International Strategy BUSI 7130/7136 Chris Shook, Ph.D.

AGENDA u Lecture u BRL Hardy

Drivers of Globalization Increased similarity of lifestylesIncreased similarity of lifestyles Global communicationsGlobal communications Fast communicationFast communication Pressures to reduce costsPressures to reduce costs

Motivators u Increase Market Size u Achieve Acceptable ROI u Achieve Economies of Scale u Achieve Location Advantage

Choice of Entry Mode u Exporting u Licensing u Franchising u Joint Ventures u Acquisition of Wholly-Owned Subsidiary u Development of Wholly-Owned Subsidiary

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 Conditions Size and Nature of Home Country’s Demand Porter’s Determinants of National Advantage Home country of origin is crucial to International success

Demand Conditions Size and Nature of Home Country’s Demand 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 Size and Nature of Home Country’s Demand 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

Advice from Porter u Create pressures for innovation u Seek out competitors as motivators u Establish early warning systems u Improve national diamond u Welcome rivalry u Globalize to tap selectively into sources of other nations u Locate home base to support competitive advantage

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

Do you REALLY have a global strategy ? u Global strategy –cross subsidization of national market share battles in pursuit of global brand and distribution positions

Do you REALLY have a global strategy ? u Why? –Loose bricks F Necessity of understanding competitor’s strategic intent –Labor and scale advantages are not sustainable –Domestic competitors are NEVER safe

Do you REALLY have a global strategy ? u Implications –Broader corporate concept of a product line –Don’t allocate resources by SBUs –Don’t allocate resources by country