Week 1 (Strategy)
Formulating a strategy happens in three different ways: industry structure or firm resources
affect strategy or strategy is seen as an emerging process. For industry structure, Porter’s five
forces capture the most important factors: bargaining power of buyers and suppliers, threat of
new entrants or substitutes and industry rivalry. The resource-based view (RBV, Barney) states
that competitive advantages come from a firm's internal resources, their strengths and
weaknesses. External analysis consists of opportunities and threats, the environmental factors
or industry attractiveness.
Mintzberg states that strategy is an emerging process that forms gradually. A strategy is then
formed when there is an observed, consistent pattern in the decision stream. Constant feedback
loop between corporate strategy/action and performance.
In general, a strategy formulation framework look like this:
Global operation involves different types of risks: violent
conflict, macro-economic, political, environmental, legal,
computer security, currency fluctuation, climate change
etc.
Peng and Pleggenkuhle-Miles (2009) discussed four current debates in global strategy: (1)
cultural vs institutional, (2) global vs regional geographic diversification, (3) convergence vs
divergence in corporate governance and (4) domestic vs overseas CSR.
Institution-based view (IBV) suggests that firm strategies are enabled and constrained by
different rules of the game around the world. It also states that formal institutions may appear to
be converging as common legislation or governing systems are adopted, however, the informal
institutions at work may not actually implement these convergence mechanisms.
(1)
- Cultural distance involves the study of principal differences in national cultures between
the home countries of MNEs and the host countries of their operations.
- Institutional distance encompasses cultural differences as well as additional factors,
such as regulatory differences, normative pressures, and cognitive identification.
(2)
- Much of the international activity of MNEs is conducted at the intra-regional (within a
region) rather than the inter-regional level (between regions).
- Due to liability of foreignness
- Difficulty in managing an internal network with more than one region
- Regionally focused firms are more likely to maximize their performance
- Critics state that data supporting the ‘regional’ view only capture a snapshot in
time
- Many MNE operations are organized at the regional level as opposed to the global level.
, (3)
- Convergence - economic ideology drives value (two things are moving together)
- Globalization unleashes a survival-of-the-fittest process in which firms will be
forced to adopt globally best practices (usually Anglo American)
- Market forces (demand) forces enhancing cross-national convergence on
international standards
- Divergence - national culture drives value (two things moving apart)
- Crossvergence argues that neither of these views adequately explain the dynamic
interaction at play
(4)
- Managers should make decisions that maximize the wealth of the firm’s equity holders
(Friedman 1962)
- Since corporations draw resources from society, they have a duty to that same society
which goes beyond wealth (Freeman 1984)
Week 3 (Leadership)
The CEO effect (accounting for 15-20%) is becoming more prominent, mainly because the
business environment is more dynamic, choices matter more and shareholder orientation is
shifting. Latitude of CEO’s actions is subjective to the country business is done, having to do
with national cultural value (Hofstede’s dimensions), ownership structure and corporate
governance. Also connected to Hofstede’s dimensions, e.g. individualism and uncertainty
avoidance.
Upper - Echelon perspective by Hambrick and Mason (1984)
Personal traits of organization’s top leaders impact business’s strategic choices and
performance. Focused on observable characteristics, such as education, age, or background.
Because of these traits, managers are bounded rational.1 Firms with similar resources can
therefore choose different strategy paths, according to the top management’s traits.
1
Bounded rationality is the idea that managers, like all humans, don't have perfect information or
unlimited mental capacity to make the best decisions. Instead, they make choices that are "good enough"
based on what they know and can process, often using shortcuts or heuristics.
Formulating a strategy happens in three different ways: industry structure or firm resources
affect strategy or strategy is seen as an emerging process. For industry structure, Porter’s five
forces capture the most important factors: bargaining power of buyers and suppliers, threat of
new entrants or substitutes and industry rivalry. The resource-based view (RBV, Barney) states
that competitive advantages come from a firm's internal resources, their strengths and
weaknesses. External analysis consists of opportunities and threats, the environmental factors
or industry attractiveness.
Mintzberg states that strategy is an emerging process that forms gradually. A strategy is then
formed when there is an observed, consistent pattern in the decision stream. Constant feedback
loop between corporate strategy/action and performance.
In general, a strategy formulation framework look like this:
Global operation involves different types of risks: violent
conflict, macro-economic, political, environmental, legal,
computer security, currency fluctuation, climate change
etc.
Peng and Pleggenkuhle-Miles (2009) discussed four current debates in global strategy: (1)
cultural vs institutional, (2) global vs regional geographic diversification, (3) convergence vs
divergence in corporate governance and (4) domestic vs overseas CSR.
Institution-based view (IBV) suggests that firm strategies are enabled and constrained by
different rules of the game around the world. It also states that formal institutions may appear to
be converging as common legislation or governing systems are adopted, however, the informal
institutions at work may not actually implement these convergence mechanisms.
(1)
- Cultural distance involves the study of principal differences in national cultures between
the home countries of MNEs and the host countries of their operations.
- Institutional distance encompasses cultural differences as well as additional factors,
such as regulatory differences, normative pressures, and cognitive identification.
(2)
- Much of the international activity of MNEs is conducted at the intra-regional (within a
region) rather than the inter-regional level (between regions).
- Due to liability of foreignness
- Difficulty in managing an internal network with more than one region
- Regionally focused firms are more likely to maximize their performance
- Critics state that data supporting the ‘regional’ view only capture a snapshot in
time
- Many MNE operations are organized at the regional level as opposed to the global level.
, (3)
- Convergence - economic ideology drives value (two things are moving together)
- Globalization unleashes a survival-of-the-fittest process in which firms will be
forced to adopt globally best practices (usually Anglo American)
- Market forces (demand) forces enhancing cross-national convergence on
international standards
- Divergence - national culture drives value (two things moving apart)
- Crossvergence argues that neither of these views adequately explain the dynamic
interaction at play
(4)
- Managers should make decisions that maximize the wealth of the firm’s equity holders
(Friedman 1962)
- Since corporations draw resources from society, they have a duty to that same society
which goes beyond wealth (Freeman 1984)
Week 3 (Leadership)
The CEO effect (accounting for 15-20%) is becoming more prominent, mainly because the
business environment is more dynamic, choices matter more and shareholder orientation is
shifting. Latitude of CEO’s actions is subjective to the country business is done, having to do
with national cultural value (Hofstede’s dimensions), ownership structure and corporate
governance. Also connected to Hofstede’s dimensions, e.g. individualism and uncertainty
avoidance.
Upper - Echelon perspective by Hambrick and Mason (1984)
Personal traits of organization’s top leaders impact business’s strategic choices and
performance. Focused on observable characteristics, such as education, age, or background.
Because of these traits, managers are bounded rational.1 Firms with similar resources can
therefore choose different strategy paths, according to the top management’s traits.
1
Bounded rationality is the idea that managers, like all humans, don't have perfect information or
unlimited mental capacity to make the best decisions. Instead, they make choices that are "good enough"
based on what they know and can process, often using shortcuts or heuristics.
