We can begin by looking at an actual case study: the global market for beer has seen some radical changes over the last few years. Here is a short film, taken from my book Strategic Management, that summarises some of the changes. Importantly, it explains why global strategy changed and what this meant for global management.
The global beer video shows that one of the important factors in that market has been acquisition strategy. To acquire the American company Anheuser-Busch, the makers of Budweiser, InBev had to negotiate with the European Commission. In addition (though I don’t have any specific evidence for this) it is highly likely that InBev also had to talk with the US Federal Trade Commission. These discussions will have involved bargaining with both these organisations. This is a useful example of the C-C-B Paradigm explained below.
Hence, in exploring how you manage a global enterprise, one of the most important is the relationship between companies and the countries in which they are operating. From one perspective, the companies will wish to bring their competitive advantages to those countries. From another perspective, the countries themselves will wish to see benefits for their citizens and will also wish to protect the country from any aspects of the company’s strategy that they regard as being detrimental.
Hence in this section, we focus on the relationship between three areas:
Company: the international companies and their resources;
Country: the countries within which the companies are located;
Bargaining: the relationships that exist between companies and countries.
We call this the C-C-B Paradigm.
[For those interested in such matters, the foundations of the C-C-B Paradigm derive from Dunning’s O-L-I Paradigm which has been re-interpreted from a resource-based and game theory strategic perspective. For other web readers, this background comment does not matter.]
The first element of the paradigm is shown in the red dotted line surrounding the company and country areas – the world environment. It represents both the world institutions that have no country home and the world environment in terms of trade, economic trends, financial activities, culture, ecological and energy saving issues and many other matters. All these major factors will have an influence on companies and the countries within which they operate.
The second element of the paradigm is shown in the top left area: company strategies. Each company will move internationally with a set of competitive advantages that will shift and change over time. These resource-based advantages will then be used to generate value added – usually in the form of profitable activities – and these are represented by the ‘outcomes’ section below the companies in the diagram above. Each company subsidiary 1, 2, 3, etc may generate some value added. Part of this value will be generated by the negotations and agreements that have taken place with the countries within which the subsidiary operates. This is represented by the vertical downward arrows in the diagram above.
These two parts of the C-C-B Paradigm are summarised in the figure below:
The next element of the paradigm is the country within which the company is operating: country strategies.
Many, but not all, countries have competitive advantages – for example, deposits of oil or minerals in some Middle Eastern countries, special technical skills like Silicon Valley in California USA or financial centres of excellence like the City of London in the UK. In addition, countries will also belong to trade and other powerful groups – like the European Union, ASEAN in Asia , Mercosur in South America. Membership of such groups can itself also confer competitive advantage on individual countries through special trading relationships, support funds, and so on.
These country strategies will then influence the companies operating in those countries – both home companies and international companies. The policies of the governments of those countries can be expected to improve the general welfare of those countries. This is represented by the downward arrow pointing from the country competitive advantages in the first diagram above.
The final element of the paradigm is the negotiation that will take place between the countries and the companies located in those countries: bargaining.
Although the word ‘bargaining’ may sound combative and competitive, this is not necessarily the case. Many international companies find it perfectly possible to negotiate in a friendly and mature way with their host governments. However, the word reflects the fact that the prime interests of the company do not necessarily co-incide with the main interests of the country. There may be a conflict of interest that is captured in the word bargaining.
These final two elements of the C-C-B Paradigm are summarised in the diagram below: