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Strategies for Competing in Globalizing Markets. International Strategies: Advantages. Gain access to: New customers Capital Raw materials Skills and expertise Exploit economies of scale Capitalize on core competencies Spread risks across a broader base.

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international strategies advantages
International Strategies:Advantages
  • Gain access to:
    • New customers
    • Capital
    • Raw materials
    • Skills and expertise
  • Exploit economies of scale
  • Capitalize on core competencies
  • Spread risks across a broader base
international strategies political environment
International Strategies:Political Environment
  • Political risk
    • Domestic instability
    • Foreign conflict
    • Political climate
    • Economic climate
international strategies political environment4
International Strategies:Political Environment
  • Political mechanisms
    • Protectionism
      • Tariff
      • Quota
      • Subsidy
      • Cartel
    • Under the table
      • Bribery
      • Extortion
      • Grease payments
international strategies cultural environment
International Strategies:Cultural Environment
  • Language
  • Symbols
  • Values and beliefs
  • Individual differences
    • Social orientation
    • Power orientation
    • Uncertainty orientation
    • Goal orientation
    • Time orientation
international strategies economic environment
International Strategies:Economic Environment
  • Economic system
    • Market
    • High growth/high potential
    • Other
  • Natural resources
  • Infrastructure
  • FX exposure
international strategies entering international markets
International Strategies:Entering International Markets
  • Importing and exporting
  • Licensing
  • Franchising
  • Strategic alliances
  • Direct investment
international strategies importing and exporting
Advantages

Small cash outlay

Little risk

No adaptation necessary

Disadvantages

Tariffs and taxes

High transportation costs

Government restrictions

International Strategies:Importing and Exporting
international strategies licensing
Advantages

Increased profitability

Extended profitability

Disadvantages

Inflexibility

Helps competitors

International Strategies:Licensing
international strategies strategic alliances
Advantages

Quick market entry

Access to materials and technology

Disadvantages

Shared ownership limits control and profits

International Strategies:Strategic Alliances
international strategies strategic alliances11
International Strategies:Strategic Alliances
  • Mutually strengthens partners
    • Exploit economies of scale
    • Fills gaps in technology and expertise
    • Share distribution facilities
  • Must overcome issues of
    • Language, cultural barriers and trust
    • Differences on how to proceed
    • Effective and efficient decision making
    • Sharing competitively sensitive information
international strategies strategic alliances12
International Strategies:Strategic Alliances
  • Pick good partners
  • Be sensitive to cultural differences
  • Alliance must benefit both sides
  • Ensure parties honor their commitments
  • Initiate structure for fast and effective decision making
  • Keep the alliance flexible
international strategies direct investment
Advantages

Enhances control

Existing infrastructure

Disadvantages

Complexity

Greater economic and political risk

Greater uncertainty

International Strategies:Direct Investment
international strategies direct investment14
International Strategies:Direct Investment
  • Multinational or multi-domestic
    • Adjusting products, services and practices to individual countries or regions
    • Each subsidiary is somewhat independent
  • Global
    • Stresses world-wide consistency and standardization
    • More centralized control
international strategy
International Strategy
  • Create value by transferring valuable core competencies to foreign markets that indigenous competitors lack
  • Centralize product development functions at home
  • Establish manufacturing and marketing functions in local country but head office exercises tight control over it
  • Limit customization of product offering and market strategy
    • Strategy effective if firm faces weak pressures for local responsive and cost reductions
multidomestic strategy
Multidomestic Strategy
  • Main aim is maximum local responsiveness
  • Customize product offering, market strategy including production, and R&D according to national conditions
  • Generally unable to realize value from experience curve effects and location economies
  • Possess high cost structure
global strategy
Global Strategy
  • Focus is on achieving a low cost strategy by reaping cost reductions that come from experience curve effects and location economies
  • Production, marketing, and R&D concentrated in few favorable functions
  • Market standardized product to keep cost’s low
  • Effective where strong pressures for cost reductions and low demand for local responsiveness
    • Semiconductor industry
transnational strategy
Transnational Strategy
  • To meet competition firms aim to reduce costs, transfer core competencies while paying attention to pressures for local responsiveness
  • Global learning
    • Valuable skills can develop in any of the firm’s world wide operations
    • Transfer of knowledge from foreign subsidiary to home country, to other foreign subsidiaries
  • Transnational strategy difficult task due to contradictory demands placed on the organization
    • Example : Caterpillar
international strategies direct investment20
International Strategies:Direct Investment
  • Profit sanctuaries
    • Countries where a firm derives significant profits
    • Strong market position
  • Cross-market subsidization
    • Subsidize price through margins gained in other markets
    • Many consider unfair
international strategies local defenses
International Strategies:Local Defenses
  • Use home-field advantages
  • Transfer expertise to cross-border markets
  • Shift to a new business model or niche
  • Contend on a global level