END HOME SYSR0 PGUP BRUK DEL INS SCROLL LOCK F12 F11 F10 F8 F9 9/9 F7 F5 F6 DACV F4 79 9/0 * $ 4 Pou peng 3 GLOBAL D 3 PGDN GLOBAL BUSINESS DEL ALT ors es. GMAE04518010 4LTR NOW WITH GLOBAL ONLINE $85 US SUGGESTED RETAIL PRICE PRESS 12:36 PM 4/19/2018 3 8P те e key is tes help not to ould be InFocus: Nordic Multinationals apabili LIMITED EDITION WHERE'S THE PART NAMIERZ IMPREZE S6 book, terms capa- 2. PGUP BREAK END RISC IN COLE hange- -en in other ilities Citrus arlsberg Бләsan arlsberg re the cces. even pos- and ning- PGUP 8 Nigdy use- and Nordic countries have small populations (six million in Denmark, nine million in Sweden, five million in Finland, and five million in Norway). But they are big in breeding globally competitive multinationals. Denmark boasts world leaders in beer (Carlsberg), fur (Kopenhagen Fur), medical insulin (Novo Nordisk), shipping (Maersk), toys (LEGO), and wind turbines (Vestas). Tiny Denmark is also an agricultural superpower, which is home to 30 million pigs- five pigs for every Dane. Leading global players include Arla, Danish Crown, Rose Poultry, and DuPont Danisco (a household name with over 100 years of history, Danisco was acquired by DuPont in 2011). Sweden is a world leader in fighter jets (SAAB), mining equipment and machine tools (Sandvik and Atlas Copco), retail (IKEA and H&M), telecom equipment (Ericsson), and trucks (Scania). Finland leads the world in elevators and escalators (Kone), games (Ravio, the creator of Angry Birds), and tele- com (Nokia, whose mobile phones had been a sensation until pushed aside by Apple's iPhones more recently). Norway has world-class competitors in oil services (Statoil) and fishing (Aker BioMarine and Havfisk-formerly Aker Seafoods). Nordic multinationals also often collaborate and some- times merge with each other. TeliaSonera is the result of the merger between Telia of Sweden and Sonera of Finland in 2002. TeliaSonera is the fifth largest telecom operator in Europe, and is the world's first operator of 4G networks. If you climb on top of Mount Everest and want to call down to brag about your views, it will be TeliaSonera that connects you from such a remote corner to the rest of the world. The small size of the domestic markets has propelled Nordic firms to go international at a relatively young age. Some are founded to be born globals. Beyond this urge, three common characteristics make Nordic multinationals stand out among global peers. The first is their commitment to relentless innovation. Second, they foster a consensus-based approach to nie jete po alkohola 6 OPENHAGEN 1847 DARIOS/SHUTTERSTOCK.COM and COPENHAGEN 1847 rces and cat- 3 2 PC iza- management, which promotes trust and cooperation. Finally, they share a passion for replacing labor with machines. In some advanced farms, robots can now automatically milk cows-with no human intervention. In one Swedish farm your author has visited, two owners—with the aid of milking robots--can man- age 70 productive milk cows. pa- (or et, re, ve Sources: The author's interviews in Mora, Sweden;"Global niche players." Economist, 2 February 2013 (special report: The Nordic countries), 8-10; "Adventures in the skin trade." Economist, 3 May 2014,62; "Bringing home the bacon" Economist, 4 January 2014,52; C. Mutlu, "TeliaSonera: A Nordic investor in Eurasia"in M. W. Peng, Global Strategy, 3rd ed. (Cincinnati: Cengage Learning, 2014) 404-408. a- de d lite es 5150 ). 11 ectrum res, colo S 4-2 4-3 RESOURCES, CAPABILITIES, AND THE VALUE CHAIN sibilitie as think about firm resources and capabilities at a very micro, activity-based level. Given that no firm is likely to be good at all primary and support activities, the key is to examine whether the firm has resources and capabilities to perform a particular activity in a manner supe- rior to competitors- Value chain A series of activities a process known used in the production of goods benchmarking in SWOT and services that make a product or service more valuable. analysis. If managers find that their firm's particu- Benchmarking Examining lar activity is unsatisfac- whether a firm has the resources and tory, a decision model capabilities to perform a particular activity in a manner superior to (shown in Exhibit 4.3) competitors. can remedy the situation. If a firm is a bundle of resources and capabilities, how do they come together to add value? A value chain analy- sis allows us to answer this question. Shown in Panel A of Exhibit 4.2, most goods and services are produced through a chain of vertical activities (from