1. Basic Strategies & Multinational and Participation Strategies

2. Objectives
Choice between a local responsiveness or global approach to a multinational’s strategy
Some of the broad multinational strategies
Multi-domestic
Transnational
International
Regional
Participation strategies – how should one enter a market
Alliance Strategy will be the focus of this course

3. Multinational Strategies and the Global Local Dilemma
Fundamental Strategic Dilemma – “Global-Local Dilemma
The local responsiveness solution
National or cultural differences in consumer tastes, variation in customer needs
National differences in how industry work or political pressure
Customize organizations and products to country or regional differences
The global integration solution
Reduce costs with worldwide standardized products, uniform promotional strategies and distribution channels
Seek lower costs or higher quality anywhere in the value chain and in the world

4. 4 Broad Multinational Strategies: All offer solutions to the global-local responsiveness dilemma
Multidomestic
Transnational
International
Regional

5. Multidomestic Strategy
Many ways like a differentiation strategy
Offer products/services that satisfy cultural needs and expectation
Ex. Advertising, packaging, sales outlets, and pricing are adapted to local standards
Results usually more costly
Different packaging, sizes, colors and as a result need to charge a higher price to recoup extra costs
MNC often treat subsidiaries as independent business units
Examples of Multidomestic
Even for standardized products, sometimes localization is necessary
Ex: McDonald’s could not sell its famous Big Mac in India – instead sells a mutton sandwich called Maharaja sandwich
See Multinational Management Challenge -p 157

6. Matsushita: A GLOCAL company – “go GLObal and act loCAL”
Has key “go global, act local” strategies and policies
Be good citizen in all countries
Give overseas operations your best manufacturing technology
Keep expatriate headcount down – groom local managers
Let plants set their own rules, fine-tune manufacturing process to match skills of workers
Develop local R&D to tailor products to market
Encourage competition among overseas outposts and with plants back home

7. Transnational/Global Strategy
Gives two goals top priority:
seek location advantages- Global Platform
gain economic efficiencies from worldwide networks
Location Advantages
Location based competitive advantages in cost/quality
Locate subunits near cheap sources of high quality raw materials
Locate subunits near sources of research and innovation
Locate subunits near high sources of high quality or low cost labor
Seek low cost financing anywhere around the world
Share discoveries and innovations made in one part of the world with operations in other parts
See Case in Point p. 152

8. International Strategy
Selling global products and using similar marketing techniques worldwide
Compromise approach to the G-L Dilemma
Like Transnational Strategies, firms attempt to sell global products/similar marketing techniques worldwide
Like Multidomestic, if pressured to from economic or political reasons, will set up subunits (sales/production) in major countries of operation
Do not locate locate value chain activities anywhere in the world but instead remain concentrated at home
Home country headquarters retain control of local strategies, marketing, R&D, Finance, and production

9. Regional Strategy A compromise strategy
Attempts to gain economic advantages from regional network
Attempts to gain local adaptation advantages from regional adaptation
Managing raw material sourcing, production, marketing, and support activities within a particular region
Rise of trading blocs – EU, NAFTA, ASEAN led to more uniformity in customer needs and reduced government and industry-required specifications for products
Ex. Proctor & Gamble – combined subunits in Mexico, Canada and USA into one regional organization

10. Multinational Strategy Content
Transnational
Strategy
International
Multidomestc
Regional
Worldwide
Markets
Yes as much as possible with flexibility to adapt to local conditions
Yes with little flexibility for local adaptation
No, each country treated as a separate market
No, but major regions treated as similar market (Europe)
Worldwide location of separate value chain activities
Yes anywhere based on best value to the company-lowest cost for highest quality
No, or limited to sales or local production replicating headquarters
No, all or most value chain activities located in country of production and sales
No but region can provide some different country location of activities.
Global Products
Yes to the highest degree possible with some local products if necessary; companies rely on worldwide brand recognition
Yes to the highest degree possible with little local adaptation; companies rely on worldwide brand recognition
No, products produced in and tailored to the country of location to best serve the needs of local customers
No, but simpler products offered throughout a major economic region.
Global Marketing
Yes similar strategy to global product development
Yes to the highest degree possible
No, marketing focuses on local-country customers
No, but region is often treated similarly.
Global Competitive moves
Resources from any country used to attack or defend
Attacks and defenses in all countries, but resources must come from headquarters
No, competitive moves planned and financed by country units
No, but resources from region can be used to attack or defend.

11. International Participation Strategies: Review
The choice of how to enter each
international market
1. Exporting
2. Licensing
3. Strategic alliances
4. Foreign direct investment

12. 1. Exporting
The easiest – low risk, minimal investment, and fast withdrawal
Passive exporting – treating and
filling overseas orders like domestic orders
Indirect export strategies – indirect through Export Management Companies or Export Trading Companies (title)
Direct Export Strategies- take on the duties of the intermediaries, often use foreign sale representatives, foreign distributors, or foreign retailers to get their product to end users

13. Exporting (cont’d) Often the only available choices for small
and new firms wanting to go international
Provide an avenue for larger firms that want to begin their international expansion with a minimum of investment
Exporting and importing can provide easy
access to overseas markets
Strategy usually is transitional in nature

14. 2. Licensing
International licensing is a contractual agreement between a domestic licensor and a foreign licensee
International franchising
Contract manufacturing
Turnkey operations
Licensing distinctions:
Patent – legal protection for new inventions
Trademark – legal protection for symbols,
picture [Nike swoosh]
Copyright
Trade secret – Coca Cola formula etc.
Widely used in the fast-food and hotel/motel industries
With minor adjustments for the local market, it can result in a highly profitable international business

15. Reasons for licensing:
Quick way to recover R&D
Expand overseas quickly without major capital outlay
To squeeze more life out of a mature product
To test potential of a foreign market
Inability to enter market because of government restrictions on export
Avoids customs duties, trade quotas, and other export-import restrictions

16. 3. The International Strategic Alliance
Cooperative agreements between two or more firms from different countries to participate in a business activity
Benefits:
--Access to the resources and capabilities of another company
--Learning from one another
--Reducing time-to-market for innovations
--Risk sharing
Problems:
--Disagreements & conflict between the partners. Disputes
most likely where the partners are also competitors.
Benefits are seldom shared equally. Distribution of benefits determined by:
Strategic intent of the partners- which partner has the clearer vision of the purpose of the alliance?
Appropriability of the contribution—which partner’s resources and capabilities can more easily be captured by the other?
Absorptive capacity of the company-- which partner is the more receptive learner?

17. 4. Foreign Direct Investment (FDI)
FDI means that companies own and control directly a foreign operation
symbolizes the highest stage of internationalization
Mergers and acquisitions versus greenfield
Reasons to Invest in Foreign Countries:
To extract raw materials
To find low cost sources of labor,
components, parts, or finished goods
To penetrate new markets, the major motivation

18. Advantages of FDI Disadvantages of FDI Greater control
Lower costs of supplying host country
Avoid import quotas
Greater opportunity to adapt product to the local markets
Better local image of the product
Disadvantages of FDI
Increased capital investment
Increased investment of managerial and other resources
Greater exposure of the investment to political and financial risks

19. Wholly-owned subsidiary
An overseas operation that is totally owned and controlled by an MNC
MNC’s desire for total control and belief that managerial efficiency is better without outside partners
Some host countries are concerned that the MNC will drive out local enterprises and others prohibit fully owned subsidiaries
Home-country unions sometimes view foreign subsidiaries as an attempt to “export jobs”
Today many multinationals opt for a merger, alliance, or joint venture rather than a fully owned subsidiary

20. Implementing a Strategic-Alliance Strategy
Decide Where to Link in Value Chain
Select a Potential Partner
Begin Over
Is Partner Acceptable?
Choose an Alliance Type
Negotiate an Agreement
Build the Organization
Build Trust and Commitment
Assess Performance
Terminate the Alliance OR Check and Revise Implementation
Meets Strategic Objectives?
Continue or Increase Involvement NO
Yes No
Yes

21. Linking Value Chains Company A Company B Research and Development
R&D
Input Logistics
Raw material supply and acquisition
Input Logistics
Raw material supply and acquisition
Supply/
Production
Operations
Manufacturing, assembly, facility operations
Operations
Manufacturing, assembly, facility operations
Operations
Production/
Marketing
Marketing and sales
Promotions, and channel relations
Marketing and sales
Promotions, and channel relations
Marketing
Output Logistics
delivery
Output Logistics
delivery
Delivery
Service
repair
Service
repair

22. Alliance Creation Framework
External Analysis (internal and external environment)
Strategy Development
Alliance – Type of Alliance
Partner Selection
Strategic Fit Assessment
Resource Fit Assessment
Negotiate Agreement