USA: +1(669)289-8683
USA: +1(669)289-8683

Unit 3 Discussion Questions

Instructions: There are 2 discussion questions. Read each discussion question thoroughly and answer in 150 words or more.

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper

Discussion Question 1.) In chapter 2 of the textbook, it talks about Porter’s Five Forces analysis.o Requirements: Discuss what you learned from the chapter and how you can apply what you learned to your workplace.Discussion Question 2.) Read the Integrative Case 3 at the back of the textbook Global Strategy.o Requirements: Discuss the questions at the end of the Integrative Case 3 9780357512364_IFC.indd 1
25/11/20 4:54 PM
9780357512364_INS1.indd 1
25/11/20 4:54 PM
Global Strategy
FIFTH EDITION
Mike W. Peng, Ph.D.
Jindal Chair of Global Strategy
University of Texas at Dallas
Chair, Global Strategy Interest Group, Strategic Management Society (2008)
Decade Award Winner, Journal of International Business Studies (2015)
Fellow, Academy of International Business (since 2012)
and Asia Academy of Management (since 2019)
The Only Global-Strategy Textbook Author Listed among Highly Cited
Researchers (among the top 0.1% most cited researchers worldwide)
(every year since 2014)
Australia
• Brazil • Canada• Mexico • Singapore • United Kingdom • United States
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
This is an electronic version of the print textbook. Due to electronic rights restrictions,
some third party content may be suppressed. Editorial review has deemed that any suppressed
content does not materially affect the overall learning experience. The publisher reserves the right
to remove content from this title at any time if subsequent rights restrictions require it. For
valuable information on pricing, previous editions, changes to current editions, and alternate
formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for
materials in your areas of interest.
Important Notice: Media content referenced within the product description or the product
text may not be available in the eBook version.
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Global Strategy, Fifth Edition
Mike W. Peng
© 2022, 2017 Cengage Learning, Inc.
SVP, Higher Education & Skills Product: Erin Joyner
Unless otherwise noted, all content is © Cengage.
VP, Higher Education & Skills Product: Michael
Schenk
ALL RIGHTS RESERVED. No part of this work covered by the copyright herein
may be reproduced or distributed in any form or by any means, except as
permitted by U.S. copyright law, without the prior written permission of the
copyright owner.
Product Director: Joe Sabatino
Product Manager: Heather Mooney
WCN: 02-300
Content Manager: Anubhav Kaushal,
MPS Limited
For product information and technology assistance, contact us at
Digital Delivery Lead: Drew Gaither
Cengage Customer & Sales Support, 1-800-354-9706 or
support.cengage.com.
Product Assistant: Nick Perez
Director, Marketing: Kristen Hurd
For permission to use material from this text or product,
Marketing Manager: Audrey Wyrick
submit all requests online at
Marketing Coordinator: Alexis Cortez
www.cengage.com/permissions.
IP Analyst : Diane Garrity
IP Project Manager: Nick Barrows
Library of Congress Control Number: 2020949397
Production Service: MPS Limited
ISBN: 978-0-357-51236-4
Sr. Art Director: Bethany Bourgeois
Cover & Text Designer: Bethany Bourgeois
Cover Image Source: iStock.com/busracavus
Map Credit: pingebat/Shutterstock.com
Cengage
200 Pier 4 Boulevard
Boston, MA 02210
USA
Cengage is a leading provider of customized learning solutions with employees
residing in nearly 40 different countries and sales in more than 125 countries
around the world. Find your local representative at www.cengage.com.
To learn more about Cengage platforms and services, register or access
your online learning solution, or purchase materials for your course, visit
www.cengage.com.
Printed in the United States of America
Print Number: 01   Print Year: 2020
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
To Agnes, Grace, and James
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Brief Contents
List of In-Chapter Features and Integrative Cases
Preface xv
About the Author xx
PA R T
PA R T
xi
1 Foundations of Global Strategy 1
1
Strategizing Around the Globe 2
2
Managing Industry Competition
3
Leveraging Resources and Capabilities
4
Emphasizing Institutions, Cultures, and Ethics
32
58
84
2 Business-Level Strategies 113
5 Growing and Internationalizing the Entrepreneurial Firm
PA R T
6
Entering Foreign Markets
7
Making Strategic Alliances and Networks Work
8
Managing Competitive Dynamics
114
140
168
194
3 Corporate-Level Strategies 223
9
Diversifying and Managing Acquisitions Globally
224
10 Strategizing, Structuring, and Innovating Around the World
PA R T
11
Governing the Corporation Globally
12
Strategizing on Corporate Social Responsibility
254
282
314
4 Integrative Cases 341
Glossary 426
Index of Names 438
Index of Organizations 451
Index of Subjects 454
iv
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Brief Contents
Contents
List of In-Chapter Features and Integrative Cases xi
Preface xv
About the Author xx
PA R T
1 Foundations of
Global Strategy
chapter 1 Strategizing Around
the Globe 2
opening case: Zoom 3
Why Study Global Strategy? 5
What is Strategy? 6
Origin 6
Plan versus Action 6
Strategy as Theory 7
Strategy in Action 1.1: German and
French Military Strategies in 1914 7
Strategy in Action 1.2: Selling Star Wars
to LEGO Top Management 10
Strategy, Strategist, and Strategic
Leadership 11
Fundamental Questions in Strategy 12
Why Do Firms Differ? 12
How Do Firms Behave? 14
What Determines the Scope of the
Firm? 15
What Determines the Success and Failure
of Firms Around the Globe? 15
Strategy in Action 1.3: Confessions of
Your Textbook Author 16
What is Global Strategy? 17
Globalization and Semiglobalization 17
What Is Globalization? 17
The Swing of a Pendulum 18
Black Swan and Risk Management 19
Semiglobalization 20
Debates and Extensions 20
Debate 1: Globalization versus
Deglobalization 20
Debate 2: Strategic versus Nonstrategic
Industries 22
Debate 3: Just-in-Time versus Just-in-Case
Management 22
Fostering Critical Strategic Thinking
Through Debates 23
Organization of the Book 23
Chapter Summary 24
Key Terms 24
Critical Discussion Questions 24
Topics for Expanded Projects 25
Closing Case: Two Scenarios of the Global
Economy in 2050 25
Notes 27
chapter 2 Managing Industry
Competition 32
Opening Case: Global Competition in the
Cruise Industry 33
Defining Industry Competition 35
The Five Forces Framework 35
From Economics to Strategy 35
Rivalry among Competitors 37
Threat of Entrants 37
Strategy in Action 2.1: High Fashion
Fights Recession 38
Bargaining Power of Suppliers 40
Bargaining Power of Buyers 40
Threat of Substitutes 41
Lessons from the Five Forces
Framework 41
Strategy in Action 2.2: Digital Strategy
and Five Forces 42
Three Generic Strategies 43
Cost Leadership 43
Differentiation 44
Focus 45
Lessons from the Three Generic
Strategies 45
Debates and Extensions 45
Debate 1: Clear versus Blurred Definitions
of Industry 46
Debate 2: Industry Rivalry versus
Strategic Groups 46
Debate 3: Integration versus
Outsourcing 47
Debate 4: Stuck in the Middle versus
All-Rounder 48
Debate 5: Economies of Scale versus 3D
Printing 48
Strategy in Action 2.3: Singapore Airlines
Is Both a Differentiator and a Cost
Leader 49
Debate 6: Industry-Specific versus FirmSpecific and Institution-Specific
Determinants of Performance 50
Making Sense of the Debates 50
The Savvy Strategist 50
Chapter Summary 51
Key Terms 51
Critical Discussion Questions 52
Topics For Expanded Projects 52
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
v
vi
Contents
The Strategic Role of Culture 94
The Definition of Culture 94
The Five Dimensions of Culture 95
Cultures and Strategic Choices 96
The Strategic Role of Ethics 97
The Definition and Impact of Ethics 97
Managing Ethics Overseas 98
Strategy in Action 4.2: Onsen and Tattoos
in Japan 98
Ethics and Corruption 99
A Strategic Response Framework
for Ethical Challenges 100
Strategy in Action 4.3: Monetizing the
Maasai Tribal Name 101
Debates and Extensions 102
Debate 1: Opportunism versus
Individualism/Collectivism 102
Debate 2: Cultural Distance versus
Institutional Distance 103
Debate 3: Freedom of Speech versus
Censorship on the Internet 104
The Savvy Strategist 105
Chapter Summary 106
Key Terms 106
Critical Discussion Questions 107
Topics For Expanded Projects 107
Closing Case: IKEA’s Challenge in Saudi
Arabia 107
Notes 108
Closing Case: The Future of the
Automobile Industry 52
Notes 54
chapter 3 Leveraging Resources
and Capabilities  58
opening case: Canada Goose Flies High 59
Understanding Resources and
Capabilities 60
Resources, Capabilities, and the Value
Chain 62
From Swot to Vrio 65
The Question of Value 66
The Question of Rarity 66
The Question of Imitability 66
Strategy in Action 3.1: ASML 67
The Question of Organization 68
Strategy in Action 3.2: CIMC  69
Debates and Extensions 70
Debate 1: Firm-Specific versus
Industry-Specific Determinants of
Performance 71
Debate 2: Static Resources versus
Dynamic Capabilities 71
Debate 3: Offshoring versus
Nonoffshoring 72
Debate 4: Domestic Resources versus
International (Cross-Border)
Capabilities 74
Strategy in Action 3.3: Natura 75
The Savvy Stategist 76
Chapter Summary 77
Key Terms 77
Critical Discussion Questions 78
Topics For Expanded Projects 78
Closing Case: H-E-B Fights
Coronavirus 78
Notes 80
chapter 4 Emphasizing Institutions,
Cultures, and Ethics  84
Opening Case: Brexit and Strategic
Choices 85
Understanding Institutions 87
Definitions 87
What Do Institutions Do? 88
How Do Institutions Reduce
Uncertainty? 88
An Institution-Based View of Business
Strategy 90
Overview 90
Two Core Propositions 92
Strategy in Action 4.1: The American
Guanxi Industry 93
Institutional Logics and Hybrid
Organizations 94
PA R T
2 Business-Level
Strategies
chapter 5 Growing and Internationa­
lizing the Entrepreneurial
Firm 114
Opening Case: The New East India
Company 115
Entrepreneurship and Entrepreneurial
Firms 116
A Comprehensive Model of
Entrepreneurship 117
Industry-Based Considerations 118
Resource-Based Considerations 119
Institution-Based Considerations 120
Strategy in Action 5.1: Europe’s
Entrepreneurship Deficit 120
Five Entrepreneurial Strategies 121
Growth 122
Strategy in Action 5.2: Tory Burch’s Rise
in the Fashion Industry 122
Innovation 123
Network 123
Financing and Governance 124
