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GLOBAL STRATEGY THIRD EDIT ION

Mike W. Peng, PhD

Jindal Chair of Global Strategy

Jindal School of Management

University of Texas at Dallas

Chair, Global Strategy Interest Group (2008)

Strategic Management Society

Fellow, Academy of International Business (since 2012)

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GLOBAL STRATEGY THIRD EDIT ION

Mike W. Peng, PhD

Jindal Chair of Global Strategy

Jindal School of Management

University of Texas at Dallas

Chair, Global Strategy Interest Group (2008)

Strategic Management Society

Fellow, Academy of International Business (since 2012)

Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States

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Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).

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This is an electronic version of the print textbook. Due to electronic rights restrictions, some third party content may be suppressed. Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. The publisher reserves the right to remove content from this title at any time if subsequent rights restrictions require it. For valuable information on pricing, previous editions, changes to current editions, and alternate formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for materials in your areas of interest.

Global Strategy, 3rd Edition

Mike W. Peng

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ISBN-13: 978-1-133-96461-2

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To Agnes, Grace, and James ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||

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ABOUT THE AUTHOR

Mike W. Peng is the Jindal Chair of Global Strategy at the Jindal School of Management, University of Texas at Dallas, a National Science Foundation CAREER Award winner, and a Fellow of the Academy of International Business. He is also Executive Director of the Center for Global Business, which he founded. At UT Dallas, he has been the number one contributor to the 45 top journals tracked by Financial Times, which has ranked UT Dallas as a top 20 school in research worldwide and its MBA and EMBA programs increasingly in the top tier.

Professor Peng holds a bachelor’s degree from Winona State University, Minnesota, and a PhD degree from the University of Washington, Seattle. Between 2005 and 2011, he was the first Provost’s Distinguished Professor at UT Dallas, a chair position that was created to attract him to join the faculty. He had previously been an associate professor (with tenure) at the Ohio State University. Prior to that he had served on the faculty at the Chinese University of Hong Kong and University of Hawaii. He has taught in five states in the United States (Hawaii, Ohio, Tennessee, Texas, and Washington) as well as China, Hong Kong, and Vietnam. He has also held visiting or courtesy appointments in Australia, Britain, China, Denmark, Hong Kong, and the United States.

Professor Peng is one of the most prolific and most influential scholars in global strategy. During the decade 1996–2006, he was among the top seven contributors to the Journal of International Business Studies. His research is also among some of the most widely cited—both the United Nations and the World Bank have cited his work. A Journal of Management article found him to be among the top 65 most widely cited management scholars, and an Academy of Management Perspectives study found him to be the fourth most influential management scholar both inside and outside of academia (measured by academic citations and non-edu Google webpages) among professors who obtained their PhD since 1991. Overall, Professor Peng has published over 100 articles in

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leading journals, over 30 pieces in non-refereed outlets, and five books. Since the launch of Global Strategy’s second edition, he has published not only in top global strategy journals, such as the Academy of Management Journal, Journal of International Business Studies, and Strategic Management Journal, but also in leading outlets in operations (Journal of Operations Management), entrepreneurship (Journal of Business Venturing and Entrepreneurship Theory and Practice), and human resources (International Journal of Human Resource Management).

Professor Peng’s market-leading textbooks, Global Strategy, Global Business, and GLOBAL, are studied in over 30 countries and have been translated into Chinese, Spanish, and Portuguese. A European adaptation, International Business (with Klaus Meyer), has been successfully launched.

Professor Peng is active in leadership positions. He has served on the editorial boards of AMJ, AMR, JIBS, JMS, JWB, and SMJ, and guest-edited a special issue for the JMS. At the Strategic Management Society (SMS), he was elected to be the Global Strategy Interest Group Chair (2008). He also co-chaired the SMS Special Conference on China in Shanghai (2007). At the Academy of International Business (AIB), he was co-chair of the AIB/JIBS Frontiers Conference in San Diego (2006), guest-edited a JIBS special issue (2010), chaired the Emerging and Transition Economies track for the Nagoya conference (2011), and chaired the Richard Farmer Best Dissertation Award Committee for the Washington conference (2012). He was recently elected to be a Fellow of AIB. He served one term as Editor-in-Chief of the Asia Pacific Journal of Management. During his editorial tenure, he managed the doubling of submission numbers and the successful bid to enter the Social Sciences Citation Index (SSCI), which reported APJM’s first citation impact to be 3.36 and rated it as the top 18 among 140 management journals for 2010.

Professor Peng is also an active consultant, trainer, and keynote speaker. He has provided on-the-job training to over 300 professors. He has consulted and been a keynote speaker for multinational enterprises (such as AstraZeneca, Berlitz, KOSTA, Nationwide, SAFRAN, and Texas Instruments), nonprofit organizations (such as Greater Dallas Asian American Chamber of Commerce and World Affairs Council of Dallas-Fort Worth), educational and funding organizations (such as Harvard University Kennedy School of Government, National Science Foundation, Social Sciences and Humanities Research Council of Canada, and the University of Memphis), and national and international organizations (such as the US-China Business Council, US Navy, and World Bank).

Professor Peng has attracted close to $1 million in external funding. His honors include a National Science Foundation CAREER Grant, a US Small Business Administration Best Paper Award, a (lifetime) Distinguished Scholar Award from the Southwestern Academy of Management, and a (lifetime) Scholarly Contribution Award from the International Association for Chinese Management Research. He has been quoted in The Economist, Newsweek, Dallas Morning News, Smart Business Dallas, Atlanta Journal-Constitution, The Exporter Magazine, The World Journal, Business Times (Singapore), Sing Tao Daily (Vancouver), and Brasil Econômico (São Paulo), as well as on Voice of America.

