international strategy
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Strategic management for international startegyTRANSCRIPT
INTERNATIONAL STRATEGY SUBMITTED BY ARVIND GUPTA (8123)
KNOWLEDGE OBJECTIVES1. Identifying International Opportunities: Incentives to use an International strategy 2. Explore the four factors that lead to a basis for international business-level strategies. 3. Define the three international corporate-level strategies: multidomestic, global, and transnational. 4. Choices of International Entry Mode 5. Strategic Competitive outcomes 6. Risks in an International Environments
nternational Opportunities Explore Resources & Capabilitie s
International Strategy Opportunities & OutcomesUse Core Competence Outcomes Management Problems , Risk , and First Steps
Competitiven ess
Strategic
Internatio nalIncreased Market Size Return on Investment Economies of Scale and Learning Location Advantage
Strategies Internation al Bus .- Level Strategy Multidomest ic Strategy Global Strategy Transnation al Strategy
Modes of EntryExporting Licensing Strategic Alliances Acquisitio n Establishmen t of New Sub .
Higher Performance Returns
Innovation
Management Problems , Risk , and First Steps
IDENTIFY INTERNATIONAL OPPORTUNITIESMainly for three reasons firms go international
1.Lower Production cost E.g. :- Clothing, Electronics, watch making
2.To secure needed resources E.g.:- Gems & Jwellery (Europe:- Roseyblu, Eurostar),
Minerals and Energy
3.To extend a product`s life cycle E.g.:- Bajaj Auto (Sri Lanka, Bangladesh & China)
Benefits of International StrategiesIncreased market size. Greater returns on major capital
investments or new products or processes. Greater economies of scale, scope or learning. A competitive advantage through location.
1. INCREASED MARKET SIZEExpand the size of potential marketEx. General motors- Asia, Pharmaceutical
Firms (85% Firms)- FDI- China
Firms competing in Domestic markets have
limited growth opportunitiesEx. Pepsi and Coca-cola
Invest in R&D to build competitive
advantaagesEx. Ranbaxy in Africa
2. RETURN ON INVESTMENTLarge markets needs heavy investmentEx.: R&D, Plant and capital
Reverse Engineering Above average return on Investments
3. ECONOMIES OF SCALE AND LEARNINGEconomies of scale:- Refers to reduction in
unit cost by producing a large volume of a product country BordersPepsi & coke
Firm can standardize products acrossEx. Production and R&D across country---
Allow price their product competitively to
gain market share
Ex. Automobile Industry such as Toyota, GM
Exploit core competencies in international
4. LOCATION ADVANTAGESLower the basic costs of the goods and
services Lower labour cost, energy and natural resources Access to critical suppliers and to customers Help to earn positive returns.Ex.: GM- Asia Help in differentiation of products from
competitors
International Strategy Opportunities & OutcomesIdentify Internationa l Opportunitie s Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage Explore Resources & Capabilitie s Use Core Competence Outcomes Management Problems , Risk , and First Steps
Competitiven ess
Strategic
Internatio nal Strategies
Modes of EntryExporting Licensing Strategic Alliances Acquisitio n Establishmen t of New Sub .
Internation al Bus .- Level Strategy Multidomest ic Strategy Global Strategy Transnation al Strategy
Higher Performance Returns
Innovation
Management Problems , Risk , and First Steps
International StrategiesInternational Business Level Strategies International Corporate Level Strategies
Multi-domestic Strategy Global Strategy Transnational Strategy
International Business Level StrategiesInternational Low Cost Usually
located in home country Export to international markets Low value added operations in foreign countries High value added operations in home country
International Differentiation Countries
with advanced or specialized factor conditions most likely to use this strategy
Example: Japan, Germany, U.S.
International Business Level StrategiesInternational Focus Strategies Technologically advanced firms follow focused
low cost strategy Focused differentiation firms compete on the basis of image & design Third group competes on low price by imitating
International Integrated Low
Cost/Differentiation Can be most effective in dealing with diverse
markets Often relies upon flexible manufacturing, total quality management or rapid communication networks
D e te rm in a n ts o f N a tio n a l A d v a n ta g eFACTOR OF PRODUCTION
TRATEGY , STRUCTURE AND RIVALRY
DEMAND CONDITIONS
Related & Supporting Industries
Determinants of National Advantage Factors of Production Inputs Labour, land, natural resources, capital &
infrastructure Demand Conditions The nature and size of he buyers needs in the home market of goods & services Related & Supporting Industries Industries in which the target country is considered the leader e.g. Italy - shoes with a supporting leather industry, Japan- cameras & photocopiers, Denmark - diary & an industry focused on food enzymes. Firm Strategy, Structure & Rivalry make up Germany focused on methodical product & process improvements,
Corporate-Level International Strategieshave an impact on the selection and implementation of the business-level strategies Some Corporate strategies provide individual country units with flexibility to choose their own strategies Others dictate business-level strategies from the home office andMulti - Domestic coordinate resource T h re e Strategy sharing across units
Type of Corporate Strategy selected will
C o rp o ra te S tra te g i
Global Strategy Transnational Strategy
Multi-domestic StrategyStrategy and operating decisions are
decentralized to strategic business units (SBU) in each country. Products and services are tailored to local markets Business units in each country are independent of each otherAssumes markets differ by country or
regions Focus on competition in each market
Global StrategyProducts are standardized across national
markets Decisions regarding business-level strategies are centralized in the home office Strategic business units (SBU) are assumed to be interdependent Often lacks responsiveness to local markets Requires resource sharing and coordination across borders (which also makes it difficult to manage)
Tra n sn a ti n a lS tra te g y oSeeks to achieve both global efficiency and
local responsiveness
Difficult to achieve because of simultaneous
requirements for strong central control and coordination to achieve efficiency and local flexibility and decentralization to achieve local market responsiveness
Eg.FORD
International Corporate-Level StrategyHIGH
When is each strategy appropriate?
