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ABOUTTHE AUTHOR MikeW.Peng istheJindalChairofGlobalStrategyattheJindalSchoolofManagement, UniversityofTexasatDallas,aNationalScienceFoundationCAREERAwardwinner, andaFellowoftheAcademyofInternationalBusiness.HeisalsoExecutiveDirectorof theCenterforGlobalBusiness,whichhefounded.AtUTDallas,hehasbeenthenumber onecontributortothe45topjournalstrackedby FinancialTimes,whichhasrankedUT Dallasasatop20schoolinresearchworldwideanditsMBAandEMBAprograms increasinglyinthetoptier.
ProfessorPengholdsabachelor’sdegreefromWinonaStateUniversity,Minnesota, andaPhDdegreefromtheUniversityofWashington,Seattle.Between2005and2011,he wasthefirstProvost’sDistinguishedProfessoratUTDallas,achairpositionthatwas createdtoattracthimtojointhefaculty.Hehadpreviouslybeenanassociateprofessor (withtenure)attheOhioStateUniversity.Priortothathehadservedonthefacultyatthe ChineseUniversityofHongKongandUniversityofHawaii.Hehastaughtinfivestates intheUnitedStates(Hawaii,Ohio,Tennessee,Texas,andWashington)aswellasChina, HongKong,andVietnam.Hehasalsoheldvisitingorcourtesyappointmentsin Australia,Britain,China,Denmark,HongKong,andtheUnitedStates.
ProfessorPengisoneofthemostprolificandmostinfluentialscholarsinglobal strategy.Duringthedecade1996–2006,hewasamongthetopsevencontributorstothe JournalofInternationalBusinessStudies.Hisresearchisalsoamongsomeofthemost widelycited boththeUnitedNationsandtheWorldBankhavecitedhiswork.A JournalofManagement articlefoundhimtobeamongthetop65mostwidelycited managementscholars,andan AcademyofManagementPerspectives studyfoundhimto bethefourthmostinfluentialmanagementscholarbothinsideandoutsideofacademia (measuredbyacademiccitationsandnon-eduGooglewebpages)amongprofessorswho obtainedtheirPhDsince1991.Overall,ProfessorPenghaspublishedover100articlesin
leadingjournals,over30piecesinnon-refereedoutlets,andfivebooks.Sincethelaunch of GlobalStrategy’ssecondedition,hehaspublishednotonlyintopglobalstrategy journals,suchasthe AcademyofManagementJournal,JournalofInternationalBusiness Studies, and StrategicManagementJournal,butalsoinleadingoutletsinoperations (JournalofOperationsManagement),entrepreneurship(JournalofBusinessVenturing and EntrepreneurshipTheoryandPractice),andhumanresources(InternationalJournal ofHumanResourceManagement).
ProfessorPeng’smarket-leadingtextbooks, GlobalStrategy,GlobalBusiness, and GLOBAL,arestudiedinover30countriesandhavebeentranslatedintoChinese,Spanish, andPortuguese.AEuropeanadaptation, InternationalBusiness (withKlausMeyer),has beensuccessfullylaunched.
ProfessorPengisactiveinleadershippositions.Hehasservedontheeditorialboards of AMJ,AMR,JIBS,JMS,JWB, and SMJ, andguest-editedaspecialissueforthe JMS.At theStrategicManagementSociety(SMS),hewaselectedtobetheGlobalStrategyInterest GroupChair(2008).Healsoco-chairedtheSMSSpecialConferenceonChinain Shanghai(2007).AttheAcademyofInternationalBusiness(AIB),hewasco-chairof theAIB/JIBS FrontiersConferenceinSanDiego(2006),guest-editeda JIBS specialissue (2010),chairedtheEmergingandTransitionEconomiestrackfortheNagoyaconference (2011),andchairedtheRichardFarmerBestDissertationAwardCommitteeforthe Washingtonconference(2012).HewasrecentlyelectedtobeaFellowofAIB.Heserved onetermasEditor-in-Chiefofthe AsiaPacificJournalofManagement.Duringhis editorialtenure,hemanagedthedoublingofsubmissionnumbersandthesuccessful bidtoentertheSocialSciencesCitationIndex(SSCI),whichreported APJM’sfirstcitation impacttobe3.36andrateditasthetop18among140managementjournalsfor2010.
ProfessorPengisalsoanactiveconsultant,trainer,andkeynotespeaker.Hehas providedon-the-jobtrainingtoover300professors.Hehasconsultedandbeenakeynote speakerformultinationalenterprises(suchasAstraZeneca,Berlitz,KOSTA,Nationwide, SAFRAN,andTexasInstruments),nonprofitorganizations(suchasGreaterDallasAsian AmericanChamberofCommerceandWorldAffairsCouncilofDallas-FortWorth), educationalandfundingorganizations(suchasHarvardUniversityKennedySchoolof Government,NationalScienceFoundation,SocialSciencesandHumanitiesResearch CouncilofCanada,andtheUniversityofMemphis),andnationalandinternational organizations(suchastheUS-ChinaBusinessCouncil,USNavy,andWorldBank).
ProfessorPenghasattractedcloseto$1millioninexternalfunding.Hishonorsinclude aNationalScienceFoundationCAREERGrant,aUSSmallBusinessAdministrationBest PaperAward,a(lifetime)DistinguishedScholarAwardfromtheSouthwesternAcademy ofManagement,anda(lifetime)ScholarlyContributionAwardfromtheInternational AssociationforChineseManagementResearch.Hehasbeenquotedin TheEconomist, Newsweek,DallasMorningNews,SmartBusinessDallas,AtlantaJournal-Constitution, TheExporterMagazine,TheWorldJournal,BusinessTimes (Singapore), SingTaoDaily (Vancouver),and BrasilEconômico (SãoPaulo),aswellasonVoiceofAmerica.