Harvest and Exit 125
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Contents
Internationalizing the Entrepreneurial
Firm 126
International Strategies for Entering
Foreign Markets 126
International Strategies for Staying in
Domestic Markets 127
Debates and Extensions 128
Debate 1: Traits versus Institutions 128
Debate 2: Slow Internationalizers versus
Born Global Start-ups 128
Strategy in Action 5.3: Immigrant
Entrepreneurs 129
Debate 3: High-Growth Entrepreneurship
versus Ethically Questionable
Behavior 130
The Savvy Entrepreneur 131
Chapter Summary 132
Key Terms 132
Critical Discussion Questions 132
Topics For Expanded Projects 133
Closing Case: Boom in Busts: Good
or Bad? 133
Notes 134
chapter 6 Entering Foreign
Markets 140
Opening Case: Amazon Enters India 141
Overcoming Liability of Foreignness 143
Understanding the Propensity to
Internationalize 143
Strategy in Action 6.1 Nordic
Multinationals 144
A Comprehensive Model of Foreign
Market Entries 145
Industry-Based Considerations 145
Resource-Based Considerations 146
Institution-Based Considerations 147
Where to Enter? 148
Location-Specific Advantages and
Strategic Goals 148
Cultural and Institutional Distances
and Foreign Entry Locations 150
When to Enter? 150
How to Enter? 152
Scale of Entry: Commitment and
Experience 152
Modes of Entry: The First Step on Equity
versus Nonequity Modes 152
Modes of Entry: The Second Step
in Making Actual Selections 155
Strategy in Action 6.1: Thai Union’s
Foreign Market Entries 157
Debates and Extensions 157
Debate 1: Liability versus Asset of
Foreignness 157
Debate 2: Old-Line versus Emerging
Multinationals: OLI versus LLL 158
vii
Debate 3: Global versus Regional
Geographic Diversification 159
Debate 4: Contractual versus
Noncontractual
Approaches of Entry 159
Strategy in Action 6.3: Goldman Sachs
Enters Libya 160
The Savvy Strategist 161
Chapter Summary 162
Key Terms 162
Critical Discussion Questions 162
Topics For Expanded Projects 163
Closing Case: How Firms from Emerging
Economies Fight Back 163
Notes 164
chapter 7 Making strategic alliances
and networks work 168
Opening Case: Even Toyota Needs
Friends 169
Defining Strategic Alliances and
Networks 170
A Comprehensive Model of Strategic
Alliances and Networks 171
Industry-Based Considerations 171
Resource-Based Considerations 172
Rarity 173
Imitability 174
Organization 174
Institution-Based Considerations 175
Formation 176
Stage One: To Cooperate or Not to
Cooperate? 176
Stage Two: Contractual or Equity
Modes? 176
Stage Three: How to Position the
Relationship? 177
Strategy in Action 7.1: Delta Spreads Its
Wings Globally 178
Evolution 178
Combating Opportunism 178
Evolving from Strong Ties to Weak
Ties 179
From Corporate Marriage to
Divorce 180
Strategy in Action 7.2: Yum Brands,
McDonald’s, and Sinopec 181
Performance 182
The Performance of Strategic Alliances
and Networks 182
The Performance of Parent Firms 183
Debates and Extensions 184
Debate 1: Majority JVs as Control
Mechanisms versus Minority
JVs as Real Options 184
Debate 2: Alliances versus
Acquisitions 184
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
viii
Contents
Debate 3: Acquiring versus Not Acquiring
Alliance Partners 185
Strategy in Action 7.3: Renaussanbishi: No
Way! 186
The Savvy Strategist 187
Chapter Summary 188
Key Terms 188
Critical Discussion Questions 189
Topics For Expanded Projects 189
Closing Case: Fiat Chrysler: From Alliance
to Acquisition 189
Notes 190
chapter 8 Managing Competitive
Dynamics 194
Opening Case: Jetstar’s Rise in the Asia
Pacific 195
Strategy as Action 196
Industry-Based Considerations 198
Collusion and Prisoner’s Dilemma 198
Industry Characteristics and Collusion
vis-à-vis Competition 198
Strategy in Action 8.1: The Global
Vitamin Cartel 200
Resource-Based Considerations 201
Value 201
Rarity 202
Imitability 202
Organization 202
Resource Similarity 202
Competitor Analysis 202
Strategy in Action 8.2: Alibaba versus
Amazon 204
Institution-Based Considerations 205
Formal Institutions Governing Domestic
Competition: A Focus on
Antitrust 205
Formal Institutions Governing
International Competition: A Focus
on Antidumping 207
Attack and Counterattack 208
Three Main Types of Attack 208
Awareness, Motivation, and Capability 210
Cooperation and Signaling 211
Debates and Extensions 211
Debate 1: Strategy versus Antitrust
Policy 211
Debate 2: Competition versus
Antidumping 213
Strategy in Action 8.3: Brussels versus
Google 214
The Savvy Strategist 215
Chapter Summary 216
Key Terms 216
Critical Discussion Questions 217
Topics for Extended Projects 217
Closing Case: Is There an Antitrust Case
Against Big Tech? 217
Notes 219
PA R T
3 Corporate-Level
Strategies
chapter 9 Diversifying and Managing
Acquisitions Globally 224
Opening Case: The Growth of Marriott
International 225
Product Diversification 227
Product-Related Diversification 227
Product-Unrelated Diversification 227
Strategy in Action 9.1: Starbucks
Diversifies into Tea 227
Product Diversification and Firm
Performance 228
Geographic Diversification 229
Limited versus Extensive International
Diversification 229
Geographic Diversification and Firm
Performance 229
Combining Product and Geographic
Diversification 230
A Comprehensive Model of
Diversification 231
Industry-Based Considerations 231
Resource-Based Considerations 232
Institution-Based Considerations 234
The Evolution of the Scope of the Firm 235
Acquisitions 238
Setting the Terms Straight 238
Motives for Mergers and
Acquisitions 239
Performance of Mergers and
Acquisitions 240
Strategy in Action 9.2: GE–Alstom: A
Deal Too Far? 241
Strategy in Action 9.3: Can Mergers of
Equals Work? 242
Debates and Extensions 243
Debate 1: Product Relatedness versus
Other Forms of Relatedness 243
Debate 2: Old-Line versus New-Age
Conglomerates 244
Debate 3: High Road versus Low Road
in Integration 245
Debate 4: Acquisitions versus
Alliances 246
The Savvy Strategist 246
Chapter Summary 248
Key Terms 248
Critical Discussion Questions 248
Topics for Expanded Projects 249
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Contents
Closing Case: Puzzles Behind Emerging
Multinationals’ Acquisitions 249
Notes 250
chapter 10 Strategizing, Structuring,
and Innovating Around the
World 254
Opening Case: Launching the McWrap 255
Multinational Strategies and Structures 256
Pressures for Cost Reduction and Local
Responsiveness 256
Four Strategic Choices 257
Strategy in Action 10.1: KFC Leverages
Artificial Intelligence in China 259
Four Organizational Structures 260
The Reciprocal Relationship between
Multinational Strategy and
Structure 262
A Comprehensive Model of Multinational
Strategy, Structure, and Innovation 262
Industry-Based Considerations 263
Resource-Based Considerations 264
Institution-Based Considerations 265
Strategy in Action 10.2: Canadian Apotex,
Indian Production, and EU, UK, and
US Regulations 265
Strategy in Action 10.3: Moving
Headquarters 267
Worldwide Learning, Innovation,
and Knowledge Management 269
Knowledge Management 269
Knowledge Management in Four Types
of Multinational Enterprises 269
Globalizing Research and
Development 271
Problems and Solutions in Knowledge
Management 272
Debates and Extensions 273
Debate 1: Headquarters Control versus
Subsidiary Initiative 273
Debate 2: Customer-Focused Dimensions
versus Integration, Responsiveness,
and Learning 273
The Savvy Strategist 274
Chapter Summary 275
Key Terms 276
Critical Discussion Questions 276
Topics for Expanded Projects 276
Closing Case: Subsidiary Initiative at
Schenck Shanghai Machinery 277
Notes 278
chapter 11 Governing the Corporation
Globally 282
Opening Case: The Murdochs versus
Minority Shareholders 283
ix
Owners 284
Concentrated versus Diffused
Ownership 284
Family Ownership 285
State Ownership 285
Managers 286
Principal-Agent Conflicts 286
Principal-Principal Conflicts 287
Board of Directors 288
Board Composition 288
Strategy in Action 11.1: The Debate about
Independent Directors in China 289
Leadership Structure 290
Board Interlocks 290
The Role of Boards of Directors 290
Strategy in Action 11.2: Professor Michael
Jensen as an Outside Director 291
Directing Strategically 291
Governance Mechanisms as a Package 292
Internal (Voice-Based) Governance
Mechanisms 292
External (Exit-Based) Governance
Mechanisms 293
Internal Mechanisms + External
Mechanisms 5 Governance
Package 294
A Global Perspective 294
Strategy in Action 11.3: Global
Competition in How to Best Govern
Large Firms 296
A Comprehensive Model of Corporate
Governance 297
Industry-Based Considerations 297
Resource-Based Considerations 298
Institution-Based Considerations 298
Debates and Extensions 300
Debate 1: Opportunistic Agents versus
Managerial Stewards 300
Debate 2: Global Convergence versus
Divergence 301
Debate 3: Value versus Stigma of Multiple
Directorships 301
Debate 4: State Ownership versus Private
Ownership 302
The Savvy Strategist 304
Chapter Summary 305
Key Terms 305
Critical Discussion Questions 306
Topics for Expanded Projects 306
Closing Case: The Private Equity
Challenge 306
Notes 308
chapter 12 S trategizing on Corporate
Social Responsibility 314
Opening Case: Starbucks’s Corporate Social
Responsibility Journey 315
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
x
Contents
A Stakeholder View of the Firm 317
A Big Picture Perspective 317
Strategy in Action 12.1: Global Warming
and Arctic Boom 318
Stakeholder Groups, Triple Bottom Line,
and ESG 319
A Fundamental Debate 320
A Comprehensive Model of Corporate
Social Responsibility 322
Strategy in Action 12.2: Giants of the
Sea 323
Industry-Based Considerations 323
Resource-Based Considerations 325
Strategy in Action 12.3: Can McDonald’s
Set the Chickens Cage-Free? 326
The CSR-Economic Performance
Puzzle 326
Institution-Based Considerations 327
Debates and Extensions 330
Debate 1: Reducing versus Contributing
toward Income Inequality 330
Debate 2: Domestic versus Overseas Social
Responsibility 331
Debate 3: Active versus Inactive CSR
Engagement Overseas 332
Debate 4: Race to the Bottom (“Pollution
Haven”) versus Race to the Top 332
The Savvy Strategist 333
Chapter Summary 334
Key Terms 335
Critical Discussion Questions 335
Topics For Expanded Projects 335
Closing Case: The Ebola Challenge 336
Notes 337
PA R T
4 Integrative Cases
IC 8
The Final Frontier of Outsourcing to India
(by A. P. Krishnan) 367
IC 9
Volkswagen’s Emissions Scandal
(by B. E. Coates) 372
IC 10 Private Military Companies
(by M. W. Peng)
375
IC 11 Snowsports Interactive: A Global Start-Up’s
Challenges
(by M. L. Taylor, X. Yang, and D.
