International Strategy

Chapter 8 : Chapter 8 International Strategy Michael A. Hitt R. Duane Ireland Robert E. Hoskisson ©2000 South-Western College Publishing

Slide2 : Chapter 3 Internal Environment Chapter 2 External Environment Strategic Intent Strategic Mission Strategic Competitiveness Above Average Returns Feedback Strategy Formulation Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 6 Corporate-Level Strategy Chapter 8 International Strategy Chapter 9 Cooperative Strategies Chapter 7 Acquisitions & Restructuring Strategy Implementation Chapter 10 Corporate Governance Chapter 11 Structure & Control Chapter 12 Strategic Leadership Chapter 13 Entrepreneurship & Innovation Strategic Actions

Slide3 : International Strategy Opportunities and Outcomes Identify International Opportunities Explore Resources and Capabilities Use Core Competence Strategic Competitiveness Outcomes International Strategies Modes of Entry Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage International Business-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Exporting Establishment of New Subsidiary Exporting Strategic Alliances Acquisition Management Problems and Risk Management Problems and Risk Higher Performance Returns Innovation

Slide4 : Selling Products or Services Outside a Firm’s Domestic Market International Strategy Lifecycle

Slide5 : Example: Aircraft manufacturers Boeing or Airbus Example: Japanese electronics or automobile manufacturers Motivations for International Expansion

Slide6 : Motivations for International Expansion Economies of Scale or Learning Expanding size or scope of markets helps to achieve economies of scale in manufacturing as well as marketing, R & D or distribution

Slide7 : Porter’s Determinants of National Advantage Home Country of Origin Is Crucial to International Success

Slide8 : International Strategy Opportunities and Outcomes Identify International Opportunities Explore Resources and Capabilities Use Core Competence Strategic Competitiveness Outcomes International Strategies Modes of Entry Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage International Business-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Exporting Establishment of New Subsidiary Exporting Strategic Alliances Acquisition Management Problems and Risk Management Problems and Risk Higher Performance Returns Innovation

Slide9 : International Differentiation Countries with advanced or specialized factor conditions most likely to use this strategy Example: Japan, Germany, U.S. International Low Cost Business-Level International Strategies

Slide10 : International Focus Strategies International Integrated Low Cost/Differentiation Business-Level International Strategies

Slide11 : Global Strategy Transnational Strategy Multi-Domestic Strategy Corporate-Level International Strategies

Slide12 : Business units in each country are independent of each other Assumes markets differ by country or regions Focus on competition in each market Prominent strategy among European firms due to broad variety of cultures and markets in Europe Strategy and operating decisions are decentralized to strategic business units (SBU) in each country Products and services are tailored to local markets Corporate-Level International Strategies

Slide13 : Products are standardized across national markets Decisions regarding business-level strategies are centralized in the home office Strategic business units (SBU) are assumed to be interdependent Emphasizes economies of scale Often lacks responsiveness to local markets Requires resource sharing and coordination across borders (which also makes it difficult to manage) Corporate-Level International Strategies

Slide14 : Seeks to achieve both global efficiency and local responsiveness Difficult to achieve because of simultaneous requirements for strong central control and coordination to achieve efficiency and local flexibility and decentralization to achieve local market responsiveness Must pursue organizational learning to achieve competitive advantage Corporate-Level International Strategies

Slide15 : International Corporate Strategy When is each strategy appropriate? Multi- Domestic

Slide16 : International Corporate Strategy When is each strategy appropriate? Multi- Domestic Global Strategy

Slide17 : International Corporate Strategy When is each strategy appropriate? Multi- Domestic Global Strategy Trans- national

Slide18 : International Strategy Opportunities and Outcomes Identify International Opportunities Explore Resources and Capabilities Use Core Competence Strategic Competitiveness Outcomes International Strategies Modes of Entry Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage International Business-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Exporting Establishment of New Subsidiary Exporting Strategic Alliances Acquisition Management Problems and Risk Management Problems and Risk Higher Performance Returns Innovation

Slide19 : Common way to enter new international markets No need to establish operations in other countries May have high transportation costs May have less control on marketing and distribution May encounter high import tariffs Difficult to customize products Establish distribution channels through contractual relationships Choice of International Entry Mode Exporting

Slide20 : Choice of International Entry Mode Licensing

Slide21 : Choice of International Entry Mode Strategic Alliances

Slide22 : Choice of International Entry Mode Acquisitions

Slide23 : New Wholly-Owned Subsidiary Choice of International Entry Mode

Slide24 : International Strategy Opportunities and Outcomes Identify International Opportunities Explore Resources and Capabilities Use Core Competence Strategic Competitiveness Outcomes International Strategies Modes of Entry Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage International Business-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Exporting Establishment of New Subsidiary Exporting Strategic Alliances Acquisition Management Problems and Risk Management Problems and Risk Higher Performance Returns Innovation

Slide25 : Strategic Competitiveness Outcomes

Slide26 : International Strategy Opportunities and Outcomes Identify International Opportunities Explore Resources and Capabilities Use Core Competence Strategic Competitiveness Outcomes International Strategies Modes of Entry Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage International Business-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Exporting Establishment of New Subsidiary Exporting Strategic Alliances Acquisition Management Problems and Risk Management Problems and Risk Higher Performance Returns Innovation

Slide27 : Political Risk Major Risks of International Diversification

Slide28 : Economic Risk Major Risks of International Diversification

Slide29 : Management Problems Limits To International Expansion