Globalization of Markets and Competition

Investments Globalization Information Trade

Consumer Convergence Capital Flow IT and Communications Deregulation and Trade agreements

People Cross-borders Innovation Cross-borders Sourcing and Production Cross-borders Marketing Cross-Cultural Management

A global industry is an industry in which firms can sustain competitive advantages only through : 1. 2. A multi-market presence. An integration and cross-borders coordination of their resources, assets and competencies in various components of the value chain.

Globalisation Competitive Factors (induce integration and co-ordination) Japanese and Korea Multinational Customers Social Factors (Favours standardization and global branding) Convergence of customers needs Travel, TV, Moviess Political Factors (reduce trade barriers) GATT EEC

 FDI Technological Factors (reduce the cost of co-ordination increase economies of scale) Transport Telecommunication Manufacturing R& D

Localisation Legal Factors (limit free flow of people, goods, data, cash impose localisation constraints) Regulations National Security Commercial Factors (require differentiated approaches to sales and marketing) Distribution networks Customisation Responsiveness Cultural Factors (reduce the benefits of standardisation) Attitudes, Tastes Behavior Social Codes Technical Factors (reduce the benefits of economies of scale, centralisation and standardisation) Standards Spatial presence Transportation Languages

The Societal Benefits of Globalisation Arguments in Favour of Globalisation Creates overall wealth for all nations because specialisation increases trade. Reduces inflation because costs efficiency.

Benefit to customers because of price reduction due to cost efficiency. Better allocation of natural, financial and human resources. Reduces corruption because of free market.

Arguments against Globalisation Impose massive strain on labour force both in developed countries (job destruction) and developing countries (sweatshops, child labour). Standardi zation of customer tastes. Reduces diversity. Induces concentration of power in a few numbers of global corporations. Introduces a jungle world leading to the domination of the stronges t multinational. Harmful for the environment because of unrestrained exploitation of natural resources such as forests. Reduce capabilities for nations to protect their national interests, culture and values.

Global Organisations

PRE-WAR EUROPEAN EMPIRES: NATIONALLY RESPONSIVE STRATEGIES EXPANDED ABROAD IN A PERIOD OF HIGH INTERNATIONAL BARRIERS PREFERENTIAL ACCESS TO FOREIGN EMPIRE MARKETS ORGANIZATION DEVELOPED AS A PORTFOLIO OF NATIONAL COMPANIES HERITAGE OF FAMILY MANAGEMENT, PERSONAL CONTROL STRATEGY BASED ON UNDERSTANDING AND RESPONDING TO NATIONAL MARKETS

MODERN DAY JAPANESE CHALLENGE: COMPETING THROUGH GLOBAL EFFICIENCY EXPANDING ABROAD IN A PERIOD OF FALLING TRADE BARRIERS NEWLY ADDED CAPACITY AND GOVERNMENT INDUSTRIAL POLICY AS ASSETS ORGANIZATION GREW AS DEPENDENT FOREIGN UNITS TIGHTLY CONTROLLED FROM THE CENTRE HERITAGE OF CULTURALLY DEPENDANT MANAGEMENT PRACTICES DOMINATED BY GROUP PROCESSES STRATEGY BASED ON CAPTURING CLOBAL SCALE ECONOMIES

POST-WAR AMERICAN HEGEMONY: STRATEGY OF KNOWLEDGE TRANSFER EXPANDED ABROAD IN A TIME OF ECONOMIC RECONSTRUCTION LARGE, ADVANCED HOME MARKET AS KNOWLEDGE SOURCE ORGANIZATION BUILT ON STRONG LINKS TO THE PARENT COMPANY BASED ON TRANSFER OF EXPERTISE HERITAGE OF PROFESSIONAL MANAGEMENT, SYSTEMS CONTROL

 STRATEGY BASED ON TRANSFERRING PARENT COMPANYS LEADERSHIP IN TECHNOLOGY, MARKETING, AND OTHER SKILLS

STRUCTURES 1. 2. 3. 4. WORLD FUNCTIONAL WORLD PRODUCT GEOGRAPHICAL MATRIX

Making the Transnational Work Focuses on people,processes and culture not on structure Experienced managers are critical Plurality of perspectives (functional, geographic, technological) General management excellence Continuity of management teams Subtle mechanisms are key Well developed, documented processes Ad-hoc, off-line processes Cant be developed overnight Reliable, accessible, multidimensional information systems Conflict resolution Disentangle business performance/individual performance and rewards

Requires a strong sharing culture Matrix in the mind Sharing values Sharing information Networking attitudes

Organisational Mechanisms induce Behaviour Behaviour CONTEXT STRUCTURE POWER DISTRIBUTION INFORMATION SYSTEMS