upstream to downstream) that add value-in short, a value chain. The value chain typically consists of two areas: primary activities and support activities. Each activity requires a number of resources and capabilities. Value chain analysis forces managers to MUTU COM/CLAUDIO BALDINI CHAPTER 4 Leveraging Resources & Capabilities 53 degree of commoditization. The answer may also be “No” if the activity is in Cell 1 in Exhibit 4.4, which is EXHIBIT industry-specific but also with a high level of commoditi- zation. Then, the firm may want to outsource this activity, EXHIBIT 4.2 THE VALUE CHAIN Panel A. An Example of Value Chain with Firm Boundaries Support activities Commoditization versus proprietary nature of the activity Primary activities INPUT Infrastructure Logistics Research and development Components Final assembly Marketing OUTPUT Note: A firms ei Human resources Panel B. An Example of Value Chain with Some Outsourcing Support activities Primary activities sell the unit involved, or lease the unit's services to other firms (see Exhibit 4.3). This is because operating multiple stages of uncompetitive activities in the value chain may be prohibitively costly. Think about steel, definitely a crucial component for automobiles. But the question for automakers is: “Do we need to make steel by ourselves?” The requirements for steel are common across end-user industries—that is, the steel for automakers is essentially the same for construction, defense, and other steel-consuming end users (ignoring minor technical differences for the sake of our discus- sion). For automakers, while it is imperative to keep the automaking activity (especially engine and final assembly) proprietary (Cell 3 in Exhibit 4.3), there is no need to keep steelmaking in-house. Therefore, although many automak- ers, such as Ford and GM, historically were involved in steelmaking, none of them does it now. In other words, steelmaking is outsourced and steel is commoditized. Outsourcing is defined as turning over an activity to an outside supplier that will perform it on behalf of the focal firm. For example, many consumer products com- panies (such as Nike and Apple), which possess strong capabilities in upstream activities (such as design) and downstream activities (such as marketing), have out- sourced manufacturing to suppliers in low-cost coun- tries. A total of 70% of the value of Boeing's new 787 Dreamliner is provided by outside suppliers. This com- pares with 51% for existing Boeing aircraft. Recently, not only is manufacturing often outsourced but a num- INPUT Infrastructure Research and development Logistics Components Final assembly Human resources Marketing OUTPUT call cente tively get tries. Of rise of se Manpow and DH such act ent firm makers clients ing ena! organiza ities (se If to perf Exhibit bilities (see E: develo particu enoug may w С. is the Note: Dashed lines represent firm boundaries. In the first stage, managers ask, “Do we really need to perform this activity in-house?" Exhibit 4.4 introduces a framework to take a hard look at this question, the answer to which boils down to (1) whether an activity is industry- ber of service activities, such as IT, HR, and logistics, specific or common across industries, and (2) whether are also outsourced. The driving force is that many firms, this activity is proprietary (firm-specific) or not. The which used to view certain activities as a very special part answer is “No," when the activity is found in Cell 2 in of their industries (such as airline reservations and bank Exhibit 4.4 with a great deal of commonality across indus- EXHIBIT 4.3 A TWO-STAGE DECISION MODEL IN VALUE CHAIN ANALYSIS tries and little need for keep- ing it proprietary-known in Outsource, the recent jargon as a high sell the unit, No or lease its services to other firms Do we really need to Commoditization A process of perform this activity market competition through which in-house? Do we have the (keep doing it) unique products that command high resources and prices and high margins gradually capabilities that Acquire necessary lose their ability to do so, thus add value in resources and a way better becoming commodities. capabilities in-house than rivals do? Outsourcing Turning over an activity to an outside supplier that will Access resources and perform it on behalf of the focal firm. capabilities through strategic alliances locatie shorin dealo often Yes we go Yes on loc 0 о No OI Ca fo 54 PART I Laying Foundations ► D
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