BOOK SPECIAL ...................International Strategy

BOOK  International Strategy

In the new book International Strategy: Context, Concepts, and Implications, Harvard Business School Adjunct Professor David collis presents a comprehensive guide to a topic of ever-increasing relevance for managers across all sectors and industries.

By first offering a context for the "why" of multinational firms, then a framework for how to craft an international strategy that creates shareholder value, Collis provides students and new managers with an integrated perspective on international strategy, drawing on earlier work by scholars who include HBS colleagues Christopher Bartlett (with Sumantra Ghoshal), Michael Porter, and Pankaj Ghemawat.

More seasoned managers seeking pragmatic guidance on day-to-day decision making can turn to the book's extensive analysis of cases drawn from real-world companies grappling with the familiar (yet complex) questions that confront any organization trying to do business across borders.

According to Collis, every strategic choice that multinationals face falls into one of the following four buckets:

• What product do we offer? "There's always a choice and a tradeoff here, in terms of how similar a product will be around the world and what sort of product range a company will offer," Collis says. Will a company allow for local variation and differences in taste, and what will its differences be, if any, when it comes to how it brands and positions the product? In Europe, consumers in 13 different countries have 13 different preferences for the texture and taste of tomato soup. In addition, a company may decide to offer a product completely outside its "known" product line: In Japan, Coca-Cola's portfolio of products includes "Georgia," a hot coffee drink sold from a vending machine.
• Where do we compete? "What should a company's global footprint look like? How should it allocate resources across countries?" Collis asks. In the eternal battle between Coke and Pepsi, should Pepsi allocate its resources to being a first mover in a less developed market, or battle for consumers in a bigger, more established market?
• Where do you locate your activities? "People rushed into China, and now wage rates are going through the roof," Collis says. Building a manufacturing plant is a long-term investment requiring more consideration than setting up shop in the current low-cost location.
• How to organize? What are the structures, systems, and processes that need to be in place to manage a company's international strategy? Should authority be delegated to many organizational units or centralized in one? Collis points to Procter & Gamble, a multinational that started out with a generic "international department," then set up country bases before trying to layer in global business units that placed the country managers in subordinate roles. The company then evolved to a matrix organization, with executives reporting to a country manager and a global business unit head, and has recently returned to a straight-ahead global business unit reporting structure. "There are never-ending tradeoffs between creating global efficiencies through a more centralized structure and establishing a local environment that allows for innovation and flexibility," Collis says. "These are the cycles and choices that companies go through."

The answers to these four questions, Collis says, flow out of an understanding of a firm's international advantage.

"We talk about competitive advantage…in other words, how do you add value over and above individual businesses? In determining your firm's global advantage, the question is simply what advantage you seek to create or exploit by virtue of being an international player."

For example, if it's easy for an organization to sell an identical product all over the world (Collis cites Boeing and Intel), then scale economies have the potential to be an obvious global advantage.

DOWN TO CASES

The book's case examples and detailed decision-making maps offer a practical guide to some of the complex issues that emerge from doing business across borders.

If a manager is trying to decide where to build a new manufacturing plant, the quick and easy decision would be to choose the current low-cost location—but since that can change within a relatively short time span (as it did with China), it's also important to factor in longer-term country competitiveness and how the plant fits into an existing portfolio of locations. Collis drills down into the many factors that can affect location and observes how companies typically assign each a weighted percentage: employee availability, sourcing, quality, and cost (40 percent); infrastructure availability (30 percent); a country's security, receptivity, and judicial environment (15 percent); "cluster" factors and so on. (A sense of an incumbent company's presence in the location should also be taken into consideration.)

Once a shortlist of countries is identified, a more detailed analysis can be conducted around the cost structure for performing the manufacturing activity, involving everything from the cost per kilowatt-hour for electricity rates to local material and wage costs. There are also productivity differences between countries to consider, thanks in part to varying labor practices, cultural attitudes, and limitations in managerial oversight.

Those steps are just the beginning of a process that easily fills a full chapter of International Strategy; it's the sort of exhaustive approach that operating in today's complex transnational environment requires.

"I enjoy the variety and intellectual challenge of the problems that managers confront-often there is no one right answer," Collis says, although that doesn't mean there isn't plenty of advice out there that can make it seem that way.

"Sometimes it can be difficult to translate the slogans from strategy books into 'what do I do on Monday morning?'" Collis says. "This book is designed to help an executive frame a decision-making process to answer an issue he or she is wrestling with and move forward with actionable steps."

- Julia Hanna is associate editor of the HBS Alumni Bulletin.