International Business Strategy

Global competitive strategies:
Platform and network strategies

Session 7A
International Business Strategy STRT 460
©Professor Daniel F. Spulber
Section 41
Global competitive strategies
For managers to meet the strategic challenge:

 Achieve competitive advantage in the global
market – standardization
 Address local market differences in different
countries – customization/tailoring
What are strategies to address the tradeoffs?
2
Forces calling for global products – standardization

• Price competition – need for lower costs
• Competition from global companies
• Competition from high-quality products and global brands
• Falling costs of trade with greater globalization
3
Forces calling for local products: customization/tailoring

• Differences in customer preferences and income across
target countries
• Competition from successful domestic products and local
companies
• Regulatory requirements (quality, safety, technical
specifications, domestic content, product standards)
• High costs of trade create separate markets
4
Some strategic solutions – the “G5”

1. Global platform strategy
2. Global network strategy
3. Global intermediary strategy
4. Global entrepreneur strategy
5. Global investment strategy
5
Global platform strategy
1. Global platform strategy

The platform is a technology that allow modular components
• The modular components interoperate or connect to each
other
• The modular components can be combined to produce
final products
• Applies to practically any industry
• Takes advantage of digital technologies and innovation
6
Transforms an interconnected system

into a platform with modular components
Component 1
Platform
Component 2
Component Component Component
1 2 3
Component 3
7
Company can vary the components and combine like

LEGOs to produce different products (variants)
Platform

1
Component 2
Component 3
Component
1 2 3
1 2 3
8
Country
Use the platform to provide product Variant X X
variety and increase revenues
Variant Y Country
Platform
Y
Variant Z
Component Component Component Country
1 2 3
Z
9
Increase revenues
The global platform strategy solves
• Tailor product variants to
the problem of local customization
different countries
Platform • Customize products to
customer segments
• Gain advantage over local,
1 2 3 regional, and global
competitors
10
• Global economies of scale

The global platform strategy in producing the platform
decreases average costs and common components
Platform • Global economies of scope
from sharing platform and
components across variants
1 2 3
11
The global platform

strategy allows creation
of a global value chain
Platform with independent
component suppliers and
independent innovation
1
Component 2
Component 3
Component
1 2 3
1 2 3
12
AC(Q)
The global platform strategy

lowers unit costs and decreases the
break-even price
P
P* AC(Q)
D(P) AC*(Q)
Q Q* Q
13
AC(Q)
Increased profit from greater

revenues due to increased variety
Decreases the break-even price.
P
P* AC(Q)
D(P) D(P) + DI(P)
Q Q* Q
14
AC(Q)
Increases international demand from
variety and local customization
Generates incremental profit from
combination of increased revenue
and lower unit costs (lower
P breakeven price)
AC(Q)
P*
D(P) D(P) + DI(P) AC*(Q)
Q Q* Q
15
How did the Samsung

Galaxy become the
leader in global
smartphones?
https://www.pcmag.com/news/362302
/smartphone-global-market-share-
2009-to-2018
16
How did the Samsung

Galaxy become the
leader in global
smartphones?
https://www.counterpointresearch
.com/global-smartphone-share/
17
The Samsung Galaxy is a platform

• The platform generates global economies of scale and scope
because it is used for all of the variants worldwide
• The variants generate product variety that allows customization

to different country markets – increases revenues
https://www.phonemore.com/models/samsung/galaxy-s10/ 18

The Samsung Galaxy S10 has 4 models and [many] variants.
“Generally the variants are the same device models with some
different features and specifications, as the amount of internal
storage, processor or just 3G/4G frequencies that may be different
depending on the country the Samsung Galaxy S10 is available to.”
Product variety: also S10e, S10+, and S10 5G

https://www.phonemore.com/models/samsung/galaxy-s10/ 19
The Samsung Galaxy is a platform – combines multiple components

• microprocessor
• memory
• batteries
• screen
• operating system software
• connectivity
• camera
• antenna, modem
https://www.cnet.com/pictures/samsung-galaxy-note-9/17/
20
The Samsung
Galaxy is a
platform:
cameras
Power mgmt
https://www.techinsights.com/
blog/samsung-galaxy-s10-5g-
teardown 21
The Samsung
Galaxy is a
platform:
memory
modem
chip
(Exynos 9820)
https://www.techinsights.com/blog/samsung-galaxy-s10-5g-teardown 22
Technology and Innovation
The Samsung
Galaxy is a
platform:
Front end
modules
(FEMs)
https://www.techinsights.com/blog/samsung-galaxy-s10-5g-teardown 23
The Samsung
Galaxy is a
platform:
Uses Android
Share of Android in
global smartphone
sales
https://www.benzinga.com/news/18/09/124
04475/10-years-of-android-how-the-
operating-system-reached-86-market-share
24
The Samsung
Galaxy is a
platform:
Android
passes
Windows
https://www.theverge.com/
2018/9/26/17903788/goog
le-android-history-
dominance-marketshare-
apple
25

