1. 6. Strategy and organization
FM : FM : Anis Gunawan, MBA,MM,SP
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2. International business III.Strategy and opportunity
V. Functional Area excellence
IV. Entering and operating in
International Markets.
6.Strategy and
organization
III.Strategy and opportunity
assessment
II.The environment of International Business
I.Foundation concepts of
International business
International Business: Strategy, Management, and the New Realities

3. Perusahaan

4. What Is Strategy?
A planned set of actions that managers take to make best use of the firm’s resources and
core competences to gain a competitive advantage
When developing strategies, managers examine the firm’s strengths and weaknesses, and the opportunities and challenges facing the firm.
They then decide which customers to target, what product lines to offer, how best to contend with competitors, and how generally to configure and coordinate the firm’s activities around the world.
Porter
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5. International Strategy
Strategy carried out in two or more countries.
Managers develop international strategies to:
Allocate scarce resources and configure value-adding activities on a worldwide scale
Participate in major markets
Implement valuable partnerships abroad
Engage in competitive moves in response to foreign rivals.
China Car
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6. Global, Sustainable Competitive Advantage
Managers should aim to “…develop, at one and the same time, global scale in efficiency, multinational flexibility, and the ability to develop innovations and leverage knowledge on a worldwide basis.”
Thus, the firm that aspires to become a globally competitive enterprise should simultaneously strive for three strategic objectives: * Efficiency * Flexibility, and * Learning
The firm must build efficient international value chains. Efficiency refers to lowering the cost of the firm’s operations and activities on a global scale. MNEs with multiple value chains must pay special attention to how they organize their R&D, manufacturing, product sourcing, marketing, and customer service activities. Automotive companies strive to achieve scale economies by concentrating manufacturing and sourcing activities in a limited number of locations. For Toyota ( this means manufacturing in low-cost countries like China and in major markets like the United States. Toyota works with its suppliers to ensure they provide low-cost parts and components while maintaining quality. Its logistical operations for shipping its cars around the world are efficient and cost-effective.
The firm must develop worldwide flexibility to accommodate diverse country specific risks and opportunities. The diversity and volatility of the international environment are especially challenging for managers, making the firm’s ability to tap local resources and exploit local opportunities critical. Managers may opt for contractual relationships with independent suppliers and distributors in one country, while engaging in direct investment in another. They may adapt their marketing and human resource practices to suit unique country conditions. Exchange rate fluctuations may prompt managers to switch to local sourcing or to adjust prices. The firm structures its operations to ensure it can respond to specific customer needs in individual markets, especially those critical to company performance.
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7. Three Strategic Objectives
Efficiency – lower the cost of the firm’s operations and activities on a global scale
Flexibility – the agility to manage diverse country-specific risks and opportunities by tapping resources in individual countries and exploiting local opportunities
Learning – develop the firm’s products, technologies, capabilities, and skills by internalizing knowledge gained from international ventures
Often, even successful firms excel at only one or two of these objectives.
The firm must create the ability to obtain learning from operating in international environments and exploit this learning on a worldwide basis. The diversity of the international environment presents the internationalizing firm with unique learning opportunities. By operating in various countries, the MNE can acquire new technical and managerial know-how, new product ideas, improved R&D capabilities, partnering skills, and survival capabilities in unfamiliar environments. The firm’s partners or subsidiaries capture and disseminate this learning throughout their corporate network. Although Procter & Gamble ( is based in the United States, the firm’s research center in Belgium developed a special water-softening technology to deal with Europe’s hard water. P&G’s subsidiary in Japan formulated a detergent that works well in cold water to adapt to Japanese customers’ preference for cold-water clothes washing. P&G incorporated these inventions into its knowledge base and applied the knowledge to the development of products for other markets around the world.
International business success is determined in the end by the degree to which the firm achieves all three skills—efficiency, flexibility, and learning. But it is often difficult to excel in all three simultaneously. One firm may be highly efficient, while another excels at flexibility and a third at learning. Many Japanese firms achieved international success by developing highly efficient and centralized manufacturing systems. In Europe, numerous firms succeeded internationally by being locally responsive, despite sometimes failing to achieve substantial efficiency or technological leadership. Many MNEs from the United States have struggled to adapt their activities to the cultural and political diversity of national environments and instead have proven adept at achieving efficiency via economies of scale. During the global financial crisis that began in 2008, efficiency and flexibility became particularly important to the success of multinational firms.
