Strategy: Analysis and Practice

Slide 1 ©The McGraw-Hill Companies, 2005

11. Global strategies and international advantage

Strategy: Analysis and Practice

Slide 2 ©The McGraw-Hill Companies, 2005

Outline● Terminology of International Business● The Context of International Strategy● National Competitive Advantage● The Internationalization Process● From International to Global Strategies● The Drivers of Globalization

Strategy: Analysis and Practice

Slide 3 ©The McGraw-Hill Companies, 2005

Outline (continued)

● Global vs. Local● Strategic Choices● The Best of Both Worlds● Strategy and Organization● Managing International Organisation

Strategy: Analysis and Practice

Slide 4 ©The McGraw-Hill Companies, 2005

The Terminology of International Business

● International Business: Transactions across national borders.

● International Trade: exporting and importing● Foreign Direct Investment: capital invested in

other nations by firms through their control of foreign subsidiaries and affiliates.

● Multinational Enterprises: Companies with subsidiaries located in more than one country, normally restricted to the largest international firms.

Strategy: Analysis and Practice

Slide 5 ©The McGraw-Hill Companies, 2005

World Trade 2000

Strategy: Analysis and Practice

Slide 6 ©The McGraw-Hill Companies, 2005

USA: Inward and Outward FDI 1999

Strategy: Analysis and Practice

Slide 7 ©The McGraw-Hill Companies, 2005

Determinants of National Competitive Advantage

Strategy: Analysis and Practice

Slide 8 ©The McGraw-Hill Companies, 2005

The Internationalization Process

Strategy: Analysis and Practice

Slide 9 ©The McGraw-Hill Companies, 2005

Determinants of Globalization

Strategy: Analysis and Practice

Slide 10 ©The McGraw-Hill Companies, 2005

From International to Global Strategy

Multidomestic Strategy

• Competition in one country is independent of competition elsewhere.

• Markets in each country have different consumer behaviour.

• Product diversity.• Portfolio of

independent subsidiaries

Global Strategy• Competition in one

country influenced by competition elsewhere.

• Markets and consumer behaviour broadly similar in all countries.

• Product standardisation

• International coordination and integration.

Strategy: Analysis and Practice

Slide 11 ©The McGraw-Hill Companies, 2005

Drivers of Globalization

Strategy: Analysis and Practice

Slide 12 ©The McGraw-Hill Companies, 2005

Strategic Choices

Strategy: Analysis and Practice

Slide 13 ©The McGraw-Hill Companies, 2005

Transnational Strategies“Exploit experience-based cost economies and location economies, transfer distinctive competences within the company, and at the same time pay attention to pressures for local responsiveness”(Bartlett and Ghoshal, 1989)

Strategy: Analysis and Practice

Slide 14 ©The McGraw-Hill Companies, 2005

Alternative Organizational Solutions

Strategy: Analysis and Practice

Slide 15 ©The McGraw-Hill Companies, 2005

The Flagship Firm

Strategy: Analysis and Practice

Slide 16 ©The McGraw-Hill Companies, 2005

The Matrix StructureAdvantages

• Combines product specialisation with geographical market knowledge.

• Overcomes silos and duplication by direct contact.

• Effective when there is clarity, continuity and consistency through the organization.

Disadvantages• Extends decision-

making time.• Dual reporting can

confuse responsibilities and priorities.

• May engender conflict.• May make

performance assessment ambiguous.

Strategy: Analysis and Practice

Slide 17 ©The McGraw-Hill Companies, 2005

Evolution of International Structure

Strategy: Analysis and Practice

Slide 18 ©The McGraw-Hill Companies, 2005

Concluding Remarks● International strategy is a significant

extension of the logic of competitive advantage.

● International trade and national competitive advantage are key parts of the business environment– International trade underpinning

internationalization.– Globalization promoting international

standardization.

Strategy: Analysis and Practice

Slide 19 ©The McGraw-Hill Companies, 2005

Concluding Remarks (continued)● International business strategy

involves the management of standardization and differentiation.

● Attempts to gain the ‘best of both worlds’ have involved– Transnational strategy– The matrix structure– The flagship firm