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Presentation on theme: "MULTINATIONAL AND PARTICIPATION STRATEGIES:"— Presentation transcript:


2 Multinational Strategies and the Global-- Local Dilemma
The local responsiveness solution The global integration solution

3 Local Solution Customize organizations and products to country or regional differences

4 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

5 Four Broad Multinational Strategies
Solutions to the global--local responsiveness dilemma multidomestic transnational international regional

6 Multidomestic Strategy
Gives top priority to local responsiveness issues A form of the differentiation strategy Not limited to large multinationals

7 Transnational Strategy
Gives two goals top priority: seek location advantages global platforms gain economic efficiencies from worldwide networks

8 International Strategy
A compromise approach Global products, similar marketing techniques worldwide Upstream and support activities remain concentrated at home country

9 Regional Strategy A compromise strategy
Attempts to gain economic advantages from regional network Attempts to gain local adaptation advantages from regional adaptation

10 Regional Trading Blocks
Encourage regional strategies Reduce differences in government and industry required specifications for products


12 Mixed Strategies Seldom do companies adopt pure forms
Different strategies for each business Different strategies for product differences

13 The Local-global Dilemma: Diagnostic Questions for Strategy Formulation
The KEY question: how global is the industry?

14 What makes an industry global?
Globalization drivers four categories of global drivers: markets, costs, governments, and competition

15 Global Markets Are there? common customer needs? global customers?
Can you transfer marketing? What is the volume of imports and exports in the industry?

16 Costs Are there? global economies of scale?
global sources of low cost raw materials? cheaper sources of high skilled labor? high product development costs?

17 Governments Do the targeted countries have favorable trade policies?
Do the target countries have regulations that restrict operations?

18 The Competition Successful strategies of competitors
Volume of imports and exports in industry

19 Competitive Advantage in the Value Chain
Upstream advantages favor transnational strategy or an international strategy Downstream advantages favor multidomestic strategy

20 Mixed Conditions Competitive strength downstream in industry with strong globalization drivers Competitive strength upstream in industries with local adaptation pressures both favor regional strategies See summary Exhibit 6.2 next


22 Select an International Strategy over a Transnational When:
Cost savings of centralization offset the lower costs or higher quality raw materials or labor available from worldwide locations

23 Participation Strategies
The choice of how to enter each international market exporting, licensing, strategic alliances, and foreign direct investment

24 Exporting The easiest Passive exporting Active export strategies

25 Export Strategies Indirect exporting uses intermediaries

26 Export Management and Trading Companies (EMCs and ETCs)
Specialize in products, countries or regions Provide ready-made access to markets Have networks of foreign distributors

27 Direct Exporting More aggressive
Requires more contact with foreign companies Uses foreign sales representatives, distributors, or retailers May require branch offices in foreign countries

28 Channels in Direct Exporting
Sales representatives: use the company's promotional literature and samples Foreign distributors: resell the products Sell directly to foreign retailers or end users

29 Licensing International licensing is a contractual agreement between a domestic licensor and a foreign licensee

30 Other contractual agreements
International franchising Contract manufacturing Turnkey operations

31 The International Strategic Alliance
Cooperative agreements between two or more firms from different countries to participate in a business activity

32 Two Basic Types Equity international joint ventures (IJV)
International cooperative alliance (ICA)

33 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

34 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

35 Formulating a Participation Strategy

36 Deciding on an Export Strategy
Assess control needs for: sales, customer credit, and the eventual sale of the product Assess financial and human resources capabilities to manage export operations

37 Deciding on an export strategy, continued
to design/execute international promotional activities to support extensive international travel or possibly an expatriate sales force to develop overseas contacts and networks

38 When Should Companies License?
Based on three factors 1. characteristics of the product 2. characteristics of the target country 3. nature of the licensing company

39 Disadvantages of Licensing
Gives up control May create new competitors Often generates only low revenues Opportunity costs (barriers to other participation strategies

40 Why Seek Strategic Alliances?
Partner’s different capabilities Partner's knowledge of the market Government requirements To share risks To share technology Economies of scale Low cost raw materials or labor

41 Key Considerations for Alliances
Pick partners carefully Seek win-win ventures-last much longer Assess need for the alliance Estimate ability to succeed Plan for design and management

42 Which Type? IJV probably more secure
ICA probably more flexible and less visible

43 Advantages 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

44 Disadvantages of FDI Increased capital investment
Increased investment of managerial and other resources Greater exposure of the investment to political and financial risks

45 General Strategic and Operational Considerations

46 Strategic Intent Immediate profit, or.. Other goals
e.g., being first in a market with potential or learning a new technology

47 Company Capabilities What can a company afford? Human resources
Production capabilities Commitment to using resources

48 Local Government Regulations
Import or export tariffs, duties, or restrictions Laws regarding foreign ownership Other legal and regulatory issues patent, consumer protection, labor, and tax laws

49 Characteristics Of The Target Product /Market (e.g.s)
Products that spoil quickly or are difficult to transport poor candidates for exporting Products that need little local adaptation good candidates for licensing, joint ventures, or FDI

50 Geographic Distance Transportation costs
Management of FDI and equity strategic alliances more difficult

51 Cultural Distance With very different cultures, direct investment more risky Joint ventures, licensing and exporting local partners deal with local cultural issues

52 Risk Financial risk Economic risk currencies, markets, etc.
Political risk governments change policies regarding foreign firms change

53 Need for Control Key areas for concern
product quality in the manufacturing process, product price, advertising and other promotional activities, where the product is sold, and after market service

54 The control versus risk tradeoff


56 Multinational and Participation Strategies
What is the strategic reason to be in the market? location advantages versus market penetration e.g., source of raw materials, R&D, production, etc.

57 Multinational strategy and participation strategies, continued
A mix of participation strategies often support the basic multinational strategy see Exhibit 6.9

58 Conclusions Dealing with the global--local responsiveness dilemma
Four strategies multidomestic transnational international regional

59 Participation strategies
all can be used for sales others besides exporting serve more value chain activities


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