International Strategy Flashcards
(21 cards)
Changed Conditions fostering global competition
- Declining Tariffs and Emergence of regional trading blocks.
- homogenization of consumer tastes and lifestyles
- Telecommunication technology
- Transportation technology
Reasons for international activity
- New markets
- lower Costs
- Raw materials access
- Income stream Diversification
- Strategic Market Protection.
Adding Value Through for International activity
- Economies of scale
- Experience curve
- Core skills transfer
- Value chain reconfiguration
- Amortization of product Development Costs/capital investment
- Window on Technology
Competitive Downside of Industry Globalization
- Lower entry barriers Initially (Market extensions)
- Lower industry Concentration
- Increased Competitor Diversity
- Increased Buyer Choice.
All serve to increase competitive Intensity and depress industry profitability.
International Strategic Approach
- International Strategy
- Multidomestic (Localization) Strategy
- Global standardization Strategy
- Transnational Strategy
International Strategy
- Creating value by transferring competencies and products to foreign markets where indigenous competitors lack those competencies and products.
- Makes sense if a company has a valuable competence that indigenous competitors in foreign markets lack and if it faces weak pressure for local responsiveness and cost reductions.
Multidomestic (Localization ) Strategy
- Developing a business model that allows a company to achieve maximum local responsiveness.
- Make sense when there are high pressures for local responsiveness and low pressures for cost reductions
- Companies may become too decentralized and lose the ability to transfer skills and products.
Global Standardization strategy
- Focusing on increasing profitability by reaping cost reductions that come experience curve effects and location economies; pursuing a low-cost strategy on a global scale.
- Makes sense when there are strong pressures for cost reductions and demand for local responsiveness is minimal.
Transnational Strategy
- Simultaneously seeking to lower costs, be locally responsive, and transfer competencies in a way consistent with global learning.
Basic Entry decisions
- Which overseas markets to enter
- Timing of entry
- Scale of entry and strategic commitments
Assessment of long-run profit potential
A function of the size of the market, purchasing power of consumers, the likely future purchasing power of consumers
- Balancing the benefits, costs, and risks associated with doing business in a country.
- A function of economic development and political stability.
Integrations responsiveness grid.
- Thee need for global integration
If the market shows a need for each other
If people uses the product or services in the same way in everywhere.
NEEd for local responsiveness
- when government is on the way,
- transportation is too expensive.
Depends on where a company is the approach will make sense.
Company like Nestle (see the book)
Timing Entry
First - mover advantages
First-mover disadvantages
Scale of entry and strategic commitments
- Entering on a large scale is a strategic commitment, both positive and negative
- Benefits and drawbacks of small-scale entry
The choice of Entry Mode
- Exporting
- Licensing
- Franchising
- Joint Ventures
- Wholly-owned subsidiaries
Exporting
- Many companies begin global expansion through exporting production
- Exporting allows companies to bypass the cost of establishing manufacturing facilities
- Exporting may be consistent with scale economies and location economies.
Licensing
- A licensee in a foreign country can purchase the rights to produce a product in their country
- the cost of development is low, as well as the risk involved.
Franchising
- A specialized form of licensing where the franchiser sells intangible property (usually a brand or trademark)
- The franchisee agrees to follow the strict rules and business plans of the company.
Joint Venture
- Separate corporations come together to form a new corporate entity
- two or more companies have an ownership stake, but combine resources for mutual benefit.
- sharing knowledge can be dangerous for the companies involved.
Wholly owned subsidiaries
- A parent company owns 100% of a smaller self-contained business unit.
- This can be a very costly approach, since the parent company is responsible for all of the financing.
Strategic Alliances
Advantages
- Facilitate entry into a foreign market
- share fixed costs and associated risks
- bring together complementary skills and assets
- set technological standards to the industry.
Disadvantages
- Give competitors a low-cost route to gain new technology and market access.
