Post on 21-Dec-2015
International Strategy
What is a global business?
What determines global business success?
How do firms enter global markets?
How does a firm manage a global operation?
Unique IssuesUnique Issues
Complex Pricing exchange rates
Political Risk threats to ownership, and profit
Unique IssuesUnique Issues
Cultural Differences– tastes, values, language
Conflicting political demand– government policies, and economic systems
Advantages of GlobalizationAdvantages of Globalization
Scale economies Growth potential Factor costs Vertical integration demands Opportunities
Homogenization of global culture Competitive dynamics
Advantages vary across value chain• Downstream advantages
• price, product design• Midstream advantages
• assets, skills, relations with other firms• Upstream advantages
• ability and willingness to learn, • adaptability
Transferring Competitive Advantage
Advantages vary across domains International Contexts
• public good issues regulatory climate, economy, trade policy, etc.
• infrastructure transportation, education, communication, etc.
Industry Contexts• structure
competitive rivalry, entry barriers, etc.
Transferring Competitive Advantage
Limitations on TransferabilityLimitations on Transferability
Geographic advantages– labor, monopoly positions, distribution network, reputation,
customer or supplier relations Tacit knowledge
– difficult to enact in different context, unknown interaction with context
Cost of transfer– loss of effectiveness or efficiency
Mode of transfer– joint venture, partnership, direct investment
Domestic advantages may not transfer across national boundaries The advantage in the home market may not be that
important in foreign markets. International advantages may not hold in
domestic markets A successful international competitor may not be the
strongest firm at home.
Limitations on TransferabilityLimitations on Transferability
Modes of Entry
Exportation– accessing markets at low risk
Licensing– retaining some rights to product design
Joint Venture– looking for complementary knowledge
Foreign Direct Investment– going it alone
Balancing opportunity with opportunism
Opportunity– the potential returns from taking products into new
geographic regions Opportunism: contracting
– Moral hazard– Learning opportunities.
• knowledge transfer • knowledge development
Matching Advantage to Mode of Entry
Downstream advantages– export or license
Midstream advantages – joint venture or direct investment
Upstream advantages– direct investment
Economic demands
Remain competitive within one’s industry– Improve efficiency by streamlining operations– Achieve economies of scale– Coordinate R&D efforts Share assets and knowledge as much as possible– Transfer people and knowledge
Political Demands
Be responsible to local government demands– jobs and taxes
Adjust to different regulatory setting– restrictions on competitive practices
Recognize cultural differences– product design and placement– human resource practices
Strategic Options: Global StrategyStrategic Options: Global Strategy
Regional or global approachCost advantage
• scale economies, rationalize and integrate activities , allows side-payments (good citizen), simplifies management practices
Lowers expropriation risk Bargaining power
• larger firms have more power
Efficiency
Strategic Options: MultinationalStrategic Options: Multinational
Nationally Responsive ApproachDifferentiation advantages
• respond to local tastes and preferences
Image advantages• subsidiaries have latitude to respond to local
political needs, used where government plays a key role
Locally Responsive
Strategic Options: TransnationalStrategic Options: Transnational
Balances cost with differentiation benefits• business manager• country manager• functional manager• corporate manager
Balance global efficiency and competitiveness with national-level responsiveness and flexibility
cross market capacity to leverage learning
Efficiency Responsive
Global Strategy Textbooks
Bartlett, Christopher A. & Ghoshal Sumantra– “Transnational Management,” McGraw-Hill– Text, Cases and readings
Bartlett, Christopher, and Ghoshal, Sumantra– “Managing across borders,” Harvard B-school Press– Transnational view of global firms
Yip, George S. – “Total Global Strategy II,” Prentice-Hall– Strategic focus
Global Strategy Texts and Readings
De la Torre, Jose, Doz, Yves and Devinney, Timothy– “Managing the Global Corporation,” McGraw-Hill– Case studies
Cullen, John B. – “Multinational Management: A strategic approach,” Southwestern
Publ. (Thompson Learning)– Management focus
Tallman, Stephan (2002), “Global Strategic Management (pp. 464-490).” In The Blackwell Handbook of Strategic Management, M. Hitt, E.R. Freeman, & J.S. Harrison (eds.). Blackwell Publ: Oxford, U.K.