Effective use of modularity – taps into innovations
Operating system, microprocessors, cameras, batteries,
screens
Now preparing platform for 5G
https://news.samsung.com/global/a-journey-of-mobile-innovation 26
How did the Samsung Galaxy become the leader in global

smartphones?
Effective use of platform to generate product variety and
customization to customer countries
How did the Samsung Galaxy become the leader in global

smartphones?
Effective global platform strategy
Operating system are platforms

Apple iOS Google Android OS
Proprietary Open source
iOS 12 on an
iPhone X
29
Operating systems are platforms

Android platform “It’s the operating system inside 2.5
billion active devices. Everything from 5G phones to stunning
tablets, Android powers them all.”
“Powering your phone, tablet, watch, TV and car.”
https://www.android.com/what-is-android/
30
Apple iOS v Google Android
Operating systems are
platforms
• The operating system
provides economies of
scale and scope
• Apps provide variants
https://techcrunch.com/2019/07/03/app-
revenue-tops-39-billion-in-first-half-of-2019-up-
15-from-first-half-of-last-year/
31
iOS v Android
Market shares
differ by
country 2019
https://deviceatlas.com/blog/android-v-ios-
market-share 32
https://www.businessofapps.com/data/app-statistics/

33
Operating systems
are platforms
Apps provide
customization: apps
released differ by
country
https://blog.appfigures.com/ios-
developers-ship-less-apps-for-first-time/
34
Operating systems
are platforms
Problem of older
versions of Android
as compared to iOS
https://www.forbes.com/sites/ianmorri
s/2018/04/13/android-is-still-failing-
where-apples-ios-is-winning/
35

Effective use of global platform strategy
36
Automobile platforms
Variants: automobile bodies
(visible to consumer)
Platforms are the chassis
underbody and engine
(invisible to consumer)
http://wheels.blogs.nytimes.com/2013/01/02/polk-
forecasts-increased-u-s-vehicle-sales-and-production-in-
2013/?_r=0
37
Economies of scale in production of the underbody
(floor, axles, steering, suspension, engine family)
Economies of scope from sharing
underbody across models
Revenues from product variety
using variants – different bodies
38
Next steps: unibody construction of the body replaces body-
on-frame construction for cars and crossovers
Manufacturing Volvos in
China Video 1:20
https://www.youtube.com/w
atch?v=Unyw4uyxjDk
39
Renault Nissan Mitsubishi
The Common Module Family
(CMF) “expected to lower the
initial outlay per model by
30% to 40% and yield average
savings on component Video 3:30
purchases of 20% to 30%” https://www.youtube.com/
watch?v=Y468RNYIBLA
40
Renault Nissan Mitsubishi
41
Renault-Nissan-Mitsubishi
EV platform
Sell 2 million vehicles by
2025 based on the platform
Reduce development costs
of the EVs by 20 to 30%
https://www.electrive.com/2018/05/28/renault-
nissan-mitsubishi-planning-ev-platform/ 42
Toyota New Global

Architecture (TNGA) platform
The 2018 Camry – the first

TNGA-inspired vehicle assembled
in North America, also Avalon
and Highlander.
https://pressroom.toyota.com/tnga/
http://www.motorauthority.com/news/1097481_t
oyota-previews-new-tnga-modular-platform 43
https://www.motortrader.com.m
y/news/toyota-reveals-new-
powertrains-to-be-introduced-
over-next-5-years/
Toyota New Global Architecture (TNGA) platform

40% cost reduction
44
Global platform strategy: example

Cost per product without platforms (development and production): $80
Cost of basic platform development: $100
Cost of production for each variant: $50
Use platform when serving 4 or more customer country markets
Compare costs:
Distinct products: 4 x $80 = $320
Platform and 4 variants $100 + 4 x $50 = $300 ***
45
Global platform strategy: use platform to set technology

standards
• Achieve market leadership
• Technology suppliers and partners provide innovations,
components, complementary products
• Complementary products generate customer demand
• Provides returns to your company’s intellectual property (IP)
Example: attract customers and suppliers with first-party
content to create a leading technology platform
46
Global network strategy

