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Strategy Highlight 10.2
POWERPOINT SLIDE 22: WALMART RETREATS FROM GERMANY
Walmart entered Germany by acquiring the 21-store Wertkauf chain and 74 hypermarkets from German retailer Spar Handels
AG. Walmart also entered Germany using the U.S. operation policy and procedures, such as the Walmart cheer and door
DISCUSSION TOPICS
POWERPOINT SLIDE 21
EXPERIENCED FACULTY: The Wall Street Journal video, “Bad roads, red tape, burly thugs, slow Walmart’s passage to
India” (1/11/13) offers an interesting look at some elements that make up the administrative/political challenges for U.S.
firms in expanding into emerging markets. Liability of foreignness makes it hard to navigate such different business
END OF CHAPTER ETHICAL/SOCIAL ISSUES 1
POWERPOINT SLIDE 18
A “race–to-the-bottom” process may set in as MNEs search for ever-lower cost locations. Discuss the trade-offs
between the positive effects of raising the standard of living in some of the world’s poorest countries with the
drawbacks of moving jobs established in one country to another. Does your perspective change in light of the recent
accidents in textile factories in Bangladesh, Cambodia, and elsewhere, where the cumulative death was over 1,000
workers? What responsibilities do MNEs have?
Students may refer back to the national advantage framework to understand why certain MNEs outsource the operation
elements from low-cost countries. The trade-off is the increased cost structure to the MNEs while promoting brand image and
goodwill in foreign markets. You might want to draw attention to the transient nature of cost advantages. As manufacturing
END OF CHAPTER DISCUSSION QUESTION 4
POWERPOINT SLIDE 24
“Licensing patented technology to a foreign competitor is likely to reduce or eliminate the firm’s competitive
advantage.” True or false? Write a paragraph discussing this statement.
In today’s economy, the preceding statement seems to be false. First, it is due to the dynamic nature of the environment, and
licensing technology might not give competitors a competitive edge since they might have limited use of it. Second, licensing
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Extended Discussion
POWERPOINT SLIDE 16
NEWER FACULTY: While students are quite familiar with these movies, in most cases we find they are NOT aware of
how large the international revenue impact is on the business. They also have not usually given much thought to such
revenues having a direct effect on which scripts are “green–lighted” for production and how key actors are often now
chosen based on international appeal rather than what will sell best in the United States. Use the example of Slumdog
Millionaire, Crouching Tiger, Hidden Dragon, Fast and Furious 6, Pacific Rim, A Good Day to Die Hard, and so on.
Those films incorporated foreign actors/actresses, foreign directors, foreign environmental settings, screenplays, music,
and other elements, with many multicultural flavors so they satisfied international markets. You can contrast international
earnings for two Hollywood movies that are popular at the time of your course, one with foreign elements and one
without. For example, as of November 1, 2013, Fast and Furious 6 and Gravity had almost the same U.S. box office
revenue, but total revenue for Fast and Furious 6 was almost double due to strong foreign sales. A Good Day to Die
Hard, taking place in Russia and filmed in Budapest, had similar U.S. ticket sales to the more U.S.-centric Lee Daniels,
The Butler, but sold more than twice as much overall, because 77 percent of its revenue came from outside the U.S. The
data can be found at boxofficemojo.com.
Think about the last movie you saw in a movie theater. What aspects of the movie had international components in
it (e.g., the plot line, locations, cast, and so on)? Are there more international elements included than compared to
your favorite movie from a decade ago?
So many movies today are produced outside the United States. Also, the directors, plot lines, and other elements are often
taken from other countries. The cast of many movies today has also gained a lot of international members. In general, the
elements of popular films do seem to have a more international make-up. Simply ask students and they will respond well.
to the fact that the U.S. filmmaking industry still enjoys a very dominant position in the world, and most of the films
produced are still very U.S.-centered. What we have observed is that the international “sales” of U.S.-made films have
been soaring in the past couple years, not the “contents” of the movies. However, it is reasonable to think more content
will “follow the money” and global scripts, locations, and actors will increase.
How would you prioritize which nations to expand distribution into if you were working for a major Hollywood
movie studio?
One must conduct research on the market potential as well as the legal system in this instance. Clearly, China has the
largest population and seems the best target for many filmmakers. However, China has a very strict information
censorship policy, so it is not too easy to have a movie broadcast license approved by the Chinese government.
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10.3 Going Global: Where and How? LO 10–3 & LO
10–4
POWERPOINT SLIDES 26–32
EXAMPLES
POWERPOINT SLIDE 28
NEWER FACULTY: Because of its attractive institutional framework and low cultural distance, Ireland received roughly one–
quarter of all U.S. FDI into the EU. The chipmaker Intel invested some $5 billion just west of Dublin to build the largest and
most advanced chipmaking facility in the world. HP is one of the biggest employers in the western part of Ireland. Apple
located its European software development and support center in Ireland. Likewise, Dell has made significant investments in
Ireland. The consulting firm Accenture moved its location of incorporation to Ireland, citing Ireland’s economic, political,
and legal strengths.
POWERPOINT SLIDE 32
When Walmart entered its rival Tesco’s, home market, it entered by acquiring the third largest mass market retailer in the
UK, ASDA. It has since thrived in that market. When Tesco decided to enter the U.S., they did so through greenfield building
with the Fresh & Easy Concept. This was an expensive failure. You can use this example to discuss the advantages and
disadvantages of each method of entering a new market (see “The $1.6B grocery flop” 12/6/12 The Wall Street Journal). (In
2013, Tesco sold the majority of its Fresh & Easy stores out of bankruptcy to a turnaround firm, Yucaipa.) Contrast the
experience of these two firms, and Walmart’s experience in the UK with their experience in Germany (Strategy Highlight
10.2) to illustrate the importance of choosing the optimal entry method.
Danone has struggled with some of its businesses in China due to difficulties in adapting to cultural differences and
challenges in operating Chinese subsidiaries. It decided that the best way to deal with its struggles in infant formula in China
END OF CHAPTER DISCUSSION QUESTION 2
POWERPOINT SLIDE 26
Professor Pankaj Ghemawat delivered a TED talk [17.04 min] entitled “Actually, the world isn’t flat.” Do you agree
with his assessment that the world is at most semi-globalized, and that we need to be careful not to fall victim to
“globalony”?
The New York Times columnist and author Thomas Friedman used his book title, The World Is Flat, to describe a truly global
marketplace in which goods, services, capital, knowledge, ideas, and people move freely across geographic boundaries in
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EXERCISES
POWERPOINT SLIDE 26
EXPERIENCED FACULTY: You could assign the above question in the form of a debate, asking one team of students to
present Friedman’s view and a different team to argue Ghemawat’s perspective, plus other teams to develop questions for
each team of debaters.
POWERPOINT SLIDE 27
To communicate how important cultural differences can become when a firm goes global, we can combine the cultural
differences with Porter’s value chain. For instance, McDonald’s menu in the U.S. is different from the one in India. Why?
Will the staffing policy be different when comparing the U.S. style with the Japanese style? Will different cultural holidays
affect a MNE’s global operations? How about religions? These questions can be tied into Hofstede’s cultural dimensions.
You can use this discussion to set up a team exercise. Group students into countries they are familiar with (easy for
END OF CHAPTER SMALL GROUP EXERCISE 2
STRATEGY SMART VIDEO EXAMPLE
POWERPOINT SLIDE 70 CLIF BAR’S STRATEGY: 5 BOTTOM LINES
This 10-minute video could be used to introduce the discussion or it could be assigned for viewing before class.
POWERPOINT SLIDES 27 AND 67
Apply the CAGE distance framework to the six international countries where Clif Bar is operating. What is the
relative distance of each to the United States? Rank the order of the six countries in terms of relative distance.
Calculating the exact ordering of the countries using the model requires a paid subscription to the CAGE model. If your
university does not have a subscription, the students can still have a good discussion. The website does provide some
Given the results from the CAGE model, do the six chosen countries make sense? Why or why not?
criteria.
Can you recommend three or four other countries Clif Bar should enter? Support your recommendations.
POWERPOINT SLIDE 32
What entrance strategy should the firm employ in expanding the business to new countries? Why?
Refer to the international entry stage model (Exhibit 10.5) and discuss. Clif Bar may simply choose exporting. The entry
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10.4 Cost Reduction vs. Local Responsiveness: The
Integration–Responsiveness Framework
LO 10–5
POWERPOINT SLIDES 33–41
EXAMPLES
STRATEGY SMART VIDEO EXAMPLE
POWERPOINT SLIDES 36 AND 73: COCA-COLA’S INTERNATIONAL STRATEGY
This video can be used to illustrate international strategy.
