International Issues in Strategy

Porter’s Determinants of National Advantage Home country of origin is crucial to International success

Factor Conditions Basic Factors - Land, labor Advanced Factors - Highly educated workers - Digital communications Generalized Factors - Capital, infrastructure Specialized Factors - Skilled personnel Porter’s Determinants of National Advantage Home country of origin is crucial to International success

Factor Conditions Basic Factors - Land, labor Advanced Factors - Highly educated workers - Digital communications - Highly educated workers - Digital communications Generalized Factors - Capital, infrastructure Specialized Factors - Skilled personnel Demand Condition s Home country may support scale efficient operations by itself Porter’s Determinants of National Advantage Home country of origin is crucial to International success

Demand Conditions Home country may support scale efficient operations by itself Factor Conditions Basic Factors - Land, labor Advanced Factors - Highly educated workers - Digital communications - Highly educated workers - Digital communications Generalized Factors - Capital, infrastructure Specialized Factors - Skilled personnel Related & Supporting Industries - Japanese cameras & copiers - Italian shoes & leather Home country of origin is crucial to International success Porter’s Determinants of National Advantage

Demand Conditions Home country may support scale efficient operations by itself Factor Conditions Basic Factors - Land, labor Advanced Factors - Highly educated workers - Digital communications - Highly educated workers - Digital communications Generalized Factors - Capital, infrastructure Specialized Factors - Skilled personnel Firm Strategy, Structure & Rivalry Intense rivalry fosters industry competition Porter’s Determinants of National Advantage Related & Supporting Industries - Japanese cameras & copiers - Italian shoes & leather - Japanese cameras & copiers - Italian shoes & leather Home country of origin is crucial to International success

International Corporate Strategy Corporate-Level International Strategies Three Corporate Strategies Global Strategy Transnational Strategy Multi-Domestic Strategy

International Corporate Strategy Corporate-Level International Strategies

Strategy and operating decisions are decentralized to strategic business units (SBU) in each country International Corporate Strategy Corporate-Level International Strategies Multi-Domestic Strategy

Strategy and operating decisions are decentralized to strategic business units (SBU) in each country Products and services are tailored to local markets International Corporate Strategy Corporate-Level International Strategies Multi-Domestic Strategy

Strategy and operating decisions are decentralized to strategic business units (SBU) in each country Products and services are tailored to local markets Business units in each country are independent of each other International Corporate Strategy Corporate-Level International Strategies Multi-Domestic Strategy

Strategy and operating decisions are decentralized to strategic business units (SBU) in each country Products and services are tailored to local markets Business units in each country are independent of each other Assumes markets differ by country or regions International Corporate Strategy Corporate-Level International Strategies Multi-Domestic Strategy

Strategy and operating decisions are decentralized to strategic business units (SBU) in each country Products and services are tailored to local markets Business units in each country are independent of each other Assumes markets differ by country or regions Focus on competition in each market International Corporate Strategy Corporate-Level International Strategies Multi-Domestic Strategy

Global Strategy International Corporate Strategy Corporate-Level International Strategies

Products are standardized across national markets International Corporate Strategy Corporate-Level International Strategies Global Strategy

Products are standardized across national markets Decisions regarding business-level strategies are centralized in the home office International Corporate Strategy Corporate-Level International Strategies Global Strategy

Products are standardized across national markets Decisions regarding business-level strategies are centralized in the home office Strategic business units (SBU) are assumed to be interdependent International Corporate Strategy Corporate-Level International Strategies Global Strategy

Products are standardized across national markets Decisions regarding business-level strategies are centralized in the home office Strategic business units (SBU) are assumed to be interdependent Emphasizes economies of scale International Corporate Strategy Corporate-Level International Strategies Global Strategy

Products are standardized across national markets Decisions regarding business-level strategies are centralized in the home office Strategic business units (SBU) are assumed to be interdependent Emphasizes economies of scale Often lacks responsiveness to local markets International Corporate Strategy Corporate-Level International Strategies Global Strategy

