Opportunities and Outcomes of International Strategy Identify International Opportunities Explore Resources and Capabilities Use Core Competence International Strategies Modes of Entry Increased market size Return on investment Economies of scale and learning Advantage in location International business-level strategy Multidomestic strategy Global strategy Transnational strategy Exporting Licensing Strategic alliances Acquisitions Establishment of a new subsidiary

Opportunities and Outcomes of International Strategy: Continued Use Core Competence Strategic Competitiveness Outcomes Management problems and risk Modes of Entry Better performance Exporting Licensing Strategic alliances Acquisitions Establishment of a new subsidiary Innovation

International Strategy Life Cycle Product Demand Develops and Firm Exports Products Foreign Competition Begins Production Selling Products or Services Outside a Firm’s Domestic Market Firm Introduces Innovation in Domestic Market Firm Begins Production Abroad Production Becomes Standardized and is Relocated to Low Cost Countries

Motivations for International Expansion Increase Market Share domestic market may lack the size to support efficient scale manufacturing facilities Return on Investment large investment projects may require global markets to justify the capital outlays weak patent protection in some countries implies that firms should expand overseas rapidly in order to preempt imitators

Motivations for International Expansion Economies of Scale or Learning expanding size or scope of markets helps to achieve economies of scale in manufacturing as well as marketing, R & D or distribution can spread costs over a larger sales’ base increase profit per unit Location Advantages low cost markets may aid in developing competitive advantage may achieve better access to: Raw materials Lower cost labor Key customers Energy

International Business-Level Strategy: Determinants of National Advantage Factors of production Firm strategy, structure, and rivalry Demand conditions Related and supporting industries

International Corporate-Level Strategy Global strategy Transnational strategy High Need for Global Integration Multidomestic strategy Low Low High Need for Local Responsiveness

International Corporate-Level Strategy: Multidomestic 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 one country are independent of each other Assumes markets differ by country or regions Focus on competition in each market Prominent strategy among European firms due to broad variety of cultures and markets in Europe

International Corporate-Level Strategy: 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-Level Strategy: Transnational Strategy Seeks to achieve both global efficiency and local responsiveness Difficult to achieve because of simultaneous requirements strong central control and coordination to achieve efficiency decentralization to achieve local market responsiveness Must pursue organizational learning to achieve competitive advantage

Global Market Entry: Choice of Entry Mode Type of Entry Characteristics Exporting High cost, low control Licensing Low cost, low risk, little control, low returns Strategic alliances Shared costs, shared resources, shared risks, problems of integration Acquisition Quick access to new market, high cost, complex negotiations, problems of merging with domestic operations New wholly owned subsidiary Complex, often costly, time consuming, high risk, maximum control, potential above-average returns

Risks in an International Environment Political Risks Political Risks Economic Risks Political risks include instability in national governments war, both civil and international potential nationalization of a firm’s resources

Risks in an International Environment Political Risks Economic Risks Economic risks are interdependent with political risks and include differences and fluctuations in the value of different currencies differences in prevailing wage rates difficulties in enforcing property rights unemployment