AbouttheAuthorvii
Prefacexxiii
1 StrategizingAroundtheGlobe2
OpeningCase:TheGlobalStrategyof GlobalStrategy 3
ClosingCase:EmergingMarkets:Microsoft’sEvolvingChinaStrategy27
2 ManagingIndustryCompetition32
OpeningCase:EmergingMarkets:CompetingintheIndianRetail Industry33
ClosingCase:EmergingMarkets:HighFashionFightsRecession57
3 LeveragingResourcesandCapabilities62
OpeningCase:IBMat10063
ClosingCase:EmergingMarkets:FromCopycatstoInnovators85
4 EmphasizingInstitutions,Cultures,andEthics92
OpeningCase:CutSalariesorCutJobs?93
ClosingCase:FacebookViolatesPrivacy119
PART 2 BUSINESS-LEVEL STRATEGIES 125 5 GrowingandInternationalizingtheEntrepreneurialFirm126
OpeningCase:EmergingMarkets:Amazon.comofRussia127
ClosingCase:EmergingMarkets:Microfinance:MacroSuccessorGlobal Mess?149
6 EnteringForeignMarkets154
OpeningCase:EntertheUnitedStatesbyBus155
ClosingCase:EmergingMarkets:PearlRiverGoesAbroad182
7 MakingStrategicAlliancesandNetworksWork188
OpeningCase:EmergingMarkets:Yum!BrandsTeamsUpwith Sinopec189
ClosingCase:EmergingMarkets:BP,AAR,andTNK-BP215
8 ManagingGlobalCompetitiveDynamics222
OpeningCase:PatentWarsandSharkAttacks223
ClosingCase:EmergingMarkets:HTCFightsApple253
PART 3 CORPORATE-LEVEL STRATEGIES 257 9 Diversifying,Acquiring,andRestructuring258
OpeningCase:EmergingMarkets:CorporateDiversificationStrategyinSouth KoreanBusinessGroups259
ClosingCase:EmergingMarkets:EmergingAcquirersfromChinaand India288
10 Strategizing,Structuring,andLearningAroundtheWorld294
OpeningCase:EmergingMarkets:Samsung’sGlobalStrategyGroup295
ClosingCase:ASubsidiaryInitiativeatBayerMaterialScienceNorth America321
11 GoverningtheCorporationAroundtheWorld326
OpeningCase:HighDramaatHewlett-Packard(HP)327
ClosingCase:EmergingMarkets:ThePrivateEquityChallenge353
12 StrategizingwithCorporateSocialResponsibility360
OpeningCase:LaunchingtheNissanLeaf:TheWorld’sFirstElectric Car361
ClosingCase:WholeFoods’ JohnMackeyonConsciousCapitalism385
IntegrativeCases389 IC1 3iGroup’sPrivateEquityInvestmentinChina’sLittleSheep391
IC2 TeliaSonera:ANordicInvestorinEurasia404
IC3 TheIndianBusinessProcessOffshoringIndustry409
IC4 WynnMacau:GamblingontheEdgeofChina412
IC5 Ryanair418
IC6 SolarWorldUSA424
IC7 SnowSportsInteractive:AGlobalStart-up’sChallenges431
IC8 Wikimart:BuildingaRussianVersionofAmazon436
IC9 TexasInstrumentsinSouthKorea:AnEducationalOpportunity440
IC10 JobekdoBrasil’sJointVentureChallenges448
IC11 TheAntitrustCaseontheAT&T–T-MobileMerger456
IC12 OceanParkFightsHongKongDisneyland460
IC13 Nomura’sIntegrationofLehmanBrothers’ AssetsinAsiaand Europe462
IC14 BaosteelEurope465
IC15 BankofAmerica’sCorporateSocialResponsibilityandtheOccupy WallStreetMovement471
Glossary477
IndexofOrganizations491
IndexofNames499
IndexofSubjects517
CONTENTS AbouttheAuthorvii
Prefacexxiii
PART 1 FOUNDATIONSOF GLOBAL STRATEGY 1 CHAPTER 1
StrategizingAroundtheGlobe2
OpeningCase:TheGlobalStrategyof GlobalStrategy 3
A Global Global-StrategyBook4 EmergingMarkets1.1 Foxconn6 EmergingMarkets1.2 GE’sReverseInnovationfromtheBaseofthe Pyramid8
WhyStudyGlobalStrategy?9 WhatIsStrategy?10 Origin10 PlanversusAction10 StrategyasTheory11 StrategyinAction1.1 GermanandFrenchMilitaryStrategy,191412 FundamentalQuestionsinStrategy15 WhyDoFirmsDiffer?15 HowDoFirmsBehave?16 WhatDeterminestheScopeoftheFirm?17 WhatDeterminestheSuccessandFailureofFirmsAroundthe Globe?18
WhatIsGlobalStrategy?19 WhatIsGlobalization?20
ThreeViewsonGlobalization20 ThePendulumViewonGlobalization21 Semiglobalization22 GlobalStrategyandtheGlobalizationDebate23
OrganizationoftheBook24
ChapterSummary25
KeyTerms26
CriticalDiscussionQuestions26
TopicsforExpandedProjects26
ClosingCase:EmergingMarkets:Microsoft’sEvolvingChinaStrategy27 Notes29
CHAPTER 2
ManagingIndustryCompetition32
OpeningCase:EmergingMarkets:CompetingintheIndianRetail Industry33
DefiningIndustryCompetition34
TheFiveForcesFramework35
FromEconomicstoStrategy35
IntensityofRivalryamongCompetitors35 ThreatofPotentialEntry38
StrategyinAction2.1 TheCruiseIndustry:TooManyLoveBoats39
BargainingPowerofSuppliers41
BargainingPowerofBuyers41 ThreatofSubstitutes42
LessonsfromtheFiveForcesFramework43 StrategyinAction2.2 FromCardinalFoodstoCardinalHealth44
ThreeGenericStrategies45 CostLeadership45
StrategyinAction2.3 Ryanair:TheContinuousSearchforLowCost46 Differentiation47
Focus47
LessonsfromtheThreeGenericStrategies48 DebatesandExtensions48
ClearversusBlurredBoundariesofIndustry48 ThreatsversusOpportunities49 FiveForcesversusaSixthForce50
StuckintheMiddleversusAllRounder50
IndustryRivalryversusStrategicGroups51 IntegrationversusOutsourcing52 Industry-SpecificversusFirm-SpecificandInstitution-Specific DeterminantsofPerformance54
MakingSenseoftheDebates54
TheSavvyStrategist54
ChapterSummary55
KeyTerms56
CriticalDiscussionQuestions56
TopicsforExpandedProjects57
ClosingCase:EmergingMarkets:HighFashionFightsRecession57 Notes59
CHAPTER 3
OpeningCase:IBMat10063
UnderstandingResourcesandCapabilities64 EmergingMarkets3.1 TheOrdinaryHeroesoftheTaj66
CHAPTER 4
Resources,Capabilities,andtheValueChain67
FromSWOTtoVRIO71
TheQuestionofValue71
TheQuestionofRarity72
TheQuestionofImitability72
StrategyinAction3.1 ANA:RefreshingthePartsOtherAirlines Can’tReach73
TheQuestionofOrganization74
EmergingMarkets3.2 StrategicAmbidexterityinEmerging Economies75
DebatesandExtensions76
Firm-SpecificversusIndustry-SpecificDeterminantsofPerformance76 StaticResourcesversusDynamicCapabilities77 OffshoringversusNon-Offshoring79
DomesticResourcesversusInternational(Cross-Border)Capabilities81
TheSavvyStategist82
ChapterSummary83
KeyTerms84
CriticalDiscussionQuestions84
TopicsforExpandedProjects84
ClosingCase:EmergingMarkets:FromCopycatstoInnovators85 Notes87
EmphasizingInstitutions,Cultures,andEthics92
OpeningCase:CutSalariesorCutJobs?93 UnderstandingInstitutions94 Definitions94
WhatDoInstitutionsDo?95
EmergingMarkets4.1 ManagingUncertaintyinPakistan96 EmergingMarkets4.2 BindingInternationalCommercial Arbitration97
HowDoInstitutionsReduceUncertainty?98
AnInstitution-BasedViewofBusinessStrategy100 Overview100
TwoCorePropositions102
EmergingMarkets4.3 TheInstitution-BasedMotivationBehind EmergingMultinationals103
TheStrategicRoleofCultures105
TheDefinitionofCulture105
TheFiveDimensionsofCulture105
