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Post Reply Close Saving..... Edit Comment Close Premium member Presentation Transcript Slide 1: “INTERNATIONAL STRATEGY” SUBMITTED BY ARVIND GUPTA (8123) KNOWLEDGE OBJECTIVES : KNOWLEDGE OBJECTIVES Identifying International Opportunities: Incentives to use an International strategy Explore the four factors that lead to a basis for international business-level strategies. Define the three international corporate-level strategies: multidomestic, global, and transnational. Choices of International Entry Mode Strategic Competitive outcomes Risks in an International Environments Slide 3: International Strategy Opportunities & Outcomes IDENTIFY INTERNATIONAL OPPORTUNITIES : IDENTIFY INTERNATIONAL OPPORTUNITIES Mainly for three reasons firms go international Lower Production cost E.g. :- Clothing, Electronics, watch making To secure needed resources E.g.:- Gems & Jwellery (Europe:- Roseyblu, Eurostar), Minerals and Energy To extend a product`s life cycle E.g.:- Bajaj Auto (Sri Lanka, Bangladesh & China) Benefits of International Strategies : Benefits of International Strategies Increased market size. Greater returns on major capital investments or new products or processes. Greater economies of scale, scope or learning. A competitive advantage through location. 1. INCREASED MARKET SIZE : 1. INCREASED MARKET SIZE Expand the size of potential market Ex. General motors- Asia, Pharmaceutical Firms (85% Firms)- FDI- China Firms competing in Domestic markets have limited growth opportunities Ex. Pepsi and Coca-cola Invest in R&D to build competitive advantaages Ex. Ranbaxy in Africa 2. RETURN ON INVESTMENT : 2. RETURN ON INVESTMENT Large markets needs heavy investment Ex.: R&D, Plant and capital Reverse Engineering Above average return on Investments 3. ECONOMIES OF SCALE AND LEARNING : 3. ECONOMIES OF SCALE AND LEARNING Economies of scale:- Refers to reduction in unit cost by producing a large volume of a product Firm can standardize products across country Borders Ex. Production and R&D across country---Pepsi & coke Allow price their product competitively to gain market share Ex. Automobile Industry such as Toyota, GM Exploit core competencies in international markets 4. LOCATION ADVANTAGES : 4. LOCATION ADVANTAGES Lower the basic costs of the goods and services Lower labour cost, energy and natural resources Access to critical suppliers and to customers Help to earn positive returns. Ex.: GM- Asia Help in differentiation of products from competitors International Strategy Opportunities & Outcomes : Identify International Opportunities Explore Resources & Capabilities Use Core Competence Strategic Competitiveness Outcomes International Strategies Modes of Entry Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage International Bus.-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Exporting Establishment of New Sub. Licensing Strategic Alliances Acquisition Higher Performance Returns Innovation International Strategy Opportunities & Outcomes International Strategies : International Strategies International Business Level Strategies International Corporate Level Strategies Multi-domestic Strategy Global Strategy Transnational Strategy International Business Level Strategies : International Business Level Strategies International Low Cost Usually located in home country Export to international markets Low value added operations in foreign countries High value added operations in home country International Differentiation Countries with advanced or specialized factor conditions most likely to use this strategy Example: Japan, Germany, U.S. International Business Level Strategies : International Business Level Strategies International Focus Strategies Technologically advanced firms follow focused low cost strategy Focused differentiation firms compete on the basis of image & design Third group competes on low price by imitating International Integrated Low Cost/Differentiation Can be most effective in dealing with diverse markets Often relies upon flexible manufacturing, total quality management or rapid communication networks Slide 14: Determinants of National Advantage FIRM STRATEGY,STRUCTURE AND RIVALRY DEMAND CONDITIONS FACTOR OF PRODUCTION Related & Supporting Industries Determinants of National Advantage : Determinants of National Advantage Factors of Production Inputs – Labour, land, natural resources, capital & infrastructure Demand Conditions The nature and size of he buyers needs in the home market of goods & services Related & Supporting Industries Industries in which the target country is considered the leader e.g. Italy - shoes with a supporting leather industry, Japan - cameras & photocopiers, Denmark - diary & an industry focused on food enzymes. Firm Strategy, Structure & Rivalry make up Germany focused on methodical product & process improvements, Italy’s national pride of designers helped spawn fashion apparel, furniture & sports car industries. Corporate-Level International Strategies : Corporate-Level International Strategies 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 Multi-Domestic Strategy Global Strategy Transnational Strategy Multi-domestic Strategy : Multi-domestic 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 each country are independent of each other Assumes markets differ by country or regions Focus on competition in each market Global 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 Often lacks responsiveness to local markets Requires resource sharing and coordination across borders (which also makes it difficult to manage) : Transnational Strategy Seeks to achieve both global efficiency and local responsiveness Difficult to achieve because of simultaneous requirements for strong central control and coordination to achieve efficiency and local flexibility and decentralization to achieve local market