SunSzu
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8. Essentials of Successful Global Firms
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Visionary Leadership
A quality of senior management that provides superior strategic guidance for managing efficiency, flexibility, and learning
International mindset and cosmopolitan values: Openness to, and awareness of, diversity across cultures
Willingness to commit resources: financial, human, and other resources
Strategic vision: articulating what the firm wants to be in the future and how it will get there
Willingness to invest in human assets: Emphasizing the use of foreign nationals, promoting multi-country careers, and training to develop international ‘supermanagers’
Consider Peter Brabeck, former Chief Executive Officer (CEO) of Nestlé ( From headquarters in Switzerland, Brabeck led Nestlé into the worldwide market for products that meet consumers’ growing interest in health and nutrition. To pursue this market, Nestlé purchased Jenny Craig, the U.S. weight management and food-products company. In Germany, Nestlé launched an institute to advise consumers on dietary issues, dispensing nutritional advice to more than 300,000 customers per month. In France, Brabeck created a nutritional home-care service, providing for patients with special dietary needs. These initiatives position Nestlé in a growing global market and generate global brand loyalty for the firm’s line of healthy food products. Visionary leaders such as Peter Brabeck are characterized by four major traits:
■ International mind-set and cosmopolitan values. Visionary leadership requires managers to acquire an international mind-set—an openness to, and awareness of, diversity across cultures.10 Dogmatic, close-minded managers who lack vision and have difficulty adapting to other cultures are likely to fail. Those who are open minded, committed to internationalization, and ready to adapt to other cultures are likely to succeed.
■ Willingness to commit resources. The complexities of foreign markets imply that international ventures take more time than domestic ones to become profitable. Visionary leaders commit to them and unswervingly believe the firm will eventually succeed. Commitment drives them to develop the financial, human, and other resources their firms need to achieve their international goals. Highly committed firms engage in systematic international market expansion, allocate necessary resources, and empower structures and processes that ensure ultimate success.
■ Strategic vision. Visionary leaders articulate a strategic vision— what the firm wants to be in the future and how it will get there. As they develop strategic vision, senior managers focus on the ideal picture of what the firm should become. The picture is a central rallying point for all plans, employees, and employee actions.12 For example, by 2015, one in four Japanese—about 30 million people—will be over age 65. Synclayer ( is a Japanese SME whose managers anticipate a large and growing market for new products for the elderly. Their vision of achieving worldwide leadership in this market led Synclayer to develop, among other products, a system that allows homebound seniors to measure their blood pressure, temperature, and other vital signs, and send them to a health care service that can dispatch an ambulance if problems are detected. Synclayer’s vision is to develop the products in Japan and then launch them in other countries with sizable elderly populations.
■ Willingness to invest in human assets. Visionary leaders must nurture the most critical asset of any organization—human capital. In global firms, senior leaders adopt such human resource practices as hiring foreign nationals, promoting multi-country careers, and providing cross-cultural and language training to develop international supermanagers.
Jack Ma
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10. Examples of Visionary Leaders
Ratan Tata, chairman of the Tata Group, oversees a $67 billion family conglomerate whose companies market a range of products from cars to watches.
His group made numerous international acquisitions, reflecting a change in strategic vision from local to global.
Recently, Tata developed a $2,500 car, the Nano, targeted worldwide to emerging markets.
Ratan Tata is chairperson of the Tata Group in India and oversees a $63 billion family conglomerate whose companies market a range of products from cars to watches. His group has made numerous international acquisitions (from Tetley Tea to the Anglo- Dutch steel firm Corus), reflecting a change in strategic vision from local to global. In its latest venture, Tata developed a $2,500 car, the Nano, targeted to emerging markets worldwide. Another visionary leader is Fujio Cho, who led Toyota to record sales in the intensely competitive global car industry. His leadership style emphasized innovation, continuous improvement, and an ability to spot future-oriented opportunities, including the Prius hybrid and the youth-oriented Scion brands of Toyota cars. Toyota’s main sales focus now is emerging markets, especially China and India.
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11. Multidomestic Industry
An industry in which competition takes place on
a country-by-country basis.
Firms that specialize in such industries as processed food, consumer products, fashion, retailing, and publishing usually cater to specific conditions in each country where they do business.
In such industries, the firm must adapt its offerings to suit the language, culture, laws, income level, and other specific characteristics of each country.
Each country tends to have a unique set of competitors.
