1

INT’L REGIONAL STRATEGIESINT’L REGIONAL STRATEGIES

77

2

Why do companies develope Why do companies develope international regional strategies?international regional strategies?

Strategic options for national playersStrategic options for national players

What is international regional What is international regional strategy?strategy?

International regional co-ordination of International regional co-ordination of key business functionskey business functions

3

Worldwide

InternationalInternationalregionalregional

International market entry and development

Restricted national market scope

InternationalisationInternationalisation RetrenchmentRetrenchment

Phase 1 Phase 2 Phase 3 Phase 4

Figure 7.1. The phase model of international business development

Restricted national market scope

International market entry and development

International regional

Worldwide competitor

4

What is International Regional Strategy

Focus on a given geographical area Market entry and selection: not simply on a country by

country basis Network of interlinked international markets

Economic integrations: NAFTA dominated by USA EU: collection of national states

5

FEATUREFEATUREFree

Trade Area

Customs Customs UnionUnion

Common Common MarketMarket

Economic Economic UnionUnion

Political Political UnionUnion

Removal X X X X Xof internaltariffs

Common X X X Xexternaltariffs

UnrestrictedUnrestricted X X X X X Xmovementmovementof capitalof capitaland labourand labour

Convergence X Xof economic policies

PoliticalPolitical X Xintegrationintegration

Figure 7.2 Forms of economic integration

6

Examine three conditions:Examine three conditions:

(1) Extent of operations, applying and leveraging knowledge, resources

regional exporterregional exporter(2) Production facilities, value-adding

activities located outside?(1)+(2): fragmented int’l reg. strategy(1)+(2): fragmented int’l reg. strategy

(3) Business functions: organized on the needs of the region?

Co-ordinated strategyCo-ordinated strategy

7

International regional strategiesInternational regional strategies

CharacteristicsCharacteristics ExporterExporter FragmentedFragmented Co-ordinatedCo-ordinated

(1) Regional scope

(2) Located outside

(3) Functions on regional basis

YES

NO

NO

YES

YES

NO

YES

YES

YES

Overall

Strategy

Supplies from home production base

Value adding facilities at home

Series of country strategies

No or little co-ordination between market

Region as a unified market

Co-ordinates functions regionally

8

Why to Develope Int’l Regional Why to Develope Int’l Regional Strategy?Strategy?

EXTERNAL TRIGGERS EXTERNAL TRIGGERS metatrends, competitive forces Standardization

opportunities Emergence of cross-

border customers, distributors

Competitive interdependencies

Reducing product life cycles

INTERNALINTERNAL TRIGGERSTRIGGERS

Past operating Vision/mindset

Core competence Organizational learning Administrative

heritage

9

External triggers

Previous phase of international

business development

International regional strategy

Internal triggers

Figure 7.3 The development of an international regional strategy

Move to next phaseMove to next phase of international business

development

Retreat to previous Retreat to previous phase phase of international business development

10

Strategic Options for National PlayersStrategic Options for National Players Not too easy to respond Depends on individual context Bipolarization: possible choices

Defendable national niche Developing to be international

Not all national players able to cross borders!!! Niche occupied Unable to find alternative markets

Fewer company serves regional Fewer company serves regional markets – more absorbed or replaced!!markets – more absorbed or replaced!!

