International Strategy Flashcards
What is the point of international strategy? and whats the use of the strategy?
To be able to exploit new market opportunities for growth and development.
Use: The strategy helps choose which geographic markets, what strategies to use and the mode of entry into that market that the company wants.
What organisations expand internaionally?
- large multinational enterprises (MNEs)
- new small firms including ‘born global’ firms
- publically listed or privately owned firms
- not-for profit organisations
- public-sector organisations
What drives internationalisation?
(Cost/Market/Govt/Competitive drivers)
Market drivers:
* Similiar customer needs abroad,
* Global customers that could buy,
* Transferable marketing into new markets
Cost drivers:
* Favourable logistics (not hard to transport),
* Country specific differences - e.g. better to manufacture in Bangladesh than Paris,
* Scale economies
Govt drivers:
* Decrease in trade policies,
* Liberalisation of free markets,
* Technical standardisation e.g. EU laws.
Comp. drivers:
* Global competitors (they can produce lower and undercut hence and buy rivals etc),
* Interdependence (subsidaries relying on each other around world)
What is a liability of foreigness? when it comes to international strategy
Differences between the home country of a company and abroad.
e.g. different regulations, cultures and ways of working with suppliers etc.
What are the determinants of Porter’s Diamond and what are they?
Top:
Firms strategy, structure and rivalry - Strong local rivals encourage each other to be the best and lead to competitive advantage as it separates them from non-domestic etc. Also helps how the firms are organised and managed
Right:
Demand conditions - businesses in a country can get competitive strengths if the industry of domestic buyers are the most demanding for that product/service. e.g. Swiss punctuality - watches.
Left:
Factor conditions - country has things that its specialised towards for that specific industry e.g. technological base in Silicon valley, Los Angeles.
Bottom:
Related and supporting industries - cluster of local companies can lead to national advantage if supporting industries are internationally competitive. e.g. Silicon valley has hardware, software, research and VC firms nearby that are key in the world.
What does the international value system mean?
When firms go wherever in the world to the most appropriate supplier for them.
This leads to advantages such as:
1) Cost advantages: e.g. labour costs, transportation, taxation, investment incentives etc.
2) Unique local capabilities: e.g. clusters of excellence
3) National market characteristics: enable differentiated product offerings for different markets/segments
What are the two pressures when selecting international strategy for a business?
1) Global integration pressures: encourage firms to coordinate their activities across countries to maximise efficiency
or
2) Local responsiveness pressures: disperse operations across countries, each with a high degree of autonomy and adapt products and services to meet local needs.
What is the global-local dilemma in international strategy? and how is best to manage this?
The global–local dilemma relates to the extent to which products and services may be standardised across national boundaries or need to be adapted to meet the requirements of specific national markets.
Best way: “think globally, act locally” i.e. globalise where you can but remain sensitive to local conditions.
What are the international strategies that a business can adopt?
- Export strategy
- Transnational strategy
- Multi-domestic strategy
- Global strategy
What are the key points of an export strategy (international strategy)?
- Leverages home country capabilities, innovations and products in foreign markets.
- Used when pressure for both global integration and local responsiveness is low.
- Suitable for companies with distinctive capabilities and strong brands (e.g. Google).
- The key risk is a home country-centred view in contrast to skilled local rivals.
What are the key points of an Transnational strategy (international strategy)?
- Seeks to maximise local responsiveness and global coordination.
- Aims to exploit learning and knowledge exchange between dispersed units.
- Efficient operations but products/services adapted to local conditions.
- Very hard to achieve in practice due to organisational complexity. (local variants around the world, hard to manage)
What are the key points of a Global strategy (international strategy)?
- Maximises global integration with little or no local adaptation of products/services – risk being may not meet local needs .
- Standardised products are deemed to suit all markets and efficient production is emphasised through economies of scale.
- Geographically dispersed activities are centrally controlled from headquarters.
e.g. Common for commodity products (e.g. cement) but also might include IKEA.
What are the key points of a Multi-domestic strategy (international strategy)?
- Maximises local responsiveness – different product offerings for different countries.
- A low level of international coordination.
- Organisation is like a collection of relatively independent units.
- Commonly found in marketing-orientated companies (e.g. food companies).
- Risks include manufacturing inefficiencies and brand dilution.
How can regional strategies be efficient within an international strategy?
By treating regions as homogenous markets and concentrating value chain activities within regions rather than specific countries.
Through enabling some local adaptation of products and services but at the level of the broader region rather than the country alone.
What are the three key criteria for assessting a countries market to enter into?
1) Market attractiveness: PESL of the PESTEL analysis, Porters Diamond, CAGE framework
2) Defenders reaction - likelihood and extent of backlash of entering from existing businesses/people etc.
3) Defenders clout - power of defenders to fight back (relationships with government, key suppliers etc.)
