of international business strategy
Yip’s (2003) view as a global company : “A global company has the capacity to go anywhere, deploy any assets, and access any resources, and it maximizes profits on a global basis. ”
3 main possibilities of strategy • An entirely globally-centered business • A fully polycentric business on a national level • A regional organization
A framework for analyzing “Globalization” Locus of decision making power on corporate, business, functional strategy issues Corporate headquarters World product Actual product Characteristics Regionbased or adapted product Nationbased or adapted product 1 Regional centers National units 4 7 5 8 Global strategy 2 Regional strategy 3 6 9 National strategy
A framework for analyzing “Globalization” Locus of decision making power on corporate, business, functional strategy issues Corporate headquarters World product Actual product Characteristics Regionbased or adapted product Nationbased or adapted product 1 Regional centers National units 4 7 5 8 Global strategy 2 Regional strategy 3 6 9 National strategy
A framework for analyzing “Globalization” Locus of decision making power on corporate, business, functional strategy issues Corporate headquarters World product Actual product Characteristics Regionbased or adapted product Nationbased or adapted product 1 Regional centers National units 4 7 5 8 Global strategy 2 Regional strategy 3 6 9 National strategy
A framework for analyzing “Globalization” Locus of decision making power on corporate, business, functional strategy issues Corporate headquarters World product Actual product Characteristics Regionbased or adapted product Nationbased or adapted product 1 Regional centers National units 4 7 5 8 Global strategy 2 Regional strategy 3 6 9 National strategy
A framework for analyzing “Globalization” Locus of decision making power on corporate, business, functional strategy issues Corporate headquarters World product Actual product Characteristics Regionbased or adapted product Nationbased or adapted product 1 Regional centers National units 4 7 5 8 Global strategy 2 Regional strategy 3 6 9 National strategy
A framework for analyzing “Globalization” Locus of decision making power on corporate, business, functional strategy issues Corporate headquarters World product Actual product Characteristics Regionbased or adapted product Nationbased or adapted product 1 Regional centers National units 4 7 5 8 Global strategy 2 Regional strategy 3 6 9 National strategy
A framework for analyzing “Globalization” Locus of decision making power on corporate, business, functional strategy issues Corporate headquarters World product Actual product Characteristics Regionbased or adapted product Nationbased or adapted product 1 Regional centers National units 4 7 5 8 Global strategy 2 Regional strategy 3 6 9 National strategy
A framework for analyzing “Globalization” Locus of decision making power on corporate, business, functional strategy issues Corporate headquarters World product Actual product Characteristics Regionbased or adapted product Nationbased or adapted product 1 Regional centers National units 4 7 5 8 Global strategy 2 Regional strategy 3 6 9 National strategy
III. Multinationals and Regional Trading
The build-up of regional trading blocks I NAFTA EU ASEAN FTAA MERCOSUR APEC
The build-up of regional trading blocks II Africa Central & Eastern Europe ASIA (APEC, ASEAN) China & India Middle East EUROPE (EU) CIS AMERICAS (NAFTA) South America (MERCOSUR)
Influence of Free Trade Areas Overall growth in international trade and political stability Shift of regulatory authority to the regional level Rise of “intra-regional trade” Free Trade Area = free trade
Influence of WTO (World Trade Organization): successor to the General Agreement on Tariffs and Trade (GATT) Arbitration of triad-based disputes Protectionism of health, safety and environmental Reinforce of triad-markets
States – Firms – Regions I Company Regional Institution 4 2 6 Company Regional Institution 1 5 3 Government
States – Firms – Regions II C C 2 R 4 1 G 3 6 5 G R Relationships (1), (2) and (3) reflect conventional interactions between firms and national governments in form of cooperation or competition Relationships (4), (5) and (6) are of special interest in a regionalized world
States – Firms – Regions III C C 2 R 4 1 G 3 6 R Relationship (5) national governments have to pay the same attention to regional institutions as to state-to-state relationships 5 G Relationship (6) deepening of regional integration will lead to bargaining among regional institutions
States – Firms – Regions III Relationship (4) C C 2 R 4 1 G 3 6 5 G R - MNE should pay increasing attention to policy making at regional level - MNE may be affected by common standards or additional costs
MNEs and Regional Policy Perceived Regional Policy Intent MNE Perception of Regional Policy Manageable Exogenous Fortress against Outsiders Internal Liberalization 1 3 2 4
Case Study Benetton’s International Strategy
Revenues 2003 Net sales for the casual segment by geographic area for the last three years (in thousands of Euro) 2001 EU Asia The Americas Other Areas WORLD 2002 2003 1, 193, 948 1, 165, 642 1, 179, 334 154, 832 143, 025 138, 382 85, 815 81, 107 77, 422 193, 276 196, 236 183, 389 1, 627, 871 1, 586, 010 1, 578, 527
Number of Stores 2000 2001 2002 2003 Italy 2, 095 2, 202 2, 270 2, 256 Rest of Europe 2, 200 2, 157 1, 999 1, 932 The Americas 294 259 262 286 Other geographic areas 718 622 675 621 5, 307 5, 240 5, 206 5, 095 Total
Organizational Structure Benetton Group S. p. A. is the holding company of the Benetton group companies. The following table sets forth the significant subsidiaries owned, directly or indirectly, by Benetton Group S. p. A. belongs to the Edizione Holding Group.
Country Ownership Benetton International N. V. S. A The Netherlands 100 % Benetton Trading USA Inc USA 100 % Benetton Japan Co. , Ltd. Japan 100 % Benetton International Property N. V. S. A The Netherlands 100 % Olimpias S. p. A Italy 85 % Benetton Textil Spain S. L Spain 100 % Benetton Retail International S. A Luxembourg 100 % Benetton Società di Servizi S. A Switzerland 100 % Bencom S. r. l. Italy 100 % Benind S. p. A Italy 100 % Bentec S. p. A. Italy 100 %
Thanks a lot for your attention.
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