Transcript Document

Emerging Markets and Global Strategy:
Future Research Topics
1
YADONG LUO
JUNE 2010
NATIONAL TAIWAN UNIVERSITY
Areas in Emerging Market-Related Global
Strategy (EMGS)
2
I. MNEs Investing
in Emerging
Economies
II. International
Expansion of EM
MNEs
Epoch of Global
Cooptition
in a Dynamic,
Complex
Environment
IV. International
Competition with
Copycats
III. Comparative
Strategies across
Emerging
Economies
I. MNEs Investing in Emerging Markets
3
1. Winning
Strategies for
New Generation
MNEs
2. Strategic
Alignments
3. Dynamic
Capability
Building &
Leveraging
MNEs’ Success in
Emerging Markets
5. Organizational
Ambidexterity
4. New Generation
of Offshoring &
Outsourcing
I(1) Winning Strategies
Changing demographic & socio-cultural environments
Shifting Competitive
Parameters
Shifting Institutional
Parameters
1. Shift from scant to strong
1. Shift from entrance to
operational restriction
2. Shift from separation
from to convergence with
domestic policies
3. Shift from national-level
to regional –level regulation
4. IPR and corruption are
long-lasting hurdles
competition
2. Shift from niche to
massive competition
3. Shift from single- to
multi-market competition
4. Shift from structural
similarity to multiplicity
Shifting Dominant Strategies
1. Shift from parent integration to national integration
2. Shift from production relocation to value chain
localization
3. Shift from competence transfer to competence building
4. Shift from competition to coopetition with business
community
5. Shift from repetition to adaptive diversification
6. Shift from alliance building to alliance restructuring
Changing economic and technological environments
4
Changing political and legal environments
Shift from “Foreign Investor” to “Strategic Insider”
Shift from “Foreign Investor” to “Strategic Insider”
The Localized
Integration
Perspective
• Shift from
corporate to national
integration
• Build an umbrella
center as national
headquarters to
consolidate localized
common functions
• Seek cost
reduction, better
resource deployment
& interunit sharing
• Add new insights to
theories of global
integration,
internalization &
organizational
design
The Insiderization
Perspective
The Coopetition
Perspective
• Shift from local
responsiveness to
strategic
insiderization
• Shift from rivalry
dominance to
coopetition
prevalence
•Proactive in value
chain localization,
adaptive
diversification & local
competence building
• Simultaneous
competition and
cooperation with
local rivals,
suppliers, partners,
regulators, etc.
• Seek market
dominance
competitive
leadership & vast
volume and scale
• Seek collaborative
competitive
advantages by
benefiting from a
bigger pie
• Add new insights to
theories of institution,
co-evolution, liabilities
of foreignness &
strategic option
• Add new insights to
theories of resource
dependence, global
competition &
networking
5
The Acceleration
Perspective
• Shift from
incremental evolution
to radical acceleration
• Acceleration in vast
commitments in R&D,
acquisitions & other
investments, treating
the market as geoemphasizer or global
network captain
• Seek a swift and
aggressive move
ahead of competitors
• Add new insights to
theories of
internationalization
process, dynamic
capability & risktaking behavior
I(2): Strategic Alignments
6
Commitment/
Risks ― Rewards
Local Market
Share ― Export
Growth
Environment ―
Strategy
Outsourcing ―
Inhouse Activities
Strategic
Alignments for
MNEs Investing
in Emerging
Markets
Uncertainty ―
Strategic Option
Internalization
― Localization
Short Term ―
Long Term Growth
Diversification ―
Market Conditions
Underlying Theories: Structural contingency, strategic option, resource
dependency, risk exposure, resource commitment, information processing, TCE
I(3): Dynamic Capability
7
New Competence
Building &
Upgrading in EM
Bi-Directional
Knowledge
Global Centers of
Excellence & IntraFirm Sharing
Dynamic
Capability for
MNEs Investing
in Emerging
Markets
Transfer & Flows
Global Structure &
Governance Spurring
Dynamic Capability
Knowledge Sourcing,
Deployment and
Protection
Underlying Theories: Dynamic Capability, RBV, KBV, Org. Learning, Org. Design
I(4): Offshoring & Outsourcing
8
From Call Center to
BPO and KPO
Governing, Managing &
Integrating BPO/KPO
New Generation
of Offshoring &
Outsourcing
From OEM to ODM
and OBM
Controlling and
Overhauling
OEM/ODM/OBM
Underlying Theories: Modularization, System Theory, Complexity Theory,
Org. Evolution, Population Ecology, Org. Control
I(5): Organizational Ambidexterity
9
 Organizational ambidexterity is multilevel and multidimensional, with two
distinct, even competing, forces each constituting a separate but interrelated,
nonsubstitutable element
Contextual dimension – Co-evolution
Stakeholder dimension – Co-opetition
Organizational
Ambidexterity
Exploitation vs.
