INTERNATIO

NAL
BUSINESS
STRATEGY
Presented by
Group 1
ABOUT
US
1.Võ Rạng Đông
2.Trần Hải Đăng
3.Phạm Phương Anh
4.Phạm Phương Trang
5.Đoàn Nguyễn Thảo
S 2. BASIC 1. BASIC
T FRAMEWORKS THEORIES
R 2.1 Dunning’s OLI Framework
2.2 Porter’s Five Forces
U Framework
C 2.3 Kogut’s Comparative and
Competitive Advantage
T Framework
2.4 Porter’s Configuration-
U Coordination Framework
2.5 Prahalad and Doz’s
R Integration-Responsiveness
3. CASE
E Framework
2.6 Bartlett and Ghoshal’s STUDY
Globalization-Localization
1.THEORIES PROVIDE DIFFERENT
PERSPECTIVES ON WHY FIRMS
EXPAND INTERNATIONALLY -
MAIN VIEWPOINT
Firms go global to gain ownership,
1.Eclectic Theory location, and internalization
advantages.

2. Transaction Firms seek to minimize transaction costs

Cost Theory (TCT): when operating internationally.

3. Competitive Firms expand globally to build unique

Advantage of competitive advantages based on the
Nations (CAN) characteristics, cultures, and resources of
Theory: various nations.
1.THEORIES PROVIDE DIFFERENT
PERSPECTIVES ON WHY FIRMS
EXPAND INTERNATIONALLY:
This theory focuses on deriving
4. Resource-Based benefits from scarce, firm-specific
View (RBV) resources.

Emphasizes achieving competencies

5. Competency as a source of sustained competitive
Theory advantage.
→ These theories can serve as a foundation for analyzing
operational globalization or influencing global operations
strategy.
 ANALYSIS OF GLOBAL
OPERATIONS STRATEGY -
APPLICATION, INFLUENCE
OF THEORIES
1. Global Competency
• CAN, core competency, and real
options theories: inform competency-
based global operations strategy.
• Core Competency Theory: Provides
direct guidelines for developing
competencies.
• Competing for the Future (Hamel
and Prahalad 1994): Firms can
achieve competency in emerging
markets through innovation and
improvement, capturing market share.
• Real Options Theory: Offers a
framework for achieving global
 2. GLOBAL
RESOURCES
• Influenced by Eclectic theory, RBV, CAN,
and real options theories is to shape
resource-based global operations strategy.

• Multi-Theoretical Approach: Combines

international trade theory, RBV, and
TCT to guide resource and location
decisions.

• Indigenous Resources: CAN theory

highlights the importance of utilizing local
resources for competitive advantage.

• Global Manufacturing Networks: Real

options theories help manage these
GLOBAL PROCESSES
• Influenced by CAN, TCT, core competency,
network theory, real options, and
learning theories → impact process-based
global operations strategy.
• Optimizing the Global Value Chain: CAN
theory suggests leveraging resource
advantages from different nations for
competitive gain.
• Benchmarking: Strategic groups theory
aids in evaluating operational performance
within an industry.
• Cognitive Communities theory: Managers
can share knowledge about production
3. GLOBAL PROCESSES
• Interorganizational Networks theory: Firms can
form alliances and joint ventures,... to design global
manufacturing and supply chain networks.
• TCT: Analyzes transaction dimensions (specific
assets, the frequency of economic exchange,..) to
guide decisions on vertical integration and
outsourcing, aiming for transaction cost reduction.
• Risk Management: Real options theories enhance
global risk management and supply chain strategies.
• Learning Theories: Influence global technology and
information management practices.
DUNNING'S OLI FRAMEWORK
 DUNNING’S OLI FRAM

• Dunning (1977) provides a fruitful way to study multinational

enterprises (MNEs) and this work has inspired many
applications in global operations such as global sourcing and
global service.