Mardiasmo) 379
IC 12 Business Jet Makers Eye China
(by M. W. Peng)
384
IC 13 Carlsberg in Russia
(by M. W. Peng)
386
IC 14 Enter North America by Bus
(by M. W. Peng)
388
IC 15 Etihad Airways’ Alliance Network
(by M. W. Peng)
390
IC 16 Jobek do Brasil’s Joint Venture Challenges
(by D. M. Boehe and L. B. Cruz)
392
IC 17 Saudi Arabia in OPEC: Price Leader in a Cartel
(by M. W. Peng)
398
IC 18 
AGRANA: From a Local Supplier to a Global Player
(by M. Hasenhüttl and E. PleggenkuhleMiles) 402
IC 19 Nomura’s Integration of Lehman Brothers
(by M. W. Peng)
407
IC 20 
Cyberattack on TNT Express and Impact on
Parent Company FedEx
(by W. E. Hefley) 409
IC 1
The Consulting Industry
(by M. W. Peng) 342
IC 21 Shanghai Disneyland
IC 2
The Asia Pacific Airline Industry
(by M. W. Peng) 346
IC 22 Samsung’s Global Strategy Group
IC 3
LEGO’s Secrets
(by M. W. Peng) 349
IC 23 Corporate Governance the HP Way
IC 4
BMW at 100
(by K. Meyer)
IC 24 
When CSR Is Mandated by the Government in
351
IC 5 
Occidental Petroleum (Oxy): From Also-Ran to
(by M. W. Peng)
(by M. W. Peng)
(by M. W. Peng)
414
417
419
India
(by N. Kathuria) 422
Segment Leader
(by C. F. Hazzard) 355
IC 25 Wolf Wars
IC 6
Tesla’s CEO Quits Presidential Councils
(by Y. H. Jung) 360
IC 7
Legalization of Ride-Hailing in China
(by Y. Li) 362
Glossary 426
Index of Names 438
Index of Organizations 451
Index of Subjects 454
(by M. W. Peng)
424
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
List of In-Chapter Features
and Integrative Cases
Action
location
Headquarters
location
Industry
CH 1
Strategizing around the globe
Opening Case
Zoom
Worldwide
USA
Videoconference
SIA 1.1
German and French military strategies
Belgium/France
Germany/France
Military
SIA 1.2
Selling Star Wars to LEGO top
management
North America/
worldwide
Denmark
Toy
SIA 1.3
Confessions of your textbook author
Worldwide
USA
Publishing
Closing Case
Two scenarios of the global economy
in 2050
Worldwide
Worldwide
Unspecified
CH 2
Managing industry competition
Opening case
Global competition in the cruise industry
Worldwide
USA
Cruise
SIA 2.1
High fashion fights recession
Worldwide
USA/Europe
Fashion
SIA 2.2
Digital strategy and five forces
Worldwide
Worldwide
Digital/AI
SIA 2.3
Singapore Airlines
Worldwide
Singapore
Airline
Closing Case
The future of the automobile industry
Worldwide
USA/Europe/
Japan/Korea
Automobile
CH 3
Leveraging Resources and Capabilities
Opening Case
Canada Goose flies high
Worldwide
Canada
Apparel
SIA 3.1
ASML
Worldwide
The Netherlands
Chipmaking
equipment
SIA 3.2
CIMC
Worldwide
China
Containers
SIA 3.3
Natura
Brazil/worldwide Brazil
Cosmetics
Closing Case
H-E-B fights coronavirus
USA
USA
Supermarkets
CH 4
Emphasizing institutions, cultures, and ethics
Opening Case
Brexit and strategic choices
UK/EU/
rest of the world
Automobile,
financial
services, and
agriculture
UK/EU
SIA 5.1
The American guanxi industry
USA
USA
Lobbying
SIA 5.2
Onsen and tattoos in Japan
Japan
Japan
Bathhouse
SIA 5.3
Monetizing the Maasai tribal name
Kenya
The West
Unspecified
Closing Case
IKEA’s challenge in Saudi Arabia
Saudi Arabia
Sweden
Furniture retail
xi
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
xii
List of In-Chapter Features and Integrative Cases
Action
location
Headquarters
location
Industry
CH 5
Growing and internationalizing the entrepreneurial Firm
Opening Case
The new East India Company
UK
UK
High-end retail
SIA 5.1
Europe’s entrepreneurship deficit
Europe
Europe
Unspecified
SIA 5.2
Tory Burch’s rise in the fashion industry
Worldwide
USA
Fashion
SIA 5.3
Immigrant entrepreneurs
Worldwide
Worldwide
Unspecified
Closing Case
Boom in busts: Good or bad
Worldwide
Worldwide
Unspecified
CH 6
Entering foreign markets
Opening Case
Amazon in India
India
USA
E-commerce
SIA 6.1
Nordic multinationals
Worldwide
Nordic countries
Unspecified
SIA 6.2
Thai Union’s foreign market entries
Worldwide
Thailand
Seafood
SIA 6.3
Goldman Sachs enters Libya
Libya
USA
Financial services
Closing Case
How firms from emerging economies
fight back
Worldwide
Emerging
economies
Unspecified
CH 7
Making strategic alliances and networks work
Opening Case
Even Toyota needs friends
Worldwide
Japan
Automobile
SIA 7.1
Delta spreads its wings globally
Worldwide
USA
Airline
SIA 7.2
Yum Brands, McDonald’s, and Sinopec
China
USA/China
Fast food and
energy
SIA 7.3
Renaussanbishi: No way!
France/Japan
France/Japan
Automobile
Closing Case
Fiat Chrysler: From alliance to acquisition Italy/USA
Italy/USA
Automobile
CH 8
Managing competitive dynamics
Opening Case
Jetstar’s rise in the Asia Pacific
Asia Pacific
Australia
Airline
SIA 8.1
The global vitamin cartel
Worldwide
Switzerland/
Germany/France/
Japan
Vitamin
SIA 8.2
Alibaba versus Amazon
China/
worldwide
China/USA
E-commerce
SIA 8.3
Brussels versus Google
Europe
USA
Tech
Closing Case
Is there an antitrust case against
Big Tech?
USA
USA
Tech
CH 9
Diversifying and managing acquisitions globally
Opening Case
The growth of Marriott International
Worldwide
USA
Hotel
SIA 9.1
Starbucks diversifies into tea
Worldwide
USA
Beverage service
SIA 9.2
GE-Alstom: A deal too far?
France
USA
Conglomerates
SIA 9.3
Can mergers of equals work?
Unspecified
Unspecified
Unspecified
Closing Case
Puzzles behind emerging multinationals’
acquisitions
Worldwide
Emerging
economies
Unspecified
CH 10
Strategizing, structuring, and innovating around the World
Opening Case
Launch the McWrap
USA/Europe
USA
Fast food
SIA 10.1
KFC leverages artificial intelligence in
China
China
USA
Fast food
SIA 10.2
Canadian Apotex, Indian production,
and EU, UK, and US regulations
India
Canada
Pharmaceuticals
SIA 10.3
Moving headquarters
Worldwide
Worldwide
Unspecified
Closing Case
Subsidiary initiative at Schenck Shanghai
China
Germany
Machinery
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
List of In-Chapter Features and Integrative Cases
Action
location
Headquarters
location
Industry
xiii
CH 11
Governing the corporation globally
Opening Case
The Murdochs versus minority
shareholders
USA/UK
USA
Media
SIA 11.1
The debate about independent directors
in China
China
China
Unspecified
SIA 11.2
Professor Michael Jensen as an outside
director
USA
USA
Unspecified
SIA 11.3
Global competition in how to best
govern large firms
Worldwide
Worldwide
Unspecified
Closing Case
The private equity challenge
Worldwide
Worldwide
Unspecified
CH 12
Strategizing on corporate social responsibility
Opening Case
Starbucks’ CSR journey
USA/UK
USA
Beverage service
SIA 12.1
Global warming and Arctic boom
The Arctic
region
Australia/Canada/ Shipping and
Denmark/Russia
mining
SIA 12.2
Giants of the sea
Worldwide
Denmark
Shipping
SIA 12.3
Can McDonald’s set the chickens
cage-free?
