framework that will often prove helpful in answering case questions, especially for strategic shifts that might affect firm culture. The foundation of the Firm Analysis framework is the identification of the internal (company) and external (market) factors, which both come together to influence a company’s competitive strategy. Internal factors influencing a corporate strategy include a company’s: • Goals and values • Resources and capabilities • Structure and management External factors influencing a corporate strategy include the industry and operating environment. • Industry trends • Outside constraints (governmental, societal, legal) • Competitor activities The business strategies that will likely prove most successful for the firm are those that find a close fit between the internal (company) and external (market) factors. This framework can be applied to many types of strategy questions, especially those involving a new opportunity, a new market, or changing circumstances in the industry. For example, if you’re looking at the opportunity for a medical device manufacturer to set up a new production facility in France, you might start by looking at internal factors related to the company’s strategic objectives and resources, and then move on to the external factors it will face as it explores the market opportunities in Europe. CAGE Analysis Chances are, an interviewer is going to ask you about international issues at some point. If you get a question about international strategy, you’ll need a logical way to think about the issues. Good thing Pankaj Ghemawat, a professor at Harvard, developed a framework you can use. He suggests you consider the amount of distance that exists between two cultures when deciding whether and how it makes sense to change business strategy overseas. And, it comes with a handy mnemonic: • Cultural distance: What are the differences in the religious beliefs, race, social norms, and languages between the target country and the country of the company considering expansion? • Administrative distance: What are the differences in the ways the countries are governed? Are there colonial ties, a common currency, and trade arrange- ments in place? • Geographic distance: What’s the distance between the countries in terms of miles? What is the size of the target country? What about its infrastructure features, like ports, transportation systems, and communications networks? • Economic distance: Do the two countries have similar wealth and consumer income? Are financial resources similarly available? If you get a case about outsourcing to the Philippines, acquiring a company in Germany, or investing in Venezuela, think about how the markets are similar in terms of culture, administration, geography, and economics. How do these factors affect the strategy?
- Fall '14
- consultant, CH AP TER