• Therefore, we present Dunning’s OLI framework as a foundation

of global operations strategy. OLI stands for Ownership,
Location, and Internalization, the three advantages that
influence a firm’s decision to become an MNE.
 DUNNING’S OLI FRAM
OWNERSHIP LOCATION INTERNALIZATION
ADVANTAGES ADVANTAGES ADVANTAGES
• These influence a
• These refer to the • These refer to
firm’s decision to
specific low-cost labor
operate in a foreign
advantages (e.g., and raw
country.
products, materials, lower • They relate to the
designs, taxes and other
trade-off between
patents, trade tariff s, a well-
the benefits of a
secrets, and trained labor
wholly owned
resources) used force,....of the
subsidiary and the
to overcome host country .
• These advantages of other
operational costs make a
entry modes such as
in a foreign nation attractive
exports, licensing, or
country. for a MNE added-
• Help MNE joint ventures.
value business.
successfully
DUNNING’S OLI FRAM
DUNNING’S OLI FRAM
 2. PORTER'S
FIVE FORCE FRAMEWORK
 • Based on industrial
organization economics,
Porter (1979) proposes a five
forces framework for
PORTER’S industry analysis and
FIVE business strategy and
develops five forces that
FORCES determine the competitive
FRAMEWOR intensity and
K attractiveness of an
industry.

• The attractiveness of an
industry refers to overall
 Threat of new entrants

PORTER’S
FIVE
FORCES
FRAMEWOR Intense rivalry among
K existing players
 PORTER'S FIVE FORCES
Threat FRAMEWORK
of Bargaining Bargaining
substitute power of power of
products and suppliers customers
services
PORTER'S FIVE FORCES
FRAMEWORK
 3. KOGUT'S
MPARATIVE AND COMPETITIVE
ADVANTAGE FRAMWORK
 KOGUT’S COMPARATIVE AND
COMPETITIVE ADVANTAGE
FRAMEWORK
Kogut (1985) studies the difference between location-
specific comparative advantage and firm-specific
competitive advantage and puts forward a key concept of
“comparative advantage-based competitive advantage”,
particularly useful in global operations, including global
value chains.
 KOGUT’S COMPARATIVE AND
COMPETITIVE ADVANTAGE
FRAMEWORK
Kogut (1985) states that the design of global
strategies is based on “the interplay between the
comparative advantage of countries and
competitive advantages of firms”.
 KOGUT’S COMPARATIVE AND
COMPETITIVE ADVANTAGE
FRAMEWORK

Figure: shows Kogut’s three modes for global competition.

 4. PORTER'S
NFIGURATION-COORDINATION
FRAMEWORK
 VALUE CHAIN

The value chain is a system of discrete activities conducted to

do business.

Its activities include primary activities such as inbound

logistics, operations, outbound logistics, marketing and
sales, service, and support activities such as firm
infrastructure, human resource management, technology
development, and procurement.
 PORTER’S CONFIGURATION-
COORDINATION FRAMEWORK

Porter (1986) states that to deal effectively with global

competition, a firm must choose a value chain
configuration, determine how and where activities are
performed, and consider the coordination problem to decide if
activities should be shared among operational units.
 PORTER’S CONFIGURATION-
COORDINATION FRAMEWORK

Porter (1986) develops a framework to address how firms

can gain competitive advantage in their value chains through
two dimensions: configuration and coordination.
 PORTER’S CONFIGURATION-
COORDINATION FRAMEWORK
GLOBAL GLOBAL
CONFIGURATION COORDINATION

Refers to where and in Refers to how and to what

how many places the extent similar value
firm’s value chain chain activities are
activities are located coordinated with each
worldwide other across countries to
maximize the firm’s
competitive edge.
PORTER’S CONFIGURATION-
COORDINATION FRAMEWORK
 PORTER’S CONFIGURATION-
COORDINATION FRAMEWORK
Porter’s configuration-coordination framework can be applied in
the following fields of global operations strategy:

1. Global production:
• Its configuration issues include: the location of production
facilities for components and end products
• Its coordination issues include: the networking of
international plants, transferring of process technology, and
production of know-how among plants.
 PORTER’S CONFIGURATION-
COORDINATION FRAMEWORK
Porter’s configuration-coordination framework can be applied in
the following fields of global operations strategy:

2. Global service:
• Its configuration issues include: the location of service
organization.
• Its coordination issues include: the similarity of service,
service standards, and procedures worldwide.
 PORTER’S CONFIGURATION-
COORDINATION FRAMEWORK
Porter’s configuration-coordination framework can be applied in
the following fields of global operations strategy:

3. Global technology development:

• Its configuration issues include: the number and location
of R&D centers.
• Its coordination issues include: interchanging among
dispersed R&D centers, product development to respond to
local markets, and product introduction sequence in the
world.
5. PRAHALAD AND DOZ’S
EGRATION-RESPONSIVENESS
FRAMEWORK
 • An important tool for examining
operations strategy in a global
context.

• Be used to represent the

environmental pressures facing
multinational enterprises (MNEs) as
they expand worldwide.

• There are 2 types of pressures:

Pressure of global intergration (GI)
Pressure of local responsiveness
(LR)
 Global Local
Intergration Responssiveness
Such as the need to Such as diverse
reduce cost through large- government regulations,
scale investments, the differences in customer
presence of global demand, preferences
competitors,
Promoteetc.firms to across countries, etc.
Required firms to
conducting their manage their
activities on a global activities on a
basis. country-by-country
3 strategies

• Little to no differences between countries.

• If the pressure of GI is high, this strategy
1.Global
integration will be used to highlight global
coordination.
• Be characterized by competition with both
3 strategies

• “How company serves a specific

market’s demand?”
2.Locally
responsive • Be emphasized if industry pressures are
mainly perceived at the domestic level.
• Be characterized by a high level of
3 strategies

• Be used when both global integration and

3.Multifocal local responsiveness are perceived as
important.
• Characterized by intense competition and
 BARTLETT AND GHOSHAL’S
OBALIZATION-LOCALIZATION
FRAMEWORK
• Based on Prahalad and Doz’s
framework.

• Analyse in depth a firm’s strategic

position in the global environment, and
has high practical values for managing
different businesses, functions and
markets.

• There are also 2 main types of

pressures. These pressures form the
model presenting 4 strategies:
International strategy
Global strategy
Multi-domestic strategy
4 strategies INTERNATIONAL
STRATEGY

• Companies could aim for decentralised decision-

making and regional production.
• Take cost efficiency by going local with functions like
marketing, R&D, etc
• In this sort of strategy, subsidiaries have more
autonomy and power.
 GLOBAL

4
STRATEGY
strategies

• The companies can offer the same products or

services as a domestic marketplace.
• Some of the production can be done locally but
functions like marketing and R&D are managed
centrally.
4 strategies
MULTI-DOMESTIC
STRATEGY

The companies need to customize their product to

suit the requirements of the local market to remain
competitive
The core competencies can
get lost
 TRANSNATIONAL

4
STRATEGY
strategies

Be a challenge for companies to customize products

for the local requirements but still retain their core
competencies.
Need to understand what economies they wish
to utilize in a manufacturing context.
 3. ANALYZE
THE CASE STUDY
OF
L’OREAL
 3.1 Use Porter’s five forces
framework to analyze the
industrial environment of
3 3.2 Use Porter’s configuration-coordination
L’Oreal
USE THE framework to analyze L’Oreal. Which global
SPECIFIED strategy is used by L’Oreal?
FRAMEWO 3.3 Use Kogut’s comparative-
RK TO competitive advantage framework to
ANALYZE
analyze the value chain of L’Oreal.
L’OREAL 3.4 Use Bartlett and Ghoshal’s
globalization-localization framework
to analyze the L’Oreal group.
 3.2.1 Use Porter’s five forces
framework to analyze the industrial
environment of L’Oreal
Threat of new entrants

Intense rivalry among

PORTER’S existing players
FIVE
FORCES Threat of substitute products
FRAMEWOR and services
K
Bargaining power of
suppliers
Bargaining power of
customers
 3.1 Use Porter’s five forces
framework to analyze the industrial
environment of L’Oreal

Threat of new
entrants
• New companies seeking to
enter the market face
significant barriers to entry in
terms of research and
development, marketing, and
distribution.
• Competition is fierce in the
cosmetics and beauty industry.

