power point set 7_international strategy_fall 2007

7/31/2019 Power Point Set 7_International Strategy_Fall 2007

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Strategic Management/

Business Policy

Power Point Set #7:International Strategy


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Questions Concerning International StrategyWhat is the economic value of inter-national strategies, according toRichard Caves of Harvard University?

Why are some countries more competitivethan others in international competition?

How do companies diversify

internationally?

How do you organize an inter-national company?


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Value of International Strategies

Gain Access to Low-Cost Factors of ProductionFor example, achieving global economies of scale such ascan be observed in the automobile industry.

Leverage Core CompetenciesE.g., We saw earlier in the semester Honda developing andleveraging its competencies in producing motors formotorcycles, automobiles, snow blowers and lawn mowers


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Value of International Strategies

Managing Corporate RiskAs global capital markets become more efficient over time,the benefit provided by this corporate strategy diminishes.

Stretching to Develop New CoreCompetencies

E.g., Learning new skills in internationalmarkets

Gain Access to New Customers forCurrent Products or Services

Disneyland Tokyo, andEuro Disney


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Copyright 1998 by Houghton Mifflin Company. All rights reserved.

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The Determinants of NationalThe Determinants of National

Competitive AdvantageCompetitive Advantage

FactorConditions

Competitivenessof Related and

Supporting Industries

Competitivenessof Related and

Supporting Industries

LocalDemand

Conditions

LocalDemand

Conditions

Intensityof

Rivalry

Intensityof

Rivalry

NationalCompetitiveAdvantage


7/14Copyright 1998 by Houghton Mifflin Company. All rights reserved.

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Four Basic StrategiesFour Basic Strategies

Pressures for Local ResponsivenessPressures for Local Responsiveness

CostPress

ures

CostPress

ures

High

LowLow High

GlobalGlobal

StrategyStrategy

TransTrans--

nationalnational

StrategyStrategy

InternationalInternational

StrategyStrategy

MultiMulti--

domesticdomestic

StrategyStrategy


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Corporate-level International Strategies

Global Strategy(cost leadership strategy)

Products are standardizedacross national markets;

Emphasizes economies of scale;

Lacks responsiveness tolocal markets; and

Requires resource sharing and

coordination across borders


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Multi-Domestic Strategy(product differentiation strategy)

Decentralized strategy;

Products and services tailoredto local markets;

Focus on competition in eachmarket; and is a:

Prominent strategy amongEuropean firms due to broadvariety of cultures and marketsin Europe


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Transnational Strategy

Seeks to achieve both global efficiency(cost leadership) and local responsiveness

(product differentiation)

Difficult to achieve because ofsimultaneous requirements for strong

central control and coordination toachieve efficiency and local flexibilityand decentralization to achieve localmarket responsiveness.


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Types of Corporate-Level Strategic Alliances

Diversifying Alliancese.g., Samsung Group joins withNissan to build new automobiles

Synergistic Alliances

e.g., Sony shares development

with many small firms

Franchising

e.g., Century 21 or McDonalds


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How Should We Enter A Foreign Country?

Entry Mode Advantages Disadvantages

Exporting High Experience &Location Economies

Transport Costs Trade Barriers

AgencyLicensing Low entry costs Low control

Low learning

Low coordinationFranchising Low entry costs Low control

Low coordination

Joint Ventures Sharing of costs &

knowledge Political Risk

Low control

Diffusion ofknowledge

Wholly OwnedSubsidiaries

High Learning

Protection of Tech.

High coordination

High costs & risks

power point set 7_international strategy_fall 2007

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