OR GLOBAL INTEGRATION
MULTIDOM-ESTIC STRATEGYLOW LOW NEED FOR LOCAL RESPONSIVENESS HIGH
International Corporate-Level StrategyHIGH
When is each strategy appropriate?GLOBAL STRATEGY
OR GLOBAL INTEGRATION
MULTIDOM-ESTIC STRATEGYLOW LOW NEED FOR LOCAL RESPONSIVENESS HIGH
International Corporate-Level StrategyHIGH
When is each strategy appropriate?GLOBAL STRATEGY TRANSNATI-ONAL STRATEGY
OR GLOBAL INTEGRATION
MULTIDOM-ESTIC STRATEGYLOW LOW NEED FOR LOCAL RESPONSIVENESS HIGH
International Strategy Opportunities & International Strategy Opportunities & Outcomes OutcomesIdentify Internationa l Opportunitie s Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage Explore Resources & Capabilitie s Use Core Competence Outcomes Management Problems , Risk , and First Steps
Competitive ness
Strategic
Internatio nal
Strategies Internation al Bus .- Level Strategy Multidomest ic Strategy Global Strategy Transnation al Strategy
Modes of EntryExporting Licensing Strategic Alliances Acquisitio n Establishmen t of New Sub .
Higher Performance Returns
Innovation
Management Problems , Risk , and First Steps
Choice of International Entry ModeExportingCommon way to enter new international
markets. No need to establish operations in other nations. Establish distribution channels through contractual relationships. May have high transportation costs. May encounter high import tariffs. May have less control on marketing and distribution. Difficult to customize product.
Choice of International Entry ModeLicensingFirm authorizes another firm to manufacture
& sell its products Licensing firm is paid a royalty on each unit produced and sold. Licensee takes risks in manufacturing investments. Least risky way to enter a foreign market. Licensing firm loses control over product quality & distribution. Relatively low profit potential.
Choice of International Entry Mode Strategic Alliances Enable firms to shares risks and
resources to expand into international ventures. Most joint ventures (JVs) involve a foreign corp. with a new product or technology & a host company with access to distribution or knowledge of local customs, norms or politics. May experience difficulties in merging disparate cultures. May not understand the strategic intent of partners or experience divergent goals. Eg. Maruti udyog and suzuki. Dow Jones and Bennett and Coleman & co. Ltd.
Choice of International Entry ModeAcquisitionsEnable firms to make most rapid
international expansion. Can be very costly. Legal and regulatory requirements may present barriers to foreign ownership. Usually require complex and costly negotiations. Potentially disparate corporate culture.
Choice of International Entry Mode
New Wholly - Owned Subsidiary
Most costly & complex of entry alternatives. Achieves greatest degree of control. Potentially most profitable, if successful. Maintain control over technology, marketing
and distribution. May need to acquire expertise & knowledge that is relevant to host country.
C o u l re q u i h i n g h o st co u n try n a ti n a l d re ri o s o r co n su l n ts a t h i h co st. ta g
Strategic Competitiveness OutcomesInternational diversification facilitates
innovation in the firm. Provides larger market to gain more and faster returns form investments in innovation May generate resources necessary to sustain a large-scale R&D program. Generally related to above-average returns, assuming effective implementation and management of international operations. International diversification provides
International Strategy Opportunities & OutcomesIdentify Internationa l Opportunitie s Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage Explore Resources & Capabilitie s Use Core Competence
Internatio nal
Strategies Internation al Bus .- Level Strategy Multidomest ic Strategy Global Strategy Transnation al Strategy
Modes of EntryExporting Licensing Strategic Alliances Acquisitio n Establishmen t of New Sub .
Outcomes Management Problems , Risk , and First Steps
Competitive ness
Strategic
Higher Performance Returns
Innovation
Management Problems , Risk , and First Steps
Risks in the International Environment
Political instability in indonesia brought about by continuing ethnic strif
POLITICAL future of peace in the middle east because of changes in national Uncertain RISK
Failure of the european unions quest for economic superpower status because
POLITICAL RISK
Chinas difficulty in enforcing intellectual property rights on Russias struggle with low productivity, currency problems and
Exchange rate exposure due to the U.S.-conadian dollar fluctuati
Major Risks of International Diversification
Political RiskNational government instability may
create potential problems for internationally diversified firms. Potential changes in attitudes or regulations regarding foreign ownership. Legal authority obtained from previous administration may become invalid. Potential for nationalization of firms assets.
Major Risks of International Diversification
E co n o m ic R iskEcon. risks are interdependent with political
risks. Differences and fluctuations in international currencies may affect value of assets & liabilities. This affects prices & thus ability to compete. Differences in inflation rates may affect inter-nationally diversified firms ability to compete. Enforcing intellectual property rights on CDs, software, etc.
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