INSTRUCTIONS: Answer ALL questions from this section.

Case: Towards the development of global strategies: The case of Global Metallurgical Inc.

When Arden Sims was hired at Global Metallurgical in $1984,$ the company was a wholly$-$ owned, unremarkable division of a large steel conglomerate with more than its share of problems. Over the next several years, Sims battled unions, redesigned operations and severed a $34-$year relationship with a sales and marketing representative. He even pulled a few shifts cleaning out the furnace at the company$$s Beverly, Ohio plant. He eventually led a leverage buyout of the company. In the process of transforming Cleveland, Ohio based Global Metallurgical into a global competitor in the specialty metals industry, Sims pinpointed the reasons for operating inefficiencies, for disappearing manufacturing jobs, and how both management designed factory jobs and union$-$dictated shop rules were a sure recipe for uncompetitive labour costs.

Throughout all the adversity, Sims maintained a three$-$point strategy. To survive short term, Global had to become a high quality, low$-$cost leader in the industry. To distinguish itself technologically, Global would have to actively pursue research and development. Achieving these objectives would lay the groundwork for Sims$$ vision of the future: the ability to compete effectively in overseas markets. In $1988,$ Globe received the Malcolm Balridge National Quality award. The following year they were awarded Manufacturing Excellence. $$I felt we were now ready to compete with the rest of the world$,$ Sims said. $$I considered the last five years of Globe$$s organizational transformation as preparation for going overseas.$$

Entry into the European markets turned out to be easier than the Pacific Rim. Globe$$s $1989$ acquisition of British company Materials and Methods $($M&M$),$ a world$-$class metals engineering firm, provided and early foothold in both the United Kingdom and Eastern Europe. Globe furnished some clout of its own in the Western European Market, enabling M&M to compete with high quality alloys that were competitively priced. A market share of $1$ percent to $20\%$ by $1992.$ Asia was hard and Japan harder still, but Sims viewed the latter as a linchpin since it was the largest market in the region. He also thought he had identified a weakness Globe could exploit. $$I believe the Japanese will eventually exit specialty metals because Japanese power rates are so high and the processes they use are expensive and inefficient.$$ Sims says, $$I think we can be the future $$choice supplier in Japan.$$

It will not be easy; at least if some of Globe$$s early overtures are any indication. Sims thought that for $$120$ million Globe can take on a $$2$ billion supplier, provided he can get customers to try his product. This is easier said than done. Most giant Japanese foundries like Toyota, Nissan, Kubota, and Komastu produced no more than four

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products. Globe$$s marketing representatives can tout $180$ to meet virtually every need at the highest quality levels. Most of the companies listen politely, but orders have been hard to come by$.$ Globe has made progress using local sales agents at smaller foundries. One plant that did test Globe$$s offering found it superior in quality. The company shipped around $3,000$ tons to $20$ foundries in $1992,$ or about $7\%$ of the total Japanese market. Globe has lived up to its name by setting priorities and following markets where the greatest opportunities lie, even if they happen to be across water.

CASE QUESTIONS: REMINDER: Answer ALL questions from this section.

Question $1$

After Globe$$s organizational transformation, Sims would have conducted a foreign market analysis in preparation to go global. What steps are involved in this analysis? $(5$ marks$)$

Question $2$

To enter the European market Globe chose the acquisition method, discuss the suitability of this method of entry. $(10$ marks$)$

Question $3$

Discuss the other methods of Foreign Direct Investment that is open to Sims and the suitability of each method. $(20$ marks$)$

Question $4$

With the use of examples from the case, discuss the international investment theory that explains Globe$$s approach to foreign direct investment. $(10$ marks$).$

Question $5$

Discuss Globe$$s source of competitive advantage. $(5$ marks$)$