M N
sellers Hub buyers
Nodes
firm
Links
Number of nodes at the edge N + M
47
Victor Fung
Example: Li & Fung
15,000 1,000 retail Costs of coordination
sellers chains “It takes a great deal of coordination to
Li & Fung make a product in six factories in three
different economies, instead of in just
one factory in one country.”
“supply chain of the future”

http://www.funggroup.com/eng/knowledge/
presentations/11.pdf
48
Victor Fung
Example: Li & Fung
15,000 1,000 retail Benefits of coordination
sellers chains “The cost of this coordination effort has
Li & Fung to be traded off against the benefit. The
benefit is the fast turnaround, and also
the fact that hopefully you are the best in
class in every component, plus better
overall.”
“supply chain of the future”
http://www.funggroup.com/eng/knowledge/
presentations/11.pdf
49
2. Global network strategy: serves large global market

• Economies of scale and scope in managing purchasing,
manufacturing, and distribution
• Fixed costs of central hub F spread across nodes, lowing
unit costs
𝐹𝐹
𝐴𝐴𝐴𝐴 =
𝑀𝑀+𝑁𝑁
50
2. Global network strategy: network helps customization/=

and tailoring
Network has local nodes:
• adjust to features of target customer countries – prices,
products, distribution
• offer access to manufacturing, suppliers, partners
• adjust to modes of entry: transactions and contracts, JVs and
alliances, or growth and M&A
51

Companies that organize networks capture value
• Networks of customers, suppliers, and partners generate
network membership value
• International networks lower costs of trade
• Network organizing company achieves competitive
advantage
52
http://www.apics.org/sites/apics-blog/think-supply-chain-landing- David F. Ross
page/thinking-supply-chain/2015/10/20/what-is-push-and-pull- Senior Manager
distribution-part-4 Professional
Development
Global network strategy APICS
Creating and managing a network:

• “All network decisions affect each other and either increase or
decrease channel cost and responsiveness to the customer.”
• “delivery channels characterized by commodity-type products
exhibiting stable demand often will use push systems to move
product through complex multi-echelon channels.”
• “delivery channels exhibiting variable demand and make-to-order
products will normally use pull systems whereby low volume
products are moved through a fairly shallow distribution network.”
53
Sellers Buyers
The international business creates
value by establishing a global network
Compare a decentralized market with

N buyers and M sellers
12 links
The global network consists of the

international business as a hub and
spokes connecting local buyers and
7 links
sellers
54
Sellers Buyers
Network lowers the costs of trade
T: costs of trade per link
Decentralized market: T∙M∙N
Global network: T∙(M + N)
12 links
Network lowers costs of trade in
comparison to decentralized markets
7T less than 12T
7 links
55
M sellers N buyers Network creates value
• Value of network to each seller:
access up to N buyers
• Value of network to each buyer:
access up to M sellers
56
The global store Examples: Walmart, Carrefour,
Distribution Zara
Country 1 • Economies of scale and scope
from global hub
Hub firm • Develop global brands
Country 2
• Coordination economies:
centralized regional warehouses
Country 3 and production facilities
• Customization of products and
Country 4
retail stores
57
The global store Examples: Walmart, Carrefour,
Distribution
Zara
Country 1 • Provide access to sourcing
network – Enhances value of
Hub firm
Country 2
supplier contacts by expansion of
distribution
Country 3
• Lower transaction costs for
suppliers who deal with fewer
distributors
Country 4
• Lower risk from pooling demand
58
The global store

