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Business-Finance

Published on January 13, 2009

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Chapter 8 : Chapter 8 International Strategies “Household names” . . . ? : “Household names” . . . ? Indra Nooyi Bollywood Douglas Daft E. Neville Isdell Carlos Gutierrez M. Farooq Kathwari Dieter Zetsche Sidney Taurel Alain Belda Think about . . . : Think about . . . Most likely firms/products for international expansion; reasons for/benefits of international activity Less likely firms/products for international expansion; problems/challenges with international activity Opportunities and Outcomes of International Strategy : Opportunities and Outcomes of International Strategy Figure 8.1 International Expansion - Opportunities : International Expansion - Opportunities Increased market size Economies of scale/learning curve Increased return on investment Location advantages ROI pressures drive international expansion- : ROI pressures drive international expansion- Increasingly costly R&D More rapid pace of imitation and product obsolescence (hypercompetition) Global difficulties with intellectual property laws Determinants of National Advantage : Determinants of National Advantage SOURCE: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Competitive Advantage of Nations, by Michael E. Porter, p. 72. Copyright ©1990, 1998 by Michael E. Porter. Figure 8.2 Slide 8: Location Advantages -Factors of Production (Outsourcing/Off-shoring – recall the good, the bad, and the ugly. . .) Considerations – natural resources regulatory climate labor cost special expertise Slide 9: Location Advantages -Related and Supporting Industries Important factors - critical mass of talent skill visibility skill recombination opportunities country infrastructure Slide 10: Location Advantages - Demand Considerations Country variations in . . . market size market niches preferred features product usage Location Advantages -Supply Considerations : Location Advantages -Supply Considerations Country variations in . . . industry life cycle stage number and type of competitors company strategies International Expansion - Major General Facilitators : International Expansion - Major General Facilitators Slide 13: 5 “Modes of International Entry” Mode of Entry Advantages and Disadvantages 1.Exporting 2.Licensing 3. Strategic alliances 4.Acquisition 5.New wholly owned subsidiary Table 8.1 Selecting a Basic International Strategy : Selecting a Basic International Strategy Major considerations: Need for responsiveness to local preferences? (Which requires flexibility, along with decision-making authority within each country or region.) Need for global integration/standardization? (Which requires tightly coordinated strategy with centralized decision-making authority.) Basic International Strategies : Basic International Strategies Figure 8.3 Multidomestic Strategy : Multidomestic Strategy Strategy, marketing, and operating decisions are decentralized to business units in each country/region Assumes that markets differ by country/region Products and services are tailored to local markets Business units in one country are independent of units elsewhere, with varied value chain activities Production is often free-standing in each country/region Prominent strategy in Europe Focus on specific competition in each market Multi-domestic Strategy:More appropriate products = : Multi-domestic Strategy:More appropriate products = Advantages? Disadvantages? Global Strategy : Global Strategy Products are relatively standardized across national markets Decisions regarding strategies, marketing, and operations are centralized at HQ Business units are assumed to be interdependent Requires resource sharing and coordination of value chain activities throughout the world Production takes place in more centralized locations Competitive actions are directed at similar players in similar ways worldwide The Basic Value Chain : The Basic Value Chain Inbound Logistics Operations Outbound Logistics Marketing and Sales Service Firm Infrastructure Human Resource Management Technological Development Procurement Global Strategy:More appropriate products = : Global Strategy:More appropriate products = Advantages? Disadvantages? Transnational Strategy : Transnational Strategy Seeks to achieve both global efficiency and local responsiveness Difficult to achieve because of simultaneous requirements: Strong central control and coordination to achieve efficiency Decentralization to achieve local market responsiveness Ideas with potential to facilitate implementation of transnational strategy . . : Ideas with potential to facilitate implementation of transnational strategy . . Similarities of international strategies and generic business-level strategies? : Similarities of international strategies and generic business-level strategies? Evolutionary Trends in International Strategy : Evolutionary Trends in International Strategy Domestic strategy ? Multi-Domestic strategy ? Global strategy ? Transnational strategy ? Regionalization Obstacles/Challenges to Internationalization? : Obstacles/Challenges to Internationalization? Slide 26: Risk in the International Environment Political risks include: Instability in national governments War, both civil and international Potential nationalization of a firm’s resources Political Risks Economic Risks Risk in the International Environment : Risk in the International Environment Economic risks are interdependent with political risks and include: Differences and fluctuations in the value of different currencies Differences in prevailing wage rates Difficulties in enforcing property rights Unemployment Political Risks Economic Risks Limits to International Expansion : Limits to International Expansion Marketing Problems Institutional and cultural barriers/variations Communication Management Problems Coordination across dispersed business units (Practical) human resource issues The overall complexity in the general and competitive environments Shortage of internationally equipped leadership Slide 29: International Expansion (“Diversification”):Performance Outcomes High potential for increased returns (from both revenue and cost sides) Expanded incentives for innovation Benefits can be eroded by increased risk and management complexities

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