international strategy chapter 7 built by stambaugh/2009 jeff stambaugh [email protected]
TRANSCRIPT
International StrategyChapter 7
Built by Stambaugh/2009
Jeff [email protected]
http://faculty.mwsu.edu/business/jeff.stambaugh
In what country is Nokia headquartered?
25%
25%
25%
25% 1. U.S.
2. France
3. Finland
4. Italy
What percentage of Coca Cola’s 2006 sales came outside the U.S.
25%
25%
25%
25% 1. 25%
2. 35%
3. 50%
4. 66%
A few years ago Lenovo bought IBM’s laptop business. Where is
Lenovo headquartered?
25%
25%
25%
25%1. U.S.
2. Italy
3. Japan
4. China
Boeing has orders for ~900 787s. How many have U.S. airlines
ordered?
25%
25%
25%
25% 1. ~ 100
2. ~ 250
3. ~ 400
4. ~ 600
Today’s Objectives
Built by Stambaugh/2009
■ Know why firms expand across borders■ Understand the basic international strategies■ Know the basic entry modes and the pros / cons of
each
Why Go Global
■ Spread of Capitalism■ Decreasing
transportation costs■ Decreasing
communication costs■ Internet■ Regionalization vs
Globalization
Built by Stambaugh/2009
Area Population
USA 300M
S. America 375M
Europe 710M
Russia 110M
Asia 3.9B
China 1.4B
India 1.1B
Africa 930M
Porter’s National Competitiveness Diamond
Built by Stambaugh/2009
Motives
Built by Stambaugh/2009
■ Grow markets (economy of scale)■ Tap world-wide talent■ Extend product life cycle■ Optimize location for each element of value chain
■ Enhance performance through locations■ Cost reductions■ Risk reductions
Risks
Built by Stambaugh/2009
■ Political / economic■ Currency flux■ Cultural buffoonery / misunderstandings
■ Distance is more than physical
Business Considerations Beyond the Market Size
Built by Stambaugh/2009
■ What is their time horizon?■ How is power distributed in organizations?
■ The “great English-speaking, western-talking” executive may be powerless!
■ How does the culture negotiate?■ What types of representations are binding?
■ Are foreigners disadvantaged?
■ Key governmental / legal considerations?■ Other players: unions, professional associations,
institutional norms?
Strategies for International Ops
Built by Stambaugh/2009
X
Pro/Cons of Strategies
Built by Stambaugh/2009
Strategy Strengths Limitations
Global Strong integration across businesses.
Standardization leads to higher economies of scale.
Uniform quality standards world-wide.
Limited ability to adapt to local markets (less demand for products).
Concentration of activities may increase dependence on a single facility.
Single locations may lead to higher tariffs and transportation costs.
Pro/Cons of Strategies
Built by Stambaugh/2009
Multidomestic
Strategy Strengths Limitations
Adapt to local market conditions (increased demand).
Detect potential niche markets
Less cost savings through scale economies.
Greater difficulty in transferring knowledge
May lead to “overadaptation”
Transnational Economies of scale.
Adapt to local markets.
Locate activities in optimal locations.
Increased knowledge flows
Unique challenges in determining optimal locations.
Unique managerial challenges in fostering knowledge transfer.
Entry Strategies
Built by Stambaugh/2009
Low HighDegree of Ownership and Control
ExportingExporting
LicensingLicensing
FranchisingFranchising
Strategic AllianceStrategic Alliance
Joint VentureJoint Venture
Wholly OwnedWholly OwnedSubsidiarySubsidiary
Ext
ent
of I
nves
tmen
t R
isk
High
Low
(Toyota in San Antonio)
Toyota in MS
Summary
Built by Stambaugh/2009
■ Several reasons to cross borders: markets, tap talent, optimize value chain
■ Three major strategies: global, transnational, multi-domestic
■ Several ways to enter foreign markets: exporting, licensing, franchising, alliances, JVs, wholly-owned subsidiaries (greenfield, acquisitions)
Next Class
Built by Stambaugh/2009
■ Risk and Restructuring