VIII ABOUT THE AUTHOR

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BRIEF CONTENTS

About the Author vii Preface xxiii

PART 1 FOUNDATIONS OF GLOBAL STRATEGY 1 1 Strategizing Around the Globe 2

Opening Case: The Global Strategy of Global Strategy 3 Closing Case: Emerging Markets: Microsoft’s Evolving China Strategy 27

2 Managing Industry Competition 32 Opening Case: Emerging Markets: Competing in the Indian Retail Industry 33

Closing Case: Emerging Markets: High Fashion Fights Recession 57

3 Leveraging Resources and Capabilities 62 Opening Case: IBM at 100 63 Closing Case: Emerging Markets: From Copycats to Innovators 85

4 Emphasizing Institutions, Cultures, and Ethics 92 Opening Case: Cut Salaries or Cut Jobs? 93 Closing Case: Facebook Violates Privacy 119

PART 2 BUSINESS-LEVEL STRATEGIES 125 5 Growing and Internationalizing the Entrepreneurial Firm 126

Opening Case: Emerging Markets: Amazon.com of Russia 127 Closing Case: Emerging Markets: Microfinance: Macro Success or Global Mess? 149

6 Entering Foreign Markets 154 Opening Case: Enter the United States by Bus 155 Closing Case: Emerging Markets: Pearl River Goes Abroad 182

7 Making Strategic Alliances and Networks Work 188 Opening Case: Emerging Markets: Yum! Brands Teams Up with Sinopec 189

Closing Case: Emerging Markets: BP, AAR, and TNK-BP 215

8 Managing Global Competitive Dynamics 222 Opening Case: Patent Wars and Shark Attacks 223 Closing Case: Emerging Markets: HTC Fights Apple 253

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PART 3 CORPORATE-LEVEL STRATEGIES 257 9 Diversifying, Acquiring, and Restructuring 258

Opening Case: Emerging Markets: Corporate Diversification Strategy in South Korean Business Groups 259

Closing Case: Emerging Markets: Emerging Acquirers from China and India 288

10 Strategizing, Structuring, and Learning Around the World 294 Opening Case: Emerging Markets: Samsung’s Global Strategy Group 295 Closing Case: A Subsidiary Initiative at Bayer MaterialScience North America 321

11 Governing the Corporation Around the World 326 Opening Case: High Drama at Hewlett-Packard (HP) 327 Closing Case: Emerging Markets: The Private Equity Challenge 353

12 Strategizing with Corporate Social Responsibility 360 Opening Case: Launching the Nissan Leaf: The World’s First Electric

Car 361 Closing Case: Whole Foods’ John Mackey on Conscious Capitalism 385

Integrative Cases 389

IC 1 3i Group’s Private Equity Investment in China’s Little Sheep 391 IC 2 TeliaSonera: A Nordic Investor in Eurasia 404 IC 3 The Indian Business Process Offshoring Industry 409 IC 4 Wynn Macau: Gambling on the Edge of China 412 IC 5 Ryanair 418 IC 6 SolarWorld USA 424 IC 7 SnowSports Interactive: A Global Start-up’s Challenges 431 IC 8 Wikimart: Building a Russian Version of Amazon 436 IC 9 Texas Instruments in South Korea: An Educational Opportunity 440 IC 10 Jobek do Brasil’s Joint Venture Challenges 448 IC 11 The Antitrust Case on the AT&T–T-Mobile Merger 456 IC 12 Ocean Park Fights Hong Kong Disneyland 460 IC 13 Nomura’s Integration of Lehman Brothers’ Assets in Asia and

Europe 462 IC 14 Baosteel Europe 465 IC 15 Bank of America’s Corporate Social Responsibility and the Occupy

Wall Street Movement 471

Glossary 477 Index of Organizations 491 Index of Names 499 Index of Subjects 517

X BRIEF CONTENTS

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CONTENTS

About the Author vii Preface xxiii

PART 1 FOUNDATIONS OF GLOBAL STRATEGY 1 CH A P T E R 1

Strategizing Around the Globe 2

Opening Case: The Global Strategy of Global Strategy 3 A Global Global-Strategy Book 4

Emerging Markets 1.1—Foxconn 6 Emerging Markets 1.2—GE’s Reverse Innovation from the Base of the Pyramid 8

Why Study Global Strategy? 9 What Is Strategy? 10

Origin 10 Plan versus Action 10 Strategy as Theory 11 Strategy in Action 1.1—German and French Military Strategy, 1914 12

Fundamental Questions in Strategy 15 Why Do Firms Differ? 15 How Do Firms Behave? 16 What Determines the Scope of the Firm? 17 What Determines the Success and Failure of Firms Around the Globe? 18

What Is Global Strategy? 19 What Is Globalization? 20

Three Views on Globalization 20 The Pendulum View on Globalization 21 Semiglobalization 22

Global Strategy and the Globalization Debate 23 Organization of the Book 24 Chapter Summary 25 Key Terms 26 Critical Discussion Questions 26 Topics for Expanded Projects 26 Closing Case: Emerging Markets: Microsoft’s Evolving China Strategy 27 Notes 29

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