Global Business 　 #2April 9, 2012

Dept of Technology Management for Innovation (TMI), Graduate School of Engineering

Professor Kazuyuki Motohashi

工学系研究科 技術経営戦略学専攻教授

元橋一之http://www.mo.t.u-tokyo.ac.jp

Today’s class

• What is business strategy?

• What is global business strategy （ CAGE）

• AAA framework

Business Strategy

• Mid or long term direction of business to achieve sustainable economic returns (corporate value)– Strategy: military terms, back to Sun’s “The Art of War”– MOST

• Mission: like “Sony is pioneer”, • Objective: More concrete goal of business, corporate• Strategy 　： Short description of how to achieve goals• Tactics 　： Business unit level activities (often not documented)

• know your enemy, know thyself, and you shall not fear a hundred battles– External competition and internal competitiveness – 3C of corporate management ： Competitor, Customer, Company

Business Strategy Analysis: SWOT

Positioning School (by M. Porter): External competition focusRBV(Resource Based View) School: Internal competitiveness focus V(Value), R(Rarity), I(Imitability), O(Organization)

Strategic Planning

Ex. creating new customer value

Conducting logic tests(3C, SWOT analysis)

Needs change? ex. low cost strategy?

Pitfall: picking up bits and peaces

China: Factory or Market?

Why global strategy is different?(CAGE)

• Cultural Distance: language, customs, religion, cultures etc.

• Administrative Distance: regional integration administration (FTAs), currency, common suzerain state, political dispute

• Geographic Distance 　： physical distance, time zone,

• Economic Distance 　： per capital GDP, wages, living costs

Value Creation by combining Adaptation, Aggregation, Arbitrage

India vs China from US viewpoint

Ghemawat(2007)

AAA: How to manage “distance”?

Adaptation ： Customization of product or services to local market: McDonald’s vegi-burger in India, soundless and compact fridge in China (by Panasonic)…

Aggregation ： Globally (or regionally) standardized product and services: Toyota’s pickup tracks for SE Asia, Apple i-phone…

Arbitrage ： Making profit out of distance ：Infosys, UNIQLO….

AAA Triangle by P. Ghemawat

Shift of global strategies

Ghemawat(2007)

Economic valuation of global strategy

• Purpose of strategy: long term profit, valuation• Supply side story

– Local cost advantage (arbitrage)

– Scale economy by global supply chain (aggregation)

– Globalization of value chain (production, R&D)

• Demand side story– Localization of product and services (adaptation)

– Market analysis and marketing mix at local market

– Globalization of value chain (marketing, R&D)

Global Strategy Making

• Factory or Market?: Supply side story or demand side story or both?– Arbitration is not only for manufacturing

process but for various kinds of activities called off-shoring

• Aggregation or Adaptation:– Marketing concept: market segmentation and

targeting (or global market?)