“ INTERNATIONAL
STRATEGY ”
SUBMITTED BY
ARVIND GUPTA (8123)
KNOWLEDGE OBJECTIVES
1. Identifying International Opportunities: Incentives to use an
International strategy
2. Explore the four factors that lead to a basis for international
business-level strategies.
3. Define the three international corporate-level strategies:
multidomestic, global, and transnational.
4. Choices of International Entry Mode
5. Strategic Competitive outcomes
6. Risks in an International Environments
International Strategy Opportunities &
Outcomes
nternational Opportunities
Explore Use Core Strategic
Resources & Competence Competitiven
Capabilitie ess
s Outcomes
Internatio Modes of Management
nal Entry Problems , Risk , and
Strategies First Steps
Increased Internation Exporting
Market al
Size Bus .- Level Higher
Return on Strategy Licensing Performance
Investment Multidomest Returns
ic Strategy Strategic
Economies Alliances
of Scale Global
and Strategy Acquisitio Innovation
Learning n
Location Transnation Establishmen
Advantage al Strategy t of New Sub .
Management
Problems , Risk ,
and First
Steps
IDENTIFY INTERNATIONAL
OPPORTUNITIES
Mainly for three reasons firms go international
[Link] Production cost
E.g. :- Clothing, Electronics, watch making
[Link] secure needed resources
E.g.:- Gems & Jwellery (Europe:- Roseyblu, Eurostar),
Minerals and Energy
[Link] extend a product`s life cycle
E.g.:- Bajaj Auto (Sri Lanka, Bangladesh & China)
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
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
Large markets needs heavy investment
Ex.: R&D, Plant and capital
Reverse Engineering
Above average return on Investments
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
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 Explore Use Core Strategic
Internationa Resources & Competence Competitiven
l Capabilitie ess
Opportunitie s Outcomes
s Internatio Modes of Management
nal Entry Problems , Risk , and
Strategies First Steps
Increased Internation Exporting
Market al
Size Bus .- Level Higher
Return on Strategy Licensing Performance
Investment Multidomest Returns
ic Strategy Strategic
Economies Alliances
of Scale Global
and Strategy Acquisitio Innovation
Learning n
Location Transnation Establishmen
Advantage al Strategy t of New Sub .
Management
Problems , Risk ,
and First
Steps
International Strategies
International Business Level Strategies
International Corporate Level Strategies
§ Multi-domestic Strategy
§ Global Strategy
§ Transnational Strategy
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 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
D e te rm in a n ts o f N a tio n a l
A d v a n ta g e
FACTOR OF PRODUCTION
TRATEGY , STRUCTURE AND RIVALRY DEMAND CONDITIONS
Related & Supporting Industries
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,
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 andMulti - Domestic
coordinate resource
T h re e
sharing across units Strategy
C o rp o ra
Global Strategy
te
Transnational
S tra te g i 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
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)
Tra n sn a tio n a lS tra te g y
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
[Link]
International Corporate-Level
Strategy
When is each strategy
HIGH
appropriate?
OR GLOBAL INTEGRATION
MULTIDOM-ESTIC
STRATEGY
LOW
LOW HIGH
NEED FOR LOCAL RESPONSIVENESS
International Corporate-Level
Strategy
When is each strategy
HIGH
appropriate?
GLOBAL
STRATEGY
OR GLOBAL INTEGRATION
MULTIDOM-ESTIC
STRATEGY
LOW
LOW HIGH
NEED FOR LOCAL RESPONSIVENESS
International Corporate-Level
Strategy
When is each strategy
HIGH
appropriate?
GLOBAL TRANSNATI-ONAL
STRATEGY STRATEGY
OR GLOBAL INTEGRATION
MULTIDOM-ESTIC
STRATEGY
LOW
LOW HIGH
NEED FOR LOCAL RESPONSIVENESS
International
International Strategy
Strategy Opportunities
Opportunities &
&
Outcomes
Outcomes
Identify Explore Use Core Strategic
Internationa Resources & Competence Competitive
l Capabilitie ness
Opportunitie s Outcomes
s Internatio Modes of Management
nal Entry Problems , Risk , and
Strategies First Steps
Increased Internation Exporting
Market al
Size Bus .- Level Higher
Return on Strategy Licensing Performance
Investment Multidomest Returns
ic Strategy Strategic
Economies Alliances
of Scale Global
and Strategy Acquisitio Innovation
Learning n
Location Transnation Establishmen
Advantage al Strategy t of New Sub .
Management
Problems , Risk ,
and First
Steps
Choice of International Entry Mode
Exporting
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.
Choice of International Entry Mode
Licensing
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.
Choice of International Entry Mode
Strategic Alliances
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.
Choice of International Entry Mode
Acquisitions
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.
Choice of International Entry Mode
New Wholly - Owned Subsidiary
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.
C o u ld re q u ire h irin g h o st co u n try n a tio n a ls
o r co n su lta n ts a t h ig h co st.
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
International Strategy Opportunities &
Outcomes
Identify Explore Use Core Strategic
Internationa Resources & Competence Competitive
l Capabilitie ness
Opportunitie s Outcomes
s Internatio Modes of Management
nal Entry Problems , Risk , and
Strategies First Steps
Increased Internation Exporting
Market al
Size Bus .- Level Higher
Return on Strategy Licensing Performance
Investment Multidomest Returns
ic Strategy Strategic
Economies Alliances
of Scale Global
and Strategy Acquisitio Innovation
Learning n
Location Transnation Establishmen
Advantage al Strategy t of New Sub .
Management
Problems , Risk ,
and First
Steps
Risks in the International
Environment
ØPolitical instability in indonesia brought about by continuing ethnic strif
ØUncertain future of peace in the middle east because of changes in national
POLITICAL RISK
ØFailure of the european union’s quest for economic superpower status because
ØChina’s difficulty in enforcing intellectual property rights on
POLITICAL RISK
ØRussia’s struggle with low productivity, currency problems and
ØExchange rate exposure due to the U.S.-conadian dollar fluctuati
Major Risks of International Diversification
Political 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
E co n o m ic R isk
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.
THANK YOU