Worldwide
USA
Fast food
Closing Case
The Ebola challenge
Africa/USA
USA/Canada/
Europe
Pharmaceutical
Worldwide
USA/Europe
Consulting
Integrative cases
IC 1
The consulting industry
IC 2
The Asia Pacific airline industry
Asia Pacific
Asia Pacific
Airline
IC 3
LEGO’s secrets
Worldwide
Denmark
Toys
IC 4
BMW at 100
Worldwide
Germany
Automobile
IC 5
Occidental Petroleum (Oxy):
From also-ran to segment leader
Worldwide
USA
Energy
IC 6
Tesla’s CEO quits presidential councils
USA
USA
Automobile
IC 7
Legalizing ride-hailing in China
China
China/USA
Ride hailing
IC 8
The final frontier of outsourcing to India
India/USA
India
Commercial
surrogacy
IC 9
Volkswagen’s emissions scandal
USA/worldwide
Germany
Automobile
IC 10
Private military companies
Worldwide
USA/UK
Private military
IC 11
SnowSports Interactive: A global start-up’s
challenges
Australia
Australia
Skiing
IC 12
Business jet makers eye China
China
Brazil/Canada/
France/USA
Business aviation
IC 13
Carlsberg in Russia
Russia
Denmark
Beer
IC 14
Enter North America by bus
USA
UK
Motor coach
travel
IC 15
Etihad Airways’s alliance network
Worldwide
UAE
Airline
IC 16
Jobek do Brasil’s joint venture challenge
Brazil
Brazil/USA
Furniture
IC 17
Saudi Arabia in OPEC: Price leader in
a cartel
Worldwide
Saudi Arabia/
Austria
Energy
IC 18
AGRANA: From a local supplier to
a global player
Worldwide
Austria
Food processing
IC 19
Nomura’s integration of Lehman Brothers USA/UK
Japan
Investment
banking
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
xiv
List of In-Chapter Features and Integrative Cases
IC 20
Cyberattack on TNT Express and impact
on parent company FedEx
Action
location
Headquarters
location
Industry
Europe/The
Netherland
USA
Express delivery
IC 21
Shanghai Disneyland
China
USA
Theme park
IC 22
Samsung’s global strategy group
Worldwide
Korea
Conglomerate
IC 23
Corporate governance the HP way
USA
USA
IT
IC 24
When CSR is mandated by the
government of India
India
India
Unspecified
IC 25
Wolf wars
USA
USA
Ranching and
hunting
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Preface
T
he first four editions of Global Strategy have made this
book the world’s number-one global-strategy textbook.
The fifth edition aspires to do even better. Global Strategy
has set a new standard for (1) global or international stra­
tegy courses, (2) strategic management courses, and (3) international business courses at the undergraduate and MBA
levels. It has been widely used in Angola, Australia, Austria,
Brazil, Britain, Canada, Chile, China, Denmark, Egypt, Finland, France, Germany, Hong Kong, India, Indonesia, Ireland,
Israel, Lithuania, Macau, Malaysia, Mexico, the Netherlands,
Netherlands Antilles, New Zealand, Norway, Peru, the Philip­
pines, Portugal, Puerto Rico, Romania, Russia, Singapore,
Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, and the United States. Now available
in Chinese, Portuguese, and Spanish, Global Strategy is global.
Written during the tumultuous time of the coronavirus
that shut down most of the global economy, the fifth edition
continues the market-winning framework centered on the
strategy tripod pioneered in the first edition. Its most strategic features include (1) a broadened definition of global
strategy; (2) an evidence-based, in-depth, and consistent
explanation of cutting-edge research; and (3) an interesting
and accessible way to engage students.
A Broadened Definition of
“Global Strategy”
In this text, “global strategy” is defined not as a particular
multinational enterprise (MNE) strategy but as strategy
around the globe. In other words, we do not exclusively
focus on international strategy. Global strategy is most
fundamentally about strategy before being global. Most
global-strategy textbooks take the perspective of the foreign
entrant, typically the MNE, and ignore the other side. The
other side—namely, the domestic side—does not sit around
waiting for its market to be invaded. Instead, domestic firms
actively strategize, too. Failing to understand the other side
captures only one side of the coin at best.
Offering a more balanced and more inclusive perspective,
Global Strategy covers the strategies of both large MNEs and
small entrepreneurial start-ups, both foreign entrants and domestic firms, and enterprises from both developed and emerging economies. In short, this is a truly global global-strategy text.
An Evidence-Based, In-Depth,
and Consistent Explanation
The breadth of the field poses a challenge to textbook authors. My respect for the diversity of the field has increased
tremendously over the past two decades. To provide an evidence-based, in-depth explanation, I have leveraged the latest research. Personally, I have accelerated my own research,
publishing more than 40 articles after I finished the fourth
edition. Drawing on such cutting-edge research has greatly
enriched Global Strategy.
In addition to my own work, I have also drawn on the
latest research of numerous colleagues—please check the
Index of Names. Beyond academic sources, I have often
relied on my two favorite magazines—Bloomberg Busi­
nessweek and Economist. Recently, I have also subscribed
to Foreign Affairs, Fortune, Harvard Business Review, and
Wall Street Journal. The end result is an unparalleled, most
comprehensive set of evidence-based and timely insights
on the market.
Given the breadth of the field, it is easy to lose focus. To
combat this tendency, I have endeavored to provide a consistent set of frameworks in all chapters. This is done in three
ways. First, I have focused on the four most fundamental
questions in strategy. These are: (1) Why do firms differ? (2)
How do firms behave? (3) What determines the scope of the
firm? (4) What determines the success and failure of firms
around the globe?
Another way to combat the tendency to lose the sight
of the “forest” while scrutinizing various “trees” (or even
“branches”) is to consistently draw on the strategy tripod—
the three leading perspectives on strategy—namely, industry-based, resource-based, and institution-based views. This
provides a great deal of continuity in the learning process.
Finally, I have written a beefy “Debates and Extensions”
section for every chapter. Virtually all textbooks uncritically
present knowledge “as is” and ignore the fact that the field is
alive with numerous debates. Because debates drive practice
and research ahead, it is imperative that students be exposed
to important debates and that their critical thinking skills be
fostered. The new debates that have become more promi­
nent since the fourth edition—such as globalization versus
deglobalization and firms’ role in reducing versus contributing toward income inequality—are more spicy, making the
book more relevant.
An Interesting and Accessible
Way to Engage Students
If you fear this text must be boring because it draws so hea­
vily on latest research, you are wrong. I have used a clear and
engaging conversational style to tell the “story.” Relative to
rival texts, my chapters are shorter and livelier. The length
of all our Integrative Cases is shorter than that of many long
“monster cases” found elsewhere.
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
xv
xvi
Preface
Some earlier users commented that reading Global Stra­
tegy is like enjoying a “good magazine.” A large number of
interesting anecdotes have been woven into the text. Nontraditional (“outside-the-box”) examples range from ancient
Chinese military writings to modern “four-star company
commanders” armed with UAVs (Chapter 1), from Shakespeare’s The Merchant of Venice (Chapter 5) to Tolstoy’s
Anna Karenina (Chapter 7). Some of the discussions are
truly cutting-edge. For example, the closing case for Chapter
8, “Is There an Antitrust Case Against Big Tech?” (written
in March 2020), will force students to discuss it in a future
tense. This is because the US government—in an effort to
make the discussion about this case more interesting—sued
Google in October 2020 after this case was written, and the
future outcome of this case is unknown as the fifth edition
goes to press. A consistent theme is to engage ethics. This is
not only highlighted in Chapters 4 and 12, but also throughout all chapters in the form of Ethical Dilemma features and
Critical Discussion Questions marked “On Ethics.”
So what? Many textbooks leave students to struggle with
this question at the end of every chapter. In Global Strategy,
every chapter ends with a section titled “The Savvy Strategist” with one teachable table or slide on “Strategic Implica­
tions for Action” from a practical standpoint. No other
competing textbook is so savvy and so relevant.
What’s New in the Fifth Edition?
Most strategically, the fifth edition has (1) significantly upgraded the global-strategy knowledge base, (2) enhanced
the executive voice by drawing more heavily from CEOs and
other strategic leaders, (3) drawn directly on the author’s
consulting experience, (4) introduced a new and diverse set
of cases, and (5) returned to the traditional format of having
one hardcopy book including everything.
The scale and scope of the changes in the global-strategy
landscape between the publication of the fourth edition
(2017) and the fifth edition is likely to be some of the most
profound since the launch of the first edition (2006). Sources
of such changes not only come from disruptive tech­
nological start-ups known as unicorns—a term coined as
recently as in 2013—but also from worsening geopolitical
relationships between the top two economies of the world.
Instead of globalization, the new buzzword is deglobaliza­
tion. On top of all of the above, the coronavirus of 2020—a
black swan event—shut down the global economy. Tho­
roughly updated, the fifth edition helps students make better
sense of this rapidly changing and tumultuous era.
If Global Strategy aspires to train a new generation of
global strategists, we need to coach them to think, act,
and talk like CEOs. Although I have taught a few executive education classes with Global Strategy, most students
using the text have not assumed that kind of executive
responsibility. To facilitate strategic thinking, the fifth
edition has enhanced the executive voice by featuring
extensive block quotes from the following CEOs and
other strategic leaders:
Armstrong Industries’ outside director Michael Jensen
(Chapter 11)
Business Roundtable (183 members who are CEOs of
prominent US firms signed a statement on the purpose
of a corporation in 2019—Chapter 12)
Canada Goose’s CEO Dani Reiss (Chapter 5)
Dow Chemical’s CEO William Stavropoulos (Chapter 10)
The (new) East India Company’s founder Sanjiv Mehta
(Chapter 5)
Facebook’s founder and CEO Mark Zuckerberg (Chapter 1)
GE’s chairman and CEO Jeff Immelt (Chapters 8)
GE’s chairman and CEO Jack Welch (Chapter 12)
Google’s CEO Eric Schmidt (Chapter 7)
IBM’s CEO Ginni Rometty (Chapter 3)
L’Oreal’s CEO Jean Paul Agon (Chapter 10)
P&G’s chairman and CEO A. G. Lafley (Chapter 1)
US Assistant Attorney General (commenting on the global
vitamin cartel case—Chapter 8)
US Assistant Attorney General (representing the
Department of Justice to challenge AT&T’s proposed
merger with T-Mobile—Chapter 8)
Walmart’s CEO Doug McMillon (Chapter 1)
Whole Foods’s cofounder and CEO John Mackey
(Chapter 12)
World Health Organization’s Director-General Margaret
Chan (Chapter 12)
Zoom’s founder and CEO Eric Yuan (Chapter 1)
I have directly drawn on my consulting experience to
inject new insights. Chapter 1 describes my consulting
engagement with MTR Corporation in Hong Kong (see
Table 1.3). Chapter 3 illustrates a strategic sweet spot for
UK manufacturing, which I developed for a major consulting engagement I completed for the UK government as
part of its two-year Future of Manufacturing project (see
Figure 3.6). Table 4.5 (“Texas Instruments Guidelines on
Gifts in China,” which is in the public domain) is shared
with me by a consulting client at TI. In addition, I have
written the new Integrative Case 1 “The Consulting Industry” to more comprehensively introduce this strategically
important industry.