POWERPOINT SLIDE 33
This funny video is a set of HSBC commercials on cultural differences that could be used to illustrate why localization
strategies might be beneficial.
POWERPOINT SLIDE 35
NEWER FACULTY: The integration-responsiveness framework in Exhibit 10.6 has examples in each quadrant. These
companies have different strategic intent in terms of the economy of scale and scope. For instance, if the strategic intent is to
maximize economy of scale, then MNEs tend to offer more standardized products, and thus MNEs are located in the quadrant
P&G has a knack for understanding the very different needs of foreign cultures and creating versions of its products to match.
Until P&G, there was no market for disposable diapers in China. Caregivers (often parents or grandparents) used cloth
diapers almost exclusively, and mostly for nighttime. Otherwise, most young tots are soon out of diapers and put into split
pants to do their business. So parents weren’t looking for a time-saving convenience. What problem could Pampers solve?
P&G made thousands of site visits and the parents’ most common complaint was lack of sleep for themselves and their
babies. P&G developed paper diapers at least as soft as cloth but more absorbent, so babies fell asleep sooner—and slept
POWERPOINT SLIDE 40
EXPERIENCED FACULTY: Like the MTV example in Exhibit 10.7, automakers are shifting their global strategies. In this
case, they are becoming more standardized across markets. Ask students to research their car before class to find out whether
POWERPOINT SLIDE 40
NEWER FACULTY: Food makers, on the other hand, are moving toward increasing localization. Two examples of this are
Hershey’s and Oreo’s new flavors for the Chinese market (see “Hershey keen for a piece of China” 5/20/13 The Wall Street
Journal and video “China’s love affair with the Oreo” 5/30/12 The Wall Street Journal).
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competitive progress versus traditional formats in these markets and is a great example of liability of foreignness. Moreover,
the article discusses the reasons that these firms are moving to more localization in their strategies.
DISCUSSION TOPICS
None of China’s domestic automakers (an industry in which all major players have global operations) have been able to
penetrate U.S. and European markets. Their new strategy is to start out with smaller steps, R&D in Silicon Valley and parts
POWERPOINT SLIDE 41
EXPERIENCED FACULTY: Successful retailers have adjusted their formats to the Chinese market, for example, Starbucks has
recognized the need to modify its store footprint and furnishings (see “Starbucks plays to local Chinese tastes” 11/26/12 The
Wall Street Journal). This example offers a great opportunity for an integrative discussion that connects the strategy course
with what students have learned in marketing. The article highlights the risk that too much localization can damage brand
identity. Marketing students could debate: how much is too much localization?
10.5 National Competitive Advantage: World
Leadership in Specific Industries LO 10–6
POWERPOINT SLIDES 42–48
EXAMPLE
NEWER FACULTY: Corporate strategies have a strong association with international strategies. Even if an organization does
not plan to import or export directly, management must look at an international business environment, in which actions of
competitors, buyers, sellers, and the new entrants of providers of substitutes may influence the domestic market. Information
INTEGRATION
Case Analysis: Strategy Around the World
This case analysis discusses some debate regarding the best approach to increase jobs domestically in the U.S. The issues
raised in this case lead to important policy decisions that will ultimately impact the global approach U.S. MNEs take
going forward. The student will read the case/discussion and answer the five questions following it to complete the
activity. Difficulty: Medium Blooms: Apply AACSB: Analytic
Follow-Up Activity: The instructor can expand on the concepts from this case by referring to Exhibit 10.6 in the
textbook. This diagram provides several example firms in each of the four quadrants and can be used as a small group
exercise. The instructor can assign each group one of the quadrants and the students can research the example firms for
some deeper background on how the firm approached global expansion. Ethical/Social question 2 in the end of chapter
material also approaches this question of offshore manufacturing or production closer to the U.S. home base for firms
such as Apple and GE.
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Greek shipping companies operate 20 percent of the global fleet. Ask students to diagnose the reasons for this using Porter’s
diamond framework (see “Greek shipping industry extends its dominance” C Paris 8/10/15 The Wall Street Journal).
