1. CH15: International Strategies

2. Global Strategy Firms who define international competitiveness as no more than low-cost manufacturing are aiming at the wrong target. World-scale manufacturing may provide the necessary armament, and government support may be a tactical advantage, but winning the war against global competition requires a broader view of global strategy.

3. Global Strategy The competitive advantages to be gained from location, world-scale volume, or global brand distribution are arrayed against the three kinds of strategic intent: 1. Building a global presence 2. Defending a domestic dominance 3. Overcoming national fragmentation

4. Global Strategy by Firms in TV Industry 1. Building a global presence: Japanese companies such as Sony, Matsushita, Mitsubishi, JVC. 2. Defending a domestic position: American companies such as RCA, GE, Zenith 3. Overcoming national fragmentation: European companies such as Philips of Netherlands, CSF Thomson of France

5. Historic Focus of FDI Theory 1. Why do firms go overseas as direct investors? 2. How can foreign firms compete with local firms? 3. Why do firms enter foreign markets as producers?

6. Micro-Economic FDI Theory 1. Monopolistic Competition: Since the local firm has natural cost advantages based on location, the MNE must enjoy offsetting advantages based on either on its differentiated product or gained through the capturing of scale economies that are from production, distribution and marketing.

7. Micro-Economic FDI Theory 2. Oligopolistic Behavior: A firm producing in an oligopolistic industry is compelled to follow a rival overseas even though the firm’s assessment of the profit potential of the venture is far less optimistic than that of the rival.

8. Micro-Economic FDI Theory 2. Product Life Cycle: Any initial competitive advantage enjoyed by innovating enterprise might be eroded or eliminated by the superior competence of firms in other countries to produce the products based on them.

9. Micro-Economic FDI Theory 3. Internalization: Firms opt to exploit market opportunities as direct investors because it is the best way to minimize transaction costs in the production of information and to appropriate maximum returns on its investment in new technologies.

10. Micro-Economic FDI Theory 4. Eclectic Paradigm: The eclectic paradigm of international production sets up a generalized framework for explaining the level and pattern of the cross-border value- added activities of firms. It postulates that, at any given point of time, the stock of foreign assets, owned and controlled by MNEs, is determined by O, L, I.

11. Macro-Economic FDI Theory 1. Exchange Rate Theory: Structural imperfections in the foreign exchange market allow firms to make foreign exchange gains through the purchase or sales of assets in an undervalued or overvalued currency.

12. Macro-Economic FDI Theory 2. Dynamic Comparative Advantage Theory: A country’s FDI outflows are motivated by losing comparative advantages in its domestic market and then looking for other locational advantages in foreign countries with transferring its ownership advantages.

13. Newly Created Types of FDI 1. Defensive import-substituting investments: These investments are derived from the increased L advantages of member countries by the tariff realignment in a trading bloc. FDI inflows are created by the foreign firms to shift their strategies from trade-based to investment-based for not loosing their market shares within the bloc.

14. Newly Created Types of FDI 2. Reorganization investments: According to the increased L advantages within the members, intra-region FDIs are stimulated to encourage the reallocation of economic activity according to member states’ comparative advantage. Because the movement of FDI is within a bloc, there is no FDI inflow from outsides non-members, but increasing intra-FDI.

15. Newly Created Types of FDI 3. Rationalized investment: Major parts of the advantages by an economic integration are also derived from cost reduction and efficient gain by regrouping of production facilities in fewer locations where more favorable costs are found. So, outsiders’ FDIs are coming to the area to look for those advantages.

16. Newly Created Types of FDI 4. Offensive import-substituting investment: If a country becomes a member of a trading bloc, the whole market of the bloc will be considered as one. As a result, these kinds of investments are derived from market expansion, demand growth, technical progress and FDI inflows would come to take these advantages of growing demand and opening up of new markets.

17. IHRM Strategies 1. Before the Expatriation Relationship between headquarters and subsidiary Matching style to operations Job Description Communication Skills

18. IHRM Strategies 2. During the Expatriation Compensation Keep the relationship with headquarters

19. IHRM Strategies IHRM Strategies 3. After the Expatriation Career movement Training programs