Companies that specialize in particular industries, such as processed food, beverages, consumer products, fashion, retailing, and publishing, have long approached international business by catering to the specific needs and tastes of each of the countries where they do business. For example, the British publisher Bloomsbury translates each volume of its Harry Potter series into the local language in every country where the book is sold. Coca- Cola varies the formula of its beverages to suit differing conditions abroad. Industries such as this, in which the firm must adapt its offerings to suit the culture, laws, income level, and other specific characteristics of each country, are known as multidomestic industries. In such industries, each country tends to have a unique set of competitors. Accordingly, a multidomestic industry is one in which competition takes place on a country-by-country basis.
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12. Examples of Multidomestic Industries
The British publisher Bloomsbury has translated each volume of its Harry Potter series into the local language in every country where the book is sold.
Beverage companies produce various brands and flavors in markets worldwide. Coca-Cola offers ‘Georgia Coffee’ in Japan, ‘Café Zu’ in Thailand, Inca Cola in Peru, and ‘Burn’ energy drink in France.
In Asia, KFC restaurants are often multi-story structures that sell distinctive flavors of chicken
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Global Industry
An industry in which competition is on a regional or worldwide scale
Firms that specialize in such industries as aerospace, cars, computers, chemicals, and industrial equipment, typically cater to customers on a regional or global scale. For example, Subaru markets similar cars worldwide.
In such industries, customer needs vary little from country to country. Firms sell relatively standardized offerings across entire regions or throughout the world.
The industry usually has only a handful of the same competitors that compete regionally or worldwide.
In other types of industries, such as aerospace, automobiles, metals, computers, chemicals, and industrial equipment, firms generally approach international business by catering to the needs and tastes of customers on a regional or global scale. For example, Dupont sells essentially the same chemicals around the world. Subaru markets very similar cars in most of the countries where it does business. Industries such as this, in which competition takes place on a regional or worldwide basis, are known as global industries. Most global industries are characterized by a handful of major players that compete head-on in multiple markets. Kodak must contend with the same rivals—Japan’s Fuji and Europe’s Agfa-Gevaert—around the world. In the earth-moving equipment industry, Caterpillar and Komatsu compete head-on in all major world markets.
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14. Examples of Global IndustriesAG
Kodak contends with the same rivals worldwide ─ Japan’s Fuji and European multinational Agfa-Gevaert.
American Standard sells similar bathroom fixtures worldwide and competes with Toto in most major markets.
Caterpillar and Komatsu compete head-on in all major markets and offer similar brands of tractors
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Global
International
Local
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Global Integration
Coordination of the firm’s value-chain activities across multiple countries to achieve worldwide efficiency, synergy, and cross-fertilization to take advantage of similarities between countries.
Firms that emphasize global integration:
Make and sell standardized products and services to capitalize on converging customer needs and tastes
Compete on a regional or worldwide basis
Minimize operating costs by centralizing value chain activities and emphasizing scale economies
Global integration is the coordination of the firm’s value-chain activities across multiple countries to achieve worldwide efficiency, synergy, and cross-fertilization in order to take advantage of similarities between countries. Firms that emphasize global integration make and sell products and services that are relatively standardized—that is, uniform or with minimal adaptation—to capitalize on converging customer needs and tastes worldwide. Such firms compete on a regional or worldwide basis. They seek to minimize operating costs by centralizing value-chain activities and emphasizing economies of scale.
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17. Local Responsiveness
Meeting the specific needs of buyers in individual countries
Local responsiveness requires the firm to adapt to customer needs and the competitive environment.
Local managers are free to adjust offerings, marketing, and practices to suit conditions in individual markets.
In contrast to global integration, many companies seek to respond to specific conditions in individual countries. Accordingly, local responsiveness refers to managing the firm’s value-chain activities and addressing diverse opportunities and risks on a country-by-country basis. It emphasizes meeting the specific needs of customers in individual markets.
When operating internationally, firms try to strike the right balance between
global integration and local responsiveness.
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18. Four Strategies Emerging from the Integration Responsiveness Framework
1. Home replication strategy
2. multidomestic strategy
3. Global strategy
4. Transnational strategy
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19. Four Strategies Emerging from the Integration Responsiveness Framework
Lamb
Four Strategies Emerging from the Integration Responsiveness Framework
Ikea
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20. Home Replication Strategy
The firm views international business as separate from, and secondary to, its domestic business. Expansion abroad is an opportunity to generate incremental sales for domestic product lines.
Products are designed for domestic customers, and international business is pursued mainly to extend the life of domestic products and replicate home market success.
Management holds little interest in foreign markets and expects little knowledge to flow from foreign operations.