DISCUSSION TOPIC
POWERPOINT SLIDE 44
Understanding and having the necessary conditions to be globally competitive is important, but these conditions are neither
static nor purely domestic. The students must understand the dynamic nature of the international environment, as well as the
changing requirements of today’s resources and technologies. Porter’s diamond can help students understand the concept of
national advantage, but the existence of the four favorable conditions may represent a necessary but insufficient condition for
the development of a particular national industry. Even when abundant resources are ultimately limited. Thus, firms must
make choices regarding their pursuit of existing opportunities. Further, given the ability of firms to gain market information
and production inputs from abroad, the absence of favorable conditions within a country may be overcome by their existence
internationally. There is a five-minute section of an interview with Michael Porter expressing his optimism about America’s
future in the world.
10.6 Implications for Strategists
POWERPOINT SLIDES 49–53
EXAMPLES
POWERPOINT SLIDE 50
Solvay offers an example of a firm that used acquisition and asset sales as tools to reconfigure its corporate strategy both for
what products they would sell and in what geographic markets they would operate. With the Rhodia acquisition and sale of
the pharma business, they expanded their chemical business, and built a stronger position in China (see “Tilting the global
balance: An interview with the CEO of Solvay” October 2013 McKinsey Quarterly).
INTEGRATION
Drag-and-Drop: Porter’s Diamond Framework of National Advantage
This click-and-drag interactive activity builds student understanding of the elements of national competitive advantage.
Students will match the correct factor to an example in the click-and-drag exercise. Then the student will answer three
questions to conclude the activity. Students should already be familiar with Porter’s diamond framework from the text
before starting this activity. Difficulty: Medium Blooms: Evaluate AACSB: Analytic
Follow-Up Activity: The instructor can expand on the concepts from this activity by bringing out some of the
international experiences of students in the class. Students that have grown up in other countries or even had study
abroad or other travel experiences can often see a difference in these factors from that found in the home location of your
university.
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STRATEGY SMART VIDEO EXAMPLE
POWERPOINT SLIDES 50 AND 75: MICROSOFT’S GLOBAL STRATEGY
This video is a brief summary of a MNE’s global strategy from the CEO.
DISCUSSION TOPICS
Extended Discussion
POWER POINT SLIDE 53
EXPERIENCED FACULTY: Location remains central to competition. Today’s economic map of the world is characterized
by what Porter calls clusters: critical masses in one place of linked industries and institutions, from suppliers to
universities to government agencies, which enjoy unusual competitive success in a particular field. If globalization and
drastic advancements in technology indeed reduce the importance of firm location, what accounts for the thriving clusters
of computer technology firms in Silicon Valley, medical device firms in the Chicago area, and biotechnology firms in
Boston? Known for their engineering prowess, car companies such as Daimler, BMW, Audi, and Porsche are clustered in
southern Germany. High-performance Formula One racecars are designed and crafted in England’s Motor Sport Valley,
near London. Many fashion-related companies (clothing, shoes, and accessories) are located in northern Italy. Singapore
is a well-known cluster for semiconductor materials. India’s leading BPO firms are in Bangalore. Porter captures this
phenomenon succinctly: “Paradoxically, the enduring competitive advantages in a global economy lie increasingly in
local things—knowledge, relationships, and motivation that distant rivals cannot match.”
The Research Triangle Park (RTP) in North Carolina is bounded by the cities of Chapel Hill, Durham, and Raleigh.
Several important cluster ingredients are readily apparent: top-notch research universities (The University of North
Carolina at Chapel Hill, Duke University, and North Carolina State University); well-known MNEs (BASF, Bayer, Cisco
Systems, Ericsson, and IBM, among others); good interstate highway connections; and an international airport. The RTP
has one of the highest concentrations of PhDs worldwide, and it continues to attract the brightest students, researchers,
and knowledge workers from around the world. The RTP contains two distinct clusters, a biopharma cluster and a
communications–technology cluster. These two clusters are anchored by U.S. and foreign MNEs. The RTP’s resident
new-venture creation because VCs provide not only capital but also strategic and technical assistance. Leading venture
capital firms such as Kleiner Perkins Caufield & Byers (KPCB) in Silicon Valley tend to actively recruit managers,
lawyers, suppliers, and customers for its portfolio companies. Because relationships between venture capitalists and their
portfolio companies tend to be deep and extensive, venture capitalists generally prefer to fund ventures that are located
nearby, mostly within the regional cluster. KPCB, for example, provided early-stage funding for Electronic Arts, Google,
Genentech, Genomic Health, Intuit, Sun Microsystems, and VeriSign—all located in Silicon Valley.
between technology clusters in the U.S. market and those in emerging markets, such as Africa. You could use this video
as a basis for students to have a theory-based discussion of how a multinational firm, such as Apple, Ford, IBM, or GE
might use this information to develop a global R&D strategy. Should they participate in emerging market technology
clusters? Why or why not? If so, which countries should they enter for this purpose? What is the best way for them to
learn from these clusters or benefit from the ideas generated?
