Business Question

Assignment 2: Choose an industry (like the aerospace industry or the apparel industry; do not choose a single company), then 1) identify where the industry is clustered in the world (include a map as part of your answer) and speculate about why the industry is clustered where it is, 2) using George Yip’s approach (see course slides), assess where your chosen industry falls on the spectrum from multi-domestic to global industries.

MGMT 385 – International Business
Global Industries – Week 5
Gregory Theyel, Ph.D. Professor
gregory.theyel@csueastbay.edu
International Business
Global Strategy
Implementation
Global Strategy
Context
Global Strategy
Development
Gregory Theyel, Ph.D. Professor
gregory.theyel@csueastbay.edu
Global Industries
Objectives:
• Understand the how an industry begins to have global characteristics if firms can derive some
competitive advantage by spreading and integrating their activities on a worldwide basis.
• Use George Yip’s concept of the multi-domestic vs. global continuum (market, cost, government,
and competitive drivers) to assess industries and determine how the position on the continuum
matters for firm strategy.
• Apply the concepts of configuration, which means where in the world a firm performs its valuecreation activities and coordination, which means how activities are coordinated with each other
across different countries.
Gregory Theyel, Ph.D. Professor
gregory.theyel@csueastbay.edu
Global Industries: Global and Multi-Domestic Industries
An industry is a group of firms offering goods or services that are close substitutes of each other and
that compete with each other.
An industry begins to have global characteristics if firms can derive some competitive advantage by
spreading and integrating their activities on a worldwide basis.
Gregory Theyel, Ph.D., Professor
gregory.theyel@csueastbay.edu
Global industries are where what a company does in one country is affected and affects what it does
in the other countries where it competes; a company’s competitive position in one country is affected
by its competitive position in the other countries where it competes.
Companies in global industries must therefore integrate (coordinate) their activities across markets in
order to develop competitive advantage.
Firms in global industries face cost reduction pressure arising from commodification of goods and
services and the existence of competitors based in low-cost locations.
Products with high value (relative to weight) are likely to be traded more heavily internationally than
products with low value-to-weight ratio, e.g. electronic integrated circuits $40,000/kilogram vs.
cement $1 per kilogram.
Gregory Theyel, Ph.D., Professor
gregory.theyel@csueastbay.edu
Multi-domestic industries are where competition and competitive advantage tend to be countryspecific; what a company does in one country has little or no effect on other countries (e.g. cement,
hospitals, consumer finance, and utilities).
Firms in multi-domestic industries face local responsiveness pressures due to differences in customer
tastes, preferences, and needs across nations; difference in levels of economic development;
differences in distribution channels, differences in infrastructure and use conditions; and hostgovernment demands.
Firms offer customized goods and services to suit local needs and requirements in countries where
they do business.
Gregory Theyel, Ph.D., Professor
gregory.theyel@csueastbay.edu
Drivers of Industry Globalization (George Yip)
Market Drivers
• Location-specific Customer tastes,
preferences & needs
• Existence of global customers
• Global distribution channels or local
channels
• Transferability of market know-how
Cost Drivers
• Value relative to transportation costs
• Low trade barriers
• Potential for economies of scale
Government Drivers
• Specific standards or regulations (trade
barriers, local content requirements, safety
and environmental standards
Competitive Drivers
• Industry structure (competition, concentration,
etc.)
• Protection of Intellectual Property
Gregory Theyel, Ph.D., Professor
gregory.theyel@csueastbay.edu
Why Go Abroad?
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Desire to continue to grow
Small domestic market
Need to seek valuable resources that may not be available in the home market,
Create operational efficiencies
Follow customers
Exchange rates and trade barriers
Purchase of companies in distress or bankruptcy
Following competitors
The reasons for going abroad will have an effect on the competitive strategy to be adopted and can
make a difference between successful and unsuccessful internationalization.
Gregory Theyel, Ph.D., Professor
gregory.theyel@csueastbay.edu
Challenges Companies Face in Foreign Markets
o Lack of managerial, organizational, and financial resources needed for successful expansion into
foreign markets
o Inability to modify products and services, strategy and approach to doing business to suit new
markets
o Costs of operating in an unfamiliar market
o Lack of understanding of the market, including culture and business practices
o Existing competitors (competition from local firms, state-owned enterprises, and foreign firms
already established)
o Liability of foreignness
o Difficulties accessing distribution channels
o Lack of brand image and reputation
o High costs of operating in a new country
o Unclear regulatory regime, difficulty enforcing contracts, and tax administration
Gregory Theyel, Ph.D., Professor
gregory.theyel@csueastbay.edu
Key issues firms face as they begin, or continue, their internationalization journey:
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Which country (countries) to enter?
Which product(s) to internationalize?
When to enter? What should be the scale of entry?
How to enter foreign markets?
How to compete and grow in foreign markets?
How to implement global strategy?
Configuration means where in the world a firm performs its value-creation activities.
Coordination means how activities are coordinated with each other across different countries.
Gregory Theyel, Ph.D., Professor
gregory.theyel@csueastbay.edu
Global Industries
Learning Objective: Understand the concepts of global industry structure, location, and the globalization of
industries.
Assignment 2: Choose an industry (like the aerospace industry or the apparel industry; do not choose a single
company), then 1) identify where the industry is clustered in the world (include a map as part of your answer)
and speculate about why the industry is clustered where it is, 2) using George Yip’s approach (see course slides),
assess where your chosen industry falls on the spectrum from multi-domestic to global industries. (In order to
receive credit, limit your answer to 500 or fewer words and submit it via Canvas before 10:00 PM (San Francisco
time) on Sunday, June 16, 2024. No late assignments will be accepted.)
Gregory Theyel, Ph.D., Professor
gregory.theyel@csueastbay.edu