Exploration
Knowledge Creation
vs. Knowledge
Protection
Stability vs.
Evolution
Temporal dimension – Co-adaptation
Capability dimension – Co-competence
Global Control vs.
Decentralization
Standardization vs.
Local Adaptation
I(5) Organizational Ambidexterity
Co-competence
Co-competence is the capability dimension of ambidexterity, encompassing (i) transactional
competence (e.g., four building blocks of competitive advantage) and (ii) relational competence
(guanxi with business community members). The forces below propel the need for co-competence via
competitive pressure and institutional pressure (relationship and legitimacy)
Economic Transformation
Residuals
• Government interference
• Regulatory variability
Co-competence
Transactional
Competence
Economic Liberalization Mandates
• Market/competition forces
• Rule of law awareness
Relational
Competence
Sociocultural Residuals
• Importance of social ties
10
I(5): Organizational Ambidexterity
- A Unifying Model
11
Exploitation vs. Exploration
Knowledge Development
vs. Protection
Antecedent Factors
• Institution-based
• Market-based
• Culture-based
• Resource-based
Control vs. Decentralization
Stability vs. Growth
Consequent Factors
Standardization vs. Adaptation
Organizational
Ambidexterity
•Co-evolution
• Co-opetition
• Co-competence
• Co-adaptation
• External resource dependence
• Market orientation duality
• Market position
• Business portfolio
• Corporate culture
• BusinessLevel
• CorporateLevel
• Incentive system
• Inter-unit sharing
• Organizational justice
Profitability
Adaptability
Potentiality
Sustainability
II. International Expansion of EM MNEs
(HEAD Model)
12
Transnational Operations
Alliances
Outward Investment
Acquisitions &
Export Growth
Home Base
Home Market Development
Dual Intent (Strategy Entry & Strategic Exit)
Inward Internationalizaton
II: EM MNEs: Ownership-Diversification Matrix
Non-state owned
State owned
H
International Diversification
World-stage
Aspirant
Transnational
Agent
Niche
Entrepreneur
Commissioned
Specialist
L
13
13
II. EM MNEs: Product-Geographic Diversification Matrix
Focused
Product Scope
Diversified
H
International Diversification
Global
Replicator
Far-flung
Conglomerate
Anchored
Replicator
Home-centered
Conglomerate
L
14
14
II. EM MNEs: Typology and Strategy
Focused
Product Scope
H
Global Replicator
Diversified
Far-flung Conglomerate
International Diversification
Global customer orientation
•High value-price ratio
•Integrated cost-differentiation
•Geo/specialized R&D system
•Global vertical value chain
•Home supply/production base
•Intraorganizational sharing
•Global stage performer
•Mature int/external networker
•Sophisticated R&D builder
•Localized globalizer
•Building centers of excellence
•Fixed cost sharing
•Differentiated multiple branding
Anchored Replicator
Home-centered Conglomerate
•Niche/positioning strategy
•Unique growth trajectory
•Export dominance
•Build competence for future
•Eye on emerging markets
•Positioning/dominating at home
•Export to leverage home capacity
•Home market prospector
•Pioneer in home embryonic bus.
