International Strategy

1. International Strategy So, whose idea was this anyway?

2. The overriding reason for incorporating an international strategy into the company’s strategic plan The reason for being a global company is to leverage capabilities worldwide so that a long term competitive advantage is achieved that cannot be achieved otherwise

3. Questions to be answered Customize our offerings in Merica and Sereno or match the tastes and preferences of local buyers or to offer a mostly standardized product worldwide. Employ the same competive strategy in all countries or modify the strategy country by country Where to locate the production facilities to maximize efficiency How do we use our distinctive competencies in Merica and in Sereno to gain competitive advantage in both

4. Companies expand internationally in order to: Gain new customers Lower costs Leverage core competencies Spread risk Move to an earlier point on the life cycle curve

5. Profit Sanctuaries Areas of low competition with assured profit margins Companies with large, protected profit sanctuaries have a competitive advantage over companies that don’t have a protected sanctuary.(global competitor vs. local or national competitor)

6. Cross-Market Subsidization Supporting competitive offensives in one market with resources and profits diverted from operations in other markets.

7. What is our competitive advantage in Sereno? Labor cost Worker productivity Tax rates Energy costs Government regulations Distribution costs Government business friendly

8. What are the risks? Exchange rates Culture and lifestyle differences Demographics Income levels

9. Should we compete Internationally or globally?

10. International or Multi Country A company is an international(or multinational competitor when it competes in a select few foreign markets. Buyers are attracted to different product attributes Sellers vary from country to country Industry conditions and competitive forces vary in important ways

11. Global Competition It is a global competitor when it has or is pursuing a market presence on most continents and in virtually all of the world’s major countries

12. Strategies for entering International Markets

13. Collaborative Efforts Export Licensing Franchising Strategic Alliances

14. Characteristics of Export Strategies Involves using domestic plants as a production base for exporting to foreign markets- each team started here. Excellent initial strategy to pursue international sales Advantages Minimizes both risk and capital requirements Conservative way to test international waters Minimizes direct investments in foreign countries An export strategy is vulnerable when Manufacturing costs in home country are higher than in foreign countries where rivals have plants High shipping costs are involved

15. Licensing makes sense when a firm Has valuable technical know-how or a patented product but does not have international capabilities or resources to enter foreign markets Desires to avoid risks of committing resources to markets which Are unfamiliar Present economic uncertainty Are politically volatile Disadvantage Risk of providing valuable technical know-how to foreign firms and losing some control over its use Characteristics of Licensing Strategies

16. Often is better suited to global expansion efforts of service and retailing enterprises Advantages Franchisee bears most of costs and risks of establishing foreign locations Franchisor has to expend only the resources to recruit, train, and support franchisees Disadvantage Maintaining cross-country quality control Characteristics of Franchising Strategies

17. Strategic Alliances and Collaborative Partnerships Companies sometimes use strategic alliances or collaborative partnerships to complement their own strategic initiatives and strengthen their competitiveness. Such cooperative strategies go beyond normal company-to-company dealings but fall short of merger or full joint venture partnership.

18. Examples Airbus Industrie and European aerospace companies—European aircraft company General Motors, DaimlerChrysler and BMW – hybrid gasoline-electric engine Toyota and First Automotive Works – luxury sedans, SUVs and minivehicles for the Chinese market

19. Alliances Can Enhance aFirm’s Competitiveness Alliances and partnerships can help companies cope with two demanding competitive challenges Racing against rivals to build a market presence in many different national markets Racing against rivals to seize opportunities on the frontiers of advancing technology

20. Why Are Strategic Alliances Formed? To collaborate on technology development or new product development To fill gaps in technical or manufacturing expertise To acquire new competencies To improve supply chain efficiency To gain economies of scale inproduction and/or marketing To acquire or improve market access via joint marketing agreements

21. Why Alliances Fail Ability of an alliance to endure depends on How well partners work together Success of partners in respondingand adapting to changing conditions Willingness of partners torenegotiate the bargain Reasons for alliance failure Diverging objectives and priorities of partners Inability of partners to work well together Changing conditions rendering purpose of alliance obsolete Emergence of more attractive technological paths Marketplace rivalry between one or more allies

22. Localized Multi-country Strategy

23. Each country market is self-contained Competition in one country market is independent of competition in other country markets Rivals competing in one country market differ from set of rivals competing in another country market Rivals vie for national market leadership No “international” market, just a collection of country markets Characteristics ofMulti-Country Competition

24. Localized Multi-country Strategy Customized competitive approach to fit each market Different product versions under different brand names, customized to fit buyer tastes in each country Production plants in each country Producing products for that country Using local suppliers where possible Marketing and distribution to local customes and cultures Transfer competences where possible Autonomous local managers

25. Characteristics of Global Competition Competitive conditions across country markets are strongly linked together Many of same rivals compete in many of the same country markets Rivals vie for worldwide leadership A true international market exists A firm’s competitive position in one country is affected by its position in other countries Competitive advantage (or disadvantage) is based on a firm’s world-wide operations and overall global standing

26. Global Strategy Pursue basic strategy world wide. Sell the same products under the same brand Production plants located local efficiencies Best suppliers from anywhere Coordinated marketing and distribution worldwide Compete on worldwide competitive advantage. Not invented here Managers expected to stick close to the global stragety

27. Pitfalls – Cultural In order to compete, differences in culture, market conditions and demographics must be considered. Nestles in Africa Disney in France

28. Pitfalls -- Economic Cost issues currency exchange rates labor cost material costs taxes Business Issues Business Friendly Political Stability Access to customers

29. A final word of warning Profitability in emerging country markets rarely comes quickly or easily New entrants have to be very sensitive to local conditions, be willing to invest in developing the market for their products over the long term and be patient in earning a profit

30. Questions to be answered about Sereno Why are we competing in Sereno? What is our competitive advantage? How should we proceed? International, Global or Domestic What is our Generic strategy? Is it different from Merica? Should we customize the product and how? How about the cultural differences in advertising? Where should we produce the product What are the projected results of this strategy? Income statement, cash flow