=> It’s very hard for new

entrants to survive in the
industry
 Be the world’s largest cosmetics and beauty
Company, with 68,900 employees managing 27
global brands across 130 countries in 2012

L’OREAL Invested €721 million into cosmetic and

dermatological research and filed 613 patents in
2011 to achieve product innovation and to sell
the “science of beauty” worldwide.

The threat of new entrants into

L’Oreal is low
 3.2.1 Use Porter’s five forces
framework to analyze the industrial
environment of L’Oreal
Threat of new entrants

Intense rivalry among

PORTER’S existing players
FIVE
FORCES Threat of substitute products
FRAMEWOR and services
K
Bargaining power of
suppliers
Bargaining power of
customers
 3.1 Use Porter’s five forces
framework to analyze the industrial
environment of L’Oreal

Intense rivalry
among existing
players
• L’Oreal’s main rivals
are P&G, Unilever,
Estee Lauder, and
Shiseido
• All of which have
strong financial,
operational, and
marketing
capacities,
particularly in their
home countries.
Intense rivalry among existing
players

Naturally
Luxury Consumer Professio Active
oriented
products products nal cosmetics
segment
products

L’Oreal divisions and brands

Intense rivalry among existing
players
Luxury products Consumer Professional
products products

LVMH, Estee P&G and P&G

Lauder Unilever
 3.2.1 Use Porter’s five forces
framework to analyze the industrial
environment of L’Oreal
Threat of new entrants

Intense rivalry among

PORTER’S existing players
FIVE
FORCES Threat of substitute products
FRAMEWOR and services
K
Bargaining power of
suppliers
Bargaining power of
customers
Threat of substitute products and
services

New trends such as the L’Ore

aging population in al
developed countries, • Invested €721 million
aspiring consumers in into cosmetic and
emerging markets, dermatological research
growing demand for and filed 613 patents in
male beauty products, 2011 to achieve product
and increasing ethnic innovation and to sell the
groups bring about “science of beauty”
serious threats of worldwide.
demand fluctuation and
new product
substitution
 3.2.1 Use Porter’s five forces
framework to analyze the industrial
environment of L’Oreal
Threat of new entrants

Intense rivalry among

PORTER’S existing players
FIVE
FORCES Threat of substitute products
FRAMEWOR and services
K
Bargaining power of
suppliers
Bargaining power of
customers
 Bargaining power of suppliers

• L’Oreal has efforted to

prevent suppliers from
gaining too much power.
• By maintaining a
diverse global supply
chain, including major
suppliers like Ingredion,
Croda, BASF, and
Solvay, as well as
smaller local suppliers
in each location
 3.2.1 Use Porter’s five forces
framework to analyze the industrial
environment of L’Oreal
Threat of new entrants

Intense rivalry among

PORTER’S existing players
FIVE
FORCES Threat of substitute products
FRAMEWOR and services
K
Bargaining power of
suppliers
Bargaining power of
customers
Bargaining power of customers

Consumer
products
• The bargaining power of
global customers is
strong in the consumer
products division.

