INT’L REGIONAL STRATEGIES

1. INT’L REGIONAL STRATEGIES 7

2. Why do companies develope international regional strategies? • Strategic options for national players • What is international regional strategy? • International regional co-ordination of key business functions

3. Worldwide International regional Internationalisation Retrenchment International market entry and development Restricted national market scope Phase 1 Phase 2 Phase 3 Phase 4 Restricted national market scope International market entry and development International regional Worldwide competitor Figure 7.1. The phase model of international business development

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. Figure 7.2 Forms of economic integration Free Trade Area Customs Union Common Market Economic Union Political Union FEATURE Removal X X X X X of internal tariffs Common X X X X external tariffs Unrestricted X X X movement of capital and labour Convergence X X of economic policies Political X integration

6. Examine three conditions: (1) Extent of operations, applying and leveraging knowledge, resources regional exporter (2) Production facilities, value-adding activities located outside? (1)+(2): fragmented int’l reg. strategy (3) Business functions: organized on the needs of the region? Co-ordinated strategy

8. EXTERNAL TRIGGERS metatrends, competitive forces Standardization opportunities Emergence of cross-border customers, distributors Competitive interdependencies Reducing product life cycles INTERNALTRIGGERS Past operating Vision/mindset Core competence Organizational learning Administrative heritage Why to Develope Int’l Regional Strategy?

9. External triggers Move to next phase of international business development Previous phase of international business development International regional strategy Retreat to previous phase of international business development Internal triggers Figure 7.3 The development of an international regional strategy

10. Strategic 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 markets – more absorbed or replaced!!

11. Product range Narrow Broad Restricted national market scope • National broad-based strategy • Company A National niche strategy Geographical scope • Company C • Company B Interna-tional region Regional niche strategy Regional broad-based strategy Key: = Zone of transition Figure 7.4 Product-market grid

12. STRATEGIC OPTIONS Do nothing Develope broad-based regional strategy Retreat to niche Withdraw STRATEGIC IMPERATIVES Cease trading Extend scope, configure functions to regional market Refocus business to niche Sell business, exit Options for Company A

13. STRATEGIC OPTIONS Do nothing Retreat to national niche Withdraw STRATEGIC IMPERATIVES Cease trading Find niche and refocus business Sell business, exit Options for Company B

14. STRATEGIC OPTIONS Do nothing STRATEGIC IMPERATIVES May be able to continue to develope its int’l presence Could be vulnerable from broad-based suppliers or niche players Options for Company C

15. Product range Narrow Broad Restricted national market scope • National broad-based strategy • Company A National niche strategy • Company C • Company B Geographical scope Interna-tional region 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. Co-ordination of Key Business Functions • Considerable challenge • To completing market coverage • Developing single strategy to all markets • To manage the transition TASKS Centralized decentralized to into a hubnational operations (Co-ordination)(no co-ordination) Balance changed between tasks!

17. High All functions undertaken by the region. No national structures Complete centralisation Regional managers able to exert authority over national subsidiaries Regional centre directs Regional centre co-ordinates Regional staff operates to influence and co-ordinate national managers Level of international co-operation Formal co-ordinating mechanisms Formal committee structures and systems Meeting to share information and ideas Informal co-operation Complete decentralisation No co-ordination between national subsidiaries Low Figure 7.6 Centralisation versus decentralisation of key business functions

18. Concern accompanying co-ordinated regional strategy: • Contact with national market will be diluted • Take steps to minimise the likelyhood!!

19. Co-ordinate functions • Marketing • Human resources • Operations • Logistics • Finance

20. (i) Logistics functions organised on a country by country basis Country A Country B Country C Country D Figure 7.7 Changing patterns of distribution for international regions

21. (ii)Develop. of a pan-regional logistics function for a reg. exporter Country A Country B Regional exporter Country C Country D Figure 7.7 Changing patterns of distribution for international regions

22. (iii) Development of a pan-regional logistics function for a co-ordinated international regional strategy Country A Country B Country C Country D Figure 7.7 Changing patterns of distribution for international regions

23. Table C7.1 Network consolidation, 1989-94