•Leapfrog when internationalizing
L
Need more evolutionary/incremental
15 15
Need more ambitious/radical
II. EM MNEs: Target market tells a lot…
Target Market
Developing Country
Developed Country
Escape from domestic
Institutional deterrents
Low
High
Leveraging skills in dealing
institutional austerity
High
Low
Round-tripping arbitrage
High
Low
Market/capability arbitrage
High
Low
Compensating competitive
disadvantages
Low
High
Exploiting competitive
Advantages
High
Low
Substitutability between
Transactional and relational
Capabilities
High
Low
Importance of Location Advantages
High
Low
Importance of Ownership Advantages
High
Low
Importance of Institutional Advantages
High
Low
16 16
II. International Expansion of EM MNEs
17
Institutional Arbitrage
and Leverage
Location/market selection
• We know why but how
• Business-home government
ties in int’l expansion
Spring-boarding
Behaviors
• Compensate weakness
• Circumvent home hardship
• Overcome late entrance
Research
Topics on
EM MNEs
Double Loop
Internationalization
• Recursive reinforcement
between inward and outward
Radical Entry
Commitment
•
•
•
Risk taking entry modes
Path departure in destiny
Radical in size, sequence
and speed
Capability/Resources
• Effects on localization and
global design
• Relationship competence
III. Comparative Strategic Management:
Major Components
18
Strategic
Orientations
Contextual
Differences
1.
2.
3.
4.
5.
Economic
Institutional
Socio-cultural
Demographic
Competitive
Strategy
Formulation
• Corporate-level
• Business-level
• Global-level
Strategy
Implementation
• Corporate governance
• Structure and control
• Strategic leadership
• Strategic entrep.
• Small business mgt
Capability
Differences
1.
Capability
Composition
2. Capability
Building
3. Capability
Deployment
4. Capability
Upgrading
19
But, BRICs are certainly not the same
20
 China and India are by far the world’s two most populous countries, with 1.34
billion and 1.18 billion inhabitants, compared with 193 million in Brazil and 142
million in Russia
 China is the “workshop of the world”, competitive in manufacturing, while
India is stronger in skill-intensive services (the ratio of trade in services to GDP
is 15%, against 7% for China), Brazil is mainly an exporter of food and raw
materials and Russia is an exporter of fuels and minerals
 Brazil has a far more closed economy than either China or India, with a ratio of
merchandise exports to GDP of a mere 22%, compared to 67% for China and
32% for India
 Neither Brazil and Russia achieved a significant rise in their share of world
GDP in recent years. The story, then, has been of the rise of China and India. In
2009, China’s economy grew by 8.5% and India’s by 6.6%, but Brazil’s
stagnated and Russia’s shrank by 7.9%
 Yet the notion of BRICs does capture the reality of a shift in economic power
away from the old developed countries (e.g., G7) to emerging economies
Economic Conditions: BRIC Comparison
Brazil
Predictors
Measure
GDP
Billion USD
current
prices $
GDP per capita
GDP growth
GNI per capita
GDP per person
engaged
Inflation, GDP
deflator
2006
Russia
2007
2008
1,089,061 1,333,271 1,612,539
India
China
212007
2008
990,577 1,290,082
1,607,816
914,892 1,176,890 1,217,490 2,657,881 3,382,267 4,326,187
2006
2006
2007
2008
2006
2007
2008
5,870.21
7,106.64
8,295.00
6,928.77
9,102.55
11,806.95
759.895
941.635
1,017.17
2,021.97
2,560.42
3,259.46
4
6
5
7
8
7
10
9
7
12
13
9
4820
6060
7350
5800
7530
9620
820
950
1070
2010
2410
2940
116.9
121.6
126.3
108.9
116.8
122.4
190.1
201.8
210.8
333.2
373.7
405.1
%
6
4
6
16
14
15
5
5
7
4
7
7
%
Current
USD (Atlas
method)
1990=100
Industrial
production growth
rate
Industry, value
added
Foreign exchange
and gold reserves
Investment (gross
fixed)
%
3.4
3.2
4.9
4.0
4.8
7.4
7.9
7.5
8.5
29.5
22.9
13.4
% of GDP
29
28
28
38
38
..
29
30
29
49
49
49
53,800
87,270
178,000
182,200
314,500
470,000
136,000
165,000
239,400
%
19.9
20.2
17.9
18.1
18.2
19.4
28.1
29.2
31.8
44.4
44.3
42.2
Public debt
% of GDP
51.6
50.0
43.9
12.9
8.0
7.0
53.8
52.8
58.8
24.4
22.1
18.9
Airports
NO.
