This report is final consultancy report for International Business Strategy Module of Executive MBA course at Rotterdam Business School. This report is focused on Philips’ IT activities and reviews the IT offshoring strategy of Philips and look at the possible IT operating options as a way forward, if needed. I work for Philips IT and believe that with this report, I can do a real contribution to my company.
Philips is one of the largest global diversified industrial companies with sales in 2013 of EUR 23.3 billion with multinational workforce of 114,689 employees, globally present with manufacturing sites in 100 countries and sales outlets in 100 countries. Philips has divided its business in 3 sectors namely Healthcare, Lighting and Consumer Lifestyle. And besides these, Corporate-functions is a central organization comprising of governance functions along with corporate technology, which drives research and innovation.
In this report we will analyze Philips IT strategy, the activities that are undertaken in IT and current model under which the Philips IT is organized. The objective of research is to develop an in-depth understanding and give a practical analysis on key issues. This analysis will be based on qualitative approach. Following theoretical frameworks will be used for literature study:
a. The resource-based view: “A leading perspective in global business that suggests that firm performance is fundamentally driven by firm specific resources” (Peng & Meyer, 2011).
b. The institutional-based view: “a leading perspective in international business that suggests that firm performance is, at least in part, determined by the institutional frameworks governing firm” (Peng & Meyer, 2011).
The main research question we are goi...
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...d moves towards a more transparent companies law regime - Lexology: http://www.lexology.com/library/detail.aspx?g=67f31d7a-f8a8-4a2b-b992-4920e9fa3faa
Hofstede, G. (2005). Culture’s consequences. In G. Hofstede, Culture’s consequences.
Indian Government. (n.d.). Constitution of India. Retrieved from National Portal of India: http://india.gov.in/my-government/constitution-india
My Government . (n.d.). Retrieved from National Portal of India: http://india.gov.in/my-government
Neelakantapillai, V. (2011). Right to Property under the Indian Constitution. Retrieved from Right to Property under the Indian Constitution: http://www.lawyersclubindia.com/articles/Right-to-Property-under-the-Indian-Constitution-3515.asp
Peng, M., & Meyer, K. (2011). International Business. London: Cengage Learning EMEA.
Porter, M. E. (1985). Competitive advantage. New York, free press, 1-27.
Knack, S., and P. Keefer. 1995. Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Measures. Economics and Politics 7(3): 207227
Meyer , J. W. , and Rowan , B. “ Institutionalized Organizations: Formal Structure as Myth
Hill, C., Wee, C. and Udayasankar, K. 2012.International Business:An Asian Perspective. 8th ed. Singapore: McGraw-Hill.
Pitts and Koufopoulos (2012) argue that resources and capability are highly important internal factors that should be taken into account by the organization in order to obtain the successful performance in the long run.
Henderson and Venkatraman proposed a model for business – IT alignment; it was intended to support the integration of information technology (IT) into business strategy by advocating alignment between and within four domains (see figure 1). The inter-domain alignment is pursued along two dimensions: strategic fit (between the external and internal domain) and functional integration (between the business domain and the IT domain). The objective of this model was to provide a way to align information technology with business objectives in order to realise value from IT investments. The authors argued that the potential strategic impact of information technology requires both an understanding of the critical components of IT strategy and its role in supporting and shaping business strategy decisions and a process of continuous adaptation and change. Hence, they presented a model that defines the range of strategic choices facing managers.
Gilpin discussed the MNC’s evolution through the lenses of a number of business economic theories. Using Raymond Vernon’s Product Cycle Theory, the overseas expansion of American companies until the 1960s was shown as a means of preempting foreign competition and preserving monopoly positions, which was possible then because of the wealth and technology gaps that existed between the US and the rest of the world (282-83). Following the closing of such gaps, Dunning and the Reading School’s Eclectic Theory explained the next stage of the MNC’s evolution as propelled by the great leaps made in technology and communication, which made internationalized management both possible and viable (283). Michael Porter’s Strategy Theory, meanwhile, asserted that the MNC is now in the era of strategic management, wherein activities and capabilities spanning borders allow it to “tap into the value chain” in the most advantageous positions (285-85). Gilpin made an interesting point, however, that MNCs are oftentimes the result of market imperfections and unique corporate situations. In many instances, the decision to expand a firm’s operations in another country was a means of circumventing protectionist measures and trade barriers, or simply to curry favor with governments, as practiced by IBM (280...