=> Diversifying the sales

market, not concentrating
customers in a certain
location, this helps L'Oreal
not be dominated by any
customer group of a certain
market.
 3.1 Use Porter’s five forces
framework to analyze the
industrial environment of
3 3.2 Use Porter’s configuration-coordination
L’Oreal
USE THE framework to analyze L’Oreal. Which global
SPECIFIED strategy is used by L’Oreal?
FRAMEWO 3.3 Use Kogut’s comparative-
RK TO competitive advantage framework to
ANALYZE
analyze the value chain of L’Oreal.
L’OREAL 3.4 Use Bartlett and Ghoshal’s
globalization-localization framework
to analyze the L’Oreal group.
Global configuration
L’Ore
al
• Its manufacturing is
globalized with 41
factories around
the world and 5.8
billion units
manufactured in
2011.
• Its R&D is
globalized with
3,676 employees
of 60 different
nationalities
working in 30
disciplines.
• The group made
100 active
 3.2 Use Porter’s configuration-
coordination framework to analyze
L’Oreal. Which global strategy
Global is used by
configurationL’Oreal?
• Global
coordination
• Each division builds its own
marketing team for
individual brands. Regional
teams further reach local
customers.
• L’Oreal develops
“geocosmetics” to address
the specific demand of local
customers.
• To adapt global products to
local markets, L’Oreal has The L’Oreal Shanghai
built 19 research centers in center
five regional hubs as well as has developed more
16 evaluation centers and than 300 products for
50 scientific and regulatory Chinese consumers
departments across the
 3.2 Use Porter’s configuration-
coordination framework to analyze
L’Oreal. Which global strategy is used by
Global
configuration L’Oreal?

Global coordination
Country-centered
 3.1 Use Porter’s five forces
framework to analyze the
industrial environment of
3 3.2 Use Porter’s configuration-coordination
L’Oreal
USE THE framework to analyze L’Oreal. Which global
SPECIFIED strategy is used by L’Oreal?
FRAMEWO 3.3 Use Kogut’s comparative-
RK TO competitive advantage framework to
ANALYZE
analyze the value chain of L’Oreal.
L’OREAL 3.4 Use Bartlett and Ghoshal’s
globalization-localization framework
to analyze the L’Oreal group.
competitive advantage

• Acquisition is a way
to access the local
markets and take
advantage of
comparative
advantage in that
markets
• L’Oreal has acquired
brands of companies
in the US and China -
> This helps L’Oreal
take advantage of
cheap labor (China),
large market (US),
and the prestige of
Competitive advantage

• invested €721 million into cosmetic and

dermatological research and filed 613
patents in 2011 to achieve product
innovation and to sell the “science of
beauty” worldwide.
• L’Oreal creates its own competitive
advantage such as owning favorite
product lines that no other brand can
be alternative
 3.1 Use Porter’s five forces
framework to analyze the
industrial environment of
3 3.2 Use Porter’s configuration-coordination
L’Oreal
USE THE framework to analyze L’Oreal. Which global
SPECIFIED strategy is used by L’Oreal?
FRAMEWO 3.3 Use Kogut’s comparative-
RK TO competitive advantage framework to
ANALYZE
analyze the value chain of L’Oreal.
L’OREAL 3.4 Use Bartlett and Ghoshal’s
globalization-localization framework
to analyze the L’Oreal group.
 3.4 Use Bartlett and Ghoshal’s
globalization-localization framework to
analyze
• pressure the L’Oreal
of global group.
integration

--> L’Oreal has a

• pressure of global integration balance between
localization and
globalization,
aiming to be
effi cient while
remaining locally
responsive.
 3.4 Use Bartlett and Ghoshal’s
globalization-localization framework to
analyze the L’Oreal group.

L’Oreal has the function of showing the

strategic positions of different functions, in
which the strategic position of R&D is higher
 3.4 Use Bartlett and Ghoshal’s
globalization-localization framework to
analyze the L’Oreal group.
 3.2 Use Porter’s configuration-
coordination framework to analyze
L’Oreal. Which global strategy is used by
Threat L’Oreal?
of new
entrants
• The threat of new entrants into the
cosmetics and beauty industry is
moderate. Because, new
companies seeking to enter the
market face significant barriers to
entry in terms of research and
development, marketing, and
distribution.
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