4,276
4,276
4,263
1,623
1,623
1,260
341
341
346
486
486
467
Railways
KM
29,252
29,252
29,295
87,157
87,157
87,157
63,230
63,230
63,221
74,408
74,408
75,438
Roadways
KM
871,000
871,000
Million
USD
1,724,929 1,751,868 1,751,868
825,600 1,034,000 1,493,000
933,000 3,851,440 3,383,344 3,316,452 1,809,829 1,870,661 1,930,544
Economic Openness Comparison in BRIC
22
Brazil
Predictors
Measure
FDI inflow
Flow
Stock
FDI Inflow/
Imports
FDI Inflow/GDP
FDI outflow
FDI outflow/GDP
India
China
2006
2007
2008
2006
2007
2008
2006
2007
2008
2006
2007
2008
18,822
34,585
45,058
29,701
55,073
70,320
20,336
25,127
41,554
72,715
83,521
108,312
220,621 309,668
287,697
265,873
491,232 213,734
70,282
105,429
123,288
292,559 327,087
378,083
Flow
1.29
1.75
2.65
2.03
2.78
4.14
1.39
1.27
2.45
4.98
4.22
6.38
Stock
1.78
1.98
1.93
2.14
3.14
1.43
0.57
0.67
0.83
2.36
2.09
2.54
Flow
1.76
2.63
2.90
3.02
4.27
4.21
2.23
2.20
3.32
2.62
2.46
2.49
Stock
20.57
23.56
18.53
26.99
38.09
12.80
7.72
9.24
9.84
10.55
9.62
8.69
Flow
28,202
7,067
20,457
23,151
45,916
52,390
14,344
17,281
17,685
21,160
22,469
52,150
113,925 136,103
162,218
216,488
370,161 202,837
26,799
44,080
61,765
73,330
95,799
147,949
Stock
FDI outflow/
exports
Russia
Flow
20.47
4.40
10.33
7.62
12.96
11.11
11.87
11.89
10.00
2.18
1.85
3.65
Stock
82.67
84.72
81.95
71.23
104.45
43.00
22.17
30.32
34.92
7.56
7.87
10.36
Flow
2.63
0.54
1.32
2.35
3.56
3.14
1.58
1.51
1.41
0.76
0.66
1.20
Stock
10.62
10.36
10.45
21.98
28.70
12.14
2.94
3.86
4.93
2.64
2.82
3.40
Net cross-border
M&A purchases
Million USD
18,629
10,785
5,243
3,507
18,597
17,115
6,715
29,076
11,662
20,085
-10,391
35,683
Net cross-border
M&A sales
Million USD
2,637
6,539
8,240
5,811
22,753
13,777
4,410
4,406
9,519
20,403
16,234
13,432
Source: UNCTAD
Comparing Doing Business in BRIC
23
Brazil
Predictors
Russia
India
China
2006
2007
2008
2006
2007
2008
2006
2007
2008
2006
2007
2008
17
17
18
10
9
9
11
11
13
13
13
13
Time
152
152
152
35
30
30
71
35
33
48
35
35
Cost
10.1
9.9
10.4
8.8
5.1
4.8
62
78.4
74.6
13.6
9.3
8.4
Min. capital
0
0
0
4.4
3.4
3.2 352.1 314.4 269.5 946.7 213.1 190.2
Procedures
18
18
18
56
56
54
37
37
37
36
37
37
Time
316
316
411
739
739
704
195
195
195
345
349
336
Cost
65.7
62.2
59.4
3788 286.1 642.9
3060
Difficulty of hiring index
67
78
78
33
33
33
0
0
0
11
11
11
Rigidity of hours index
60
60
60
40
40
40
20
20
20
33
33
33
Difficulty of redundancy index
0
0
0
40
40
40
70
70
70
40
40
40
Rigidity of employment index
42
46
46
38
38
38
30
30
30
28
28
28
Redundancy costs
46
46
46
17
17
17
56
56
56
91
91
91
Procedures
14
14
14
6
6
6
5
5
5
4
4
4
3. Registering Property Time
47
47
45
52
52
52
61
61
61
29
29
29
Cost
2.5
2.8
2.8
0.4
0.3
0.3
8
7.8
7.7
3.6
3.6
3.6
Strength of legal rights index
3
3
3
3
3
3
6
7
8
4
4
4
Depth of credit information index
5
5
5
0
0
4
2
3
4
2
4
4
Public registry coverage
9.6
16.9
17.1
0
0
0
0
0
0
0.4
10.2
49.2
Private bureau coverage
53.6
43
46.4
0
0
4.4
1.7
6.1
10.8
0
0
0
Procedures
1. Start a business
2. Employing Workers
4. Getting Credit
4 317.7
1073 941.4 840.2
(continued)
Brazil24
Predictors
6. Paying Taxes
7. Trading Across