CulturesandStrategicChoices107
TheStrategicRoleofEthics108
TheDefinitionandImpactofEthics108 ManagingEthicsOverseas109 EthicsandCorruption110
AStrategicResponseFrameworkforEthicalChallenges111 DebatesandExtensions113
OpportunismversusIndividualism/Collectivism113
CulturalDistanceversusInstitutionalDistance114
BadApplesversusBadBarrels115
TheSavvyStrategist115
ChapterSummary117
KeyTerms117
CriticalDiscussionQuestions118
TopicsforExpandedProjects118
ClosingCase:FacebookViolatesPrivacy119
Notes120
PART 2 BUSINESS-LEVEL STRATEGIES 125 CHAPTER 5
GrowingandInternationalizingtheEntrepreneurialFirm126
OpeningCase:EmergingMarkets:Amazon.comofRussia127 EntrepreneurshipandEntrepreneurialFirms128
AComprehensiveModelofEntrepreneurship129
Industry-BasedConsiderations130 Resource-BasedConsiderations130
StrategyinAction5.1 ProfitingfromtheDirtiestJobOnline131 StrategyinAction5.2 PrivateMilitaryCompanies132
Institution-BasedConsiderations133 FiveEntrepreneurialStrategies134 Growth134
Innovation134
EmergingMarkets5.1 Israel:TheStart-UpNation135 Network136
FinancingandGovernance136 HarvestandExit138
InternationalizingtheEntrepreneurialFirm140 TransactionCostsandEntrepreneurialOpportunities140 InternationalStrategiesforEnteringForeignMarkets141 InternationalStrategiesforStayinginDomesticMarkets141 DebatesandExtensions142
TraitsversusInstitutions142
SlowInternationalizersversusBornGlobalStart-ups143 Anti-FailureBiasesversusEntrepreneur-FriendlyBankruptcyLaws144
TheSavvyEntrepreneur146
ChapterSummary147
KeyTerms147
CriticalDiscussionQuestions148
TopicsforExpandedProjects148
ClosingCase:EmergingMarkets:Microfinance:MacroSuccessorGlobal Mess?149
Notes150
CHAPTER 6
EnteringForeignMarkets154 OpeningCase:EntertheUnitedStatesbyBus155
OvercomingtheLiabilityofForeignness156
EmergingMarkets6.1 RussianFirmsSpreadTheirWings157
UnderstandingthePropensitytoInternationalize158
AComprehensiveModelofForeignMarketEntries159
Industry-BasedConsiderations160
Resource-BasedConsiderations160
Institution-BasedConsiderations161
WheretoEnter?163
Location-SpecificAdvantagesandStrategicGoals163
EmergingMarkets6.2 DubaiAirportConnectstheWorld164
Cultural/InstitutionalDistancesandForeignEntryLocations166
EmergingMarkets6.3 EmergingMultinationalsfromSouthAfrica167
WhentoEnter?168
HowtoEnter?170
ScaleofEntry:CommitmentandExperience170
ModesofEntry:TheFirstSteponEquityversusNon-equityModes170 ModesofEntry:TheSecondSteponMakingActualSelections174 DebatesandExtensions176
LiabilityversusAssetofForeignness177 GlobalversusRegionalGeographicDiversification177 Old-lineversusEmergingMultinationals:OLIversusLLL178
TheSavvyStrategist179
ChapterSummary180
KeyTerms181
CriticalDiscussionQuestions181
TopicsforExpandedProjects182
ClosingCase:EmergingMarkets:PearlRiverGoesAbroad182 Notes183
CHAPTER 7
MakingStrategicAlliancesandNetworksWork188
OpeningCase:EmergingMarkets:Yum!BrandsTeamsUpwith Sinopec189
DefiningStrategicAlliancesandNetworks190
AComprehensiveModelofStrategicAlliancesandNetworks191 StrategyinAction7.1 TheTugofWarOverJapanAirlines192
Industry-BasedConsiderations193 Resource-BasedConsiderations195
EmergingMarkets7.1 ALocalPartner’sPerspective: “BPHasBeen TreatingRussiansasSubjects” 197 Institution-BasedConsiderations198 Formation200
StageOne:ToCooperateorNottoCooperate?200
StageTwo:ContractorEquity?200
StageThree:PositioningtheRelationship202 Evolution203
CombatingOpportunism203 EvolvingfromStrongTiestoWeakTies203
FromCorporateMarriagetoDivorce205 Performance206
ThePerformanceofStrategicAlliancesandNetworks206 ThePerformanceofParentFirms207 DebatesandExtensions208
MajorityJVsasControlMechanismsversusMinorityJVsasReal Options208
AlliancesversusAcquisitions209
EmergingMarkets7.2 Embraer’sAlliancesandAcquisitions209 AcquiringversusNotAcquiringAlliancePartners211
TheSavvyStrategist211 ChapterSummary213 KeyTerms214
CriticalDiscussionQuestions214 TopicsforExpandedProjects214
ClosingCase:EmergingMarkets:BP,AAR,andTNK-BP215 Notes217
CHAPTER 8 ManagingGlobalCompetitiveDynamics222
OpeningCase:PatentWarsandSharkAttacks223 StrategyasAction224
Industry-basedConsiderations225 CollusionandPrisoners’ Dilemma225 IndustryCharacteristicsandCollusionvis-à-visCompetition229 EmergingMarkets8.1 IsaDiamond(Cartel)Forever?228
Resource-basedConsiderations231 Value231 Rarity232 Imitability232 Organization232
ResourceSimilarity232
StrategyinAction8.1 AFoxintheHenHouse234
FightingLow-CostRivals235
Institution-basedConsiderations236
FormalInstitutionsGoverningDomesticCompetition:AFocuson Antitrust236
FormalInstitutionsGoverningInternationalCompetition:AFocuson Antidumping238
EmergingMarkets8.2 FromTradeWarstoAntitrustWars239 AttackandCounterattack241
ThreeMainTypesofAttack241
Awareness,Motivation,andCapability242 CooperationandSignaling245
LocalFirmsversusMultinationalEnterprises245 DebatesandExtensions247
StrategyversusIOEconomicsandAntitrustPolicy247
CompetitionversusAntidumping249
TheSavvyStrategist249
ChapterSummary251
KeyTerms252
CriticalDiscussionQuestions252
TopicsforExpandedProjects252
ClosingCase:EmergingMarkets:HTCFightsApple253 Notes255
PART 3 CORPORATE-LEVEL STRATEGIES 257 CHAPTER 9
Diversifying,Acquiring,andRestructuring258 OpeningCase:EmergingMarkets:CorporateDiversificationStrategyin SouthKoreanBusinessGroups259
ProductDiversification261
Product-RelatedDiversification261
Product-UnrelatedDiversification261
ProductDiversificationandFirmPerformance262
GeographicDiversification263
LimitedversusExtensiveInternationalScope263
GeographicDiversificationandFirmPerformance264
CombiningProductandGeographicDiversification265
AComprehensiveModelofDiversification266
Industry-BasedConsiderations266
StrategyinAction9.1 TheEvolutionofDanisco’sCorporate Strategy267
Resource-BasedConsiderations269
StrategyinAction9.2 CanHondaJetFlyHigh?270
Institution-BasedConsiderations272
TheEvolutionoftheScopeoftheFirm273 Acquisitions276
SettingtheTermsStraight276
MotivesforMergersandAcquisitions277
EmergingMarkets9.1 Brazil’sWhopperDeal278 PerformanceofMergersandAcquisitions280
Restructuring282
SettingtheTermsStraight282
MotivesforRestructuring282
DebatesandExtensions283
ProductRelatednessversusOtherFormsofRelatedness283 AcquisitionsversusAlliances284
TheSavvyStrategist284
