Describe the strategic competition perspective
the internationalization choices take place on various levels based on analyses of competitors, balanced against the company’s competences and resource base.
- the company’s goal is determined by its interest in survival and financial earnings.
What is the basic assumption of the strategic competition perspective?
- firms seek alignment between their strategic objectives and opportunities they envision in foreign market.
- The firm has a clearly formulated core strategy based on its competitive advantage.
- Its internationalization is primarily driven by external factors (after core competencies of the firm have been identified), i.e., country attractiveness and competitive positing of others.
- Internationalization is done to win the competition by establishing significant market share globally.
What is the preferred entry mode in the strategic competition perspective?
Analyze the environment to create a strategy as a response – no preferred way.
How is the key issues and strategic challenges affected?
The key issues and strategic imperatives facing the firm will vary depending on the degree of experience and the nature of operations in international markets.
- In the initial phase of entry, a key objective is the geographic expansion of operations to identify markets overseas for existing products and services and to leverage potential EoS in production and marketing.
- After, emphasis shifts to developing local markets and exploiting potential economies of scope, building upon the existing geographic base.
- In the third phase, attention shifts to consolidation of overseas expansion initiatives, and improved coordination and integration of operations to take advantage of potential synergies in multinational operations.
- LINKED TO ARBITRAGE AND A SEMI-GLOBALIZED BUSINESS MODEL
Explain the process of strategy formulation according to Douglas and Craig.
Strategy formulation in international markets involves a number of key parameters whose nature and impact will depend on the phase in the internationalization process:
- At each phase a number of triggers (internal and external) will prompt movement into a new phase stimulating generation of a new strategic thrust.
- The direction of this is guided by the key international levers in each phase.
- Together these will define the key strategic decisions and expected outcomes.
What is the Strategic Thrust?
The strategic thrust determines the direction the firm will pursue and defines the arena in which the firm will compete, as well as its strategic priorities.
What are Key International Levers?
The key strategic levers aid in further redefining the direction of the firm’s efforts and determining the decision and investment priorities at each successive stage.
What are the phases of international market development?
- Pre-internationalization: domestic focus
- Phase 1. Initial International Market Entry: Focus is to identify markets overseas for existing products and services and to leverage potential EoS.
o Triggers to internationalization:
Some of the factors which may underlie this shift are: - Saturated home market
- Movement overseas of domestic customers
- Diversification of risk
- Overseas sourcing opportunities
- International competitors in home market
- …
o Key Strategic Thrust: The firm’s efforts are directed toward identifying the most attractive market opportunities overseas for its existing products/services (minimal adaptation to reach economies of scale).
o International Levers: The firm seeks to leverage its domestic competitive position and core competency, given the lack of experience and knowledge in overseas markets.
Key Decisions in the phase of initial entry: - 1) the choice of countries to enter,
- 2) the timing of entry, and
- 3) how operations are to be conducted in these countries.
- Phase 2. Local Market Expansion: focus of developing local markets and exploiting potential economies of scope, building upon the existing geographic base.
o Triggers to Overseas Market Expansion:
Concern with increasing market penetration
Need to meet local competition,
Desire to foster local management initiative and motivation;
Concern for more effective utilization of local assets
Constraints imposed by natural market boundaries and barriers
o Adopt a nationally oriented focus in strategy development in a series of multidomestic markets or businesses.
o Key Strategic Thrust: The driving force underlying this phase is market expansion within existing countries through local responsiveness to reach economies of scope.
o Internationalization Levers: to build a strategy based on the organizational structure established in each country to achieve economies of scope and to leverage assets and core competencies to foster local market growth.
Multidomestic strategy. - Phase 3. Global Rationalization: focus on consolidation of overseas expansion initiatives, and improved coordination and integration.
o Triggers to Global Rationalization:
Cost inefficiencies and duplication of effort;
Opportunities for the transfer of products, brands, and other ideas and of learning from experience.
Emergence of competition on a global scale;
Improved linkages between national marketing infrastructures leading to the development of a global marketing infrastructure.
o Key Strategic Thrust:
the firm seeks to capitalize on potential synergies arising from operating on a global scale by optimal allocation of resources globally to maximize profits. - eliminating duplication of effort and realization of economies of scale enhanced by product standardization.
o Internationalization Levers:
the key levers lie in exploitation of potential synergies arising from operating on a global scale through improved coordination and integration.
Leverage may also be achieved through the transfer of experiences, skills and resources. - developing a global strategy, geocentric mindset.
What can explain the non-linearity of our firm’s internationalization paths?
The key role played by strategic objectives in internationalization decisions may explain the non-linearity. Internationalization does not necessarily start in less distant countries and proceed towards more distant ones with increasing resources commitment. These paths may be the result of a firm’s market assessment in terms of its “strategic instrumentality” for prospective internationalization plans, thus discounting the psychic distance.
- the relative strategic importance of markets is important, because current and future decisions to enter countries that are distant can be explained by the fact that these are hubs to access other strategic markets.
According to Yip, what are the three steps to develop a global strategy?
- Developing the core strategy –basis of sustainable competitive advantage.
o Often happens in host country - Internationalizing the core strategy through international expansion of activities and through adaptation.
- Globalizing the international strategy by integrating the strategy across countries.
Explain the global strategy model according to Yip.
Industry globalization drivers are externally determined, while global strategy levers are choices available to the worldwide business.
- Drivers create the potential for a multinational business to achieve the benefits of global strategy. To achieve these benefits a multinational business needs to set its global strategy levers appropriately to industry drivers.
What is the focus in a multidomestic and global strategy?
- a multidomestic strategy seeks to maximize worldwide performance by maximizing local competitive advantage, revenues, or profits;
- a global strategy seeks to maximize worldwide performance through sharing and integration.
What are some of the drawbacks of Global Strategy?
- higher management costs through increased coordination, reporting requirements, and added staff.
- reduce the firm’s effectiveness in individual countries if overgeneralization hurts local motivation and moral
- Product standardization can result in a product that does not entirely satisfy any customers
- Activity concentration distances customers and can result in lower responsiveness and flexibility.
- Uniform marketing can reduce adaptation to local customer behavior.
- Integrated competitive moves can mean sacrificing revenues, profits, or competitive position in individual countries