It is also perhaps not feasible to evaluate the attractiveness of an industry independent of the resources a firm brings to that industry. It is thus argued that this theory be coupled with the Resource-Based View (RBV) in order for the firm to develop a much more sound strategy. It provides a simple perspective for accessing and analysing the competitive strength and position of a corporation, business or organisation.
Our economic development will forever be defined as our ability to succeed internationally. PwC forecasts India’s real annual GDP growth until 2050 at 8.9 percent, Vietnam’s at 8.8 percent, and China’s at 5.9 percent. The list of fast-growing emerging markets goes on and on. The U.S. forecast is a meager 2.4 percent, comparable with most Western economies. The domestic companies that are likely to see incremental growth in the coming decades are those that are not only doing business internationally, but that are developing the strategic skill set to master doing business across cultures. Cross-cultural core competence is at the crux of today’s sustainable competitive advantage. For example, political environment will tell us, as to how and why political leaders control, whether and how of international business. Legal environment, both national and international will tell us about many kinds of laws by which business firms must work. The cultural environment will tell us about attitudes, beliefs and opinions important to business people. Economic environment will tell us about the economic system being followed by the host country, which may or may not be different from home country. It will also explain the variables such as level of development, human resources, Gross Domestic Per Capita and consumption patterns that determine a firm’s ability to do business. Geography will tell us about location, quantity, and quality of the world’s resources.
Royal Philips Electronics of the Netherlands began as a small light-bulb factory in Holland, and by the turn of the century, was one of the largest producers in Europe. One-product focus made Philips a leader in industrial research which stimulated product innovation. Consequently, product line was broadened significantly and the flow of exciting new products and ideas continued through the years. Limited domestic market soon forced Philips to grow internationally. The foundations for what was to become one of the world's biggest electronics companies were laid.
Acedo F.J 2006, ‘The Resource Based Theory: Dissemination and main trends’, Strategic Management Journal, Vol. 27, pp. 621-636.
Oesterie, M. J., Richta, H. N., & Fisch, J. H. (2012). The influence of ownership structure on internationalization. International Business Review, 22(1), 187-201.
This strategy emphasizes the use of an organization’s resources and capabilities to achieve a core competence that cannot be imitated by competitors. Furthermore, the resource based school argues that if an organization distinctively improves its internal capability; that is being able to have effective inside machinery to deliver products and services to customers, the organization will enjoy a massive advantage in the market. This school also argues that in order to have a competitive advantage, an organization must have resource and capabilities that are sophisticated to those of competitors (QuickMBA, 2010).
Organizations and individuals have to strategically position themselves in order to take advantage of the growing technology and achieve business competitive advantage while at it (DeHaven 2010 pg 1). Technology has enabled globalization; where ideas, products and services have been shared. This has promoted foreign businesses thus helping different economies all across the globe. Different organizations and individuals have realized that technology will keep growing and changing and the best strategy will be to adapt it other than holding to rigid ways of doin...
15. Hill, Charles W.L. International Business: Competing in the Global Marketplace. New York : McGraw-Hill, 2007.
One main apprehension that they have against Information System is the high investment cost. In addition to this there is the high maintenance and upgrade costs associated with the deployment of new IT systems. In fact they prefer to outsource the heavy IT department expenditures to other companies having IT as their core activities. In return they expected to receive a full solution pack to meet their requirements and they are ready to pay these IT services as an operating cost. At the same time the risks associated with IS are being shifted to the other