Borders
9. Closing a
Business
China
2007
6
2008
6
2006
6
2007
6
2008
6
2006
7
2007
7
2008
7
2006
10
2007
10
2008
10
Extent of director liability index
7
7
7
2
2
2
4
4
4
1
1
1
Ease of shareholder suits index
3
3
3
7
7
7
7
7
7
2
4
4
Strength of investor protection
index
Payments
Time
Total tax rate
Documents to export
Time to export
5.3
10
2,600
68.8
8
18
5.3
10
2,600
26.3
8
18
5.3
10
2,600
68.8
8
18
5
15
448
60
8
36
5
11
448
51.2
8
36
5
11
448
48.3
8
36
6
55
264
65.5
10
36
6
58
264
72.8
10
27
6
59
271
71.5
8
18
4.3
35
872
80
6
18
5
35
872
80.7
7
21
5
35
872
81.2
7
21
895
7
24
895
7
24
1090
7
22
1750
13
36
1750
13
36
1750
13
36
864
15
43
864
15
41
820
9
21
335
11
24
390
6
24
390
6
24
1,145
45
1,145
45
1,240
45
1,750
37
1,750
37
1,750
37
1,244 1,244
46
46
910
46
375
35
430
35
430
35
Time
616
616
616
281
281
281
1420
1420
1420
406
406
406
Cost
16.5
16.5
16.5
13.4
13.4
13.4
39.6
39.6
39.6
11.1
11.1
11.1
0.4
10
9
12.1
4
12
14.6
4
12
27.6
3.8
9
28.7
3.8
9
29
3.8
9
12.8
10
9
13
10
9
11.6
10
9
31.5
2.4
22
31.5
2.4
22
35.9
1.7
22
Cost to export
Documents to import
Time to import
Cost to import
Procedures
8. Enforcing
Contracts
India
2006
6
Extent of disclosure index
5. Protecting
Investors
Russia
Recovery rate
Time
Cost
Institutional Environment Comparison
25
Brazil
Predictors
Political
stability
Government
effectiveness
Regulatory
quality
Rule of law
Control of
corruption
Source: The World Bank
Russia
India
China
Measure
2006
2007
2008
2006
2007
2008
2006
2007
2008
2006
2007
2008
0-5
2.37
2.33
2.38
1.73
1.78
1.88
1.60
1.52
1.51
2.19
2.22
2.18
0-5
2.36
2.37
2.49
2.05
2.09
2.18
2.46
2.55
2.47
2.56
2.69
2.74
0-5
2.46
2.46
2.69
1.93
2.06
1.94
2.31
2.28
2.29
2.17
2.26
2.28
0-5
2.07
2.07
2.20
1.55
1.55
1.59
2.71
2.63
2.62
2.02
2.05
2.17
0-5
2.33
2.29
2.47
1.73
1.59
1.52
2.27
2.11
2.13
1.97
1.89
2.06
Social Cultural Environment
26
Indicators
Poorest 10% Share of
income or expenditure
Richest 10% Share of
income or expenditure
Richest 10% to poorest
10% Ratio
Source
WB
WB
WB
Year
(Most
Recent)
Brazil
Russia
India
1.1
2.6
3.6
2.4
43
28.4
31.1
31.4
40.6
11
8.6
13.2
1992-2007
1992-2007
1992-2007
56.7 (2005) 42.3 (2008) 36.8 (2004)
Gini index
WB
China
41.5 (2007)
Technological Environment
27
Brazil
Russia
India
China
Predictors
Source
2005 2006 2007
2005
2006
2007
2005 2006 2007
2005
2006
2007
Adult literacy rate
UN
89.6
89.6
90.0
99.0
99.0
99.0
64.5
65.2
66.0
92.6
93.0
93.3
Education index
UN
0.89
0.89
0.89
0.93
0.93
0.93
0.63
0.64
0.64
0.85
0.85
0.85
Combined gross enrolment ratio
High-technology exports % of
manufactured exports
UN
87.2
87.2
87.2
81.7
81.9
81.9
60.7
61.0
61.0
68.5
68.7
68.7
WB
13
12
12
20
19
17
5
5
5
31
30
30
WB
21
31
36
19
20
21
4
7
7
9
11
16
Mobile cellular subscriptions per
100 people
WB
46
53
64
46
53
63
8
15
21
30
35
42
Patent grants
WIPO
527
591
319
19947
19643
19009
2124 2789 1025
21519
26298
33409
Internet users per 100 people
Note: Education Index is measured by the adult literacy rate (with two-thirds weighting) and the combined primary, secondary,
and tertiary gross enrollment ratio (with one-third weighting).