ChapterSummary285
KeyTerms286
CriticalDiscussionQuestions287
TopicsforExpandedProjects287
ClosingCase:EmergingMarkets:EmergingAcquirersfromChinaand India288
Notes290
CHAPTER 10
Strategizing,Structuring,andLearningAroundtheWorld294
OpeningCase:EmergingMarkets:Samsung’sGlobalStrategyGroup295 MultinationalStrategiesandStructures296 PressuresforCostReductionandLocalResponsiveness296 FourStrategicChoices297
EmergingMarkets10.1 CitroënDesignsCarsinShanghai300 FourOrganizationalStructures300 TheReciprocalRelationshipbetweenMultinationalStrategyand Structure304
AComprehensiveModelofMultinationalStrategy,Structure,and Learning304
Industry-BasedConsiderations304
Resource-BasedConsiderations306
Institution-BasedConsiderations307
StrategyinAction10.1 MovingHeadquartersOverseas308 WorldwideLearning,Innovation,andKnowledgeManagement310 KnowledgeManagement310
KnowledgeManagementinFourTypesofMultinationalEnterprises311 GlobalizingResearchandDevelopment(R&D)312 ProblemsandSolutionsinKnowledgeManagement313
DebatesandExtensions314
OneMultionationalversusManyNationalCompanies315 CorporateControlsversusSubsidiaryInitiatives315
StrategyinAction10.2 CentralizedandDecentralizedStrategic PlanningattheOilMajors316
Customer-FocusedDimensionsversusIntegration,Responsiveness,and Learning317
TheSavvyStrategist318
ChapterSummary319
KeyTerms319
CriticalDiscussionQuestions320
TopicsforExpandedProjects320
ClosingCase:ASubsidiaryInitiativeatBayerMaterialScienceNorth America321
Notes322
CHAPTER 11
GoverningtheCorporationAroundtheWorld326
OpeningCase:HighDramaatHewlett-Packard(HP)327
Owners328
ConcentratedversusDiffusedOwnership328
FamilyOwnership329
StateOwnership329
Managers330
Principal–AgentConflicts330
Principal–PrincipalConflicts331
StrategyinAction11.1 TheMurdochsversusMinority
Shareholders331
BoardofDirectors333
BoardComposition334
LeadershipStructure334
BoardInterlocks334
TheRoleofBoardsofDirectors335
DirectingStrategically335
GovernanceMechanismsasaPackage336
Internal(Voice-Based)GovernanceMechanisms337
External(Exit-Based)GovernanceMechanisms337
InternalMechanisms+ExternalMechanisms=GovernancePackage338
AGlobalPerspective339
AComprehensiveModelofCorporateGovernance340
Industry-BasedConsiderations340
Resource-BasedConsiderations342
Institution-BasedConsiderations342
DebatesandExtensions344
OpportunisticAgentsversusManagerialStewards345
GlobalConvergenceversusDivergence345 StateOwnershipversusPrivateOwnership346 EmergingMarkets11.1 WelcomingVersusRestrictingSovereign WealthFundInvestments349
TheSavvyStrategist350
ChapterSummary351
KeyTerms352
CriticalDiscussionQuestions352
TopicsforExpandedProjects353
ClosingCase:EmergingMarkets:ThePrivateEquityChallenge353
Notes355
CHAPTER 12 StrategizingwithCorporateSocialResponsibility360 OpeningCase:LaunchingtheNissanLeaf:TheWorld’sFirstElectric Car361
AStakeholderViewoftheFirm364
ABigPicturePerspective364
PrimaryandSecondaryStakeholderGroups364 AFundamentalDebate365
StrategyinAction12.1 MichaelPorteronCreating SharedValue367
AComprehensiveModelofCorporateSocialResponsibility368
Industry-BasedConsiderations370 Resource-BasedConsiderations372 Institution-BasedConsiderations373 DebatesandExtensions378 DomesticversusOverseasSocialResponsibility378 ActiveversusInactiveCSREngagementOverseas379 RacetotheBottom(“PollutionHaven”)versus RacetotheTop380
TheSavvyStrategist380
EmergingMarkets12.1 DowChemicalCompanyinChina381
ChapterSummary383
KeyTerms383
CriticalDiscussionQuestions383
TopicsforExpandedProjects384
ClosingCase:WholeFoods’ JohnMackeyon ConsciousCapitalism385
Notes386
IntegrativeCases389 IC1 3iGroup’sPrivateEquityInvestmentinChina’sLittleSheep (LilyFang,INSEAD,andRogerLeeds,JohnsHopkinsUniversity,SchoolofAdvanced InternationalStudies) 391
IC2 TeliaSonera:ANordicInvestorinEurasia (CananMutlu,UniversityofTexasatDallas) 404
IC3 TheIndianBusinessProcessOffshoringIndustry (DebmalyaMukherjee,UniversityofAkron) 409
IC4 WynnMacau:GamblingontheEdgeofChina (JavierC.Cuervo,UniversityofMacau) 412
IC5 Ryanair
(CharlesM.Byles,VirginiaCommonwealthUniversity) 418
IC6 SolarWorldUSA (DavidDarlingandFabiaBourda,UniversityofTexasatDallas) 424
IC7 SnowSportsInteractive:AGlobalStart-up’sChallenges
(MarilynL.Taylor,UniversityofMissouriatKansasCity,XiaohuaYang,University ofSanFrancisco,andDiaswati(Asti)Mardiasmo,QueenslandUniversityof Technology) 431
IC8 Wikimart:BuildingaRussianVersionofAmazon (DanielJ.McCarthyandSheilaM.Puffer,NortheasternUniversity) 436
IC9 TexasInstrumentsinSouthKorea:AnEducationalOpportunity (KrisBaker,HaroldBurman,AndrewCyders,andBenWilson,UniversityofTexasat Dallas,andYanminWu,TexasInstruments) 440
IC10 JobekdoBrasil’sJointVentureChallenges
(DirkMichaelBoehe,InsperInstituteofEducationandResearch,andLucianoBarin Cruz,HECMontréal) 448
IC11 TheAntitrustCaseontheAT&T–T-MobileMerger (MikeW.Peng,UniversityofTexasatDallas) 456
IC12 OceanParkFightsHongKongDisneyland (MichaelN.Young,HongKongBaptistUniversity) 460
IC13 Nomura’sIntegrationofLehmanBrothers’ AssetsinAsiaandEurope (MikeW.Peng,UniversityofTexasatDallas) 462
IC14 BaosteelEurope
(BerndMichaelLinke,FriedrichSchillerUniversityofJena,Germany,andAndreas Klossek,TechnicalUniversityofFreiberg,Germany) 465
IC15 BankofAmerica’sCorporateSocialResponsibilityandtheOccupyWall StreetMovement
(CathyBenjamin,VivianBrown,JamesBuchanon,GraceCrane,andMicheleHarkins, UniversityofTexasatDallas) 471
Glossary477
IndexofOrganizations491
IndexofNames499
IndexofSubjects517
PREFACE IthasbeenadecadesinceIbeganworkonthefirsteditionof
GlobalStrategy.Whilethe practiceofglobalstrategyhasclearlybecomemoreimportant,theresearchandteachingofglobalstrategyhavealsoscalednewheights.Twolandmarkeventsimportanttothe globalstrategycommunityinthepastdecadeare(1)thefoundingofadedicatedGlobal StrategyInterestGroup(GSIG)withintheStrategicManagementSociety(SMS)and(2) thelaunchofthe GlobalStrategyJournal (GSJ).Ihaveactivelysupportedthesetwo initiatives,byservingasthefirstelectedofficerofGSIG(culminatinginmyserviceas theGSIGChair)andbyservingasaninauguralmemberof GSJ’seditorialreviewboard. Ibelievethatthewidespreadadoptionof GlobalStrategy’sfirsttwoeditionshasenhanced thelegitimacyoftheglobalstrategyfield,wideneditsinfluence,andhelpedpushthe launchofthesetwoexcitinginitiatives.
