Please answer these discussion questions:

LEARNING FROM MISTAKES Since Ford entered the Chinese market in 2001, the U.S. automaker's strategic focus on China has yet to pay off. Ford had initial success in China, mostly based on a world car approach that aimed at selling similar cars around the world. This global approach took advantage of leveraging economies of scale in design and manufacturing to save costs. At its peak, Ford was the sixth-largest car company in China in 2014 with almost 5 percent of the Chinese car market. However, Ford's car sales have dwindled ever since. In early 2018, Ford plunged to 18th place among car manufacturers in China. To make matters worse, Ford posted a rare net financial loss in its China business in the first three months of that year. The Chinese car market is now the largest in the world and Chinese customers demand different cars than North American and European customers. This change in de mand has led to more market fragmentation, making global strategies less viable. Specifically, Chinese custom- ers seek out cars with technological innovations such as Internet connectivity and best-in-class fuel economy. As a result of the increasing sophistication of Chinese custom- ers, China is now home to the largest number of electric vehicles in the world. Until recently, Ford's engineering and design work was located outside of China. This distance between the Chi- nese market and Ford's engineering and design prowess may have contributed to Ford's lack of appeal to Chinese customers. A Chinese proverb says that "distant water won't quench your thirst." In the same way, Ford's initial decision to locate key value chain activities outside of China may have caused issues with understanding the needs and wants of Chinese customers. Ford responded to the recent challenges by separat- ing the Chinese business from the broader Ford operation in the Asia Pacific region. The new China business will di- rectly report to the Ford global headquarters in Dearborn, Michigan. Ford also named a new top executive to lead the China business, industry veteran Anning Chen, who brings ample local knowledge of the Chinese market from a previous position at Chery Jaguar Land Rover. Overall, Ford plans to address its recent challenges in China by launching 50 new vehicles for the Chinese market by 2025. While some analysts fear that the influx of new models will increase the complexity and cost of Ford cars, Ford's new China strategy finally pays greater attention to the local needs of the largest and most important car mar- ket in the world. Discussion Questions 1. How should executives manage the tensions be- tween attention to local tastes and the desire to cut costs in multinational companies? 2. How should Ford compete against local Chinese car manufacturers such as Geely who are uniquely posi- tioned to understand and satisfy local customer tastes? Sources: Rogers, C., and T. Moss. 2018. Why Ford's big China wager is faltering. Wall Street Journal, May 10: np: Choudhury, S. R. 2018, Ford sets up China business as a standalone unit. cnbc.com, October 24: np: Hoffman, B. 2017. Here's what's wrong with Ford's China plan-and what's right. Forbes, December 9: np: Hertzke P, Muller N and S. Schenk. 2017. China's electric vehicle market plugs in. McKinsey Quarterly, July: 1-3. In this chapter we discuss how firms create value and pitfalls by developing a better understanding of the busi- achieve competitive advantage in the global marketplace. ness environments of different countries as illustrated by Multinational firms are constantly faced with many impor- the challenges Ford faced in China discussed previously. In tant decisions. These include entry strategies; the dilemma addition, we address factors that can influence a nation's of choosing between local adaptation (in product offer- success in a particular industry. In our view, this is an im- ings, locations, advertising, and pricing) and global inte portant context in determining how well firms eventually gration, and others. We will address how firms can avoid do when they compete beyond their nation's boundaries. PART 2: STRATEGIC FORMULATION