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J. GEORGE FRYNAS AND KAMEL MELLAHI

OXFORD

UNIVERSITY PRESS

Great Clarendon Street, Oxford, 0X 2 6DP.

United Kingdom

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© J^drzej George Frynas and Kamel Mellahi 2015

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First Edition 2005

Second Edition 2011

Impression: 1

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British Library Cataloguing in Publication Data

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Library of Congress Control Number: 2014943574

ISBN 978-0-19-870659-5

Printed in Great Britain by

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Contents

Pre'ace xv

Adnowledgements xvii

Ho.v to use this book xvin

Ho.v to use the Online Resource Centre xx

PA(- T 1 Introduction

1 Introduction to global strategic management 3

Learning outcomes 3

Opening case study: IKEA 3

1.1 Introduction 5

1.2 Defining the strategic management field 6

1.3 Phases of global strategy 7

'1.3.1 Singie-couniry strategy 7

1.3.2 Export strategy 10

1.3.3 International strategy 10

13 4 Global strategy 10

1.4 International strategy versus global strategy 11

1 4.1 Global integration versus national responsiveness 12

1 4 2 Pressures towards regional integration 12

1.5 Defining global strategic management 13

1.6 Drivers for a global strategic perspective 15

1.6.1 Macro globalizing drivers 16

16.2 Industry globalizing drivers 24

16.3 Internal globalizing drivers 27

1.7 Organization of the book 28

Key readings 28

Discussion questions 29

Closing case study: Walmart vs. LVM H -tw o retailers, two different

global strategies 29

References 32

vi C O N T E N T S

PART 2 Global strategic analysis

2 Global business environment: the external macro environment 37

Learning outcomes 37

Opening case study: Embraer and the external business environment 37

2.1 Introduction 39

2.2 The external business environment 40

2.2.1 Identifying threats and opportunities 40

2.2 2 Strategic fit and firm performance 41

2.3 PEST analysis 42

2.4 The political environment 44

2 4 1 Regional integration 45

2A 2 Government legislation 47

2.4 3 Political risk 47

2.4 4 Corruption 48

2.5 The economic environment 49

2.5.1 Cost of production 50

2.5.2 Currency exchange rates 51

2 5.3 Cost of capital 52

2 5.4 Rate of taxation 53

2.6 The social environment 54

2 6.1 Social change 54

2 6 2 Global convergence 54

2.7 The technological environment 55

2.71 Global technology scanning and technology clusters 55

2.72 The knowledge-based economy 56

2.73 The spread of the Internet 57

2.8 The CAGE framework 58

2 81 Cultural differences 60

2 8.2 Administrative differences 60

2.8 3 Geographic differences 61

2.8 4 Economic differences 61

2.9 National environmental influences and the Diamond Model 62

2.91 Factor conditions 63

2.9 2 Demand conditions 63

2 9.3 Related and supporting industries 65

2 94 Firm strategy, structure, and rivalry 65

2.10 Criticisms of the Diamond Model 66

2.10 1 The Diamond Model for small nations 66

2 10.2 The Diamond Model and globalization 67

210 3 Response to criticisms 67

2.11 Summary 68

Key readings 68

C O N T E N T S

• •

VII

Discussion questions 69

Closing case study Japan's video game industry and global competition 69

References 74

3 Global business environment: the industry environment 77

Learning outcomes 77

Opening case study: Global economic recession and super luxury cars 77

3.1 Introduction 79

3.2 Understanding and adapting to industry environment 79

3 2.1 Market segmentation analysis 79

3 2.2 Strategic group analysis 81

3 2.3 Challenges of segmenting the business environment 82

3.3 The Five Forces Model 83

3 31 Barr iers to entry 86

3.3.2 Bargaining power of buyers and suppliers 90

3.3.3 Threat of substitutes 92

3.3.4 Rivalry 93

3.4 Criticisms of the Five Forces Model 95

3 4 1 Static vs dynamic competition 95

34 2 Industry profitability 96

3 4 3 Response to criticisms 96

3.5 Industry evolution 97

3.5.1 The five phases of the International Product Life Cyc le HPi C) 97

3 5.2 Criticisms of the IPLC model 100

3.6 Anticipating the future 101

3.6.1 Forecasting 101

3.6.2 Scenario analysis 103

3.6.3 Anticipating the future and globalization 104

3.7 Summary 104

Key readings 105

Discussion questions 106

Closing case study: The rise of Linux-the battle for the operating system market 106

References 109

4 Global business environment: analysis of the internal environment 112

Learning outcomes 112

Opening case study Google.com 112

4.1 Introduction 114

4.2 Positioning perspective vs resource-based perspect ve 114

4.2.1 The positioning perspective 115

4 2.2 The resource-based perspective 116

4 2.3 Industry profitability vs firm profitability 116

• • •

VIII CONTENTS

4.3 Analysing firm resources and capabilities 117

4 3.1 Resources 117

4.3.2 Capabilities 118

4 3 3 Core competencies 119

4 3 4 The VRIO framework 121

4.3.5 Resources and capabilities in multinational firms 122

4 3.6 Changing global markets and dynamic capabilities 123

4.4 Global value chains and value systems 125

4 4.1 Value added 126

4 4.2 Value chain analysis 127

4.4.3 Value system analysis 129

4.4 4 Value analysis and cost advantages 132

4 4.5 Value analysis and strategic linkages 132

4 4 6 Value analysis and global location decisions 133

4.5 Comparative analysis 134

4 5.1 Competitor intelligence 1.34

4.5.2 Benchmarking 136

4 5 3 Internal comparative analysis 137

4.5 4 Compaiative analysis in global maikets 138

4.6 Summary 139

Key readings 139

Discussion questions 140

Closing case study: Clothing industry supply chains and Zara's business model 140

References 143

PART 3 Global strategic development

5 Managing the internationalization process 149

Learning outcomes 149

Opening case study: Internationalization of a French retailer-Carrefour 149

5.1 Introduction 151

5.2 Decision and motives to internationalize 151

5.2.1 Organizational factors 151

5.2 2 Environmental factors 153

5.2.3 Motives for foreign investment 154

5.3 The internationalization process 155

5.3.1 Timing of market entry 155

5 3 2 Obstacles to internationalization 156

5 3 3 Managers'perceptions 157

5 3 4 Psychic distance and internationalization 158

5.3 5 The Uppsala Model 159

5.4 Criticisms of the Uppsala Model 161