Startingfrom2002,mygoalhasbeentosetanewstandardforstrategicmanagement andinternationalbusinesstextbooksingeneralandglobalstrategytextbooksinparticular. GlobalStrategy servestheneedsofthreetypesofundergraduateorMBAcourses:(1) globalorinternationalstrategycourses,(2)strategicmanagementcourses(especially thosetaughtbyinternationallyorientedinstructors),and(3)internationalbusiness courses(especiallythosetaughtbystrategicallyorientedinstructors).Basedonthe enthusiasticsupportfromstudentsandprofessorsinAngola,Australia,Austria,Brazil, Britain,Canada,Chile,China,Finland,France,Denmark,Germany,HongKong,India, Ireland,Macau,Malaysia,Mexico,theNetherlands,NetherlandsAntilles,NewZealand, Norway,Portugal,Romania,Singapore,SouthKorea,Spain,Sweden,Switzerland,Taiwan, Thailand,andtheUnitedStates,thefirsttwoeditionsachievedunprecedentedsuccess andlargelyaccomplishedmygoal.InadditiontoEnglish, GlobalStrategy isalsoavailable inChinese,Spanish,andPortuguese.Inshort, GlobalStrategy isglobal.
Thethirdeditionaspirestodoevenbetter.Itcontinuesthemarket-winningframework centeredonthe “strategytripod” pioneeredinthefirsteditionandhasbeenthoroughly updatedtocapturetherapidlymovingresearchandeventsinthepastseveralyears.Its moststrategicfeaturesinclude(1)abroadeneddefinitionof “globalstrategy,” (2)a comprehensiveandinnovativecoverage,(3)anevidence-based,in-depth,andconsistent explanationofcutting-edgeresearch,and(4)aninterestingandaccessiblewaytoengage students.
ABroadenedDefinitionof“GlobalStrategy” Inthisbook, “globalstrategy” isdefinednotasaparticularmultinationalenterprise (MNE)strategy,butas “strategyaroundtheglobe.” Whileemphasizinginternational strategy,wedonotexclusivelyfocusonit.Justlike “internationalbusiness ” isabout “business” (inadditiontobeing “international”), “globalstrategy” ismostfundamentally about “strategy” beforebeing “global.” Mostglobalstrategyandinternationalbusiness
textbookstaketheperspectiveoftheforeignentrant,typicallytheMNE,oftendealing withissuessuchashowtoenterforeignmarketsandhowtolookforlocalpartners. Importantastheseissuesare,theyonlycoveronesideofinternationalbusiness namely, theforeignside.Theotherside,naturally,ishowdomesticfirmsstrategizebycompeting againsteachotheranddealingwithforeignentrants.Failingtounderstandthe “other side,” atbest,capturesonlyonesideofthecoin.
AComprehensiveandInnovativeCoverage Withabroadeneddefinitionof “globalstrategy,” thisbookcoversthestrategiesofboth largeMNEsandsmallerentrepreneurialfirms,bothforeignentrantsanddomesticfirms, andbothfirmsfromdevelopedeconomiesandfromemergingeconomies.Asaresult,this textoffersthemostcomprehensiveandinnovativecoverageofglobalstrategytopics availableonthemarket.Inshort,itistheworld’sfirst global,global-strategybook.Its uniquefeaturesinclude:
• Achapteroninstitutions,cultures,andethics(Chapter4)andafocusontheemerging institution-basedviewofstrategy(inadditiontothetraditionalindustry-basedand resource-basedviews)throughoutthebook.
• Achapteronentrepreneurship(Chapter5),especiallyitsinternationalizationaspects.
• Achapteronglobalcompetitivedynamics(Chapter8),includingsubstantialdiscussions oncartel,antitrust,andantidumpingissuestypicallyignoredbyothertextbooks.
• Achapteronbothproductandgeographicdiversification(Chapter9),thefirsttimethese crucialaspectsofcorporatestrategiesappearinthe same textbookchapter.
• Achapteroncorporategovernancearoundtheworld(Chapter11),thefirsttimeboththe principal-agentandprincipal-principalconflictsaregiven equal “airtime.”
• Achapteroncorporatesocialresponsibility(Chapter12),anincreasinglyimportantarea ofinterest.
• Ageographicallycomprehensivecoverage,notonlycoveringfirmsfromthedeveloped economiesoftheTriad(NorthAmerica,WesternEurope,andJapan)butalsothosefrom emergingeconomiesoftheworld(withafocusonBRIC Brazil,Russia,India,andChina)
• Aconsistentthemeonethics,whichisnotonlyhighlightedinChapters4and12butalso throughoutallchaptersintheformofEthicalDilemmafeaturesandethics-basedCritical DiscussionQuestions
AnEvidence-Based,In-Depth,andConsistentExplanation Thebreadthofthefieldposesachallengetotextbookauthors.Myrespectandadmiration forthediversityofthefieldhaveincreasedtremendouslyoverthepastdecade.Toprovide anevidence-based,in-depthexplanation,Ihaveleveragedthelatestresearch(including myownforthcomingandongoingwork).1 Specifically, every articlepublishedinthepast
1Allmyarticlesarelistedatwww.mikepeng.comandwww.utdallas.edu/~mikepeng.Goto “JournalArticles.”
tenyearsinleadingjournalshasbeenconsulted.Consequently,theNotesaftereach chapterarelengthyandcomprehensive.Whilenoteverypublicationiscited,Iam confidentthatIhaveleftnomajorstreamsofresearchuntouched.Readers especially contributorstotheliterature shouldfeelfreetochecktheNameIndextoverifythis claim.(Unfortunately,anumberofolderreferenceshavetobedeletedtomakeroomfor morerecentresearch.)
