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Transcript of mejik ch 8
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8/10/2019 mejik ch 8
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International Strategy : A strategy through which the firm sells its goods or services
outside its domestic market. The use of international strategies is increasing not only
because of traditional motivations, but also for emerging reasons. Traditional motives
include extending the product life cycle, securing key resources, and having access to
low-cost labor. Emerging motivations focus on the combinations of the Internet and
mobile telecommunications, which facilitates global transactions. Also, there isincreased pressure for global integration as the demand for commodities becomes
borderless, and yet pressure is also increasing for local country responsiveness.
Four Benefits :
Increased Market Size
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 expandoverseas rapidly in order to preempt imitators.
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.
Can increase profit per unit.
Location Advantages
Low cost markets aid in developing competitive advantage by providing access to:
Raw materials
Transportation
Lower costs for labor
Key customers
Energy
Four Determinants
Factors of production : These national factors often provide initial advantages,
which are subsequently built upon. Each country has its own particular set of
factor conditions; hence, in each country will develop those industries for
which the particular set of factor conditions is optimal.
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Demand Conditions : Describes the state of home demand for products and
services produced in a country.Home demand conditions influence the shaping
of particular factor conditions. They have impact on the pace and direction of
innovation and product development. According to Porter, home demand is
determined by three major characteristics: their mixture (the mix of customers
needs and wants), their scope and growth rate, and the mechanisms thattransmit domestic preferences to foreign markets.
Related and Supporting IndustriesThe existence or non-existence of internationally competitive supplying
industries and supporting industries.
One internationally successful industry may lead to advantages in other related
or supporting industries. Competitive supplying industries will reinforce
innovation and internationalization in industries at later stages in the value
system. A typical example is the shoe and leather industry in Italy. Italy is not
only successful with shoes and leather, but with related products and services
such as leather working machinery, design, etc.
Firm Strategy, Structure, and RivalryThe conditions in a country that determine how companies are established, are
organized and are managed, and that determine the characteristics of domestic
competition
Porter argues that domestic rivalry and the search for competitive advantage
within a nation can help provide organizations with bases for achieving such
advantage on a more global scale.
A multidomestic corporationis a multinational corporation that
decentralizes management and other decisions to the local country. Ex :
Nestle,With operations in almost every country on the globe, its managers
match the company's products to its consumers
Global companycentralizes its management and other decisions in the home
country. These companies treat the world market as an integrated whole and
focus on the need for global efficiency. Ex : Sony, Apple, etc
a transnational Other companies are going international by eliminating
structural divisions that impose artificial geographical barriers. Ex : GE,
Exxon, Honda, etc
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Type of Entry Characteristics
Exporting High cost, low control (The firm has no foreign
manufacturing expertise and requires investment only in distribution.)
Licensing Low cost, low risk, little control, low returns (The firm needsto facilitate the product improvements necessary to enter foreign
markets.)
Strategic alliances Shared costs, shared resources, shared risks, problems
of integration (e.g., two corporate cultures) (The firm needs to connect with
an experienced partner already in the targeted market)
Acquisition Quick access to new market, high cost, complex negotiations,
problems of merging with domestic operations (The firm needs to reduce its
risk through the sharing of costs.)
New wholly owned subsidiary Complex, often costly, time consuming,high risk, maximum control, potential above-average returns (the number of
firms in the industry is growing fast)
Risks in an International Environment
Political RisksInstability in national governments
War, both civil and international
Potential nationalization of a firms resources
Economic RisksDifferences and fluctuations in the value of different currencies
Differences in prevailing wage rates
Difficulties in enforcing property rightsUnemployment