International Strategy

BUSI 7130/7136BUSI 7130/7136

Chris Shook, Ph.D.Chris Shook, Ph.D.

AGENDA

LectureLecture BRL HardyBRL Hardy

Drivers of Globalization

• Increased similarity of lifestyles Increased similarity of lifestyles • Global communications Global communications • Fast communicationFast communication• Pressures to reduce costsPressures to reduce costs

Motivators

Increase Market SizeIncrease Market Size Achieve Acceptable ROIAchieve Acceptable ROI Achieve Economies of ScaleAchieve Economies of Scale Achieve Location AdvantageAchieve Location Advantage

Choice of Entry Mode

ExportingExporting LicensingLicensing FranchisingFranchising Joint VenturesJoint Ventures Acquisition of Wholly-Owned SubsidiaryAcquisition of Wholly-Owned Subsidiary Development of Wholly-Owned SubsidiaryDevelopment of Wholly-Owned Subsidiary

Factor ConditionsFactor ConditionsFactor ConditionsFactor Conditions

Basic FactorsBasic Factors- Land, labor- Land, labor

Advanced FactorsAdvanced Factors- Highly educated workers- Highly educated workers- Digital communications- Digital communications

Generalized FactorsGeneralized Factors- Capital, infrastructure- Capital, infrastructure

Specialized FactorsSpecialized Factors- Skilled personnel- Skilled personnel

Porter’s Determinants of National AdvantagePorter’s Determinants of National AdvantageHome country Home country of origin is crucial to International successof origin is crucial to International success

Factor ConditionsFactor Conditions

Basic FactorsBasic Factors- Land, labor- Land, labor

Advanced FactorsAdvanced Factors- Highly educated workers- Digital communications- Highly educated workers- Digital communications

Generalized FactorsGeneralized Factors- Capital, infrastructure- Capital, infrastructure

Specialized FactorsSpecialized Factors- Skilled personnel- Skilled personnel

Demand Demand ConditionsConditionsDemand Demand

ConditionsConditions

Size and Nature Size and Nature of Home of Home

Country’s Country’s DemandDemand

Porter’s Determinants of National AdvantagePorter’s Determinants of National AdvantageHome country Home country of origin is crucial to International successof origin is crucial to International success

Demand ConditionsDemand

ConditionsSize and Nature of Home Country’s Demand

Size and Nature of Home Country’s Demand

Factor ConditionsFactor Conditions

Basic FactorsBasic Factors- Land, labor- Land, labor

Advanced FactorsAdvanced Factors- Highly educated workers- Digital communications- Highly educated workers- Digital communications

Generalized FactorsGeneralized Factors- Capital, infrastructure- Capital, infrastructure

Specialized FactorsSpecialized Factors- Skilled personnel- Skilled personnel

Related & Supporting Related & Supporting IndustriesIndustries

Related & Supporting Related & Supporting IndustriesIndustries

- Japanese cameras & copiers- Japanese cameras & copiers- Italian shoes & leather- Italian shoes & leather

Home country Home country of origin is crucial to International successof origin is crucial to International success

Porter’s Determinants of National AdvantagePorter’s Determinants of National Advantage

Demand ConditionsDemand

ConditionsSize and Nature of Home Country’s Demand

Size and Nature of Home Country’s Demand

Factor ConditionsFactor Conditions

Basic FactorsBasic Factors- Land, labor- Land, labor

Advanced FactorsAdvanced Factors- Highly educated workers- Digital communications- Highly educated workers- Digital communications

Generalized FactorsGeneralized Factors- Capital, infrastructure- Capital, infrastructure

Specialized FactorsSpecialized Factors- Skilled personnel- Skilled personnel

Firm Strategy, Structure Firm Strategy, Structure & Rivalry& Rivalry

Firm Strategy, Structure Firm Strategy, Structure & Rivalry& Rivalry

Intense rivalry fosters Intense rivalry fosters industry competitionindustry competition

Porter’s Determinants of National AdvantagePorter’s Determinants of National Advantage

Related & Supporting Industries

Related & Supporting Industries

- Japanese cameras & copiers- Italian shoes & leather- Japanese cameras & copiers- Italian shoes & leather

Home country Home country of origin is crucial to International successof origin is crucial to International success

Advice from Porter Create pressures for innovationCreate pressures for innovation Seek out competitors as motivatorsSeek out competitors as motivators Establish early warning systemsEstablish early warning systems Improve national diamondImprove national diamond Welcome rivalryWelcome rivalry Globalize to tap selectively into sources of other Globalize to tap selectively into sources of other

nationsnations Locate home base to support competitive Locate home base to support competitive

advantageadvantage

International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies

ThreeThreeCorporate Corporate StrategiesStrategies Global Strategy

Transnational Strategy

Multi-Domestic Strategy

International Corporate StrategyInternational Corporate Strategy

When is each strategy appropriate?When is each strategy appropriate?

Need for Need for Global Global

IntegrationIntegration

Need for Local Market ResponsivenessNeed for Local Market Responsiveness

Low

High

Low High

International Corporate StrategyInternational Corporate Strategy

When is each strategy appropriate?When is each strategy appropriate?

Need for Need for Global Global

IntegrationIntegration

Need for Local Market ResponsivenessNeed for Local Market Responsiveness

Low

High

Low High

International Corporate StrategyInternational Corporate Strategy

When is each strategy appropriate?When is each strategy appropriate?

Need for Need for Global Global

IntegrationIntegration

Need for Local Market ResponsivenessNeed for Local Market Responsiveness

Low

High

Low High

International Corporate StrategyInternational Corporate Strategy

When is each strategy appropriate?When is each strategy appropriate?

Need for Need for Global Global

IntegrationIntegration

Need for Local Market ResponsivenessNeed for Local Market Responsiveness

Low

High

Low High

International Corporate StrategyInternational Corporate Strategy

When is each strategy appropriate?When is each strategy appropriate?

Need for Need for Global Global

IntegrationIntegration

Need for Local Market ResponsivenessNeed for Local Market Responsiveness

Low

High

Low High

International Corporate StrategyInternational Corporate Strategy

When is each strategy appropriate?When is each strategy appropriate?

Need for Need for Global Global

IntegrationIntegration

Need for Local Market ResponsivenessNeed for Local Market Responsiveness

Low

High

Low High

International Corporate StrategyInternational Corporate Strategy

When is each strategy appropriate?When is each strategy appropriate?

Need for Need for Global Global

IntegrationIntegration

Need for Local Market ResponsivenessNeed for Local Market Responsiveness

Low

High

Low High

Do you REALLY have a global strategy?

Global strategyGlobal strategy– cross subsidization of national market share cross subsidization of national market share

battles in pursuit of global brand and battles in pursuit of global brand and distribution positionsdistribution positions

Do you REALLY have a global strategy?

Why?Why?– Loose bricksLoose bricks

Necessity of understanding competitor’s strategic Necessity of understanding competitor’s strategic intentintent

– Labor and scale advantages are not sustainableLabor and scale advantages are not sustainable– Domestic competitors are NEVER safeDomestic competitors are NEVER safe

Do you REALLY have a global strategy?

ImplicationsImplications– Broader corporate concept of a product lineBroader corporate concept of a product line– Don’t allocate resources by SBUsDon’t allocate resources by SBUs– Don’t allocate resources by countryDon’t allocate resources by country