Triad concept

Professor :John MourmourisCourse : International management & strategyPresented by Fotios Maltezos

Democritus University of ThraceDepartment of Economics«MBA : Master in Business Administration»

The main concept

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Kenichi Ohmae :one of the world’s leading business and corporate strategists

Triad Power : The coming of global competition

Explains how MNCs should expand their operations globally

Triad Blocs

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•GDP (1986): 4.59 $t•30.6% world GDP

U.S.A.•GDP (1986): 3.36 $t•22.4% world GDP

E.U.

•GDP (1986) : 2.05 $t

•13.6% world GDP

Japan

The three major economic powers in the modern world

Triad Blocs

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Graph 1: World and Triad GDP (1980-2014)

They represent over the half of the world economyWith very important economic relationships between them through FDI and trade.

Japan

NAFTA : Canada, USA,

Mexico

EU : Germany,

France, Italy, UK

Γενικός τύπος

Γενικός τύπος

Γενικός τύπος

Γενικός τύπος

Γενικός τύπος

Γενικός τύπος

Γενικός τύπος

Γενικός τύπος

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Γενικός τύπος

Γενικός τύποςGDP (current trillion $)

World Triad

Triad power model

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• Companies which have presence only in one bloc were dangerously vulnerable to competition

• The combined buying force of the Triad makes most of today's high-tech products economically viable (wealth, application of scale-economies)

• Establish a presence in each area of the triad bloc

• The world is one global market and not many individuals because borderlessness is reality

• Managers and business executives to change their thinking of global competition and act fast

Traditional model

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Old fashioned internalization process of MNCs: Producing and selling the same products as the mother company and operating as a clone of the headquarter

Mother company

Small subsidia

ry

Small subsidia

ry

Small subsidia

ry

Small subsidia

ry

Small subsidia

ryExports Exports

Triad power modelWhy a MNC should follow the triad

modelThe growth of capital-intensive

manufacturing

Faster adaptation

of new technology

Overcome obstacles of protectionis

m

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Protectionism

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Protectionism: government actions and policies that restrict international trade, to protect local businesses foreign competition.

Methods of protectionism : tariffs, quotas, subsidies or tax cuts to local businesses.

MNCs access these blocs to obtain a number of benefits including the right to sell their output without having to be burdened by import duties or other restrictions.

Example : When the United States tried to stop the current of Japanese color televisions hitting its shores, Sony, which has a large plant in San Diego, was virtually untouched by quotas and surcharges.

Becoming a triad power

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Ohmae’s Triad Power theory insists on invading various markets simultaneously

To compete effectively in today's global business arena, multinational corporations must become true ''insiders'‘, To achive this are needed investments in all business facilities( R&D, sales, marketing) in the other blocs

Take advantage of the distribution, marketing,

research expertise of another company that already operates in a

chosen foreign market.

Joint Ventures

International

consortia

Evolution of the Triad

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Today businesses forget global competition does not occur just between the triad.The new player is the BRIC countries(Brazil, Russia, India, China)

Graph : GDP of major powers in 2010, 2050

USA

EUJapan

1980s-

1990s USA

EU

BRIC

2015

Case Study: Hitachi

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Fiat(Europ

e)Hitach(Japan)

John Deere

(U.S.A.)

Hitachi Kenki, a maker of construction equipment, has a loose alliance in hydraulic excavators with Deere & Company (1988) in North America and with Fiat Allis (1986) in Europe .

This is a simple example of how Hitachi took advantage of its partners distribution networks

Hitachi- FiatTimeline

1987:Joint venture with the construction machinery division of Fiat (Fiatallis)

1990: Starts the production of backhoes, wheel and crawler loaders.

1990: Fiat-Hitachi acquires the competitor Benati Macchine (2.8 million $)

1991 : Hitachi-Fiat-J.Deere sign a cooperation memorandum

2001: Hitachi decides to stop the collaboration due to creation of its own

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Hitachi – J. Deere

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Timeline1983: Supply Agreement for

excavators1988: Deere – Hitachi joint venture is

established(production plan at Kernesville).

1998: Started D-H Specialty Products

2011: Established D-H Brazil joint venture

2012: Approved expansion at the USA production plant

Joint venture in :ProductionSalesMarketing

Conclusions

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Large MNCs need broadminded business executives who :• Have analytical skills and manage to drive their corporations to right place to expand its operations because competition is very hard

• Plan for worldwide strong position• View the world like a huge global economy and not a lot of different mini markets.

Bibliography

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1. A perspective on regional and global strategies of multinational enterprises, A. Rugman & A.Verbeke, 2012

2. THE NEXT GLOBAL STAGE, Kenichi Ohmae, 20053. Triad Power: The Coming Shape of Global Competition, Kenichi Ohmae,

19864. Japanese Manufacturing Investment in Europe: Its Impact on the UK

Economy, Roger Strange, 19935. Yellow Steel: The Story of the Earthmoving Equipment Industry, W.

Haycraft, 20026. The Global Logic of Strategic Alliances, Kenichi Ohmae, 19897. The Way to Win in Cross-Border Alliances, Joel Bleeke-David Ernst,19918. http://databank.worldbank.org/9. http://hitachiconstruction.com/

Thank you for your attention!

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