Zhang, Shujun Sun Yat-sen University School of Business, M410 Tel: 020-84114136 Email: mnszsjmail.sysu.edu.cn Welcome toSTRATEGIC MANAGEMENTZhang, Shujun Sun Yat-sen University School of Business, M410 Tel: 020-84114136 Email: mnszsjmail.sysu.edu.cn Introductory LectureWhat is Strategy?The IBM-Lenovo Deal On Dec 7, 2004, IBMs PC division was sold to Lenovo Group. According to the acquisition agreement signed between Lenovo Group and IBM, Lenovo has paid 1.25 billion US dollars for all the PC business of IBM, including 650 million US dollars in cash and Lenovos shares valued at 600 million US dollars. After the trade, IBM will hold 18.9 percent of Lenovos shares and Lenovo will assume about 500 million US dollars net debt of IBM. Legend to Invest in Real Estate Legend, now renamed as Lenovo, Chinas leading personal computer manufacturer, has announced that it intends to invest three billion yuan (about 363 million U.S. dollars) in the burgeoning real estate sector, as part of attempts to readjust its overall business structure. The company will make the investment through its holding company which has started real estate business already in Huizhou and Shenzhen cities, in south Chinas Guangdong Province.Changhong net drops 24% amid price competition Sichuan Changhong Electric recorded a net profit of RMB88.5m in 2001. The result represents a decrease of 24% for the Chinese- based appliance manufacturer. Close to 75% of the revenue of Sichuan Changhong Electric is generated by its television sets. An 11% decrease in core revenue to RMB9.5bn was recorded for the year.Haier excels in all these areas!As one of Chinas fastest-growing companies, Haier Group is widely regarded as a successful company. Customer service, product quality, operating efficiency, innovation, and speed to market are among the top seven factors for success. Haier CEO Zhang Ruimin and President Yang Mianmian say the firm developed three major strategies over three stages: brand building or recognition strategy, expansion or diversification strategy, and globalization strategy Adidas China Distribution Center Opens in Suzhou On Sept 23, 2005, Adidas has opened a distribution center in China in Suzhou ProLogis Logistics Park of the Suzhou Industrial Park, east Chinas Jiangsu Province. The distribution center to be built by Adidas will have a space of 60,000 square meters. When completed, it will serve not only its factory in Suzhou, but also the whole Chinese market.Corporate StrategyBusiness StrategiesFunctional StrategiesTwo-Way InfluenceTwo-Way InfluenceCorporate-Level ManagersBusiness-Level ManagersFunctional ManagersLevels of Strategy-Making in a Diversified CompanyAdidasHaier ChangkongIBM LenovoCorporate Strategy for a Diversified CompanyCorporate StrategyApproach to capital allocationNarrow or broad-based diversificationScope of geographic operationsMoves to add new new businessesMoves to build positions in new industriesEfforts to capture cross-business strategic fitsMoves to divest weak business unitsIs diversification related, unrelated or a mix?Identifying the Components of a Single-Business Companys StrategyEfforts to build competitive advantagePlanned, proactive moves to outcompete rivals Responses to changing conditionsScope of geographic coverageCollaborative partnerships and strategic alliances R generates additional knowledge leading to innovationsComplexity of Managing Multinational FirmsExpansion into global operations in different geographic locations or markets: Makes implementing international strategy increasingly complex Can produce greater uncertainty and risk May result in the firm becoming unmanageable May cause the cost of managing the firm to exceed the benefits of expansion Exposes the firm to possible instability of some national governmentsRisk in the International EnvironmentPolitical risks include:Political risks include: Instability in national governmentsInstability in national governments War, both civil and internationalWar, both civil and international Potential nationalization of a firms resourcesPotential nationalization of a firms resourcesPolitical RisksPolitical RisksEconomic RisksEconomic RisksRisk in the International EnvironmentEconomic risks are interdependent with political risks and include: Differences and fluctuations in the value of different currencies Differences in prevailing wage rates Difficulties in enforcing property rights UnemploymentPolitical RisksPolitical RisksEconomic RisksEconomic RisksRisk in the International EnvironmentRisk in the International Environment (contd)Limits to International ExpansionManagement Problems Cost of coordination across diverse geographical business units Institutional and cultural barriers Understanding strategic intent of competitors The overall complexity of competitionZhang, Shujun Sun Yat-sen University School of Business, M410