The fifth edition has expanded case offerings by (1) presenting 21 new Integrative Cases and (2) making available four
popular and still timely Integrative Cases from earlier editions.
Students and instructors especially enjoyed the wide-ranging
and globally relevant cases in previous editions. Fourteen of
the 25 Integrative Cases were authored by me, and the other
11 were contributed by 17 colleagues from Australia, Canada,
China, New Zealand, and the United States. The fifth edition is
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Preface xvii
blessed with that many new Integrative Cases. The end result is
an unparalleled, diverse collection of cases that will significantly
enhance the teaching and learning of global strategy.
Finally, what’s new in the fifth edition is what is old—
returning to a hardcopy format that includes everything
(including all Integrative Cases). The fourth edition experi­
mented with a format that (1) was completely digital or (2)
was a hybrid—printing the 12 chapters in a hardcopy looseleaf book but keeping all Integrative Cases online. Customer
feedback indicated that the all-inclusive hardcopy is still the
most preferred format. Of course, for those digitally savvy,
the product will also be online.
MindTap
Online resources are transforming many aspects of everyday
life, and learning is not immune to the impact of technology.
Rather than simply taking the pages of Global Strategy and
placing them online, we have restructured the content to
fully utilize the engagement and interactivity that the
medium allows.
MindTap is a digital learning solution that helps instructors engage and transform today’s students into critical
thinkers. Through (1) paths of dynamic assignments and
applications that you can personalize, (2) real-time course
analytics, and (3) an accessible reader, MindTap helps you
turn apathy into engagement:
●●
●●
●●
●●
●●
Support Materials
A full set of support materials is available for adopting instructors, ensuring that instructors have the tools they need
to plan, teach, and assess their course. These resources include:
●●
●●
Personalization—Customize the Learning Path by
integrating outside content like videos, articles, and
more.
Analytics—Easily monitor student progress, time on
task, and outcomes with real-time reporting.
YouSeeU facilitates group projects and a variety
of other assignments through digital video and
collaboration tools.
Business Insights provides a rich online database and
research tool.
We have provided a pre- and postcourse assessment
that measures Global Literacy, which provides
both students and instructors with feedback on the
general awareness of global social, cultural, political,
and economic awareness. In addition, having these
data can also provide valuable data to support
assurance of learning reporting for accreditation
purposes. We thank the efforts of Anne Mägi of the
University of Illinois–Chicago for her work on these
assessments.
Additional media and text cases that are not found in
the chapters, assessment, and much more!
For more information on using MindTap in your course,
consult the instructor resources or visit www.cengage.com
/mindtap.
Critical Thinking—Engaging, chapter-specific
content is arranged in a singular Learning Path
designed to elevate thinking.
In addition, MindTap integrates other powerful tools to
help enhance your course:
●●
●●
●●
Instructor’s Manual—This comprehensive manual
provides chapter outlines, lecture notes, and sample
responses to end-of-chapter questions, providing
a complete set of teaching tools to save instructors
time in preparing for class and to maximize student
success within the class. The Instructor’s Manual also
includes notes to accompany the Integrative Cases
from the text.
Test bank—The robust Global Strategy test bank
contains a wide range of questions with varying
degrees of difficulty in true/false, multiple-choice,
and short answer/essay formats. All questions have
been tagged to the text’s learning objectives and
according to AASCB standards to ensure students
are meeting necessary criteria for course success.
Instructors can use the included Cognero software
package to view, choose, and edit their test questions
according to their specific course requirements. The
test bank is also available in a format compatible with
most Learning Management Systems.
PowerPoint Slides—Each chapter includes a complete
set of PowerPoint slides designed to present relevant
chapter material in a way that will allow more visual
learners to firmly grasp key concepts.
Acknowledgments
As Global Strategy celebrates the launch of its fifth edition,
I first want to thank all the customers—instructors and students around the world who have made the book’s success
possible. A big thanks goes to 11 very special colleagues:
Xinmei Liu and Sun Wei (Xi’an Jiaotong University), Bin Xu
(Peking University), and Haifeng Yan (East China University of Science and Technology) in China; Joaquim Carlos
Racy (Pontifícia Universidade Católica de São Paulo) and
George Bedinelli Rossi (Universidade de São Paulo) in Brazil; Enrique Benjamín and Franklin Fincowski (Universidad Nacional Autónoma del de México), Mercedes Muñoz
(Tecnológico de Monterrey Campus Santa Fe y Estado de
México), Octavio Nava (Universidad del Valle de México),
and Claudia Gutiérrez Rojas (Tecnológico de Monterrey
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
xviii
Preface
Campus Estado de México) in México. They loved the book
so much that they were willing to endure the pain of translating it into Chinese, Portuguese, and Spanish. Their hard
work has made Global Strategy more global.
At the Jindal School at UT Dallas, I appreciate Naveen
Jindal’s generous support to fund the Jindal Chair. I thank
my colleagues Shawn Carraher, Larry Chasteen, Emily
Choi, Greg Dess, Maria Hasenhuttl, Charlie Hazzard, Tom
Henderson, Jeff Hicks, Shalonda Hill, Sora Jun, Seung
Lee, Sheen Levin, John Lin, Livia Markóczy, Toyah Miller,
Dennis Park, Cuili Qian, Orlando Richard, Rajiv Shah,
Riki Takeuchi, Eric Tsang, McClain Watson, Habte Woldu,
Junfeng Wu, and Jun Xia—as well as Hasan Pirkul (dean)
and Varghese Jacob (vice dean). At the Center for Global
Business that I founded and have served as executive
director, I appreciate the contributions made by Hubert
Zydorek (director) and the Advisory Board (especially Mike
Skelton, chair; Kerry Tassopoulos, co-chair; Laura Gatins,
Hajo Siemers, and Brewster Waddell, executive committee
members). I have directly sought their advice on how to
make the fifth edition better.
At Cengage Learning, I thank Joe Sabatino (product director), Jennifer Ziegler (senior project manager), and John
Rich (content creation manager) for their guidance. At MPS
Limited, I appreciate the contributions of Anubhav Kaushal
(senior project manager) and his team, who made the editing and production process a joy.
In addition, I thank many customers who provided informal feedback to me. Space constraints force me to only
acknowledge those who wrote me since the fourth edition,
because those who wrote me earlier were thanked in earlier
editions. (If you wrote me but I failed to mention your
name here, my apologies—blame this on the volume of such
e-mails.)
Siah Hwee Ang (Victoria University of Wellington,
New Zealand)
Hari Bapuji (University of Melbourne, Australia)
Balbir Bhasin (University of Arkansas at Fort Smith, USA)
Dane Blevins (University of North Carolina at
Greensboro, USA)
Charles Byles (Virginia Commonwealth University, USA)
Anil Chandrakumara (University of Wollongong,
Australia)
Murali Chari (Rensselaer Polytechnic Institute, USA)
Tee Yin Chaw (Management and Science University,
Malaysia)
Futian Chen (Xiamen University, China)
Limin Chen (Wuhan University, China)
Glen Damro (RMIT University, Australia)
Ngo Vi Dzung (Vietnam National University, Vietnam)
Todd Fitzgerald (Sanit Joseph’s University, USA)
Dennis Garvis (Washington and Lee University, USA)
John Gerace (Chestnut Hill College, USA)
Mike Geringer (Ohio University, USA)
Katalin Haynes (Texas A&M University, USA)
Jorge Heredia (Universidad del Pacifíco, Peru)
Stephanie Hurt (Meredith College, USA)
Ana Iglesias (Tulane University, USA)
Basil Janavaras (Minnesota State University, USA)
Ferry Jie (RMIT University, Australia)
Jungkwon Kim (Hanyang University, South Korea)
Aldas Kriauciunas (Purdue University, USA)
Yong Li (University of Nevada at Las Vegas, USA)
David Liu (George Fox University, USA)
Rajiv Mehta (New Jersey Institute of Technology, USA)
Kiran Momaya (Indian Institute of Technology Bombay,
India)
Phillip Nell (Vienna University of Economics and
Business, Austria)
Pradeep Kanta Ray (University of New South Wales,
Australia)
David Reid (Seattle University, USA)
Pamela Resurreccion (De La Salle University, Philippines)
Trond Randøy (University of Agder, Norway)
Al Rosenbloom (Dominican University, USA)
Daniel Rottig (Florida Gulf Coast University, USA)
Paula Tomsett (I-Shou University, Taiwan)
Jose Vargas-Hernandez (Universidad de Guadalajara, Mexico)
Krishna Venkitachalam (Stockholm University, Sweden)
George White (University of Michigan at Flint, USA)
Josef Windsperger (University of Vienna, Austria)
Richard Young (Minnesota State University, USA)
Man Zhang (Bowling Green State University, USA)
Alan Zimmerman (City University of New York, USA)
For the fifth edition, the following 18 colleagues kindly
read one chapter of manuscript and provided crucial feedback, for which I am grateful:
Larry Chasteen (University of Texas at Dallas, USA)
Miranda Eleazar (University of Texas at Dallas, USA)
Nishant Kathuria (University of Texas at Dallas, USA)
Som Lahiri (Illinois State University, USA)
Sheen Levine (University of Texas at Dallas, USA)
John Lin (University of Texas at Dallas, USA)
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Preface
Kaveh Moghaddam (University of Houston at
Victoria, USA)
Deb Mukherjee (University of Akron, USA)
Canan Mutlu (Kennesaw State University, USA)
Dennis Park (University of Texas at Dallas, USA)
Cuili Qian (University of Texas at Dallas, USA)
Prashant Salwan (Indian Institute of Management Indore,
India)
Sunny Li Sun (University of Massachusetts at Lowell, USA)
Cristina Vlas (University of Massachusetts at Amherst,
USA)
Joyce Wang (St. Cloud State University, USA)
Jun Xia (University of Texas at Dallas, USA)
Michael Young (Appalachian State University, USA)
Wu Zhan (University of Sydney, Australia)
In this edition, the following 17 colleagues graciously
contributed fascinating new cases that grace the pages of
the fifth edition:
Dirk Michael Boehe (Massey University, New Zealand)
Breena Coates (California State University, San
Bernardino, USA)
Luciano Barin Cruz (HEC Montreal, Canada)
Maria Hasenhuttl (University of Texas at Dallas, USA)
Charles F. Hazzard (University of Texas at Dallas, USA)
William E. Hefley (University of Texas at Dallas, USA)
Young H. Jung (Montclair State University, USA)
Nishant Kathuria (University of Texas at Dallas, USA)
Arun Perumb Krishnan (University of Texas at Dallas,
USA)
xix
Yugang Li (East China University of Science and
Technology, China)
Diaswati (Asti) Mardiasmo (PRD Real Estate, Australia)
Klaus Meyer (Ivey Business School, Canada)
Canan Mutlu (Kennesaw State University, USA)
Grace Peng (Highland Park High School, USA)
Erin Pleggenkuhle-Miles (University of Nebraska at
Omaha, USA)
Marilyn L. Taylor (University of Missouri at Kansas
City, USA)
Xiaohua Yang (University of San Francisco, USA)
Last, but no means least, I thank my wife Agnes, my
daughter Grace, and my son James—to whom this textbook
is dedicated. When the first edition was conceived, Grace
was one month old and James was waiting for his turn to
show up in the world. Now Grace is a published author of
young-adult novels and a case contributor to Global Stra­
tegy, and James can build robots from nuts and bolts and
edit videos for professional presentations. Both are world
travelers, having been to more than 40 countries. Now both
of them are on the verge of leaving our house to join the
wider world—a scary (but exciting) prospect to any parent.
As a third-generation professor in my family, I can’t help
but wonder whether one (or both) of them will become a
fourth-generation professor. To all of you, my thanks and
my love.
MWP
January 1, 2021
Dallas, Texas
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
© Mike Peng
About the Author
Mike W. Peng is the Jindal Chair of Global Strategy at the
University of Texas at Dallas. He is a National Science
Foundation (NSF) Career Award winner and a Fellow of
the Academy of International Business (AIB) and the Asia
Academy of Management (AAOM).
Professor Peng holds a bachelor’s degree from Winona State
University, Minnesota; and a Ph.D. degree from the University
of Washington, Seattle. He had previously served on the faculty
at the Ohio State University, University of Hawaii, and Chinese
University of Hong Kong. He has also held visiting or courtesy
appointments in Australia, Brazil, Britain, Canada, China,
Denmark, Hong Kong, the United States, and Vietnam.
Truly global in scope, Professor Peng’s research has
investigated firm strategies in Africa, Asia Pacific, Europe, and
North and South America. With more than 160 articles and
five books, he is one of the most prolific and most influential
scholars in global strategy. Used in more than 40 countries,
his textbooks, Global Strategy, Global Business, and GLOBAL,
are world market leaders that have been translated into
Chinese, Portuguese, and Spanish. He has more than
50,000 Google citations, and both the United Nations and
the World Bank have cited his work. Among the top 0.1%
most cited researchers worldwide, he is one of the only 101
top scholars in business and economics listed among Highly
Cited Researchers (compiled by Clarivate Analytics/Web of
Science based on citation impact) in 2020. He has been on
this distinguished list every year since 2014 and is the only
global-strategy textbook author to have attained this honor.
Professor Peng is active in leadership positions. He has
served on the editorial boards of AMJ, AMP, AMR, GSJ,
JIBS, JMS, JWB, and SMJ; and guest-edited a special issue for JMS. At the Strategic Management Society (SMS),
he was elected to be the Global Strategy Interest Group
Chair (2008). He also co-chaired the SMS Special Conference in Shanghai (2007) and Sydney (2014). At AIB,
he co-chaired the AIB/JIBS Frontiers Conference in San
Diego (2006), guest-edited a JIBS special issue (2010),
and chaired the Richard Farmer Best Dissertation Award
Committee (2012). At AAOM, he served one term as
Editor-in-Chief of the Asia Pacific Journal of Manage­
ment (2007–2009). In recognition of his contributions,
APJM named its best paper award the Mike Peng Best
Paper Award. He served as program chair for the biennial
conference in Bali, Indonesia (2019); and is currently
Vice President of AAOM.
Professor Peng’s consulting clients include AstraZeneca,
Berlitz, Canada Research Chair, MTR Hong Kong,
Nationwide, Routledge, SAFRAN, Texas Instruments,
UK Government Office for Science, and World Bank.
His numerous honors include a US Small Business
Administration Best Paper Award, a (lifetime) Distinguished
Scholar Award from the Southwestern Academy of
Management, and a (lifetime) Scholarly Contribution Award
from the International Association for Chinese Management
Research (IACMR). He has been included in Who’s Who in
America, and quoted by The Economist, Newsweek, US News
and World Report, Dallas Morning News, Texas CEO, Atlanta
Journal-Constitution, Exporter Magazine, World Journal,
Business Times (Singapore), CEO-CIO (Beijing), Sing Tao
Daily (Vancouver), and Brasil Econômico (São Paulo).
xx
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Part 1
Foundations
of Global
Strategy
1
Strategizing Around
the Globe
2
Managing Industry
Competition
3
Leveraging Resources
and Capabilities
4
iStock.com/busracavus
Emphasizing Institutions,
Cultures, and Ethics
1
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
CHAPTER
1
iStock.com/golero
Strategizing Around the Globe
KNOWLEDGE OBJECTIVES
After studying this chapter, you should be able to
1. Offer a basic critique of the traditional, narrowly defined “global strategy”
2. Articulate the rationale behind studying global strategy
3. Define what is strategy and what is global strategy
4. Outline the four fundamental questions in strategy
5. Understand the nature of globalization and semiglobalization
6. Participate in three debates concerning globalization and global strategy
2
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
OPENING CASE
Emerging Markets
Ethical Dilemma
Zoom
The year 2020 is destined to go down in history as
one of the most unforgettable years. Thanks to the
coronavirus (COVID-19), economies shut down one
after another. Millions of people were sick, many
died, and suffering was immense. All nonessential
businesses closed, stock markets crashed, oil prices
dived into the negative, unemployment soared, and
firms were bankrupt left and right. In such a bleak
environment, can any firm grow? It turns out
that videoconferencing software firm Zoom has
experienced skyrocketing growth during the crisis.
Zoom was founded in 2011 by a Chinese immi­
grant Eric Yuan. In 1997, Yuan went to work for
WebEx, a videoconferencing start-up. In 2007, Cisco
acquired Webex for $3.2 billion. Yuan—as Cisco’s
corporate vice president of engineering—proposed
that Cisco develop a product that would work on
mobile phones, not merely on personal computers
(PCs). Cisco rejected his proposal. Frustrated but
determined, Yuan left in 2011 to start Zoom. By
2017, San Jose, California-based Zoom became a
“unicorn”—a private firm worth more than $1 billion.
It went through an initial public offering (IPO) at
NASDAQ in April 2019. By the end of its first day
of trading, its share price increased more than 72%
to reach $62 per share, resulting in a $16 billion
market capitalization. By the end of December 2019,
Zoom was trading at $68. On April 22, 2020, its share
reached $169 and it was worth $46 billion.
Convenient live-video chat was a science-fiction
dream for a long time. Helping to turn that dream
into reality, Zoom’s mission, according to its IPO
prospectus, was “to make video communications
frictionless.” Its original strategy was to be a leading corporate videoconferencing firm—specifically
for businesses with information technology (IT)
departments that can set up accounts and help end
users. It competed with two giants—Cisco Webex
and Microsoft Teams—as well as smaller rivals such
as Skype, Google Meets, and Hangouts. Zoom
excelled in its easy-to-use software: one click on an
email or the smartphone. If the conference had fewer
than 100 participants and was less than 40 minutes,
Zoom was free. Clients that paid a monthly fee of
$19.99 could host as many 1,000 participants on
a single video call. Another attractive feature was
that it was a neutral platform. Its solution offered
video, audio, and screen-sharing experience across
Windows, Mac, Linux, Android, BlackBerry, and Zoom
Rooms. Its IPO prospectus identified six leading
sources of competitive advantage: (1) video-first
platform, (2) cloud-native architecture, (3) functionality and scalability, (4) ease of use and reliability,
(5) ability to utilize existing legacy infrastructure, and
(6) low total cost of ownership.
The onslaught of COVID-19 made Zoom a household name. According to a letter from Zoom’s management team to customers posted on its website
on April 23, 2020:
We are humbled to have the opportunity to support
such a wide range of clients from schools (100,000
in 25 countries), to universities (many of the major
US institutions), to governments (e.g., major functions of the US Government, the British Parliament,
and many other governments around the world), to
enterprises of all sizes, industries, and geographies
(226 of the 241 countries and territories), including
full deployments in many Fortune 500 companies.
We have grown from 10 million daily meeting participants as of December 2019, to over 300 million a
day in April 2020.
Throughout March and April 2020, Zoom’s number of users broke a new record every day. Its original
strategy obviously had to rapidly adapt and improvise. It was no longer its plan to be a leading corporate videoconferencing provider that mattered. What
mattered was how its actions satisfied the ballooning
demand for its services as a mass market service provider. In late February and early March, after schools
in Italy and Japan were shut down, Zoom removed
the time limits on its free product for educational
institutions in these countries—a practice now extended to other countries where schools shut down.
3
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
4
PART 1
Foundations of Global Strategy
OPENING CASE (Continued)
By design, a Zoom meeting was anchored by one
of its 17 data centers worldwide. If one data center
experienced problems, the meeting would be handed
over to the next closest. In the middle of the crisis,
Zoom added two more data centers and bought
more cloud storage capacity for surge protection
from Oracle and Amazon Web Services.
Although meteoric, Zoom’s rise to become a
household name was not without bumps. Its connections in China made it aware of the potential devastation of COVID-19. To protect its employees, Zoom
shut down its San Jose headquarters two weeks before Santa Clara County ordered citizens to shelter in
place. As a result, Yuan and his executive team—like
millions of other people who work at home—had to
go through a long series of Zoom meetings every
day. “I hate that,” Yuan admitted to a reporter—a
sentiment more recently known as “Zoom fatigue”
worldwide.