Giventhebreadthofthefield,itiseasytolosefocus.Tocombatthistendency,Ihave endeavoredtoprovideaconsistentsetofframeworksin all chapters.Thisisdoneinthree ways.First,Ihavefocusedonthefourmostfundamentalquestionsinstrategicmanagement.2 Theseare:(1)Whydofirmsdiffer?(2)Howdofirmsbehave?(3)Whatdeterminesthescopeofthefirm?and(4)Whatdeterminesthesuccessandfailureoffirms aroundtheglobe?Aparticularemphasisisonthefourthquestiononfirmperformance, whichhasalsobeenarguedtobetheleadingquestionguidingglobalstrategyand internationalbusinessresearch.3
Anotherwaytocombatthetendencytolosethesightofthe “forest ” whilescrutinizing various “trees ” (oreven “branches”)istoconsistentlydrawonthestrategytripod the threeleadingperspectivesonstrategy,namely,industry-based,resource-based,andinstitution-basedviews.Aninnovativefeatureisthedevelopmentoftheinstitution-based view.In every chapter,thesethreeviewsareintegratedtodevelopacomprehensivemodel. Thisprovidesagreatdealofcontinuityinthelearningprocess.
Finally,Ihavewrittenabeefy “DebatesandExtensions” sectionfor every chapter. Virtuallyalltextbooksuncriticallypresentknowledge “asis” andignorethefactthatthe fieldisalivewithnumerousdebates.Becausedebatesdrivepracticeandresearchahead,it isimperativethatstudentsbeexposedtovariouscutting-edgedebates.
AnInterestingandAccessibleWayToEngageStudents Ifyoufearthisbookmustbeveryboringbecauseitdrawssoheavilyoncurrentresearch, youarewrong.Ihaveusedaclear,engaging,conversationalstyletotellthe “story.” Relativetorivalbooks,mychaptersaregenerallymorelivelyandshorter.Somereviewers commentedthatreading GlobalStrategy islikereadinga “goodmagazine.”
Ihavewovenalargenumberofinterestinganecdotesintothetext.Inadditionto examplesfromthebusinessworld, “outside-the-box” examplesrangefromancientChinesemilitarywritingstotheRomanEmpire’simportquotas,fromquotesfrom Anna Karenina tomutuallyassureddestruction(MAD)strategyduringtheColdWar.
Sowhat?Manytextbooksleavestudentstostrugglewiththisquestionattheendof everychapter.In GlobalStrategy,everychapterendswithasectionon “TheSavvy Strategist” withoneteachabletable/slideon “StrategicImplicationsforAction” froma practical standpoint.Noothercompetingtextbookissosavvyandsorelevant.
Studentsandprofessorsespeciallyenjoyedthewide-rangingandgloballyrelevantcases inpreviouseditions.Inthethirdedition,Ihaveworkedhardtobringtogetheranew(and Ibelievemoreattractive)setofcasematerials.Thethirdeditionhasbeenblessedbya
2R.Rumelt,D.Teece,&D.Schendel(eds.),1994, FundamentalIssuesinStrategy:AResearchAgenda,Boston: HarvardBusinessSchoolPress.
3M.W.Peng,2004,Identifyingthebigquestionininternationalbusinessresearch, JournalofInternational BusinessStudies,35(2):99–108.
globalcommunityofcasecontributorswhoarebasedinAustralia,Brazil,Canada,China, Germany,India,Singapore,andtheUnitedStates.Manyareexpertswhoarelocatedinor arefromthecountriesinwhichthecasestakeplace.Forexample,wenowhavean AustraliacasewrittenbyanAustralia-basedauthor(seeIntegrativeCaseonSnowSports Interactive),aBrazilcasepennedbyaBrazil-basedauthor(seeIntegrativeCaseonJobek doBrasil),twoMacauandHongKong,China,casescontributedbyMacau-basedand HongKong-basedauthors(seeIntegrativeCasesonWynnMacauandOceanParkfights HongKongDisneyland),andaTexasInstruments(TI)casecoauthoredbyaTIexecutive (seeIntegrativeCaseonTIinSouthKorea).ThiseditionalsofeaturesaRussiacase contributedbytheworld’stoptwoleadingexpertsonRussianmanagement(seeIntegrativeCaseonWikimart).Theendresultisanunparalleled,diversecollectionofcase materialsthatwillsignificantlyenhancetheteachingandlearningofglobalstrategy aroundtheworld.
What’sNewintheThirdEdition? Moststrategically,thethirdeditionhas(1)enhancedtheexecutivevoicebydrawingmore heavilyfromCEOsandotherstrategicleadersand(2)dedicatedmorespacetoemerging economies.
First,if GlobalStrategy aimstotrainanewgenerationofglobalstrategists,weneedto coachthemtothink,act,andtalklikeCEOs.WhileIhavetaughtafewCEOclassesin executiveeducationwith GlobalStrategy,moststudentsusingthebook eventhehighestlevelExecutiveMBA(EMBA)students havenotassumedthatkindofexecutiveresponsibilities.Tofacilitatestrategicthinking,thethirdeditionhasfeaturedmoreextensive quotesandperspectivesfromCEOsandotherstrategicleaders.Thesearelongerand morevisiblyprominentbreak-outquotes notmerelysinglequotestypicallyembedded (or “buried”)inparagraphs.InChapter1alone,youwillenjoysuchinsightfulquotes from(1)Facebook’sfounder,chairman,andCEO,(2)GE’schairmanandCEO,(3) Microsoft’sCEOofGreaterChina,and(4)P&G’schairmanandCEO.Inlaterchapters, thefollowingleaderswillsharetheirthoughtswithyou:
BayerNorthAmerica’sCEO
CarlyleGroup’sco-founderandmanaging director
DowChemical’sCEO
GE’sformerchairmanandCEO
IBM’sCEO
LG’schairman
TNK-BP’schairmanandCEO
USSecretaryofJustice(representingthe DepartmentofJustice ’schallengeof AT&T’sproposedmergerwithT-Mobile)
USSecretaryofTreasury(onthe US-ChinaStrategicandEconomic Dialogue)
WholeFoods’ co-founderandCEO
Second,thiseditionbuildson GlobalStrategy’spreviousstrengthsbymoreprominentlyhighlightingglobalstrategychallengesinandoutofemergingeconomies.Thisis bothareflectionoftheglobalrealitiesinwhichemergingeconomieshaveplayedamore importantroleandareflectionofmyownstrongresearchinterestinemergingeconomies.Specifically,inthethirdedition,(1)anewEmergingMarketsin-chapterfeatureis launchedineverychapter,and(2)morethanhalfofthelongerIntegrativeCasesarenow
devotedtocompetitioninandoutofemergingeconomies(includingonecaseonBrazil, twoonRussia,oneonIndia,andfiveonChina).
Ofcourse,inadditiontothesenewfeatures,everychapterhasbeenthoroughly updated.Ofthe15IntegrativeCases,14(93%)arenewtothisedition.Ofthe60inchapterfeatures(eachchapterhasanOpeningCase,aClosingCase,andthreeboxes),54 (90%)arenew.
Overall,thethirdeditionof GlobalStrategy haspackedrigorwithrelevance,timeliness withexcitement,andthestrategicwiththepractical.Toseehowthisbook,itselfaglobal product,competesaroundtheworld,checkouttheChapter1OpeningCase.
SupportMaterials Afullsetofsupportmaterialsisavailableforadoptinginstructorsontheaccompanying InstructorResourceCD,ensuringthatinstructorshavethetoolstheyneedtoplan,teach, andassesstheircourse.Theseresourcesinclude:
• Instructor’sManual Thiscomprehensivemanualprovideschapteroutlines,lecture notes,andsampleresponsestoend-of-chapterquestions,providingacompletesetof teachingtoolstosaveinstructorstimeinpreparingforclassandtomaximizestudent successwithintheclass.TheInstructor’sManualalsoincludesnotestoaccompanythe IntegrativeCasesfromthetext.
