Working Notes: George S. Yip, 'Total Global Strategy II' - Chapter 1
Sunday, December 24, 2006 at 08:24AM
Full source reference:
George S. Yip, Total Global Strategy II, Pearson Education International, Prentice Hall, Upper Saddle River, N.J. 07458, 2003, 299 p. ISBN: 0-13-017917-5
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This chapter provides the basics of the understanding of Yip’s strategy and you can get by with only this chapter in terms of general dinner conversations. The first thing to watch out for is the key (three steps) to a successful global strategy …
- Developing the core (corporate strategy) build on a sustainable competitive advantage.
- Internationalization (of the core strategy); i.e. engaging in international business some way or the other. Basically a stepping stone to the global level.
- Globalization of core/internationalization strategy. The crucial thing here is that this step goes (normatively) against the need to adapt to local market needs. The dictum goes that if only your global strategy is strong enough you will not need to adapt. We are speaking of global integration of the company’s business practices, value chain, marketing, managerial culture etc.
What it all boils down to is the globalization triangle on p. 7 (exhibit 1-3). The triangle shows how the benefits and costs of globalization depend on three distinct aspects of the process of globalizing strategy. In terms of the general framework this is what it is all about! Essentially, Yip’s framework is contained within this triangle. The three distinct aspects are.
1. Industry Globalization Drivers
This is an important place to start since we are talking somewhere between the macro- and micro level here. In essence, we need to recognize that not all industries provide the same characteristics which enable companies to globalize their strategies. This is important because it means we already here have our continuum fleshed out. I.e. some industries are just not suited for globalized strategies and integration and as such we might need some kind of local/regional adaptation; e.g. the car industry. The important point obviously becomes to asses the potential; i.e. how far can we go here and thereby obtain the maximum benefits from globalization? Yip constructs a framework based on the following four industry drivers.
Cost Drivers – To what extent do the cost trends in the industry push for globalization? E.g. increased cost of product development relative to market life.
Market Drivers – To what extent does international market tendencies push for globalization of the strategy. E.g. convergence of customer needs/wants, world brands, growth of global and regional supply channels, increased travel etc.
Government Drivers – To what extent do government policies enable (or impede) the need and possibility to globalize the strategy. E.g. reduction of tariff and non-tariff barriers, creation of trade blocs, global shift towards global market economies etc.
Competitive Drivers – To what extent do the actions of our competitors enable (or force) us to globalize our strategy. E.g. rise of ‘lead’ countries as a result of global trade specialization, rise of born-global companies (i.e. the internet!), and increased foreign ownership of companies etc.
2. Global Strategy Levers
This aspect involves the strategic decision making process within the given company. The point is that although the industry itself might reflect notable globalization potential the decisions made by the company must reflect this. I.e. Yip speaks about choices made in terms of strategic dimensions …
Market Participation – choice of markets and level of activity in each of these markets; i.e. choosing the right place to be.
Products/services – Do we offer the same products in different markets? Do we want to?
Location of Value added activities – Where do we locate our activities in the value chain? Do we have a global strategy here?
Competitive Moves – How integrated is our overall market strategy; i.e. do we tailor our competitive moves according to our different markets or do we integrate/coordinate our strategy across markets.
3. Management and Organizational Factors
This aspect basically involves the actual implementation of the global strategy in terms of the organizational aspects. In short, the nature of our organization [1] can both stimulate and impede the creation of a global strategy …
Organization structure – How does our formal organizational structure accommodate the creation of an integrated global strategy? And more importantly, what can we do to our organizational structure to make better to accommodate our strategy?
Culture – Here are talking the overall nature of our corporate culture but also the culture of the manager and employees. Once again, this can act as a facilitator or impeding factor.
People – Ok, this constitutes the employees and their ability/willingness to participate in the process of globalizing the corporate strategy.
Management Process – Same thing as above; is the current management process facilitating or impeding the transition towards a global strategy.
[1] In the end the organization is of course endogenous to this whole process but arguably some things cannot be changed easily such as for example; the international inexperience of a manager (well you can fire him of course J ).
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