B415 POB Lecture 8

1. Principles of Business
Global Business Models – Part 2

2. Overview
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• Go into detail about the types of firms that are
operating internationally and their structures e.g. MNC’s
and born globals
• Detail the different forms of international business
activity
• Strategic approaches to internationalisation
• Consider the various product based strategies that are
available to global firms
• What are the various market entry approaches that are
available to firms going global
• Determining the optimal business model and structure
for global firms (considering Uppsala model)
• Determine the key implications of competition versus
co-opetition business models
• Determine why does the ‘black market’ exist
• What are the key issues and challenges relating to the
black market

3. Learning Outcomes
• Go into detail about the types of firms that are operating
internationally and their structures e.g. MNC’s and born
globals
• Detail the different forms of international business activity
• Strategic approaches to international markets
• Consider the various product based strategies that are
3
available to global firms
• What are the various market entry approaches that are
available to firms going global
• Determining the optimal business model and structure for
global firms (considering Uppsala model)
• Determine the key implications of competition versus co-opetition
business models
• Determine why does the ‘black market’ exist
• What are the key issues and challenges relating to the
black market

4. Operating On a Global Scale
Source: HEL.org.uk

5. An Example from FMCG

6. Strategic Approaches to International
Markets
Multidomestic
Strategy
A decentralised
approach to
international
expansion in which a
company creates
highly independent
operating units in
each new country
Global Strategy
Low global
integration and low
local responsiveness.
Categorised as a low
risk option involving a
form of
import/export
methodology

7. Strategic Approaches to International
Markets
International
Strategy
A highly centralised
approach to
international
expansion, with
headquarters in the
home country making
all major decisions
Transnational
Strategy
A hybrid approach
that attempts to reap
the benefits of
international scale
while being
responsive to local
market dynamics

8. Uppsala Model of Internationalisation
Source: Uppsala

9. Concept of Psychic Distance
In international business and marketing settings, psychic
distance is based on perceived differences between a home
country and a "foreign" country regardless of physical time
and space factors which differs across diverse cultures.
These factors are associated with country-based
diversities and dissimilarities and can be grouped into
four clear areas —
• Linguistic differences and translation difficulty.
• Cultural Factors – societal norms, level of individualism
or collectivism, values and customs.
• Economic Situation – existing trading links,
infrastructure, local conditions, competition and
investor confidence.
• Political and Legal System – government stability and
risk of instability, import tariffs, legal protection and
taxation levels.
Source: Daniels et al, 2013

10. Decision to go ‘Global’: OLI Framework
• Entry mode is influenced by
• Ownership advantages
– the firm’s core
competencies
• Location advantages
– the combination of sales
opportunity and investment
risk that creates favorable
locations in foreign markets
• Internalization advantages
– reflect companies’
response to market
imperfections that often
create uncertainties
John Dunning
Source: Daniels et al, 2013

11. Decision to go ‘Global’: OLI Framework
Source: Daniels et al, 2013

12. Born Globals
Classically, born globals, or international new ventures (INVs)
are defined by one source as “business organisations that,
from inception, seek to derive significant competitive
advantage from the use of resources and the sale of outputs
in multiple countries”. A more quantitative definition is
“companies who have reached a share of foreign sales of at
least 25 per cent within a time frame of two to three years
after their establishment”.
Key Principles:
New market
conditions – the
presence of global
networks and
alliances,
homogenisation
of buyers’
Technological
advances –
advances in
communication
technology, e-business
possibilities
Learning from
overseas –
tapping into
technological
innovation and
the networks of
people

13. Globalisation or Glocalocalisation?
Theodore Levitt Roland Robertson
Significant socio-cultural
and political convergence is
taking place leading to
greater homogeneity of the
world
The heterogeneous nature
of the world blends the
‘native’ and ‘foreign’

14. An HSBC Evolution… spot the difference
Pre-2010
Post-2010
Consider why they opted for this new approach?

15. Why global firms alter products?
Legal Considerations
• Labeling requirements
• Environmental-protection
regulations
• Indirect Legal Considerations
• Issues of standardisation
Cultural Considerations
• Religious considerations
• Social considerations
• Norms
Economic Considerations
• Income level and distribution
• Infrastructure
Let’s consider:

16. Re-Cap: McProduct

17. Re-Cap: McPrice

18. Re-Cap: McPlace

19. Re-Cap: McPromotion

20. Global Supply Chain
Source: Bovee et al, 2013

21. Competition or Co-opetition in Global
Business?
Co-Creation
Experience
Firm and Consumer
(one to one)
Variety of Co-creation
Experiences
Firm and Consumer
Communities
(one to many)
Personalisation of the
Co-creation
Experience
Multiple Firms and
Multiple Communities
(many to many)
Case Study: Cardiac Pacemakers
Primary
Doctor
Patient
Medical
Specialist
Scan Clinic
Doctor on
call
Other
Patients
Manufacturer
Emergency
Services
Source: The Future of Competition, Prahalad and Ramaswamy, 2004

22. Role of Strategic Alliances & JVs
View video: https://www.youtube.com/watch?v=yZFcsYuFYiY#t=70

23. Role of Strategic Alliances & JVs
Advantages Disadvantages
• Geographic synergies
• Economies of scale
• Reduced risk
• Shared learnings
• Cultural issues
• Realising synergies
• Dominant organisation
(effective take-over)

24. The Global ‘Black’ Market: A growing
industry?
The International Anti-Counterfeiting Coalition (IACC)
estimates that international trade in illegitimate goods runs
more than U.S. $600 billion a year – approximately 5 to 7%
of world trade. Furthemore, piracy has grown over 10,000%
in the past two decades.
Counterfeiting is
astoundingly
profitable: Gross
margins of 500 to
5,000%
Counterfeit
medicines are
more profitable
than heroin
Copies of high-end
software rival
return from
cocaine

25. The Global ‘Black’ Market: A Mobile Example
View video: http://www.bbc.co.uk/news/uk-england-london-26979061

26. Essential work for next week
• Please consult the OLE for details of:
– Essential readings*
– Seminar/workshop preparation work*
– Recommended further readings
– Any additional learning
* Essential readings and preparation work must always be completed in time
for the next session
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27. Appendix – Sources for illustrations
Slide 5:
www.flatworldknowledge.com
Slide 10:
www.eiasm.org
Slide 13:
www.21cbr.com
Slide 14:
www.hsbc.com
Slide 16-19
www.slideshare.com
Slide 22:
www.denverpost.com
Slide 26:
www.answers.com

28. End of presentation
© Pearson College 2013