cullen 4e ppt ch06 [re im kompatibility] · -attempts to gain economic advantages from regional...

Chapter 6Multinational and Participation Strategies: Content and FormulationMultinational and Participation Strategies: Content and Formulation

Copyright© 2007 Thomson Learning All rights reserved

Multinational Strategies: Dealing with the Global-Local Dilemma

• Local-responsiveness solution: customize to country or

regional differences

• Global integration solution: conduct business similarly

throughout the world

Copyright© 2007 South-Western/Thomson Learning All rights reserved

throughout the world

• Global-local dilemma: choice between a local-

responsiveness or global approach to a multinational’s

strategies

Multinational Strategies: Dealing with the Global-Local Dilemma

• Four broad multinational strategies

- Multidomestic

- Transnational


- Transnational

- International

- Regional

Multidomestic Strategy

• The company attempts to offer products or services that attract customers by closely satisfying their cultural needs and expectations

• Emphasizing local-responsiveness issues


• Emphasizing local-responsiveness issues

- Ex.: different packages, colors

- Costs more to produce, need to charge higher prices to recoup

- A form of the differentiation strategy

- Not limited to large multinationals

Transnational Strategy

• Two goals get top priority

- Seeking location advantages

- Gaining economic efficiencies from operating


- Gaining economic efficiencies from operating

worldwide

Transnational Strategy (cont.)

• Location advantages: dispersing value-chain activities

anywhere in the world where they can be done best or

cheapest

• Global platform: country location where a firm can


• Global platform: country location where a firm can

better perform some of its value-chain activities

Transnational strategy (cont.)

• With upstream location advantages, the transnational can:

- Locate subunits near cheap sources of high-quality raw material


material

- Locate subunits near centers of research and innovation

- Locate subunits near sources of high-quality or low-cost labor

- Seek low-cost financing anywhere in the world

- Share discoveries and innovations made in one part of the world with operations in other parts of the world

Transnational Strategy (cont.)

• Comparative advantage: advantages of nations over

other nations

- No longer only available to domestic firms


• Location advantages can exist for all activities of the

value chain

International Strategy

• International strategy: selling global products and using

similar marketing techniques worldwide

- A compromise approach


- Limited adjustment in product offerings and

marketing strategies

- Upstream and support activities remain concentrated

at home country

Regional Strategy

• Regional strategy: managing raw-material sourcing,

production, marketing, and support activities within a

particular region

- Another compromise strategy


- Another compromise strategy

- Attempts to gain economic advantages from regional

network

- Attempts to gain local adaptation advantages from

regional adaptation

Resolving the Global-Local Dilemma: Formulating a Multinational Strategy

• Selection of strategy depends on degree of

globalization in an industry

• Globalization drivers: conditions in a industry that favor

transnational or international strategies


transnational or international strategies

• Four categories of global drivers: markets, costs,

governments, and competition

Competitive Advantage in the Value Chain

• Location of competitive advantage in value chain

determines choice of generic strategy

• Upstream advantages: low-cost or high-quality design


- Favor transnational strategy or an international

strategy

• Downstream advantages: marketing, sales, service

- Favor multidomestic strategy

Competitive Advantage in the Value Chain (cont.)

• Mixed conditions

- Competitive strength downstream in industry with

strong globalization drivers


- Competitive strength upstream in industries with

local adaptation pressures

• Both favor regional strategies

Transnational or International: Which Way for the Global Company?

• Select a transnational over an international strategy when:

• - Benefits of dispersing activities worldwide offset the costs

of coordinating a more complex organization

• Select an international strategy over a transnational when:


• Select an international strategy over a transnational when:

• - Cost savings of centralization offset the lower costs of

higher quality raw materials/labor from worldwide locations

Participation Strategies: The Content Options

• Participation strategies: the choice of how to enter

each international market

- Exporting


- Licensing

- Strategic alliances

- Foreign direct investment

International Strategic Alliances

• Cooperative agreements between firms from different

countries to participate in business activities

• May include any value-chain activity


Types of International Strategic Alliances

• Equity International Joint Ventures (IJV): two or more

firms from different countries have an equity position in

a separate company

• International Cooperative Alliance (ICA): two or more


• International Cooperative Alliance (ICA): two or more

firms from different countries agree to cooperate in any

value-chain activity

Foreign Direct Investment (FDI)

• Companies own and control directly a foreign

operation

- Symbolizes the highest stage of internationalization


• Greenfield investments: starting foreign operations

from scratch

Formulating Participation Strategy

• Must take into account several issues:

- Basic functions of each participation strategy

- Strategic considerations and intent of company


- Strategic considerations and intent of company

- How best to support company’s multinational

strategy

Motivations for Strategic Alliances

• Partner’s knowledge of the market

• Government requirements

• To share risks


• To share risks

• To share technology

• Economies of scale

• Low cost raw materials or labor

Key Considerations for Alliances

• Could other participation strategies better satisfy

strategic objectives?

• Does firm have management and capital resources to

contribute?


contribute?

• Can partner benefit the company’s objectives?

• What is expected payoffs?

Participation Strategies and the Multinational Strategies

• What is the strategic reason to be in the market?

- Location advantages vs. market penetration

• E.g., source of raw materials, R&D, production,


• E.g., source of raw materials, R&D, production,

etc.

• A mix of participation strategies often support the basic

multinational strategy

cullen 4e ppt ch06 [re im kompatibility] · -attempts to gain economic advantages from regional...

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