1 INTERNATIONAL LEVEL STRATEGY WHY FIRMS GO INTERNATIONAL?? 1.DOMESTIC MARKET SATURATION Oversupply and excess capacity Indigenous Demand Slackening Declining phase 2.HEDGING BUSINESS RISKS Scope widening to fight adverse trends Balancing cash flow pattern

2 INTERNATIONAL LEVEL STRATEGY 3.HUGE MARKET POTENTIAL International market scope attractive Chronic product shortage Better value of product 4.ECONOMICS OF SCALE & LEARNING Knowledge Transfer Access to superior technology, RMs 5.Conducive “SLEPT” Environment Political Stability Market Access Taxation Policies

3 INTERNATIONAL STRATEGY: Types and Content 1.BUSINESS LEVEL STRATEGY Resources & Capabilities Established allow the firm to pursue strategies in overseas markets MICHAEL PORTER FRAMEWORK Factors of Production Strategy, Structure & Control Demand Situation Related and Supporting Industries Systems Process Expertise of Workforce Healthy Demand Viable Segment Scale Efficient Facilities Land, Labour, Capital and Infrastructure Compete by Leveraging Italy Shoe Industry Supply of Leather, Machinery, Design Services

4 1.INTERNATIONAL COST LEADERSHIP Low cost strategy in nations with huge demand Centralize operations and obtain scale economies e.g. WALMART  Globalize Operations at Low cost - Operational Efficiency Customize and Adapt Products to satisfy local tastes e.g. VOLKSWAGEN  Launch in China 2.INTERNATIONAL DIFFERENTIATION STRATEGY Advanced and Specialized Factor Endowments Differentiate Products and Services Through Physical Characteristics, Features, Attributes Advertising and brand differentiation Positioning in the minds of consumers

5 Individual Country Units Develop Nation Specific Strategies or Corporate Dictate Strategies 1.INTERNATIONAL INTEGRATED STRATEGY Strategic and Operating Decisions are Decentralized “PEST” Conditions are Diverse  Therefore Tailor Products to fulfill local market tastes However, Diseconomies of scale can make operations more costly Different markets  Diverse Strategies  Uncertainty 2.GLOBAL STRATEGY Strategic and Business Decisions are Centralized Standardized Products Across Global Markets High Economies of Scale and low costs Lacks Differentiation and Adaptation Across Borders INTERNATIONAL CORPORATE LEVEL STRATEGY

6 International presence Accomplished Through Exporting, Licensing, Alliances, Wholly Owned Units 1.EXPORTING  PROBLEMS?? High transportations/ freight costs Tariff and non tariff barriers Common economic zones (e.g. NAFTA EU) Low cost products  Developed countries. Differentiated products  emerging markets 2.LICENSING: Purchase the right to manufacture and sell products within host country 3.ALLIANCES  Risk sharing, competency pooling removing cultural roadblocks CHOICE OF INTERNATIONAL ENTRY

7 4.WHOLLY OWNED  SUBSIDIARY  FULL OWNERSHIP (FDI) CHOICE OF INTERNATIONAL ENTRY Owned & Controlled Outfit JV/ Alliances 100 % Ownership Quick Access 0%CONTROL 100% Long Term LicensingFranchisin g Contract

8 STRATEGY  MODE OF ENTRY  OVERALL SUCCESS 1.DIVERSIFICATION AND RETURNS Firm Expands sales  Across Countries  Different Location Incentives are manifold High Returns and Earnings Economies of scale Locational Advantages Increased Market Size (e.g. Japanese Automobile Firms - Sharing Knowledge Yields Synergy) STRATEGIC COMPETITIVE OUTCOMES

9 2.DIVERSIFICATION AND INNOVATIONS Development of new technology  Competitiveness Innovate, Improve and Upgrade Operations and Products. STRATEGIC COMPETITIVE OUTCOMES Product Diversification International Diversification High Returns Innovations Managing to Cope with Complexity