Products are standardized across national markets Decisions regarding business-level strategies are centralized in the home office Strategic business units (SBU) are assumed to be interdependent Emphasizes economies of scale Often lacks responsiveness to local markets Requires resource sharing and coordination across borders (which also makes it difficult to manage) International Corporate Strategy Corporate-Level International Strategies Global Strategy

Transnational Strategy International Corporate Strategy Corporate-Level International Strategies

Seeks to achieve both global efficiency and local responsiveness International Corporate Strategy Corporate-Level International Strategies Transnational Strategy

Seeks to achieve both global efficiency and local responsiveness Difficult to achieve because of simultaneous requirements for strong central control and coordination to achieve efficiency and local flexibility and decentralization to achieve local market responsiveness International Corporate Strategy Corporate-Level International Strategies Transnational Strategy

International Corporate Strategy When is each strategy appropriate? Need for Global Integration Need for Local Market Responsiveness Low High LowHigh

International Corporate Strategy When is each strategy appropriate? Need for Global Integration Need for Local Market Responsiveness Low High LowHigh

International Corporate Strategy When is each strategy appropriate? Need for Global Integration Need for Local Market Responsiveness Low High LowHigh

International Corporate Strategy When is each strategy appropriate? Need for Global Integration Need for Local Market Responsiveness Low High LowHigh

International Corporate Strategy When is each strategy appropriate? Need for Global Integration Need for Local Market Responsiveness Low High LowHigh

International Corporate Strategy When is each strategy appropriate? Need for Global Integration Need for Local Market Responsiveness Low High LowHigh

International Corporate Strategy When is each strategy appropriate? Need for Global Integration Need for Local Market Responsiveness Low High LowHigh

International Corporate Strategy When is each strategy appropriate? Need for Global Integration Need for Local Market Responsiveness Low High LowHigh

International Corporate Strategy When is each strategy appropriate? Need for Global Integration Need for Local Market Responsiveness Low High LowHigh

National government instability may create potential problems for internationally diversified firms Major Risks of International Diversification Political Risk

National government instability may create potential problems for internationally diversified firms Major Risks of International Diversification Potential changes in attitudes or regulations regarding foreign ownership Political Risk

National government instability may create potential problems for internationally diversified firms Major Risks of International Diversification Legal authority obtained from previous administra- tion may become invalid Potential changes in attitudes or regulations regarding foreign ownership Political Risk

National government instability may create potential problems for internationally diversified firms Major Risks of International Diversification Legal authority obtained from previous administra- tion may become invalid Potential changes in attitudes or regulations regarding foreign ownership Potential for nationalization of private firms’ assets Political Risk

Economic Risk Major Risks of International Diversification

Economic risks are interdependent with political risks Major Risks of International Diversification Economic Risk

Economic risks are interdependent with political risks Differences and fluctuations in international currencies may affect value of assets and liabilities and affect prices and ultimately the ability to compete Major Risks of International Diversification Economic Risk

Economic risks are interdependent with political risks Differences in inflation rates may affect internationally diversified firms’ ability to compete Differences and fluctuations in international currencies may affect value of assets and liabilities and affect prices and ultimately the ability to compete Major Risks of International Diversification Economic Risk

Stages of International Development Domestic company—some exporting Domestic company—export division Domestic company—international division Multinational corporation— multidomestic emphasis Multinational corporation—global emphasis

Geographic Area Structure for a Multinational Corporation *Note: Because of space limitations, product groups for only Europe and Asia are shown here.

Strategy Implementation Hofstede’s Dimensions of National Culture Power distance (PD) Uncertainty avoidance (UA) Individualism-collectivism (I-C) Masculinity-femininity (M-F) Long-term orientation (LT)

Strategy Implementation International issues in staffing: –Considerable planning –Can be very costly –Cultural differences must be considered –Experience through international assignments

Strategy Implementation International issues in staffing: –Effective management of foreign assignments: Focus on transferring knowledge and developing global leadership Foreign assignments to people with technical skills matched or exceeded by cross-cultural abilities Deliberate repatriation at end of assignment with career guidance and jobs