Coca-Cola U.S. bottling
business shifted from
company-owned to a
network of local owners
https://ccbanet.com/membership/member-directory/us-bottler-map/
59
Beverages
Africa
(CCBA):
largest Coca
Cola bottler in
Africa
Spun off from
AB InBev
https://www.coca-colacompany.com/press-center/press-
releases/the-coca-cola-company-and-ab-inbev-complete-
transition-of-majori
60
Distribution
The global store FEMSA
Network firm Hellenic
Swire
CCBA
USA
61
Production and
suppliers
The global factory
• Economies of scale and scope from
Country 1 global hub
• To take advantage of country
Network firm
Country 2 competitiveness – best quality, lowest
costs
Country 3 • To take advantage of location –
minimize costs of trade
Country 4
• Supply networks and supply chains
62
Franchises
are
networks
https://www.franchisedirect.com/information/2019-top-100-
franchises-report-international-franchising-news-and-notes 63
Franchise networks Advantages
• Scale – fixed costs of franchise firm
• Scope – multi-product franchises
• Variety – product lines of franchise
• Local customization/tailoring
• Rapid international growth
• Local ownership and management
• Lower capital outlays
64
Franchise networks Disadvantages
• Search cost of finding franchise
owners overseas
• Costs of monitoring performance
across borders
• Transaction costs of forming franchise
contracts in other countries
65
https://www.franchisedirect.com/information/2019-top-100-franchises-report-introduction-and-overview
66
Franchise Rank Country of Origin
InterContinental Hotels 9 UK - England

Carrefour 18 France
Europcar 19 France
Dia 24 Spain
Groupe Casino 26 France
Kumon 30 Japan
Weed Man 42 Canada
Top 12 non-US
Naturhouse 47 Spain
franchises
Paris Baguette 48 South Korea
Yogen Fruz 50 Canada
https://www.franchisedirect.co
Husse 66 Sweden m/top100globalfranchises/ran
kings
Pita Pit 68 Canada
67
Franchises provide
local tailoring
• “While a global Brand, the vast majority of
McDonald’s restaurants – more than 80%
worldwide and nearly 90% in the U.S. – are
owned and operated by approximately 5,000
independent, small- and mid-sized businessmen
and women.” – 36,000 restaurants
68
Franchise networks
Yum! Brands
• KFC Global #2
• Pizza Hut Global #4
• Taco Bell Global #13
• Yum China
69
Pizza Hut launches Pioneer concept
Local tailoring store to drive menu innovation
Yum China
launched in 2016
70
Global network
strategy
Top 200 franchises

by category
http://www.franchisedirect.com/information/top100globalfranchise
s2014top100overview/?r=4271
71
Alliances and partner networks

• The world's leading quality
global alliance
• oneworld® brings together 13 of
the world's leading airlines - and
around 30 affiliates.
72
Alliances and partner networks

• Achieve global scale and scope by linking networks
• Local product and service customization: members focus
on countries in their region
• Reduces competition by avoiding duplication
• Avoids government restrictions on local ownership
73
Example: oneworld alliance • 500 million passengers/year

• airlines cooperate on scheduling • 14,000 flights per day
and ticketing, frequent flyer • Competitor: STAR ALLIANCE
programs, airport clubs, baggage
United, Lufthansa, SAS, Air
handling, customer service
Canada and Thai Airways
• 1,000 destinations in 150
countries
74
Summary and take-away points
Global platform strategy and global network strategy

• achieve standardization – economies of scale and scope
• generate product variety with variants or local nodes
• help with customization/tailoring
• coordinate competitive activities across borders
• help gain advantage over both global and local competitors
75

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Global competitive strategies:

Platform and network strategies

For managers to meet the strategic challenge:

Forces calling for global products – standardization

Forces calling for local products: customization/tailoring

Some strategic solutions – the “G5”

1. Global platform strategy

Transforms an interconnected system

Company can vary the components and combine like

Component Component Component

• Global economies of scale

The global platform

The global platform strategy

Increased profit from greater

How did the Samsung

How did the Samsung

The Samsung Galaxy is a platform

• The variants generate product variety that allows customization

The Samsung Galaxy is a platform

Product variety: also S10e, S10+, and S10 5G

The Samsung Galaxy is a platform – combines multiple components

The Samsung Galaxy is a platform

How did the Samsung Galaxy become the leader in global

How did the Samsung Galaxy become the leader in global

Operating system are platforms

Operating systems are platforms

Global platform strategy

Apple iOS v Google Android

Toyota New Global

The 2018 Camry – the first

Toyota New Global Architecture (TNGA) platform

Global platform strategy: example

Global platform strategy: use platform to set technology

2. Global network strategy

Number of nodes at the edge N + M

“supply chain of the future”

2. Global network strategy: serves large global market

2. Global network strategy: network helps customization/=

2. Global network strategy

Creating and managing a network:

Compare a decentralized market with

The global network consists of the

The global store

Network firm Hellenic

InterContinental Hotels 9 UK - England

Top 200 franchises

Alliances and partner networks

Alliances and partner networks

Example: oneworld alliance • 500 million passengers/year

Global platform strategy and global network strategy

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