In the home replication strategy, the firm views international business as separate from, and secondary to, its domestic business. Expanding abroad is viewed as an opportunity to generate additional sales for domestic product lines. Thus, the firm designs products with domestic customers in mind and pursues international business in order to extend product life cycles and replicate home-market success. Such a firm expects little useful knowledge to flow from its foreign operations. Firms that make and sell commodities (such as raw materials and basic parts) sometimes use the home replication strategy because such products often do not require a sophisticated internationalization approach. The strategy can also succeed when the firm targets only markets that are similar to the home market Home replication strategy is typically employed by the smaller firm with products it wants to sell abroad to generate additional sales. It contracts with an intermediary in each of several foreign markets to import and distribute the product and generally does not adapt it for foreign customers. Because management knows little about international business and has limited human and financial resources, the firm relies heavily on its foreign intermediaries. A key consequence is that it maintains little control over how its products are marketed abroad. Replicating abroad what the firm normally does at home provides few competitive advantages in foreign markets. Consequently, for most internationalizing firms, home replication is usually an initial, temporary approach rather than a long-term strategy.
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21. Multidomestic Strategy
The firm develops subsidiaries or affiliates in each of its foreign markets and appoints local managers to operate independently and be locally responsive.
Products and services are adapted to suit the needs and wants of buyers in each country.
Because headquarters acknowledges differences between national markets, subsidiaries are allowed to vary products and practices by country.
Country managers are often nationals of the host country and generally don’t share knowledge and experience with managers in other countries.
The food and beverage giant Nestlé ( applies a multidomestic strategy. In each of its country subsidiaries, the firm employs highly autonomous nationals who adapt corporate strategic guidelines to meet specific local needs and conditions. Because of this approach, Nestlé is often perceived as a local firm in each of its markets. For example, the firm varies the taste of its Nescafé brand instant coffees. In Spain, the coffee has an intense, full-bodied flavor. In Northern Europe, it is mild and aromatic. Depending on the country, Nestlé sells its products through various channels, including supermarkets, small shops, market stalls, vending machines, mobile vendors, and even door-to-door. In Nigeria, it built a network of small warehouses and ships goods via pickup trucks. In China, the firm created a system of simple distribution links among villages that facilitate direct delivery by local vendors, often by bicycle. Nestlé also adapts its marketing. In patriotic Russia, advertising emphasizes Russian history and literature. In Africa, the firm hired local singers to visit villages and offer a mix of entertainment and product demonstrations. Nestlé also charges lower prices for its products in markets such as Brazil and China to suit lower local buying power.
Advantages. If the foreign subsidiary includes a factory, locally produced products can be better adapted to the local market. There is minimal pressure on headquarters staff because local operations are managed by individual managers in each country. Firms with limited international experience find multidomestic strategy an easy option, as they can delegate many tasks to their country managers (or to foreign distributors, franchisees, or licensees, where they are used). Disadvantages. Each foreign subsidiary manager tends to develop a local strategic plan, organizational culture, and business processes that can differ substantially from those of headquarters. Subsidiaries have little incentive to share their knowledge and experience with managers in the firm’s other country markets. This may lead to reduced economies of scale. Limited information sharing also reduces the possibility of developing a knowledge-based competitive advantage. While multidomestic strategy is more responsive to individual markets, it may lead to inefficient manufacturing, redundant operations, a proliferation of over-adapted products, and higher operating costs.
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Global Strategy
Headquarters seeks substantial control over all country operations in order to minimize redundancy and achieve maximum efficiency, learning, and integration worldwide.
Global strategy asks “why not make the same thing, the same way, everywhere?” Products, marketing, and company practices are relatively standardized.
R&D, manufacturing, marketing and other activities tend to be concentrated at headquarters, where they can be centrally coordinated and controlled.
Management views the world as one large marketplace.
In the extreme, global strategy asks, “Why not make the same thing, the same way, everywhere?” Thus, global strategy emphasizes central coordination and control of international operations. Headquarters managers are often largely responsible for the firm’s operations worldwide. Activities such as R&D and manufacturing are centralized at headquarters, and management tends to view the world as one large marketplace.
An example of global strategy is Whirlpool Corporation ( the home appliance firm. Once a disjointed collection of autonomous national subsidiaries, the firm now manages its global activities from company headquarters. Its integrated value chains mean Whirlpool’s most advanced expertise in appliance technology, production, and distribution are continuously shared among all the firm’s business units worldwide. Its engineers continuously seek the most cost-effective ways to produce leading-edge products based on common parts and components. Whirlpool R&D personnel from Asia, Europe, and the Americas work in global teams to develop appliances based on standardized platforms, with little cross-national variation. For example, the firm developed the “World Washer,” a single washing machine that can be sold anywhere. In a typical Whirlpool refrigerator, the compressor, casing, and door are identical wherever the product is sold. Only basic controls and position of the freezer cabinet are varied, to suit differing national preferences. The company intranet allows R&D teams to access ideas and specs on how to create inputs that can be integrated into Whirlpool products, wherever they are made.
Parts and components are sourced from a limited number of top suppliers worldwide, who operate globally to deliver to as many of Whirlpool’s factories as possible. Whirlpool does much of its manufacturing in China, Mexico, and other emerging markets to keep costs low. In total, it makes its appliances in just twelve countries and sells them in 170. Marketing activities are standardized and focus on making Whirlpool a globally recognized brand. By emphasizing global strategy, Whirlpool optimizes its value chains and enjoys superior performance around the world. Advantages. It provides a substantial ability to respond to worldwide opportunities. It increases opportunities for cross-national learning and cross-fertilization of the firm’s knowledge among all its subsidiaries. It creates economies of scale, which result in lower operational costs. Global strategy can also improve the quality of products and processes, primarily by simplifying manufacturing and other processes. High-quality products give rise to global brand recognition, increased consumer preference, and efficient international marketing programs. Many factors make it easier to pursue global strategy, including converging buyer characteristics worldwide, growing acceptance of global brands, increased diffusion of uniform technology (especially in industrial markets), the spread of international joint ventures, and integrating effects of globalization and advanced communications technologies.
However, it is challenging for management to closely coordinate the activities of widely dispersed international operations. The firm must maintain ongoing communications between headquarters and its subsidiaries, as well as between the subsidiaries. When carried to an extreme, global strategy results in a loss of responsiveness and flexibility in local markets.
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Global Strategy
Whirlpool’s global strategy emphasizes relying on a small number of first-rate suppliers around the world and manufacturing in low-cost countries. This Whirlpool factory is in Shanghai, China.
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24. Transnational Strategy
A coordinated approach to internationalization in which the firm strives to be more responsive to local needs while retaining sufficient central control of operations to ensure efficiency and learning.
The firm seeks to combine the major advantages of multidomestic and global strategies, while minimizing their disadvantages.
It’s a flexible approach: standardize where feasible; adapt where appropriate.
But, most firms find implementing transnational strategy very challenging
One example of transnational strategy is Lenovo ( the Chinese producer of personal computers and laptops. Lenovo went global when it bought the PC arm of IBM, gaining a global sales force and strong global brands, such as the Thinkpad line. The firm rotates its headquarters between China and the United States; its official language is English. Planning and design are done in the United States, while manufacturing is done in China (for Asian markets), Mexico (for the Americas), and Poland (for Europe). Lenovo concentrates production in these low-cost countries to generate the greatest cost efficiencies and economies of scale.
Lenovo’s basic computers are the same, but the keyboards and internal software are adapted for each market to accommodate differences in language. The firm’s retailing Web sites look identical worldwide but are adapted for language. Marketing operations, centralized to Bangalore, India, include global campaigns designed to sell computers in more than sixty countries with ads that can air in multiple regions. In short, Lenovo strikes a balance between pursuing global strategy and adapting its offerings and approaches, as needed, to suit individual markets.
Given the difficulty of balancing central control and local responsiveness, most MNEs find it difficult to implement transnational strategy. In the long run, almost all need to include some elements of localized decision making, because each country has idiosyncratic characteristics.
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25. Transnational Strategy requires the firm to:
Exploit scale economies by sourcing from a reduced set of global suppliers and concentrating production in relatively few locations where competitive advantages can be maximized
Organize production, marketing, and other value-chain activities on a global scale
Optimize local responsiveness and flexibility
Facilitate global learning and knowledge transfer
Coordinate global competitive moves — that is, deal with competitors on a global, integrated basis.
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26. How IKEA Strives for Transnational Strategy
Some 90% of the product line is identical across more than two dozen countries. IKEA modifies some furniture to suit tastes in individual countries.
An overall, standardized marketing plan is centrally developed at the firm’s headquarters in Sweden but is implemented with local adjustments.
Management decentralizes some decision-making to local stores, such as product displays and language to use in advertising.
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27. Transnational Strategy
China’s Lenovo follows a transnational strategy. The firm’s computers are similar worldwide except the keyboards and internal software, which are adapted for individual markets to suit language differences. Lenovo’s retailing Web sites, which look identical across the world, are also adapted for language.
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