responsiveness Eg.FORD International Corporate-Level Strategy : MULTIDOM-ESTIC STRATEGY HIGH LOW HIGH LOW NEED FOR LOCAL RESPONSIVENESS NEED FOR GLOBAL INTEGRATION International Corporate-Level Strategy When is each strategy appropriate? International Corporate-Level Strategy : GLOBAL STRATEGY MULTIDOM-ESTIC STRATEGY HIGH LOW HIGH LOW NEED FOR LOCAL RESPONSIVENESS International Corporate-Level Strategy When is each strategy appropriate? NEED FOR GLOBAL INTEGRATION International Corporate-Level Strategy : GLOBAL STRATEGY TRANSNATI-ONAL STRATEGY MULTIDOM-ESTIC STRATEGY HIGH HIGH LOW When is each strategy appropriate? International Corporate-Level Strategy NEED FOR GLOBAL INTEGRATION NEED FOR LOCAL RESPONSIVENESS LOW Slide 23: Identify International Opportunities Explore Resources & Capabilities Use Core Competence Strategic Competitiveness Outcomes International Strategies Modes of Entry Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage International Bus.-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Exporting Establishment of New Sub. Licensing Strategic Alliances Acquisition Higher Performance Returns Innovation International Strategy Opportunities & Outcomes Choice of International Entry Mode : Choice of International Entry Mode Common way to enter new international markets. No need to establish operations in other nations. Establish distribution channels through contractual relationships. May have high transportation costs. May encounter high import tariffs. May have less control on marketing and distribution. Difficult to customize product. Exporting Choice of International Entry Mode : Choice of International Entry Mode Firm authorizes another firm to manufacture & sell its products Licensing firm is paid a royalty on each unit produced and sold. Licensee takes risks in manufacturing investments. Least risky way to enter a foreign market. Licensing firm loses control over product quality & distribution. Relatively low profit potential. Licensing Choice of International Entry Mode : Choice of International Entry Mode Enable firms to shares risks and resources to expand into international ventures. Most joint ventures (JVs) involve a foreign corp. with a new product or technology & a host company with access to distribution or knowledge of local customs, norms or politics. May experience difficulties in merging disparate cultures. May not understand the strategic intent of partners or experience divergent goals. Eg. Maruti udyog and suzuki. Dow Jones and Bennett and Coleman & co. Ltd. Strategic Alliances Choice of International Entry Mode : Choice of International Entry Mode Enable firms to make most rapid international expansion. Can be very costly. Legal and regulatory requirements may present barriers to foreign ownership. Usually require complex and costly negotiations. Potentially disparate corporate culture. Acquisitions Choice of International Entry Mode : Choice of International Entry Mode Most costly & complex of entry alternatives. Achieves greatest degree of control. Potentially most profitable, if successful. Maintain control over technology, marketing and distribution. May need to acquire expertise & knowledge that is relevant to host country. New Wholly-Owned Subsidiary Could require hiring host country nationals or consultants at high cost. Strategic Competitiveness Outcomes : Strategic Competitiveness Outcomes International diversification facilitates innovation in the firm. Provides larger market to gain more and faster returns form investments in innovation May generate resources necessary to sustain a large-scale R&D program. Generally related to above-average returns, assuming effective implementation and management of international operations. International diversification provides greater economies of scope and learning. International Strategy Opportunities & Outcomes : Identify International Opportunities Explore Resources & Capabilities Use Core Competence Strategic Competitiveness Outcomes International Strategies Modes of Entry Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage International Bus.-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Exporting Establishment of New Sub. Licensing Strategic Alliances Acquisition Higher Performance Returns Innovation International Strategy Opportunities & Outcomes Risks in the International Environment : Risks in the International Environment POLITICAL RISK POLITICAL RISK Political instability in indonesia brought about by continuing ethnic strife Uncertain future of peace in the middle east because of changes in national leaders Failure of the european union’s quest for economic superpower status because of inter-country disagreements China’s difficulty in enforcing intellectual property rights on CD’s software,etc., Russia’s struggle with low productivity, currency problems and high unemployment Exchange rate exposure due to the U.S.-conadian dollar fluctuations Major Risks of International DiversificationPolitical Risk : Major Risks of International DiversificationPolitical Risk National government instability may create potential problems for internationally diversified firms. Potential changes in attitudes or regulations regarding foreign ownership. Legal authority obtained from previous administration may become invalid. Potential for nationalization of firms’ assets. Major Risks of International Diversification : Major Risks of International Diversification Econ. risks are interdependent with political risks. Differences and fluctuations in international currencies may affect value of assets & liabilities. This affects prices & thus ability to compete. Differences in inflation rates may affect inter-nationally diversified firms’ ability to compete. Enforcing intellectual property rights on CDs, software, etc. Economic Risk Slide 34: THANK YOU You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.