1. 7-1 International Strategies Chapter 7 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

2. 7-2 Chapter Seven Learning Outcomes 7.1 Describe international strategy, and explain why it’s important. 7.2 Explain the issues that arise as organizations go international. 7.3 Describe the important international strategy alternatives and explain how they’re implemented and evaluated. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

3. 7-3 Learning Outcome 7.1 Describe international strategy, and explain why it’s important. Doing business internationally is not new – Countries and organizations have been trading with each other for centuries – Companies, including smaller firms, are finding newer ways to do business internationally Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

4. 7-4 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

5. 7-5 What is an International Strategy? It is a corporate strategy that describes companies that do business in multiple countries simultaneously. Can involve – the marketplace, – people, or – finances Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

6. 7-6 Importance of International Strategies One of the important reasons why companies pursue international strategies—potential new customers Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

7. 7-7 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

8. 7-8 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

9. 7-9 Review Learning Outcome 7.1 Explain international strategy. Describe the possible advantages of being international. Describe the potential drawbacks of being international. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

10. 7-10 Learning Outcome 7.2 Explain the Issues That Arise As Organizations Go International – International strategy is part of the strategic management process. As such, there will be opportunities and threats to consider. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

11. 7-11 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall The Legal-Political Environment The legal-political environment is not the same on a global basis – Australia, Germany, Japan, and Spain are similar to the US – Others are unstable – Bosnia, Nigeria, North Korea – Still others are failed states – Somalia, Haiti, Sudan – Each country has its own unique legal-political environment that must be understood

12. 7-12 The Economic Environment Free Market Economy - resources are primarily owned and controlled by the private sector Planned Economy - economic decisions are planned by a central government Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

13. 7-13 Inflation and Tax Policies Inflation Rates – The rising cost for products and services – This affects interest rates, exchange rates, cost of living, and confidence in a country’s systems – Strategic managers must monitor inflation rates to anticipate changes in monetary policy and make good decisions Diverse tax policies – Can be restrictive or not, will determine tax obligations Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

14. 7-14 The Cultural Environment Cultural differences are less obvious – Companies that fail to understand the national culture will fail to operate effectively – Values and attitudes shared by individuals from a specific country shape their beliefs and actions – Strategic managers must be familiar with cultural differences between the countries in which it does business Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

15. 7-15 Review Learning Outcome 7.2 What aspects of the legal-political environment do strategic decision makers need to examine? What economic issues might affect a company’s international strategy? Discuss why it’s important to understand national culture. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

16. 7-16 Learning Outcome 7.3 Describe the Important International Strategy Alternatives and Explain How They Are Implemented and Evaluated Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

17. 7-17 Multi-country Approach A firm with a multi-country approach varies its strategies according to the country in which it does business – This is based on differentiation, products are tailored to fit consumer tastes and preferences – Marketing and distribution are adapted – Competitive actions are chosen to fit the unique circumstances of the market Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

18. 7-18 Global Approach A Global Approach is one where the strategies are the same in all countries where the firm does business – This effort seeks to develop a low cost advantage – More emphasis is placed on globally integrating operations than on local market responsiveness – Products will have minor variations – Emphasis is on coordination between functions and sharing of capabilities and technologies Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

19. 7-19 International Strategy Alternatives Expanding beyond domestic borders requires considering several alternatives for growth: – Exporting – Importing – Licensing – Franchising – Direct Investment Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

20. 7-20 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

21. 7-21 International Strategy Alternatives – cont’d Exporting – A business makes products in its home country, transports them to another country for sale through an existing distribution channel Importing – Selling products at home that were made in another country Licensing – The right to manufacture or sell for a fee Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

22. 7-22 International Strategy Alternatives – cont’d Franchising – Mainly used by retailers or service brands, the company will sell limited rights to use its brand name in return for a payment and share of profits Foreign Subsidiary – Directly invest in a foreign country by setting up a separate and independent facility or office Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

23. 7-23 Implementing and Evaluating International Strategies Structuring International Organizations – Multinational corporation (MNC) is any type of international company that maintains operations in multiple countries – Multidomestic corporation, a type of MNC which decentralizes management and other decisions to the local country Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

24. 7-24 Structuring International Organizations cont’d Global company, a MNC which centralizes its management and other decisions in the home country Transnational, or borderless, organization, type of MNC that eliminates artificial geographical barriers Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

25. 7-25 Other International Strategy Implementation and Evaluation Decisions International companies must address implementation issues that concern various aspects of its functional and competitive strategies including – Production/operations – Marketing – Human resources – Information systems and financial-accounting systems Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

26. 7-26 Learning Review: Learning Outcome 7.3 Contrast the multi-country and global approaches What are the five international strategy alternatives? Describe other international strategy implementation and evaluation decisions Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

27. 7-27 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall