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International Strategy

International Strategy. Introduction, Motives, Market Entry, Strategies and Organisational Issues. Historical Development. Mercantilism International Trade The International Company The Multinational Company The Transnational Company The Global Company. Globalisation Debate.

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International Strategy

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  1. International Strategy Introduction, Motives, Market Entry, Strategies and Organisational Issues

  2. Historical Development Mercantilism International Trade The International Company The Multinational Company The Transnational Company The Global Company

  3. Globalisation Debate • Space and time contracting - Global Village • Everywhere is becoming like everywhere else • Consumer convergence • Search for scale and cost advantages • Worldwide sourcing for production • Global production • Falling of trade barriers

  4. Globalisation Cont. • Push Factors - factors that force a firm to contemplate moving from their home market • Pull Factors - those factors that attract firms into international markets

  5. Standardization Push Factors Pull Factors Standardization Global Village Consumer Convergence

  6. Or To Put It Another Way Drivers for International or Global Potential • Government Drivers • Competitive Drivers • Market Drivers • Cost Drivers

  7. Source: Adapted from YIP, Loewe and Yoshimo (1988) Industrial Globalisation Drivers - Detailed • Common customer needs • Global customers • Global channels • Transferable marketing MARKET DRIVERS INDUSTRY GLOBALISATION POTENTIAL • Favourable trade policies • Compatible technical • standards • Common marketing • regulations COST DRIVERS GOVERNMENT DRIVERS • Global scale • economies • Steep experience • curve • Low transportation costs • Differences in country costs • High product development costs • Need for technology transfer • High exports • High imports • Interdependence of countries • Competitors from different countries • Globalised competitors COMPETITIVE DRIVERS

  8. BUT I Prefer This International Development : • Push Factors • Pull Factors • Method • Direction

  9. Push and Pull Factors Affecting International Growth Pull Factors Motives Push Factors Motives • Saturated home • market • Limited growth • Escape from inflation • Increasing regulation • Costs • Competition in home • market increasing • Follow customer • Internationalisation • of industry • Create international • network • Competitive drivers • Market • liberalisation International Growth Method of Growth • Licensing • Agents • Franchising • Joint development • Acquisition • New development Direction of Growth

  10. Market Entry Issues

  11. Alternative Methods of Foreign Market Entry. Production in Home Market Foreign Production Sources Indirect Export Assembly Operations Direct Export Contract Manufacturing Export Trad. Co. Agents Licensing / Franchising Distributors Joint Ventures Via Domestic Sales Wholly Owned Export Management Co. Source: Young, Hamill, Wheeler & Davis

  12. Modes of Entry into Foreign Markets Direct Direct Investment Indirect Licensing JV Amount of Commitment, Risk, Control and Profit Potential Low High Source: F Root (1982)

  13. Source: Root F, Foreign Entry Strategies, 1982 Factors Affecting Foreign Market Entry Mode Decision External Factors Target Country Market Factors Home Country Factors Target Country Environmental Factors Target Country Production Factors Foreign Market Entry Decision Company Product Factors Company Resource Commitment Factors Internal Factors

  14. Elements of Global Organisation • Global strategy information • system • Cross-country co-ordination • Global strategic planning • Global budgeting • Global performance review • and compensation • Centralised global authority • No international division • Strong business dimension ORGANISATION STRUCTURE ABILITY TO DEVELOP AND IMPLEMENT GLOBAL STRATEGY MANAGEMENT PROCESSES PEOPLE • Use of foreign nationals • Multi-country careers • Frequent travel • Statements and actions of • leaders • Global identity • Commitment to world-wide • (v. domestic) employment • Interdependence • (v. autonomy) of businesses CULTURE Source: Adapted from YIP, Loewe and Yoshimo (1988)

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