Team #1 Andrew McDaniel Brad Schaefer Brandon Christian Robert Pace Ryan Schafer

Patterns of Internationalization  Internationalization occurs through trade- sale & shipment of goods and services between countries  Sheltered Industries-only indigenous firms, sheltered from imports. (railroads, hairdressing, milk)  Trading industries-internationalization through imports and exports. (agriculture, diamond mining, military hardware)

Patterns of Internationalization  Multidomestic industries- those that internationalize through direct investment (hotels, consulting, investing)  Global industries- those that both trade and investment are important (cars, electronics, pharmaceuticals) Figure 8.1

Analyzing competitive advantage in an international context  Over the past 20 years there have been stunning reversals in competitive advantage US Steel was the largest steel company in 1989 ArcelorMittal based in Germany took that title in 2009 IBM, Compaq, and Apple held the PC world in 1989 Hewlett-Pakard and Acer took became the new leader in 2009

Competitive advantage in an international context

Porter’s National diamond framework

Applying the framework: International location of production  How national resource conditions influence international strategies: 1. Where to locate production activities. 2. How to enter a foreign market.

Choosing where to locate production 1. National resource availability 2. Firm specific competitive advantages 3. Tradability 4. Political Considerations

Location of the value chain  Production of most goods and services comprises a vertical chain of activities where the input requirements of each stage vary considerably.  Different countries offer advantages at different stages of the value chain.  Seek to locate in countries where resources availability and cost best match each stage.

How should a firm enter foreign markets?  Enter in pursuit of profitability.  Profitability depends on: Attractiveness of that market Whether firm can establish a competitive advantage within it.

Where to locate value chains

How should a firm enter foreign markets cont.  A firm weighs the merits of different market entry modes by 5 different key factors: 1. Is the firms competitive advantage based of firm specific or country specific resources? 2. Is the product tradable and what are the barriers to trade? 3. Does the firm possess the full range of resources and capabilities for establishing a competitive advantage in the overseas market?

How should a firm enter foreign markets cont. 4. Can the firm directly appropriate the returns to its resources? 5. What transaction costs are involved?

International alliances and joint ventures  Strategic alliances- collaborative agreements between firms.  Take many forms: Information collaborative arrangements One partner taking an equity stake in the other Equity cross-holdings  By sharing resources and capabilities between the partners, alliances not only economies own investment, but also allow access to more highly developed resources and capabilities than a firm could create for itself.

Multinational Strategies  Global Strategy -The world is a single, segmented market Allows scale economies Meets growing demand for locally uniform customer preferences  National Differentiation – The needs of various nations are independently different from other nations Customer preferences that are not local vary across the world Meeting these preferences will target and urge buyers to pick your product over a global one

Global Benefits  Intel’s scale & replication cost  Access to resources Cheap raw materials Cheap Labor  Learning benefits

Multinational Strategies  National Differentiation – The needs of various nations are independently different from other nations Customer preferences that are not local vary across the world Meeting these preferences will target and urge buyers to pick your product over a global one

The Evolution of Multinational Strategies  Early 20 th Century European Companies created multinational federations ○ Product development, manufacturing, marketing  Post WWII U.S. companies such as Ford, IBM, Coca- Cola used resources and capabilities as their main competitive advantage ○ Capital, technology, and management systems

Continued  1970’s and 1980’s: Japanese Honda and Toyota used centralized manufacturing ○ Subsidiaries were used for sales and distribution ○ Trade protection and Yen

Becoming a Transnational Organization  Each National unit is a source of ideas, skills, and capabilities  Units access global scale economies  The center must establish a highly complex managing role that pieces units together

R&D Product Development  Challenges MNC’s Organizing Innovation New product development  P&G developed the “Swiffer”

 Questions?