III. Comparative Strategic Management
Across Emerging Economies: Example Questions
28
Strategy - Environment
Comparison
• Contextual differences drive
strategic differences?
• Environment –strategy alignment
is universal?
• Institutional voids are similarly
influential?
• Environment difference is a
predictor or moderator?
Strategy – Performance
Comparison
• Strategies hold similar
performance implications in
different countries?
• Environment-strategyperformance is context-specific?
Strategy Practice
Comparison
• Strategic management practices
diffuse across borders?
• Why firms use different strategy
practices in different settings?
• Commonality and dissimilarity in
capability building, leveraging and
upgrading?
CSM
Strategy - Governance
Comparison
• Comparative interfaces between
strategy and structure/culture/
control /leadership
• Comparative studies on strategic
entrepreneurship
• Why using differing organizing/
governance principles in different
countries
IV: International Competition with EM Copycats
Typology of EM Copycats
29
1st Generation
2nd Generation
3rd Generation
Small
MARKET SHARE
large
Duplicating
Wildcat
Adaptive
Junglecat
Worldstage
Innovator
Mocking
Kitten
Emulating
Housecat
Novel
Specialist
Pure
Imitation
Creative
Imitation
IMITATIVENESS
Novel
Innovation
IV: International Competition with EM Copycats
EM Copycat Capability: A CHINA Framework
30
Combinative
Capability
Absorptive
Capability
Copycat’s
Competitive
Advantages
• Cost Advantage
HardshipSurviving
Capability
• Channel Advantage
• Speed Advantage
Intelligence
Capability
Networking
Capability
Conditions Fostering Copycat Growth: The “STORM” Framework
Social Conditions
• Apathetic to intellectual property right protection
Tolerance to counterfeit31
Asymmetric information fostered fake goods
Lack of monitor and trust connive ersatz
Knockoff were encouraged by blind nationalism
 Herding effect enlarged all conditions above
Emerging Economy Copycats
Technological
Conditions
•Standardization and
modularization
•Availability of open
market for key
technology, components
and design
•Rise of specialized
intermediaries
•Convergence of
technical norms
Motivation of Copycats
•Seeking mass-market opportunity for low- & mid-end
consumers
•Seeking high volume with low margin
Behavior of Copycats
•Imitation of product offering
•Evolution from complete to creative imitation
Organizational Conditions
•Flat organizational structure
•Entrepreneurial orientation
•Performance-based culture and incentives
•Learning advantage of newness
Regulatory and Legal Conditions
•Lack a clear distinction between legal and illegal
copycat products
•Ambiguous IPR systems
•Weak enforcement of IPR protection and weak
punishment over IPR infringement
•Inadequate punitive regulations on counterfeits
Market Conditions:
•Presence of massmarket for copycat
products
•Social acceptance of
copycat products in
many countries
•Increasing sensitivity to
price-value ratio
•Improved logistics,
channels and networks
•Low entry barrier or low
startup/exit cost