Strategies for International Competition
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Transcript of Strategies for International Competition
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MEXICO - Wards off hunger
INDIA - Wards off evil
Never underestimate the
importance of local knowledge
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Dimensions of Culture
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Hofstedes culture Dimensions
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Power Distance
• The degree of inequality that exists – and is accepted by the people with or without the power.
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Characteristics of PD
High • Centralized • Large Gap in Compensation and authority
Low • Flatter Organisation• Supervisors and Employees are almost equal
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Individualism
• Refers to the Strength of the ties people have to others within the community.
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Characteristics of Individualism
High• Respect For Privacy
• An Enjoyment of Challenges, and an expectation of rewards for hardwork
Low• Emphasis on building skills and becoming masters of
something• Work for Intrinsic rewards
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Masculinity Vs Femininity
• Refers how the society sticks with and values, traditional male and female roles
• A masculine culture emphasizes status derived from wages and positions.
• A Feminine culture emphasizes on human relations and quality of life.
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Uncertainty Avoidance
• Relates to the degree of anxiety society members feel when in uncertain and unknown situations.
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Characteristics Of Uncertainty Avoidance
High• Very formal Business conduct with lots of rules and
regulations• Need and expect structure• Difference are avoided
Low• Informal Business Attitude
• More concern with the long term strategy• Accepting of change and risk
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Long term Orientation
• Refers to how much society values long standing – as opposed to short term – traditional values
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Characteristics Of Long Term Orientation
High• Strong work ethic
• High value placed on education and training• Hesitant to introduce changes
Low • High Cretivity and mind set to introduce change
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Culture & Management Styles in Selected Countries
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Culture of Japan
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Cultural Pattern Of Japan
• Japanese are a Homogeneous People• Reject Foreign Influences• Principles of Wa• Masculine Culture• Uncertainty avoidance
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Largest country located in central Europe
GERMANY
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Cultural Pattern Of Germany• Planning & Orderliness• Long term thinking• Low Power Distance• High Quality• High Technical Knowledge
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World’s largest Communist Country
CHINA
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Cultural Patterns of CHINA
• Investments in work organizations, both in human and monetary terms are regarded as long term.
• Four Cultural Characteristics• Persistence• Respect for relationship• Thrift• Sense of Shame
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Culture of Mexico
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Cultural Pattern Of Mexico
• Collectivism• Higher Power Distance• Higher uncertainty Avoidance• No Value for time• More Formalities• Importance towards family• Negotiation is a long process
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Strategies for International Competition
Follows…
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The Roots of International Strategy
• The three states of mind or attitudes that are inferred from the managerial practices:• Ethnocentrism• Polycentrism• Geocentrism
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Ethnocentrism
• Strategic decisions are made at headquarters;
• Limited subsidiary autonomy;
• Key positions in domestic and foreign operations are held by headquarters’ personnel;
• PCNs manage subsidiaries.
Ethnocentric Firm
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Polycentrism
• Strategic decisions are made at headquarters;
• Limited subsidiary autonomy;
• Key positions in domestic and foreign operations are held by headquarters’ personnel;
• PCNs manage subsidiaries.
Polycentric Firm
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Geocentric
• A global approach - worldwide integration;
• View that each part of the organization makes a unique contribution;
• Nationality is ignored in favor of ability:• Best person for the job;• Color of passport does
not matter when it comes to rewards, promotion and development.
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Strategically Expanding Overseas
• Facilitators of international Expansion
Internationalization
Government & Political
Forces
Technological
Forces
Market
Forces
Competitive Forces
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Facilitators
• Market Saturation• Political Reasons• Cheap Labor.• Availability of resources• Technological advancements• Economies of scale and scope• Competitive Pressure
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Where to Expand Internationally
• Rating factors to evaluate where to expand• Political Risk• Cultural Distance• Geographic Distance• Economic Environment• Foreign Exchange Volatility• Market Size• Market Growth• Regulatory Environment
• Firms may then derive• Measure of country risk from these ratings• Measure of expected return
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Strategic Planning For Foreign Market Entry
1. Identify the company’s objective in its Foreign Market Entry.
2. Preliminary Country Screening3. What are the Opportunities and Constraints in the
Target Market?4. What Capabilities, Resources, and Skills are needed to
succeed in the Foreign Market?5. Does the company have the Core Capabilities and
Resources to Score High on the key Success Factors? What are our Strengths and Weakness on the Key Success Factors?
6. Should the company Enter the target Market, and How?
7. Compare and Rank the Targeted Countries.
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Identify the company’s objective in its Foreign Market Entry.
