1. Copyright © 2009 South-Western, a part of Cengage Learning All rights reserved. Power Point Presentation by Dr. Leslie A. Korb Georgian Court University 1 Understanding Business Strategy Concepts & Cases Part 3: Strategy Chapter 8: Competing Across Borders

2. 2 Reading and studying this chapter should enable you to: 1. Explain four reasons why firms pursue international strategies. 2. Understand the two major pressures lead ing to three dominant international strategies. 3. Describe the four basic alternative contractual modes for entering international markets and explain the trade -offs of using each.

3. Chapter 8: Competing Across Borders Reading and studying this chapter should enable you to: 4. Discuss how three types of advantages affect the decision about which mode of entering international markets to use. 5. Explain the three alternative types of foreign direct investment and the strategic basis for each one. 6. Describe the organizational structures that are used to implement each of the international strategies. 3

4. Chapter 8: Competing Across Borders The increase in globalization is based on historical events Tariffs and quotas on imported goods after World War I Foreign direct investment after World War II GATT WTO NAFTA The Internet BRIC 4

5. Chapter 8: Competing Across Borders As a result of these events managers must develop global mind-sets The costs and risks of doing business outside a firm’s domestic market can be significant – the liability of foreignness 5

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7. Motives for International Strategies Use of current resources and access to new resources Seeking to expand or develop new markets Competitive rivalry Leveraging core competencies and learning 7

8. International Strategies Firms consider two important and potentially competing issues when choosing an international strategy: the need for global efficiencies and the need to customize a good or service for a particular host country market 8

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10. The Multidomestic Strategy Firm establishes a relatively independent set of operating subsidiaries in which each subsidiary develops specific products for a particular domestic market Customize to local market Considerable power and authority resides in host country subsidiary managers Overcomes cultural and language difficulties 10

11. The Global Strategy A firm uses a central divisional office to develop, produce, and sell its standardized products throughout the world Production and marketing strategies are usually centralized with decisions made at a division headquarters Because of the importance of a particular location for access to critical customers and markets or access to financial resources, a firm may move its headquarters to a foreign setting 11

12. The Transnational Strategy The firm attempts to combine the benefits of global scale efficiencies with the advantages of being locally responsive in a country or geographic region Requires both centralization and decentralization simultaneously Most effective for facilitating learning because culture created promotes transfer of knowledge and organizational practices 12

13. The Transnational Strategy The multidomestic strategy uses a decentralized authority structure The global strategy, on the other hand, centralizes decision making, which hampers new knowledge development 13

14. Modes of International Market Entry Exporting Licensing Franchising Contract manufacturing Turnkey projects Foreign direct investment 14

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16. Foreign Direct Investments International Strategic Alliances and Joint Ventures Greenfield Venture International Acquisition 16

17. Factors Affecting Selection Firm-specific resources advantages Country-specific or location advantages Internal coordination or administrative advantages 17

18. Implementing Multidomestic Strategy 18

19. Implementing Global Strategy 19

20. Implementing Transnational Strategy 20