International Strategy

Anne-Caroline BERTHELOT

Noémie HUBIN

Janine STROH

I. The basic directions for a firm’s strategy

1. State of mind

• Perlmutter (1960) admits that there are 3 types of attitudes :

- Ethnocentric

- Polycentric

- Geocentric.

State of mind II

• Ethnocentric :

Two characteristics :

- National strategy

- Home country reference

Organization Design ETHNOCENTRIC

Complexity of organization

Complex in home country, simple in subsidiaries

Decision making High in headquarters

Evaluation and controlHome standards applied for persons and performance

Rewards and punishments; incentives

High in headquarters, low in subsidiaries

Communication; information flow

High volume to subsidiaries

Identification Nationality of owner

Perpetuation (recruiting, development )

Recruit people of home country.

State of mind III

• Polycentric :

Polycentric company have :

- regional strategy,

- host country reference.

Organization Design POLYCENTRIC

Complexity of organization

Varied and independent.

Decision making Relatively low in headquarters.

Evaluation and control Determined locally.

Rewards and punishments; incentives

Wide variation; can be high or low rewards for subsidiary

performance.

Communication; information flow

Little to and from headquarters. Little between subsidiaries.

Identification Nationality of host country.

Perpetuation (recruiting, development )

Develop people of local nationality.

State of mind IV

• Geocentric :

Two points :

- Global strategy.

- Goal : worldwide approach.

Organization Design GEOCENTRIC

Complexity of organization

Increasingly complex and interdependent

Decision making Collaborative approach

Evaluation and controlFind standards which are

universal and local

Rewards and punishments; incentives

International and local executives rewarded for reaching local and

worldwide objectives

Communication; information flow

Both ways and between subsidiaries

IdentificationTruly international company but identifying with national interest

Perpetuation Develop best men everywhere

Two other notions…

• EPG : E : EthnocentricP : PolycentricG : Geocentric.

• Regioncentric :New notion that appears in the years

1980ies.

Nowadays…

Mostly polycentric and geocentric.

However there is still an ethnocentric

attitude in every companies.

2. Resources and capabilities• A Resource-Based Approach to Strategy Analysis :

Strategy

Competitive Advantage

Capabilities

Resources.

Resources

• 6 major categories :

- Financial resources

- Physical resources

- Human resources

- Technological resources

- Reputation and

- Organizational resources.

Capabilities

• Strategic capabilities.

• Comparative advantages.

Ex : Fed Ex.

Competitive advantages

• Two factors provide to appraise the rent-generating potential of resources and capabilities :

- The respect of the rules (durability, transparency, transferability, replicability).

- The appropriability of returns.

Strategy

• The point : select a strategy.

• If there are resources gap, they have to be filled.

II. Analyze of international business strategy

Yip’s (2003) view as a global company :

“A global company has the capacity to go anywhere, deploy any assets, and access any resources, and it maximizes profits on a global basis.”

3 main possibilities of strategy

• An entirely globally-centered business

• A fully polycentric business on a national level

• A regional organization

A framework for analyzing “Globalization”Locus of decision making power on corporate, business, functional strategy issues

Corporate headquarters

Regional centers National units

World product 1

Global strategy

4 7

Region-based or adapted product

2 5Regional strategy

8

Nation-based or adapted product

3 6 9National strategy

Actual product Characteristics

A framework for analyzing “Globalization”Locus of decision making power on corporate, business, functional strategy issues

Corporate headquarters

Regional centers National units

World product 1

Global strategy

4 7

Region-based or adapted product

2 5Regional strategy

8

Nation-based or adapted product

3 6 9National strategy

Actual product Characteristics

A framework for analyzing “Globalization”Locus of decision making power on corporate, business, functional strategy issues

Corporate headquarters

Regional centers National units

World product 1

Global strategy

4 7

Region-based or adapted product

2 5Regional strategy

8

Nation-based or adapted product

3 6 9National strategy

Actual product Characteristics

A framework for analyzing “Globalization”Locus of decision making power on corporate, business, functional strategy issues

Corporate headquarters

Regional centers National units

World product 1

Global strategy

4 7

Region-based or adapted product

2 5Regional strategy

8

Nation-based or adapted product

3 6 9National strategy

Actual product Characteristics

A framework for analyzing “Globalization”Locus of decision making power on corporate, business, functional strategy issues