• Testbank Therobust GlobalStrategy testbankcontainsawiderangeofquestionswith varyingdegreesofdifficultyintrue/false,multiple-choice,andshortanswer/essay formats.Allquestionshavebeentaggedtothetext’slearningobjectivesandaccordingto AASCBstandardstoensurestudentsaremeetingnecessarycriteriaforcoursesuccess. InstructorscanusetheincludedExamView® softwarepackagetoview,choose,andedit theirtestquestionsaccordingtotheirspecificcourserequirements.
• PowerPoint® Slides EachchapterincludesacompletesetofPowerPointslidesdesigned topresentrelevantchaptermaterialinawaythatwillallowmorevisuallearnerstofirmly graspkeyconcepts.
Acknowledgment As GlobalStrategy launchesitsthirdedition,Ifirstwanttothankallthecustomers professors,instructors,andstudentsaroundtheworldwhohavemadethebook ’ ssuccess possible.Asmy(non-book-related)researchnotonlyprogressesbutalsoaccelerateswhile Iworkonthebook,Ialsowanttothankmyover90coauthorsaroundtheworldforbeing inactiontogetherwithmeontheresearchfront.
AtUTDallas,IthankmycolleaguesDanBochsler,LarryChasteen,TevDalgic,Van Dam,GregDess,DaveFord,RichardHarrison,MariaHasenhuttl,CharlieHazzard, MarilynKaplan,Seung-HyunLee,ElizabethLim,JohnLin,LiviaMarkóczy,JoePicken, RobertoRagozzino,OrlandoRichard,JaneSalk,MaryVice,EricTsang,andHabte Woldu,aswellasthesupportiveleadershipteam HasanPirkul(dean),VargheseJacob (associatedean),andGregDess(areacoordinator).IalsothankmytwoPhDstudents, BrianPinkham(nowatTexasChristianUniversity)andSteveSauerwald,fortheir researchassistance.OnePhDstudent(CananMutlu),fourMBAstudents(KrisBaker,
HaroldBurman,AndrewCyders,andBenWilson),andsevenEMBAstudents(Cathy Benjamin,FabiaBourda,VivianBrown,JamesBuchanon,GraceCrane,DavidDarling, andMicheleHarkins)authoredexcellentcasematerials.
AtSouth-WesternCengageLearning,Ithankthe “Pengteam” thatnotonlypublishes GlobalStrategy butalso GlobalBusiness and GLOBAL. Our GlobalStrategy teamincludes ErinJoyner,Publisher;MicheleRhoades,SeniorAcquisitionsEditor;JoshWells,Associate DevelopmentEditor;JonathanMonahan,MarketDevelopmentManager;RobEllington, MediaEditor;andTammyGrega,EditorialAssistant.
Intheacademiccommunity,Iwouldliketothankthereviewers:
CharlesM.Byles(Virginia CommonwealthUniversity)
SaraB.Kimmel(BelhavenCollege)
TedW.Legatski(TexasChristian University)
JunLi(UniversityofNewHampshire)
CarolSanchez(GrandValleyState University)
Inaddition,Ithankmanycolleagueswhoprovidedinformalfeedbacktomeonthe book.OverthelastdecadeIhavebeenblessedbysuchfeedbackfromhundredsof colleaguesfromaroundtheworld.Spaceconstraintshereforcemetoonlyacknowledge colleagueswhowrotemesincethesecondedition,sincecolleagueswhowrotemeearlier werethankedinearliereditions.(IfyouwrotemebutIfailedtomentionyournamehere, myapologies blamethisonthevolumeofsuchemails.)
M.Ambashankar(GuptaCollegeof Management,India)
HariBapuji(UniversityofManitoba, Canada)
BalbirBhasin(UniversityofArkansasat FortSmith,USA)
MuraliChari(RensselaerPolytechnic Institute,USA)
TeeYinChaw(ManagementandScience University,Malaysia)
JoyceFalkenberg(NorwegianSchoolof EconomicsandBusinessAdministration, Norway)
ToddFitzgerald(SaintJoseph’sUniversity, USA)
MylesGartland(RockhurstUniversity,USA)
DennisGarvis(WashingtonandLee University,USA)
JohnGerace(ChestnutHillCollege,USA)
MikeGeringer(OhioUniversity,USA)
MariaHasenhuttl(UniversityofTexas atDallas,USA)
KatalinHaynes(TexasA&MUniversity, USA)
StephanieHurt(MeredithCollege, USA)
AnisulIslam(UniversityofHouston, USA)
BasilJanavaras(MinnesotaState University,USA)
MarshallShibingJiang(BrockUniversity, Canada)
FerryJie(UniversityofTechnology, Sydney,Australia)
BenKedia(UniversityofMemphis,USA)
AldasKriauciunas(PurdueUniversity, USA)
SumitKundu(FloridaInternational University,USA)
SomnathLahiri(IllinoisStateUniversity, USA)
Seung-HyunLee(UniversityofTexasat Dallas,USA)
DavidLiu(GeorgeFoxUniversity,USA)
AnoopMadhok(YorkUniversity,Canada)
MikePoulton(DickinsonCollege,USA)
DavidPritchard(RochesterInstituteof Technology,USA)
PradeepKantaRay(UniversityofNew SouthWales,Australia)
DavidReid(SeattleUniversity,USA)
AlRosenbloom(DominicanUniversity, USA)
AnneSmith(UniversityofTennessee,USA)
ClydeStoltenberg(WichitaState University,USA)
SteveStrombeck(AzusaPacificUniversity, USA)
JoseVargas-Hernandez(Universidadde Guadalajara,Mexico)
LorenVickery(WesternOregon University,USA)
GeorgeWhite(OldDominionUniversity, USA)
EnXie(Xi’anJiaotongUniversity,China)
GracyYang(UniversityofSydney, Australia)
HaibinYang(CityUniversityofHong Kong,China)
RichardYoung(MinnesotaState University,USA)
WuZhan(UniversityofSydney,Australia)
Ialsowanttothanksixveryspecialcolleagues:SunWeiandLuiXinmei(Xi’ an JiaotongUniversity)inChina,JoaquimCarlosRacy(PontifíciaUniversidadeCatólica deSãoPaulo)andGeorgeBedinelliRossi(UniversidadedeSãoPaulo)inBrazil,and MercedesMunoz(TecnológicodeMonterrey)andOctavioNava(UniversidaddelValle deMexico)inMexico.Theylovedthebooksomuchthattheywerewillingtoendurethe painoftranslatingthefirstandsecondeditionsintoChinese,Portuguese,andSpanish. Theirhardworkhasenabled GlobalStrategy toreachwideraudiencesglobally,livingup toitsself-proclaimedtaglineasa “global, global-strategybook.”