In addition to worrying about whether servers
were overwhelmed by the surging traffic, another
major headache was security. Simplicity versus
security (read: complexity) has always been a source
of tension in IT. The very reason behind Zoom’s
success—simplicity—also contained a seed for
security problems. How to enhance Zoom’s security
while maintaining its user-friendliness, thus, became
a dilemma. “Zoombombings” arguably became one
of the newest English words, indicating the severity
and frequency of security incidents. In response,
Zoom quickly addressed some issues (such as
requiring passwords for all Zoom meetings as of
April 4) and endeavored to solve some of the more
challenging security weaknesses going forward.
Rapidly becoming part of critical infrastructure,
Zoom “is now owned by the world,” noted Yuan
in an interview. He went on to claim that Zoom
“can’t go back. . . . For now we have to embrace
this new paradigm and figure out how to make
it work.”
Sources: (1) Bloomberg Businessweek, 2020, The accidental social
network, April 13: 45–49; (2) CNBC, 2020, Zoom Video Communications Inc., April 27: www.cnbc.com; (3) Economist, 2020,
Zoom diplomacy, April 11: 44; (4) Guardian, 2020, Worried
about Zoom’s privacy problems? April 9: theguardian.com;
(5) National Geographic, 2020, “Zoom fatigue” is taxing the brain,
April: www.nationalgeographic.com; (6) Zoom, 2019, Amendment No. 2 to Form S-1 Registration Statement, April 16,
Washington: SEC; (7) Zoom, 2020, A letter from Zoom’s management team to our customers, April 23: zoom.us.
H
multinational enterprise
(MNE)
A firm that engages in
foreign direct investment
(FDI) by directly controlling
and managing value-adding
activities in other countries.
foreign direct investment
(FDI)
A firm’s direct investment in
production and/or service
activities abroad.
ow do firms such as Zoom compete around the globe? What determines
their success and failure? Since strategy is about competing and winning,
this book will help current and would-be strategists answer these and other
important questions. In brief, “global strategy” in this book is about strategy around
the globe—practiced by firms big and small. In other words, this book does not focus
on a particular form of international (cross-border) strategy, which is characterized
by the production and distribution of standardized products and services on a worldwide basis. For more than three decades, this strategy, often referred to as global strategy for lack of a better term, has often been advocated by traditional global-strategy
books.1 However, such a relatively narrow “global strategy” had always been difficult
to practice, going forward it is likely to be less useful in a possibly deglobalizing world.
The relatively narrow “global strategy” has been practiced by some
multinational enterprises (MNEs), defined as firms that engage in foreign direct
investment (FDI) by directly controlling and managing value-adding activities
in other countries.2 Although Zoom is a young firm, it has become an MNE with
FDI in a number of countries. In reality, MNEs often have to adapt their strategies, products, and services for local markets. In the automobile industry, there
is no “world car.” Cars popular in one region are often rejected by customers
elsewhere. The Volkswagen Golf and the Ford Mondeo (marketed as the Contour in
the United States) are popular in Europe, but have little visibility in the streets of Asia
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Chapter 1 Strategizing Around the Globe
and North America. The so-called world drink, Coke Classic, actually tastes different
around the world (with varying sugar content). Coca-Cola’s effort in pushing for a
set of “world commercials” centered on the polar bear cartoon character presumably
appealing to some worldwide values and interests has not been appreciated by many
viewers around the world. Viewers in warmer weather countries had a hard time
relating to the furry bear. In response, Coca-Cola switched to more costly but more
effective country-specific advertisements. For instance, the Indian subsidiary
launched an advertising campaign that equated Coke with thanda, the Hindi word
for “cold.” The German subsidiary developed a series of commercials that showed a
“hidden” kind of eroticism (!).3 In summary, one size does not fit all.
It is evident that the narrow notion of “global strategy” (the “one-size-fitsall strategy”), while useful for a small number of MNEs, is often incomplete and
unbalanced. Even for most MNEs, a sensible approach seems to be “think global, act
local.” In the case of Zoom, it operates data centers in Australia, Brazil, Canada, China,
Germany, India, Japan, the Netherlands, and the United States. Its “global” business
model—a firm’s way of doing business and creating and capturing value—is to route
videoconferencing traffic to the data center anywhere in the world that can provide the
most seamless and best performance. At any given time, data centers in some regions
may be busier than those elsewhere. Given the sensitive nature of the content of Zoom
meetings, some users expressed concerns about their meetings being routed to data
centers in regions that have potential cybersecurity issues.4 In response, Zoom has
offered a “local” solution, by letting users opt out of specific data center regions and opt
in to specific data center regions. This gives customers more control over their data.5 In
summary, simple-mindedly pushing for a “global” solution is likely to backfire, and a
sensible combination of what is “global” and what is “local” is a must.
business model
A firm’s way of doing
business and creating and
capturing value.
Why Study Global Strategy?
Strategy courses in general—and global-strategy courses in particular—are typically the most
valued courses in a business school.6 Why study global strategy? Some of the most soughtafter and highest-paid business school graduates (both MBAs and undergraduates) are
typically strategy consultants with global-strategy expertise.7 You can be one of them.
Outside the consulting industry, if you aspire to join the top ranks of large firms, expertise
in global strategy is often a prerequisite. So, don’t forget to add a line on your résumé that
you have studied this strategically important course.
Even for graduates at large firms with no interest in working for the consulting industry
and no aspiration to compete for top jobs, as well as individuals who work at small firms
or are self-employed, you may find yourself using foreign products and services (such
as Zoom meetings), competing with foreign entrants in your home market, and perhaps
even selling and investing overseas. Alternatively, you may find yourself working for a
foreign-owned firm, your previously domestic employer acquired by a foreign player, or
your unit ordered to shut down for global consolidation. Approximately 80 million people
worldwide, including seven million Americans, one million British, and 18 million Chinese,
are directly employed by foreign-owned firms. For example, in Africa, the largest privatesector employer is Coca-Cola with 65,000 employees. In Britain, the largest private-sector
employer is Tata Group with 50,000 employees. Understanding how strategic decisions are
made may facilitate your own career in such organizations. If there is a strategic rationale
to downsize your unit, you want to be able to figure this out as soon as possible and be the
first to post your résumé online, instead of being the first to receive a pink slip. In other
words, you want to be more strategic. After all, it is your career that is at stake. Don’t be the
last to know!
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
5
6
PART 1
Foundations of Global Strategy
What is Strategy?
Origin
strategic management
A way of managing the
firm from a strategic, “big
picture” perspective.
strategy
An organization’s theory
about how to compete
successfully.
strategy as plan
A perspective that suggests
that strategy is most
fundamentally embodied
in explicit, rigorous formal
planning as in the military.
strategy as action
A perspective that suggests
that strategy is most
fundamentally reflected by
firms’ pattern of actions.
intended strategy
A strategy that is
deliberately planned for.
Derived from the ancient Greek word strategos, the word strategy originally referred to “the
art of the general” or “generalship.” Strategy has strong military roots.8 The oldest book on
strategy, The Art of War, dates back to approximately 500 b.c. It was authored by Sun Tzu, a
Chinese military strategist.9 Sun Tzu’s most famous teaching is, “Know yourself, know your
opponents; encounter a hundred battles, win a hundred victories.” The application of the
principles of military strategy to business competition, known as strategic management
(or strategy in short), is a more recent phenomenon developed since the 1960s.10
Plan versus Action
Because business strategy is a relatively young field (despite its long roots in military
strategy), what defines strategy has been a subject of intense debate.11 Three schools of
thought have emerged (see Table 1.1). The first “strategy as plan” school is the oldest.
Drawing on the work of Carl von Clausewitz, a Prussian (German) military strategist of the
19th century,12 this school suggests that strategy is embodied in the same explicit rigorous
formal planning as in the military.
However, the planning school has been challenged by the likes of Liddell Hart, a British
military strategist of the 20th century, who argued that the key to strategy is a set of
flexible goal-oriented actions.13 Hart favored an indirect approach, which seeks rapid flexible
actions to avoid clashing with opponents head-on. Within the field of business strategy, this
“strategy as action” school has been advocated by Henry Mintzberg, a Canadian scholar.
Mintzberg posited that in addition to the intended strategy that the planning school
TABLE 1.1
What Is Strategy?
Strategy as Plan
“Concerned with drafting the plan of war and shaping the individual campaigns and, within these, deciding on the individual engagements” (von Clausewitz, 1976)1
●● “A set of concrete plans to help the organization accomplish its goal” (Oster, 1994)2
●●
Strategy as Action
“The art of distributing and applying military means to fulfill the ends of policy” (Liddell
Hart, 1967)3
●● “A pattern in a stream of actions or decisions” (Mintzberg, 1978)4
●● “The creation of a unique and valuable position, involving a different set of activities . . .
making trade-offs in competing … creating fit among a company’s activities” (Porter,
1996)5
●●
Strategy as Integration
“The determination of the basic long-term goals and objectives of an enterprise, and the
adoption of courses of action and the allocation of resources necessary for carrying out
these goals” (Chandler, 1962)6
●● “The major intended and emergent initiatives undertaken by general managers on
behalf of owners, involving utilization of resources to enhance the performance of
firms in their external environments” (Nag, Hambrick, and Chen, 2007)7
●● “The ideas, decisions, and actions that enable a firm to succeed” (Dess, McNamara,
Eisner, and Lee, 2019)8
●●
Sources: Based on (1) C. von Clausewitz, 1976, On War, vol. 1 (p. 177), London: Kegan Paul; (2) S. Oster,
1994, Modern Competitive Analysis, 2nd ed. (p. 4), New York: Oxford University Press; (3) B. Liddell
Hart, 1967, Strategy, 2nd rev. ed. (p. 321), New York: Meridian; (4) H. Mintzberg, 1978, Patterns in
strategy formulation (p. 934), Management Science 24: 934–948; (5) M. Porter, 1996, What is strategy? (pp. 68, 70, 75), Harvard Business Review 74: 61–78; (6) A. Chandler, 1962, Strategy and Structure
(p. 13), Cambridge, MA: MIT Press; (7) R. Nag, D. Hambrick, & M. Chen, 2007, What is strategic management, really? Strategic Management Journal 28: 935–955; (8) G. Dess, G. McNamara, A. Eisner, & S.
Lee, 2019, Strategic Management, 9th ed. (p. 6), Chicago: McGraw-Hill.
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Chapter 1 Strategizing Around the Globe
emphasizes, there can be an emergent strategy that is not the result of “top-down” planning
but rather the outcome of a stream of smaller decisions from the “bottom up.”14 Facebook is a
good example. Its founder Mark Zuckerberg shared in an interview:
We build things quickly and ship them. We get feedback. We iterate, we iterate, we iterate.
