Basic Concepts of Strategic Management 41
For example, the interconnected nature of the global financial community meant that the mortgage lending problems of U.S. banks led to a global financial crisis that started in 2008 and impacted economies for years. The worldwide availability of the Internet and supply-chain logistical improvements, such as containerized shipping, mean that companies can now locate anywhere and work with multiple partners to serve any market. For companies seeking a low-cost approach, the internationalization of business has been a new avenue for competitive advantage. Nike and Reebok manufacture their athletic shoes in various countries throughout Asia for sale on every continent. Many other companies in North America and Western Europe are outsourcing their manu- facturing, software development, or customer service to companies in China, Eastern Europe, or India. English language proficiency, lower wages in India, and large pools of talented software programmers now enable IBM to employ an estimated 100,000 people in its global delivery centers in Bangalore, Delhi, or Kolkata to serve the needs of clients in Atlanta, Munich, or Melbourne.19 Instead of using one international divi- sion to manage everything outside the home country, large corporations are now using matrix structures in which product units are interwoven with country or regional units. Today, international assignments are considered key for anyone interested in reaching top management.
As more industries become global, strategic management is becoming an increas- ingly important way to keep track of international developments and position a com- pany for long-term competitive advantage. For example, General Electric moved a major research and development lab for its medical systems division from Japan to China in order to learn more about developing new products for developing economies. Microsoft’s largest research center outside Redmond, Washington, is in Beijing.
The formation of regional trade associations and agreements, such as the European Union, NAFTA, Mercosur, Andean Community, CAFTA, and ASEAN, is changing how international business is being conducted. See the Global Issue feature to learn how regional trade associations are pushing corporations to establish a manufactur- ing presence wherever they wish to market goods. These associations have led to the increasing harmonization of standards so that products can more easily be sold and moved across national boundaries. International considerations have led to the strate- gic alliance between British Airways and American Airlines and to the acquisition of the Anheuser-Busch Companies by the Belgium company InBev, creating AB InBev, among others.
IMPACT OF INNOVATION Innovation, as the term is used in business, is meant to describe new products, services, methods, and organizational approaches that allow the business to achieve extraordi- nary returns. Boston Consulting Group (BCG) found that innovation is a top 3 priority for three-quarters of the companies in the 2014 BCG global innovation survey.20 They also found that:
■■ 61% were spending more money on innovation in 2014 than in 2013 ■■ 75% of respondents reported that innovation investment was primarily aimed at
long-term advantage and current competitive advantage ■■ The top five most innovative companies were Apple, Google, Samsung, Microsoft,
and IBM ■■ 70% of executives felt their own companies’ innovation capabilities were only aver-
age and 13% felt they were weak.