Inthisedition,30colleagues includingoneexecutivefromTexasInstruments graciouslycontributedcases:
KrisBaker(UniversityofTexasatDallas, USA)
CathyBenjamin(UniversityofTexasat Dallas,USA)
DirkMichaelBoehe(InsperInstituteof EducationandResearch,Brazil)
FabiaBourda(UniversityofTexasat Dallas,USA)
VivianBrown(UniversityofTexasat Dallas,USA)
JamesBuchanon(UniversityofTexasat Dallas,USA)
HaroldBurman(UniversityofTexasat Dallas,USA)
CharlesByles(VirginiaCommonwealth University,USA)
LucianoBarinCruz(HECMontreal, Canada)
GraceHeCrane(UniversityofTexasat Dallas,USA)
JavierCuervo(UniversityofMacau,China)
AndrewCyders(UniversityofTexasat Dallas,USA)
DavidDarling(UniversityofTexasat Dallas,USA)
RohitDeshpande(HarvardBusiness School,USA)
LilyFang(INSEAD,Singapore)
MicheleHarkins(UniversityofTexasat Dallas,USA)
AndreasKlossek(TechnicalUniversityof Freiberg,Germany)
RogerLeeds(JohnsHopkinsUniversity, USA)
BerndMichael(FriedrichSchiller UniversityofJena,Germany)
DanielMcCarthy(Northeastern University,USA)
Diaswati(Asti)Mardiasmo(Queensland UniversityofTechnology,Australia)
DebmalyaMukherjee(Universityof Akron,USA)
CananMutlu(UniversityofTexasat Dallas,USA)
SheilaPuffer(NortheasternUniversity,USA)
AnjaliRaina(HBSIndiaResearchCenter, India)
MarilynTaylor(UniversityofMissouriat KansasCity,USA)
BenWilson(UniversityofTexasatDallas, USA)
YanminWu(TexasInstruments,USA)
XiaohuaYang(UniversityofSan Francisco,USA)
MichaelYoung(HongKongBaptist University,China) twocases
Inaddition,theworkofthefollowingglobaldignitarieswasreprintedtogracethe pagesofourbook:
MikhailFridman(chairmanandCEOof TNK-BPandfounderofAlfaGroup, Russia)
JohnMackey(co-founderandCEOof WholeFoods)
MichaelPorter(strategyguruatHarvard BusinessSchool)
Last,butnomeansleast,IthankmywifeAgnes,mydaughterGrace,andmyson James towhomthisbookisdedicated.IhavenamedAgnesCEO,CFO,CIO,CTO,and CPOforourfamily,thelastofwhichiscoinedbyme,whichstandsfor “chiefparenting officer.” TenyearsagoGracewasanewbornandJameswasstillwaitingforhisturnto showupintheworld.Nowmyten-year-oldGrace,alreadyavoraciousreaderandwriter, canhelpmeedit,andmyeight-year-oldJamescanassistmetoentergrades.Graceis writingandeditingher17thshortstorycalled MyMagicLife,andJamesisveryinterested increatingLegomodels.Fornow,GracewantstobealawyerandJamesabanker.Asa third-generationprofessorinmyfamily,Ican’thelpbutwonderwhetherone(orboth)of themwillbecomeafourth-generationprofessor.Toallofyou,mythanksandmylove.
December1,2012
CHAPTER1 STRATEGIZING AROUNDTHE GLOBE KNOWLEDGEOBJECTIVES Afterstudyingthischapter,youshouldbeableto
1.Offerabasiccritiqueofthetraditional,narrowlydefined “globalstrategy”
2.Articulatetherationalebehindstudyingglobalstrategy
3.Definewhatisstrategyandwhatisglobalstrategy
4.Outlinethefourfundamentalquestionsinstrategy
5.Participateinthedebateonglobalizationwithareasonablybalancedview andakeenawarenessofyourlikelybias
©istockphoto/AlexeyStiop
TheGlobalStrategyof GlobalStrategy Launchedin2005, GlobalStrategy hasbeenusedby businessschoolsinover30countriesandisnowavailable inChinese,Spanish,andPortugueseinadditiontoEnglish. GlobalStrategy hasalsospawnedtworelatedbooks: GlobalBusiness (amorecomprehensive,traditionaltextbook ininternationalbusiness)and GLOBAL (amorecompact, innovativepaperback).Everybodyknowsglobalcompetitionistough.Howdo GlobalStrategy anditssisterbooks competearoundtheworld?Inotherwords,whatisthe natureoftheglobalstrategyof GlobalStrategy?
GlobalStrategy anditssisterbooksarepublishedby South-WesternCengageLearning,whichisadivisionofCengageLearning.CengageLearningservesstudents,teachers, andlibrariesinthesecondaryandhighereducationmarkets, aswellasgovernmentagenciesandcorporations.Whilethe copyrightpageofthisbookindicatesanaddressinMason, Ohio(asuburbofCincinnati),notethatthisistheaddressfor thespecific division:South-Western.ThecorporateheadquartersofCengageLearningisinStamford,Connecticut.CengageLearningisaglobalcompany,whichisownedbyApax PartnersoftheUKandOMERSCapitalPartnersofCanada, twoprivateequitygroups.Overall,theglobalnatureofCengageLearningpermeatestheorganization:itisUK-and Canadian-ownedandUS-headquartered.Withannualsales ofover$2billion,CengageLearninghasapproximately 5,800employeesworldwideacross35countries.
Inbusinessandeconomicstextbooks,South-Western CengageLearningviesfornumberoneintheworldin termsofmarketsharewithMcGraw-HillIrwinandPearson PrenticeHall,theothertwomembersoftheBigThree inthisindustry.Whilecompetitionhistoricallyfocusedon theUnitedStatesandotherEnglish-speakingcountries,itis nowworldwide. GlobalStrategy targetscoursesinstrategic managementandinternationalbusiness.Whilethereisno shortageoftextbooksinthesetwoareas, GlobalStrategy brokenewgroundbybeingthefirsttospecificallyaddress their intersection.ThankstoenthusiasticstudentsandprofessorsinAngola,Australia,Austria,Brazil,Britain,Canada, Chile,China,Finland,France,Denmark,Germany,Hong Kong,India,Ireland,Japan,Macau,Malaysia,Mexico,the Netherlands,NetherlandsAntilles,NewZealand,Norway,
Portugal,Romania,Singapore,SouthKorea,Spain,Sweden,Taiwan,Thailand,andtheUnitedStates, GlobalStrategy achievedunprecedentedsuccess.
WhilecompetitionisprimarilyamongtheBigThree, GlobalStrategy hasalsoattractednewentrants competing textbookspublishedbysmaller,historicallymorespecialized academicpublisherssuchasCambridge,Oxford,andWiley thatareinterestedinbreakingintothemainstreamtextbook market.Inadditiontonewentrants,thepublishingindustry hasalsobeenexperiencinganotherchallenge:thedigital revolution.E-bookshaveemergedasaviablesubstituteto theprintedversion.AmazonnowsellsmoreKindle versionsthanprintedversionsofbooks.Tokeepupwith thismovement,theKindleversionof GlobalStrategy has beenavailablesincethesecondedition.
Althoughcompetition,intheory,isglobal,inpractice CengageLearningneedstowinonelocalmarketafter another literally,onecoursetaughtbyoneinstructorin oneschoolinonecountry.Obviously,noinstructorteachesglobally,andnostudentstudiesglobally.Teaching andlearningremainverylocal.Forthecompanyasa