We have these great signs around: “Done is better than perfect.”15
7
emergent strategy
A strategy based on the
outcome of a stream of
smaller decisions from the
“bottom up.”
It is not just fast-moving high-tech firms such as Facebook that are practitioners of the
strategy as action school. For a firm as traditional as Walmart, its CEO Doug McMillon told
a journalist:
Once, a company like ours made big decisions annually or quarterly. Today strategy
is daily.16
Both of these two schools of thought have merits and drawbacks. Strategy in Action 1.1
compares and contrasts them by drawing on real strategies used by the German and French
militaries in 1914. The Germans embraced the strategy as plan school, and the French practiced the strategy as action school. In the end, both militaries failed miserably. A crucial lesson is that a winning strategy must have a combination of both schools of thought, leveraging
their advantages while minimizing their weaknesses.
Strategy as Theory
Shown in the Opening Case, Zoom had a plan to be a leading corporate videoconferencing provider. However, in the middle of the coronavirus outbreak, it ended up becoming a mass-market provider on a much larger scale. Its actions had to adjust to these new
demands, ranging from making sure there was sufficient cloud capacity to meet the surging
demand to improving its security measures in the middle of dramatically scaling up its
operations. Like managers at Zoom, many managers and scholars have realized that, in
reality, the essence of strategy is likely to be a combination of both planned deliberate
actions and unplanned emergent activities, thus leading to a “strategy as integration”
school (see Table 1.1).
First advocated by Alfred Chandler,17 an American business historian, this more balanced
strategy as integration school of thought has been adopted in many textbooks.18 It is the
strategy as integration
A perspective that suggests
that strategy is neither
solely about plan nor action
and that strategy integrates
elements of both schools of
thought.
STRATEGY IN ACTION 1.1
German and French Military Strategies in 1914
Although Germany and France are now the best of friends within the European Union (EU), they had fought for hundreds of
years (the last war in which they butted heads was World War II).
Prior to the commencement of hostilities that led to World War I
in August 1914, both sides had planned for a major clash.
The Germans embraced the strategy as plan school with a
meticulous Schlieffen Plan. Focusing on the right wing, German
forces would smash through Belgium. Every day’s schedule of
march was fixed: Brussels would be taken by the 19th day, the
French–Belgium border crossed on the 22nd, and Paris conquered
and victory achieved by the 39th. Heeding Carl von Clausewitz’s
warning that military plans that left room for the unexpected
could result in disaster, the Germans with infinite care had endeavored to plan for everything—except flexibility. In short, there
was no Plan B.
The French were practitioners of the strategy as action
school. Known as Plan 17, the French plan was a radical contrast
to the German one. Humiliated in the 1870 Franco–Prussian War,
during which France lost two provinces (Alsace and Lorraine),
the French were determined to regain them. But the French had
a smaller population and, thus, a smaller army. Since the French
army could not match the German army man for man, the French
military emphasized action—the individual initiatives and bravery
(known as élan vital, the all-conquering will). In Plan 17, a total
of five sentences were all that was shared with the generals who
would lead a million soldiers into battle. Sentence one was “Target
Berlin.” Sentence two was “Recover Alsace and Larraine.” The last
sentence was “Vive la France!”
In the end, both plans failed miserably, with appalling casualties but no victory to show.
Source: Condensed from B. Tuchman, 1962, The Guns of August,
New York: Macmillan.
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
8
PART 1
Foundations of Global Strategy
TABLE 1.2 Four Advantages of the Strategy as Theory Definition
Integrating both planning and action schools
Leveraging the concept of “theory,” which serves two purposes (explanation and
prediction)
●● Requiring replications and experimentations
●● Understanding the difficulty of strategic change
●●
●●
strategy formulation
The crafting of a firm’s
strategy.
strategy implementation
The actions undertaken to
carry out a firm’s strategy.
SWOT analysis
A strategic analysis of a
firm’s internal strengths (S)
and weaknesses (W) and
the external opportunities
(O) and threats (T) in the
environment.
perspective we embrace here. Following Peter Drucker, an Austrian–American management
guru, we extend the strategy as integration school by defining strategy as an organization’s
theory about how to compete successfully. In other words, if we have to define strategy with one
word, it is neither plan nor action—it is theory.
According to Drucker, “a valid theory that is clear, consistent, and focused is extraordinarily powerful.”19 A theory in a business context can be viewed as a way of doing business.20
For example, Zoom’s theory “to make video communications frictionless” is clear, consistent,
and focused, helping to channel its energies to make it happen (see the Opening Case).
Table 1.2 outlines the four advantages associated with our definition. First, it capitalizes
on the insights of both planning and action schools. This is because a firm’s theory of how
to compete will simply remain an idea until it has been translated into action. Thus, formulating a theory (advocated by the planning school as strategy formulation) is merely a first
step.21 Implementing it through a series of actions (noted by the action school as strategy
implementation) is a necessary second part.22 Although the cartoon in Figure 1.1 humorously
portrays these two activities as separate endeavors, in reality good strategists do both.
Shown in Figure 1.2, a strategy entails a firm’s assessment at point A of its own strengths (S)
and weaknesses (W), its desired performance levels at point B, and the opportunities (O)
and threats (T) in the environment.23 Such a SWOT analysis resonates very well with Sun
Tzu’s teaching on the importance of knowing “yourself ” and “your opponents.” After such an
assessment, the firm formulates its theory on how to best connect points A and B. In other
words, the broad arrow becomes its intended strategy. However, given so many uncertainties,
FIGURE 1.1
Strategy Formulation and Strategy Implementation
Source: Harvard Business Review, October 2011 (p. 40).
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Chapter 1 Strategizing Around the Globe
Performance
FIGURE 1.2 The Essence of Strategy
Where must
we be?
gy
d strate
Intende
Where are we?
Point A
Point B
Emergent
strategy
Unrealized
strategy
Time
not all intended strategies may prove successful, and some may become unrealized strategies.
On the other hand, other unintended actions may become emergent strategies with a thrust
toward point B. Overall, the strategy as theory definition enables us (1) to retain the elegance
of the planning school with its more orthodox logical approach, and (2) to entertain the flexibility of the action school with its more dynamic experimental character.
Second, this new definition rests on a simple but powerful idea, the concept of “theory.” The
word theory often frightens students and managers because it implies an image of “abstract”
and “impractical.” But it shouldn’t.24 A theory is merely a statement on relationships between
two phenomena. At its core, a theory serves two purposes: to explain the past and to predict
the future. For example, the theory of gravity explains why many people committing suicide
were “successful” by jumping from high-rise buildings or tall cliffs. It also predicts that should
individuals (hypothetically) harbor such a dangerous tendency, they will be equally “successful” by doing the same. Each firm has a unique theory (way) of doing business.25 Walmart’s
theory, “everyday low prices,” explains why it has been successful in the past. After all, who
doesn’t like everyday low prices? The theory also predicts that Walmart will continue to do
well by focusing on low prices.
Third, a theory proven successful in one context during one period does not necessarily
mean it will be successful elsewhere or in other periods. A hallmark of theory building and
development is replication—repeated testing under a variety of conditions to establish a
theory’s boundaries.26 In natural sciences, this is known as continuous experimentation. For
instance, after several decades of experiments in outer space, we now know that objects
dropped by astronauts inside a spacecraft would not fall. Instead, they float. In other words,
replication helps us understand that the theory of gravity is Earth bound and does not
apply in outer space. Such replication seems to be the essence of business strategy. Firms
successful in one product or geographic market—that is, having proven the merit of their
theory once—constantly seek to expand into newer markets and replicate their success.27
Each new entry can be viewed as a new experiment. In new markets, firms sometimes
succeed and other times fail. As a result, firms are able to gradually establish the limits of
their particular theory about how to compete successfully. For instance, Walmart’s theory
failed in Germany and South Korea, and the firm had to pull out from those markets. Just
as knowing the limits of the theory of gravity helps the scientific community, knowing the
limits of a business theory, although painful to managers involved, is beneficial to the firm.
Walmart’s corporate performance actually improved after exiting money-losing operations
in Germany and South Korea.
Finally, the strategy as theory definition helps us understand why it is often difficult to
change strategy. Imagine how hard it is to change an established theory. The reason that a certain theory is widely accepted is because of its past success. But past success does not guarantee
replication
Repeated testing of
theory under a variety of
conditions to establish its
applicable boundaries.
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
9
10
PART 1
Foundations of Global Strategy
future success. Although scientists are supposed to be objective, they are also human. Many
scientists may be unwilling to concede the failure of their favorite theories even in the face
of repeatedly failed tests. Think about how much resistance from the scientific establishment
that Galileo, Copernicus, and Einstein had to face initially. The same holds true for strategists.
Bosses have been promoted to current positions because of their past success in developing
and implementing old theories. National heritage, organizational politics, and personal career
considerations may prevent many bosses from admitting the failure of an existing strategy.28
Yet, the history of scientific progress suggests that it is possible to change established theories,
although it may be difficult initially. If enough failures in testing are reported and enough
researchers raise doubts about certain theories, then their views, which may be peripheral
initially, gradually drive out failed theories and introduce better ones. The painful process
of strategic change in many firms is similar. Usually a group of younger managers challenge
the current strategy. They propose a new theory on how to compete more effectively, which
initially is often marginalized by top management. But eventually, the momentum of the new
theory may outweigh the resistance of the old strategy, leading to some strategic change (see
Strategy in Action 1.2). Walmart recently changed its strategy from “everyday low prices”
to “save money, live better,” in order to soften its undesirable image as a ruthless cost cutter
associated with “everyday low prices.”
Overall, strategy is not a rulebook, a blueprint, or a set of programmed instructions.
Rather, it is a firm’s theory about how to compete successfully, a unifying theme that gives
coherence to its various actions.29 Strategy is about making choices and balancing trade-offs.
Strategy is also about articulating and communicating.30 If a theory is to be understood, it
STRATEGY IN ACTION 1.2
Selling Star Wars to LEGO Top Management
Founded in 1932, LEGO was derived from t…

Still stressed from student homework?
Get quality assistance from academic writers!
Order now

Order your essay today and save 25% with the discount code LAVENDER

Order Now