Presentation on theme: "International Strategy"— Presentation transcript:
1 International Strategy Motives for GlobalizationChanges in the External EnvironmentMultidomestic/Global CompetitionTypes of International StrategyEntry Strategies
2 The shift toward a more integrated and interdependent world economy. GlobalizationThe shift toward a more integrated and interdependent world economy.(Hill, 2006)
3 Globalization of Production The sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (Hill, 2006).Capital(Facilities)Human ResourcesCapital (Technology)EntrepreneurNatural Resources
4 Globalization of Markets Moving away from an economic system in which national markets are distinct entities, isolated by trade barriers and barriers of distance, time, and culture (Hill, 2006).Consumer ProductsStarbucksCiticorpMcDonaldsIndustrial ProductsOilWheatCommercial Aircraft
7 Who here has been involved in International Operations? Who has traveled internationally?Who is from another country?
8 What happens to the firm’s external environment as they move overseas?MACROINDUSTRYOPERATING
9 Economic Factors: Monetary and Fiscal policies, ,exchange rates, economic development, type of economic system. Etc.Technological Factors: Regulations on technology transfer, information flow, infrastructure, patent and trademark protection, etc.Political/Legal Factors: Form of government, tariffs, protectionist sentiment, terrorist activity, legal system, government’s attitude toward foreign firms, employment laws, etc.Social/Cultural Factors: beliefs, values, attitudes, opinions, lifestyles, human rights, literacy levels, language, social institutions, skill level of the workforce, etc.
10 Balancing Macro Factors is Key Do low wages in developing countries translate intolower manufacturing costs?
11 Globalization in Competition Multi-domesticCompetitionGlobalCompetition
12 Multidomestic Competition Competition is essentially segmented from country to country.Competition in one country is independent of competition inother countries.Think in terms of the competitive forces (Porter’s 5 Forces)Examples: Grocery, healthcare****In a multidomestic industry, a global corporation’ssubsidiaries should be managed as distinct entities.
13 Global Competition Global competition occurs when competition crosses national borders.A firm’s strategic moves in one country can be significantlyaffected by it’s competitive position in another country.Once again think about the competitive forces.Examples: Automobiles, Consumer electronics, Petroleum
14 How do firms position themselves to compete in the global marketplace?
15 Competing Pressures Pressure for Cost Reductions Pressure for Local ResponsivenessConsumer’s Tastes and PreferencesDifferences in Infrastructure orTraditional PracticesDifferences in Distribution ChannelsDemands of Host GovernmentsPressure for Cost ReductionsCommodity-type productUniversal needs of customersCompetitors use a low cost position
16 Multidomestic Strategy Focus: Local ResponsivenessCustomize the strategy to fit the circumstances of each host countryLittle to no coordination of strategy across countriesForm subsidiary companies to handle operations in each hostcountry; each subsidiary operates more or less autonomouslyImpact on value chain?
18 Global Strategy Focus: Cost Reduction Same basic strategy worldwide (minor variations where essential) (e.g., Intel)Takes advantage of location economiesLocate subunits near high-quality raw materialLocate subunits near sources of high-quality or low cost laborSeek low cost financing anywhere in the worldMuch more worldwide coordinationAll major strategic decisions are closely coordinated at globalheadquarters. Structure is designed to unify subsidiaries.Impact on value chain?
20 Low Pressures for Local Responsiveness High GlobalStrategyTransnationalStrategyPressuresfor CostReductionInternationalStrategyMultidomesticStrategyLowLow Pressures for Local Responsiveness High
21 International Strategy Low Pressures for Local Responsiveness and Cost ReductionSkills and products are transferred to foreign markets werelocal competitors lack those skillsParts of the value chain remain in the home country (e.g., R&D)Parts of the value chain are duplicated throughout the world(e.g., manufacturing)Works best when: industry cost pressures are low and local capabilitiesare underdeveloped or non existent.Boeing: Production and marketing (local), sales force (global)Televisa (Mexico’s largest media firm): Spanish soap operas
22 Transnational Strategies High pressures for both local responsiveness and cost reductionA type “Best cost” strategy wherein companies try tosimultaneously achieve advantages from low cost and differentiation.Competencies are developed world-wide and transferred as appropriateExperience Curve EffectsLocation EconomiesLocal Responsiveness
23 Amount of Commitment, Control, Risk and Profit Potential Entry StrategiesLicensingExportingFranchisingContractManufacturingJVandStrategicAlliancesForeignDirectInvestmentAmount of Commitment, Control, Risk and Profit PotentialLeastMost
24 Can be leveraged internationally by linking value chain activities Strategic Alliance Joint VentureA BA BCCan be leveraged internationally by linkingvalue chain activities
25 Motivations for Partnerships 1. Generate scale economies: Toyota/GM joint venture (Toyota couldspread fixed investment over more units)2. Gain access to strategic markets: Japanese firm, JVC, provided designtechnology to partner in exchange for access to European market.3. Overcoming trade barriers: Inland Steel and Nippon Steel built coldsteel plant in Indiana (Nippon supplied technology, capital andaccess to Japanese firms in the US).4. Use excess capacity: Toyota/GM joint venture used an idle GM plant5. Gain access to low-cost manufacturing capabilities: GE sourcingmicrowaves from Korea.