Corporate headquarters

Regional centers National units

World product 1

Global strategy

4 7

Region-based or adapted product

2 5Regional strategy

8

Nation-based or adapted product

3 6 9National strategy

Actual product Characteristics

A framework for analyzing “Globalization”Locus of decision making power on corporate, business, functional strategy issues

Corporate headquarters

Regional centers National units

World product 1

Global strategy

4 7

Region-based or adapted product

2 5Regional strategy

8

Nation-based or adapted product

3 6 9National strategy

Actual product Characteristics

A framework for analyzing “Globalization”Locus of decision making power on corporate, business, functional strategy issues

Corporate headquarters

Regional centers National units

World product 1

Global strategy

4 7

Region-based or adapted product

2 5Regional strategy

8

Nation-based or adapted product

3 6 9National strategy

Actual product Characteristics

A framework for analyzing “Globalization”Locus of decision making power on corporate, business, functional strategy issues

Corporate headquarters

Regional centers National units

World product 1

Global strategy

4 7

Region-based or adapted product

2 5Regional strategy

8

Nation-based or adapted product

3 6 9National strategy

Actual product Characteristics

III. Multinationals and Regional Trading

NAFTA

The build-up of regional trading blocks I

EU

MERCOSURFTAA

ASEAN

APEC

The build-up of regional trading blocks II

EUROPE(EU)

AMERICAS(NAFTA)

ASIA(APEC,ASEAN)

Central & Eastern Europe

South America (MERCOSUR)China & India

Africa

Middle East

CIS

Influence of Free Trade Areas

Overall growth in international trade and political stability

Shift of regulatory authority to the regional level

Rise of “intra-regional trade”

Free Trade Area = free trade

Influence of WTO

WTO (World Trade Organization): successor to the General Agreement on Tariffs and Trade (GATT)

Arbitration of triad-based disputes

Protectionism of health, safety and environmental

Reinforce of triad-markets

States – Firms – Regions I

Regional InstitutionCompany

Company Regional Institution

Government Government

2

4

1

3

6

5

States – Firms – Regions II

Relationships (1), (2) and (3) reflect conventional interactions between firms and national governments in form of cooperation or competition

Relationships (4), (5) and (6) are of special interest in a regionalized world

R

RC

C

G G

2

1

46

35

States – Firms – Regions III

Relationship (5)

national governments have to pay the same attention to regional institutions as to state-to-state relationships

Relationship (6)

deepening of regional integration will lead to bargaining among regional institutions

R

RC

C

G G

2

1

46

35

States – Firms – Regions III

Relationship (4)

- MNE should pay increasing attention to policy making at regional level

- MNE may be affected by common standards or additional costs

R

RC

C

G G

2

1

46

35

MNEs and Regional Policy

1

2 4

3

Fortress against Outsiders

Internal Liberalization

Manageable

Exogenous

Perceived Regional Policy Intent

MNE Perception of Regional Policy

Case StudyBenetton’s International Strategy

Revenues 2003

Net sales for the casual segment by geographic area for the last three years (in thousands of Euro)

2001 2002 2003

EU 1,193,948 1,165,642 1,179,334

Asia 154,832 143,025 138,382

The Americas 85,815 81,107 77,422

Other Areas 193,276 196,236 183,389

WORLD 1,627,871 1,586,010 1,578,527

Number of Stores

2000 2001 2002 2003

Italy 2,095 2,202 2,270 2,256

Rest of Europe 2,200 2,157 1,999 1,932

The Americas 294 259 262 286

Other geographic areas

718 622 675 621

Total 5,307 5,240 5,206 5,095

Organizational Structure

Benetton Group S.p.A. is the holding company of the

Benetton group companies. The following table sets

forth the significant subsidiaries owned, directly or

indirectly, by Benetton Group S.p.A.

Benetton Group S.p.A. belongs to the Edizione Holding

Group.

Country Ownership

Benetton International N.V. S.A The Netherlands 100 %

Benetton Trading USA Inc USA 100 %

Benetton Japan Co., Ltd. Japan 100 %

Benetton International Property N.V. S.A

The Netherlands 100 %

Olimpias S.p.A Italy 85 %

Benetton Textil Spain S.L Spain 100 %

Benetton Retail International S.A Luxembourg 100 %

Benetton Società di Servizi S.A Switzerland 100 %

Bencom S.r.l. Italy 100 %

Benind S.p.A Italy 100 %

Bentec S.p.A. Italy 100 %

Thanks a lot for your attention.