![Page 1: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/1.jpg)
International Strategy
Motives for Globalization
Changes in the External Environment
Multidomestic/Global Competition
Types of International Strategy
Entry Strategies
![Page 2: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/2.jpg)
The shift toward a more integrated and interdependent world economy.
(Hill, 2006)
Globalization
![Page 3: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/3.jpg)
Globalization of Production
The sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (Hill, 2006).
Human ResourcesCapital (Technology)
Capital(Facilities)
Natural ResourcesEntrepreneur
![Page 4: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/4.jpg)
Globalization of Markets
Moving away from an economic system in which national markets are distinct entities, isolated by trade barriers and barriers of distance, time, and culture (Hill, 2006).
Consumer Products
StarbucksCiticorp
McDonalds Industrial Products
OilWheat
Commercial Aircraft
![Page 5: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/5.jpg)
Why might there be opposition to globalization?
![Page 6: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/6.jpg)
Why do firms globalize their operations?
![Page 7: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/7.jpg)
Who here has been involved in International Operations?
Who has traveled internationally?
Who is from another country?
![Page 8: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/8.jpg)
What happens to the firm’s external environment as they move overseas?
MACRO
INDUSTRY
OPERATING
![Page 9: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/9.jpg)
Economic Factors: Monetary and Fiscal policies, ,exchange rates, economic development, type of economic system. Etc.
Technological Factors: Regulations on technology transfer, information flow, infrastructure, patent and trademark protection, etc.
Political/Legal Factors: Form of government, tariffs, protectionist sentiment, terrorist activity, legal system, government’s attitude toward foreign firms, employment laws, etc.
Social/Cultural Factors: beliefs, values, attitudes, opinions, lifestyles, human rights, literacy levels, language, social institutions, skill level of the workforce, etc.
![Page 10: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/10.jpg)
Balancing Macro Factors is Key
Do low wages in developing countries translate into lower manufacturing costs?
![Page 11: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/11.jpg)
Globalization in Competition
Multi-domesticCompetition
GlobalCompetition
![Page 12: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/12.jpg)
Multidomestic Competition
Competition is essentially segmented from country to country.
Competition in one country is independent of competition inother countries.
Think in terms of the competitive forces (Porter’s 5 Forces)
Examples: Grocery, healthcare
****In a multidomestic industry, a global corporation’ssubsidiaries should be managed as distinct entities.
![Page 13: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/13.jpg)
Global Competition
Global competition occurs when competition crosses national borders.
A firm’s strategic moves in one country can be significantly affected by it’s competitive position in another country.
Once again think about the competitive forces.
Examples: Automobiles, Consumer electronics, Petroleum
![Page 14: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/14.jpg)
How do firms position themselves to compete in the global marketplace?
![Page 15: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/15.jpg)
Competing Pressures
Pressure for Local Responsiveness
Consumer’s Tastes and Preferences
Differences in Infrastructure or Traditional Practices
Differences in Distribution Channels
Demands of Host Governments
Pressure for Cost Reductions
Commodity-type product
Universal needs of customers
Competitors use a low cost position
![Page 16: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/16.jpg)
Multidomestic Strategy
Focus: Local Responsiveness
Customize the strategy to fit the circumstances of each host country
Little to no coordination of strategy across countries
Form subsidiary companies to handle operations in each host country; each subsidiary operates more or less autonomously
Impact on value chain?
![Page 17: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/17.jpg)
![Page 18: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/18.jpg)
Focus: Cost Reduction
Same basic strategy worldwide (minor variations where essential) (e.g., Intel)
Takes advantage of location economiesLocate subunits near high-quality raw materialLocate subunits near sources of high-quality or low cost laborSeek low cost financing anywhere in the world
Much more worldwide coordination
All major strategic decisions are closely coordinated at globalheadquarters. Structure is designed to unify subsidiaries.
Impact on value chain?
Global Strategy
![Page 19: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/19.jpg)
![Page 20: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/20.jpg)
GlobalStrategy
InternationalStrategy
MultidomesticStrategy
TransnationalStrategy
Low Pressures for Local Responsiveness High
High
Low
Pressuresfor Cost
Reduction
![Page 21: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/21.jpg)
International Strategy
Low Pressures for Local Responsiveness and Cost Reduction
Skills and products are transferred to foreign markets werelocal competitors lack those skills
Parts of the value chain remain in the home country (e.g., R&D)
Parts of the value chain are duplicated throughout the world (e.g., manufacturing)
Works best when: industry cost pressures are low and local capabilitiesare underdeveloped or non existent.
Boeing: Production and marketing (local), sales force (global)Televisa (Mexico’s largest media firm): Spanish soap operas
![Page 22: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/22.jpg)
Transnational Strategies
High pressures for both local responsiveness and cost reduction
A type “Best cost” strategy wherein companies try to simultaneously achieve advantages from low cost and differentiation.
Competencies are developed world-wide and transferred as appropriate
Experience Curve Effects
Location Economies
Local Responsiveness
![Page 23: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/23.jpg)
Amount of Commitment, Control, Risk and Profit Potential
Licensing Exporting Franchising ContractManufacturing
JVand
StrategicAlliances
ForeignDirect
Investment
Least Most
Entry Strategies
![Page 24: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/24.jpg)
A BA B
C
Strategic Alliance Joint Venture
Can be leveraged internationally by linking
value chain activities
![Page 25: International Strategy Motives for Globalization Changes in the External Environment](https://reader035.vdocument.in/reader035/viewer/2022062814/56816765550346895ddc44ca/html5/thumbnails/25.jpg)
Motivations for Partnerships
1. Generate scale economies: Toyota/GM joint venture (Toyota couldspread fixed investment over more units)
2. Gain access to strategic markets: Japanese firm, JVC, provided designtechnology to partner in exchange for access to European market.
3. Overcoming trade barriers: Inland Steel and Nippon Steel built coldsteel plant in Indiana (Nippon supplied technology, capital andaccess to Japanese firms in the US).
4. Use excess capacity: Toyota/GM joint venture used an idle GM plant
5. Gain access to low-cost manufacturing capabilities: GE sourcingmicrowaves from Korea.