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Presentation Transcript

International Strategy: 

International Strategy Robert E. Hoskisson Michael A. Hitt R. Duane Ireland Chapter 9

Slide2: 

Chapter 2 Strategic Leadership Chapter 4 The Internal Organization Chapter 6 Competitive Rivalry and Competitive Dynamics Chapter 9 International Strategy Chapter 1 Introduction to Strategic Management Chapter 3 The External Environment Chapter 5 Business-Level Strategy Chapter 8 Acquisitions and Restructuring Strategies Chapter 11 Corporate Governance Strategic Intent Strategic Mission Chapter 7 Corporate-Level Strategy Chapter 10 Cooperative Strategy Chapter 12 Strategic Entrepreneurship Strategic Analysis Strategic Thinking Creating Competitive Advantage Monitoring And Creating Entrepreneurial Opportunities The Strategic Management Process Chapter 8 Acquisition and Restructuring Strategies Chapter 9 International Strategy

Opportunities and Outcomes of International Strategy: 

Exporting Licensing Strategic alliances Acquisitions Establishment of a new subsidiary International business-level strategy Multidomestic strategy Global strategy Transnational strategy Opportunities and Outcomes of International Strategy Increased market size Return on investment Economies of scale and learning Advantage in location Identify International Opportunities Explore Resources and Capabilities Use Core Competence International Strategies Modes of Entry

Opportunities and Outcomes of International Strategy: Continued: 

Better performance Innovation Opportunities and Outcomes of International Strategy: Continued Exporting Licensing Strategic alliances Acquisitions Establishment of a new subsidiary Use Core Competence Modes of Entry Strategic Competitiveness Outcomes Click Here Return to Discussion Questions

Motivations for International Expansion: 

Motivations for International Expansion Increase Market Share domestic market may lack the size to support efficient scale manufacturing facilities Return on Investment large investment projects may require global markets to justify the capital outlays weak patent protection in some countries implies that firms should expand overseas rapidly in order to preempt imitators

Motivations for International Expansion: 

Motivations for International Expansion Economies of Scale or Learning expanding size or scope of markets helps to achieve economies of scale in manufacturing as well as marketing, R & D or distribution can spread costs over a larger sales’ base increase profit per unit Location Advantages low cost markets may aid in developing competitive advantage may achieve better access to: Raw materials Lower cost labor Key customers Energy

International Business-Level Strategy: Determinants of National Advantage: 

International Business-Level Strategy: Determinants of National Advantage

International Business-Level Strategy: Determinants of National Advantage: 

International Business-Level Strategy: Determinants of National Advantage Factors of production: the inputs necessary to compete in any industry labor land natural resources capital infrastructure basic factors include natural and labor resources advanced factors include digital communication systems and educated workforce

International Business-Level Strategy: Determinants of National Advantage: 

International Business-Level Strategy: Determinants of National Advantage Demand conditions: characterized by the nature and size of buyers’ needs in the home market for the industry’s goods or services size of market segment can lead to scale-efficient facilities efficiency can lead to domination of the industry in other countries specialized demand may create opportunities beyond national boundaries

International Business-Level Strategy: Determinants of National Advantage: 

International Business-Level Strategy: Determinants of National Advantage Related and supporting industries: supporting services, facilities, suppliers and so on support in design support in distribution related industries as suppliers and buyers

International Business-Level Strategy: Determinants of National Advantage: 

International Business-Level Strategy: Determinants of National Advantage Firm strategy, structure, and rivalry: the pattern of strategy, structure, and rivalry among firms common technical training methodological product and process improvement cooperative and competitive systems

International Corporate-Level Strategy: 

International Corporate-Level Strategy Need for Local Responsiveness Need for Global Integration Low High Low High

International Corporate-Level Strategy: 

International Corporate-Level Strategy Type of corporate strategy selected will have 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 and coordinate resource sharing across units

International Corporate-Level Strategy: Multidomestic Strategy: 

International Corporate-Level Strategy: Multidomestic Strategy Strategy and operating decisions are decentralized to strategic business units (SBU) in each country Products and services are tailored to local markets Business units in one country are independent of each other Assumes markets differ by country or regions Focus on competition in each market Prominent strategy among European firms due to broad variety of cultures and markets in Europe

Worldwide Geographic Area Structure:: 

product characteristics tailored to local preferences isolation from global competition establish protected market positions compete in industry segments most affected by differences among local countries Worldwide Geographic Area Structure: Multidomestic Strategy

International Corporate-Level Strategy: Global Strategy: 

International Corporate-Level Strategy: Global Strategy Products 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 Emphasizes economies of scale Often lacks responsiveness to local markets Requires resource sharing and coordination across borders (which also makes it difficult to manage) Historically prominent among Japanese firms

Worldwide Product Divisional Structure:: 

standardized products across countries economies of scope and scale outsource some primary or support activities to the world’s best providers decision-making authority centralized in worldwide division headquarters Worldwide Product Divisional Structure: Global Strategy

International Corporate-Level Strategy: Transnational Strategy: 

International Corporate-Level 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 Must pursue organizational learning to achieve competitive advantage

Using the Combination Structure: : 

Using the Combination Structure: The combination structure has characteristics and mechanisms that result in an emphasis on both geographic and product structures local responsiveness (multidomestic strategy) global efficiency (global strategy) Transnational Strategy

Environmental Trends: 

Environmental Trends Liability of Foreignness security risks tighter immigration policies Regionalization location can affect value creation may wish to narrow focus to a particular region of the world enter regional markets sequentially, beginning with the most familiar market

Global Market Entry: Choice of Entry Mode: 

Type of Entry Characteristics Exporting High cost, low control Licensing Low cost, low risk, little control, low returns Strategic alliances Shared costs, shared resources, shared risks, problems of integration Acquisition Quick access to new market, high cost, complex negotiations, problems of merging with domestic operations New wholly owned subsidiary Complex, often costly, time consuming, high risk, maximum control, potential above-average returns Global Market Entry: Choice of Entry Mode

Value Creation Outcomes: Returns: 

Value Creation Outcomes: Returns International diversification and returns: firm expands the sales of its goods or services across the borders of global regions and countries into different geographic locations or markets may increase a firm’s returns such firms usually achieve the most positive stock returns firm may achieve economies of scale and experience, location advantages, increased market size and opportunity to stabilize returns

Value Creation Outcomes: Innovation: 

Value Creation Outcomes: Innovation International diversification and innovation: firm expands the sales of its goods or services across the borders of global regions and countries into different geographic locations or markets potentially greater returns on innovations (larger markets) generate additional resources for investment in innovation exposed to new products and processes in international markets, generates additional knowledge leading to innovations

Risks in an International Environment: 

Risks in an International Environment Political Risks Economic Risks Political risks include instability in national governments war, both civil and international potential nationalization of a firm’s resources Political Risks

Risks in an International Environment: 

Risks in an 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 Political Risks

Limits to International Expansion: Management Problems: 

Limits to International Expansion: Management Problems Cost of coordination across diverse geographical business units Institutional and cultural barriers Understanding strategic intent of competitors The overall complexity of competition