• Management should be clearly understand the objective for entering the foreign market
• The objective could be…
• Cheap Labor.• Availability of resources• Technological advancements• Economies of scale and scope• Competitive Pressure• Reduce the Risk
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Managing Portfolio Of Country Subsidiaries
Two Approaches are
• Host Country Attractiveness Versus Competitive Strength Matrix
• International Risk Versus Return Portfolio
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Host Country Attractiveness Versus Competitive Strength Matrix
Collaborative
Strategies
Growth Strategie
s
Defensive
Strategies
Cross-Subsidizat
ion Strategies
Firm-Level Competitive Strength in Each Host Country
HostCountry
Attractiveness
Low High
High
Low
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International Risk Versus Return Portfolio
Negative to Low Medium High
High
Medium
Low
SelectivelyGrow
Harvest & DivestOr Licensing
Increase Resources
to Match Risk or International Joint Venture
Cross-Subsidize Grow Industry Leadership
Host Country risk
Expected Profits in each host country
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Modern International Strategic Orientations
High
High
Low
Low Local Responsiveness Pressures
GlobalIntegration
& Coordination
Pressures
Global Orientation(Chemicals, Heavy Metals
Extractive Industries)
Transnational Orientation(Pharmaceuticals,
Telecommunications, Financial Services)
International Orientation(Cement, Fabric Mills)
Multi Domestic Orientation(Consumer
Nondurables)
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Value Chain Configuration & Strategic Orientations Of Firms
ProcurementEg., components, machinery, advertising, services
SupportActivities
Firm InfrastructureEg., Financing , Planning, investor relations
Human Resources ManagementEg., recruiting, training, compensation system
Technology DevelopmentEg., Product design, testing, process design, material & market research
InboundLogistics
Eg. Incoming Material storage
Operations
Component Fabrication,
assemblyBranch
operation
Outbound LogisticsEg. Order
Processing, warehousing
Marketing & Sales
Eg., Sales force,
promotion
After Sales Service
Primary Activities
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Primary activities
• Primary activities are purchasing raw materials , transporting to the factory , production , operations, marketing and sales.
• Ex : Inbound Logistics .,Incoming Material storage• Operations Component Fabrication, assembly,
Branch operation• Outbound LogisticsEg. Order Processing,
warehousing• Marketing & SalesEg., Sales force, promotion
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Supporting Activities in value chain
• Firm activities which are required to enhance the efficiency and effectiveness of the primary activities are known as support activities.
• Examples• Firm Infrastructure• Eg., Financing , Planning, investor relations• Human Resources Management• Eg., recruiting, training, compensation system• Technology Development• Eg., Product design, testing, process design,
material & market research• Procurement Eg., components, machinery, advertising, services
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Down Stream Activities
Activities which are closely associated with the customers Are known as down stream activities
Example: Advertisement in the newspaper , sales promotion , delivery,Supplying the products to the shops , retailers and wholesalers
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Upstream Activities
Activities which are uncoupled from the customers are up stream activities .
Examples: purchasing the materials , Production , operations
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Worldwide Dispersal & Reintegration
• The Functional Scope Of Value Chain Dispersal & Integration Strategies• The Dispersion of companies various activities and
functions of the value chain and their locations in different
parts of the world to take advantage of the national differences.• Factors
• Comparative advantage of the country• Efficiency gains from Economies of Scope and Scale• Opportunity to innovate and learn from diverse
culture• Competitive pressure from domestic and foreign
based companies• Benefits of flexibility and risk reduction
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Reintegration of activities & Functions
• Levels of Integration
• Stand alone integration
• Simple Integration
• Complex Integration
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Stand alone integration
Televisions
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Simple Integration
• Uni-directional • Multi- Directional
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Complex Integration
• Complex integration strategy are characterized by dispersal of the value chain into discrete functions – component production, assembly, finance, R & D, distribution and so on.
• Example- Production Chain Manufacture the Electric Fan might be• Purchasing @ France• Manufacturing of Frame @ Mexico• Manufacturing of Blades @ India• Manufacturing of Motor @ Germany• Assembling in Singapore• Marketing in North America
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Firm Level Strategies For International Competitiveness
• Core Competency Leveraging
• Counter Attack• Glocalization
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Core Competency Leveraging
• Strategy used by companies that are gaining prominence in a variety of businesses.
• Core Competence – distinctive ability to excel in a key area, upon which a company can build a variety of businesses and develop new generations.
• Core Products – Intermediate linkages between core competencies and end products
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Core Competency of Honda Engines & power-train technology
• Core Product
• End Product
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Core Competency - Canon Imaging
• Core Product • End Product
• Imaging
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Core CompetencySemiconductors & Digital Display
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Counter Attack
Japan companies “attacked “ U.S MarketLower Costs derived from the cheap labor
U.S Companies “counter attacked”Offshore assembly &manufacturing sites
in Asia to lower their production cost
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Glocalization
Glocalization of Management
Glocalization of Foreign Affiliates
Glocalization of Exports
Glocalization of Prodcuts
Glocalization of Production
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Glocalization of Management
Levi’s allows the local managers to make decisions about adapting products to suit locals
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Glocalization of Foreign Affiliates
GEARING UP: Stefan Krause, CFO of BMW, in front of the car that is to be assembled at its proposed facility at Maraimalainagar
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Glocalization of Exports
• Using foreign production plants as export bases to third party country market is yet another way to become a “local” company in a foreign country.
• Example :• Japanese have been exporting U.S Made Cars
to Japan and Europe• Opening plant in developing country and
exporting to other part of the world.
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Glocalization of Prodcuts
• local favorites• McItaly burger in
Italy,• Maharaja Mac in
India,• The McLobster in
Canada• The Ebi Filit-O in
Japan.
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Glocalization of Prodcuts
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