RULES AND PROCEDURES COORDINATION PROCESSES PEOPLE MANAGEMENT VALUES

ORGANISATIONAL MECHANISMS AND PROCESSES

Global Mergers and Acquisitions

What are the Strategic benefits of the Acquisition or Merger? Strategic Value o o Defining the Scope Strategic Objectives Value Creation Potential

CONSOLIDATION ENLARGEMENT OF SCOPE: complementarity new product development gepographical expansion DEFENSIVE

How much is the deal worth? Valuation o o o o Valuation Methods Due Diligence Synergies

Stand Alone Value Synergies Value Fit Analysis Acquisition/merger plan

How do we structure the deal? Negotiation and Design Friendly/Hostile Financial Architecture Equal mergers Governance

o o

Take Over Bid M&A Agreement

How do we integrate? Implementation o Transition Strategic Integration Evolution

Post acquisition

DECISION MAKING PROCESS (Justifying the economic rationale of the acquisition) Value Creation Logic Target selection Due diligence and Valuation

INTEGRATION PROCESS (Achieving the value though the management of theacquired company) Integration Framework Preservation Absoption Symbiotic Transition Management Interface management New sense of purpose Operational focus Mutual understanding Respect Measurement and control Winning spiral Credibility Consolidation Inserting the acquired company in the overall Global strategic/organisational corporate network

Strategic Value o o o o Competence acquisition leading to higher quality, Performance. Bundling of products services. -> Value Kept by Customer Higher Market Power (Price control) -> Value for Shareholders, Community (Taxes), Employees (Bonuses) Economies of Scale and Scope Improvement in process and Management. -> Internal Costs Buying Power Access to Raw Materials -> Purchased Supplies

INTEGRATION PROCESS ENABLING FACTORS Friendly vs Hostile Positive interaction history Trust and Respect Shared values and business logics MANAGING FACTORS Achieving the value though the management of themerged companies 1. TRANSITION PHASE Leadership Interface: ability to understand the two cultures Action Minded Communicator Listener Clarity of message Commitment New sense of purpose Concrete Objectives Consistent message to all parties Clarity of message Commitment Mutual understanding Cross functional teams Concrete agenda Shoot for short term wins Customers and Operation focus Provides process methodology and measurement Harness complementarities Integration teams Establishing control

Strengthening the operations Cross functional teams Concrete agenda Shoot for short term wins Customers and Operation focus Provides process methodology and measurement Harness complementarities Credibility and Commitment Communication Show respect Straight communication Realism Manage by phases Adopt best practice without biais

2. STRATEGIC INTEGRATION Preservation Absorption Symbiotic

Assessing Countries'Attractiveness

Characteristics of Demand According to Countries Life Cycle

Demand Characteristics Growth Size Segmentation Developing Countries Low Small Dominant subsistence sector Large low end segment Price Availability Emerging Countries High Small to High Fast growing middle class Large Low End segment Price Distribution Emerging Advertising Push logistics Beginning of pull Beginning of de-regulation New entrants Newly Industrialized Economies High Small to High Established middle class Increased Diversity of segments Product functionality Performances Services Pull Beginning of mass retailing Deregulated Active Diverse Industrialized Countries Low High Established middle class Diverse and sophisticated segmentation Product functionality Performances - Services Diversity Mass Retail important Deregulated Active Diverse

Customer Value Curve

Distribution

Push logistics

Competition

Regulated

Michael Porters Country Diamond

Major Types of Incentives for Foreign Investments

Type of Incentive Fiscal Incentives: Tax Reduction Nature of the Incentive

Import and Export

Financial Incentives

Competitive Incentives

Operational incentives

Tax holiday for a certain period Ability to write-off losses against profits after the end of the tax holiday period. Reduced tax rate Accelerated Depreciation Reduction in Social Security contributions Special deductions of taxable incomes based on certain types of activities (social, R and D) Exemption of property taxes or others special taxes Reduction of taxes base on local content or employment levels Income tax exemption or reduction for expatriate personnel Exemption of import duties and value added taxes for raw material, capital equipments and parts Exemption of export duties Tax credits on domestic sales based on export performances Subsidies of all kinds Sweet loans Guaranteed loans Export credits Equity participation Risks insurance (Exports, Exchange rates) Protection against imports Capacity regulation Monopolistic position Preferential purchases Preferential rates rents, lands, power telecommunication, etc. Assistance for market studies Utilization of public services or government agencies for companies operations Detachment of personnel

Country Risk Analysis and Assessments Methods Grand Tour Banks Consultants Trade Commissions Ratings Intelligence building Issues

Availability of data Reliability of data Biais Cultures

 Lessons Dont rely on one single source Dont delegate the interpretation to third parties Invest in intelligence Look at operational issues