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POWERPOINT SLIDE 53
Consider the city/region in which your university is located. Given the discussions in the chapter about where to expand
globally, what characteristics are unusual about your location that would attract foreign direct investment? Do you have
nearby industrial regional clusters? Access to abundant (or cheap) raw materials of some sort? Is university research strong in
fields important to some industries? Students could be asked to resource this before class by investigating the economic
development website of their local government. For example, in Georgia Tech’s home state, the Georgia Office of Economic
Development has a page for international trade, it also has pages describing the resources that the state offers new businesses,
Strategy Term Project
Term Project Module 10
In this section, you will study your firm’s global strategy or a strategy that it should pursue for international growth. AACSB
2015 Standard 9 Application of knowledge (able to translate knowledge of business and management into practice)
If your firm is already engaged in international activities, answer the following questions:
Is your company varying its product or service to adapt to differences in countries? Is the marketing approach
different among the nations involved? Should it be? Is your firm working internationally to access larger markets? To
gain low-cost input factors? To develop new competencies? Is its approach in all three areas appropriate? Which of
the four global strategies is the firm using? Is this the best strategy for it to use? Why or why not? (Exhibit 10.8
provides a summary of the four global strategies.)
If your firm is not now engaged internationally, answer the following questions:
Would your firm’s product or service need to be modified or marketed differently if it expanded beyond the home
country? Does your firm have the potential to access larger markets by expanding internationally? Does it have the
possibility of lowering input factors with such expansion? Please explain why or why not. If your firm decided to
expand internationally, where does the firm reside on the integration-responsiveness framework? (Refer to Exhibit
10.6 if needed.) What does this result say about the best global strategy for your firm to use for international
expansion?
Urge students to go through the process of analyzing the firm’s global strategy by stepping through each of the elements
presented in the chapter.
Begin with a discussion of why the firm might be/have been motivated to expand internationally. Do they need larger
markets, lower input costs, or new competencies to gain or sustain competitive advantage? Analyze the pros and cons of
global expansion in this specific context.
INTEGRATION
Running Case: HP
While offering each student the opportunity to explore and analyze the company of his/her choice can add interest to the
exercise, there are many advantages for an instructor when the entire class works on the same firm. Connect allows you to
do this with a running case for a single firm that encompasses every chapter in the textbook and tracks the Strategy Term
Project. Hewlett-Packard is provided as an example firm your students can use to see what information and analysis
would be helpful to cover this portion of the term project.
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Then, ask the students to evaluate where the company operates or should operate. The students should be able to use the
CAGE framework, as well as their own experience (especially the students with international backgrounds) to address this.
my
Strategy
POWERPOINT SLIDE 65: HOW DO YOU DEVELOP A GLOBAL MINDSET?
So that you have a better idea of where you stand now, draw up a list of your strengths and weaknesses for each
component. AACSB 2015 Standard 9 Reflective thinking (able to understand oneself in the context of society)
Identify courses you could take in international business, economics, politics, history, or art history. While you may be
required to be proficient in at least one foreign language, learn a few words in other languages that can help you
navigate any new countries you visit.
Make a list of at least six activities you could do this week in order to get started. For example, you could choose to
work with international students on group projects in class. Or, move on to having lunch with them. What questions
could you ask that would help you learn about their culture and about doing business in their country? You could go
to a museum with an exhibit from another culture, an international movie, or a restaurant with cuisine that is new to
you.
If you are interested in more information, go to globalmindset.thunderbird.edu/, where you can also take a sample
survey to get an idea of the degree to which you have the attributes needed for global success.
DISCUSSION TOPIC
As a team discussion, you might ask students to complete the Thunderbird sample assessment survey before class and
compare them within their groups.
STRATEGY SMART VIDEO DISCUSSION
POWERPOINT SLIDE 72: HOW TO DEVELOP A GLOBAL MINDSET
As a full-class discussion, you might ask each student to come to class with one additional idea that is not on the HBR
globalize yourself list, to be written on the board as they come into class. Then open the class with a discussion of which
ideas students think can provide the biggest impact. Then show the video afterwards.