11

Product rangeProduct rangeG

eogr

aph

ical

G

eogr

aph

ical

sc

ope

scop

eRestricted national market scope

Interna-tional region

Narrow Broad

•Company C

National niche strategy

National broad-based

strategy

•Company A•Company B

Regional niche strategy

Regional broad-based

strategy

Key: = Zone of transition

Figure 7.4 Product-market grid

12

Options for Company AASTRATEGIC STRATEGIC

OPTIONSOPTIONS Do nothing

Develope broad-based regional strategy

Retreat to niche

Withdraw

STRATEGICSTRATEGICIMPERATIVESIMPERATIVES

Cease trading

Extend scope, configure functions to regional market

Refocus business to niche

Sell business, exit

13

Options for Company BB

STRATEGIC STRATEGIC OPTIONSOPTIONS

Do nothing

Retreat to national niche

Withdraw

STRATEGICSTRATEGIC

IMPERATIVESIMPERATIVES Cease trading

Find niche and refocus business

Sell business, exit

14

Options for Company CC

STRATEGIC STRATEGIC OPTIONSOPTIONS

Do nothing

STRATEGICSTRATEGIC

IMPERATIVESIMPERATIVES May be able to

continue to develope its int’l presence

Could be vulnerable from broad-based suppliers or niche players

15

Product rangeProduct rangeG

eogr

aph

ical

G

eogr

aph

ical

sc

ope

scop

eRestricte

d national market scope

Interna-tional region

Narrow Broad

•Company C

National niche strategy

National broad-based

strategy

•Company A•Company B

Regional niche strategy

Regional broad-based

strategy

Key: = Zone of transition

Figure 7.5 Product-market options available for Companies A and B in the face of the need to operate with a regional strategy in their existing markets

16

Considerable challenge To completing market coverage Developing single strategy to all markets To manage the transition

TASKSTASKS

CentralizedCentralized decentralized to decentralized to

into a hubinto a hub national operationsnational operations

(Co-ordination)(Co-ordination) (no co-(no co-ordination)ordination)

Balance changed between tasks!Balance changed between tasks!

Co-ordination of Key Business FunctionsCo-ordination of Key Business Functions

17

Level of Level of international international co-operationco-operation

Complete centralisationComplete centralisation All functions undertaken by All functions undertaken by the region. No national the region. No national

structuresstructures

Regional centre directs

Regional centre co-ordinates

Regional managers able to exert authority over national subsidiaries

Formal co-ordinating mechanisms

Informal co-operation

Complete Complete decentralisationdecentralisation

HighHigh

LowLow

Regional staff operates to influence and co-ordinate national managers

Formal committee structures and systems

Meeting to share information and ideas

No co-ordination between No co-ordination between national subsidiariesnational subsidiaries

Figure 7.6 Centralisation versus decentralisation of key business functions

18

Concern accompanying co-ordinated regional strategy:

Contact with national market Contact with national market will be dilutedwill be diluted

Take steps to minimise the Take steps to minimise the likelyhood!!likelyhood!!

19

Co-ordinate functions

Marketing Human resources Operations LogisticsLogistics Finance

20

Country A Country B

Country C Country D

(i) Logistics functions organised on a country by country basis(i) Logistics functions organised on a country by country basis

Figure 7.7 Changing patterns of distribution for international regions

21

Country A Country B

Country C Country D

(ii)Develop. of a pan-regional logistics function for a reg. exporter

Figure 7.7 Changing patterns of distribution for international regions

Regional exporter

22

Country A Country B

Country C Country D

(iii) Development of a pan-regional logistics function for a co-ordinated international regional strategy

Figure 7.7 Changing patterns of distribution for international regions

23

Consolidatedas in

Companyacquired

Country Interest%

NetsalesNLG

m

Numberof

employees

19891989

19891989198919891989

19901990199019911991

1992

19921993

Spendinova A/SAgence MaritiemBauzinWeich SpeditionTranspedItalexpressB.V.T. TransportRoadspeedInternationalHunold SpeditionStewiClement et CieFreightmasius ABFrans Maas NorgeA/SGerum and FurmSpeditionAmsped GmbHLito FM

DenmarkFrance

GermanyPortugalFranceNetherlandsUK andIrelandGermanyGermanyFranceSwedenNorway

Germany

GermanySpain

67100

10075

100100

75

100100

65100100

80

10051

56

54

209018

233

77N/AN/A

N/A

N/AN/A

1218

7030

100165110

16519

275N/AN/A

N/A

N/AN/A

Table C7.1 Network consolidation, 1989-94