ch09 discussion blue

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2004 by South-Western/Thomson Learning 1

International StrategyInternational Strategy

Robert E. Hoskisson

Michael A. Hitt

R. Duane Ireland

Chapter 9Chapter 9


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Chapter 2Chapter 2

Strategic LeadershipStrategic Leadership

Chapter 4Chapter 4

The InternalThe Internal

OrganizationOrganization

Chapter 6Chapter 6

Competitive Rivalry andCompetitive Rivalry and

Competitive DynamicsCompetitive Dynamics

Chapter 9Chapter 9


Chapter 1Chapter 1

Introduction toIntroduction to

Strategic ManagementStrategic Management

Chapter 3Chapter 3

The ExternalThe External

EnvironmentEnvironment

Chapter 5Chapter 5

Business-LevelBusiness-Level

StrategyStrategy

Chapter 8Chapter 8Acquisitions andAcquisitions and

Restructuring StrategiesRestructuring Strategies

Chapter 11Chapter 11

Corporate GovernanceCorporate Governance

Strategic IntentStrategic Intent

Strategic MissionStrategic Mission

Chapter 7Chapter 7

Corporate-Level StrategyCorporate-Level Strategy


Cooperative StrategyCooperative Strategy


Strategic EntrepreneurshipStrategic Entrepreneurship

Strategic

Analysis

Strategic

Thinking

Creating

Competitive

Advantage

Monitoring

And Creating

EntrepreneurialOpportunities

The Strategic Management ProcessThe Strategic Management Process

Chapter 8Chapter 8Acquisition andAcquisition and

Restructuring StrategiesRestructuring Strategies

Chapter 9Chapter 9



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Discussion QuestionsDiscussion QuestionsClick

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1. What are the issues that need to beaddressed when consideringinternational diversification decisions?

2. What opportunities create incentives topursue international diversificationstrategies?

3. How do domestic industry attributesshape international business level-strategyformulation?


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Discussion Questions (cont.)Discussion Questions (cont.)Click

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4. What two strategic emphases have

created opportunities for different

international corporate-level strategies

and structures?

5. What other significant trends have been

influencing the strategies?

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5

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Discussion Questions (cont.)Discussion Questions (cont.)

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6. Which international entry modes are leastrisky and why? Which international entrymodes provide the best control over

operations? Under what situations do youuse one mode versus another?

7. What are the potential overall benefits andrisks of international diversification?

8. Are there managerial limits to internationaldiversification?


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Discussion Question 1Discussion Question 1

What are the issues that need to be

addressed when consideringinternational diversificationdecisions?


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ExportingExporting

LicensingLicensing

StrategicStrategic

alliancesalliances

AcquisitionsAcquisitions

Establishment ofEstablishment of

a new subsidiarya new subsidiary

InternationalInternationalbusiness-levelbusiness-level

strategystrategy

MultidomesticMultidomestic

strategystrategy

Global strategyGlobal strategy

TransnationalTransnational

strategystrategy

Opportunities and Outcomes ofOpportunities and Outcomes of


Increased marketIncreased marketsizesize

Return onReturn on

investmentinvestment

Economies ofEconomies of

scale and learningscale and learning

Advantage inAdvantage in

locationlocation

Identify InternationalIdentify International

OpportunitiesOpportunitiesExplore ResourcesExplore Resources

and Capabilitiesand CapabilitiesUse CoreUse Core

CompetenceCompetenceInternationalInternational

StrategiesStrategies Modes of EntryModes of Entry


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BetterBetter

performanceperformance

InnovationInnovation

Opportunities and Outcomes ofOpportunities and Outcomes of

International Strategy:International Strategy: ContinuedContinued

ExportingExporting

LicensingLicensing

StrategicStrategic

alliancesalliances

AcquisitionsAcquisitions

Establishment ofEstablishment of

a new subsidiarya new subsidiary

Use CoreUse Core

CompetenceCompetence

Modes of EntryModes of Entry Management

problems and

risk

Management

problems and

risk

StrategicStrategic

CompetitivenessCompetitiveness

OutcomesOutcomes

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Discussion

Questions


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What opportunities create

incentives to pursue international

diversification strategies?


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Motivations for InternationalMotivations for International

ExpansionExpansion Increase Market ShareIncrease Market Share domestic market may lack the size to supportdomestic market may lack the size to support

efficient scale manufacturing facilitiesefficient scale manufacturing facilities

Return on InvestmentReturn on Investment large investment projects may require globallarge investment projects may require global

markets to justify the capital outlaysmarkets to justify the capital outlays

weak patent protection in some countriesweak patent protection in some countries

implies that firms should expand overseasimplies that firms should expand overseasrapidly in order to preempt imitatorsrapidly in order to preempt imitators


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Motivations for InternationalMotivations for International

ExpansionExpansion Economies of Scale or LearningEconomies of Scale or Learning expanding size or scope of markets helps toexpanding size or scope of markets helps to

achieve economies of scale in manufacturing asachieve economies of scale in manufacturing aswell as marketing, R & D or distributionwell as marketing, R & D or distribution

can spread costs over a larger sales basecan spread costs over a larger sales base

increase profit per unitincrease profit per unit

Location AdvantagesLocation Advantages

low cost markets may aid in developing competitivelow cost markets may aid in developing competitive

advantageadvantage

may achieve better access to:may achieve better access to:

Raw materialsRaw materials

Lower cost laborLower cost labor

Key customersKey customers

EnergyEnergy

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How do domestic industry attributes

shape international business level-

strategyformulation?


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International Business-Level Strategy:International Business-Level Strategy:

Determinants of National AdvantageDeterminants of National Advantage

Factors ofFactors of

productionproduction

Related andRelated and

supportingsupporting

industriesindustries

DemandDemand

conditionsconditions

Firm strategy,Firm strategy,

structure, andstructure, and

rivalryrivalry


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Factors of production:Factors of production: the inputs necessarythe inputs necessary

to compete in any industryto compete in any industry

laborlabor

landland

natural resourcesnatural resources

capitalcapital

infrastructureinfrastructure basic factors include natural and laborbasic factors include natural and labor

resourcesresources

advanced factors include digital communicationadvanced factors include digital communication

systems and educated workforcesystems and educated workforce


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Demand conditions:Demand conditions:characterized by thecharacterized by the

nature and size of buyers needs in thenature and size of buyers needs in the

home market for the industrys goods orhome market for the industrys goods or

servicesservices size of market segment can lead to scale-size of market segment can lead to scale-

efficient facilitiesefficient facilities

efficiency can lead to domination of theefficiency can lead to domination of the

industry in other countriesindustry in other countries

specialized demand may create opportunitiesspecialized demand may create opportunities

beyond national boundariesbeyond national boundaries


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Related and supporting industries:Related and supporting industries:

supporting services, facilities, supplierssupporting services, facilities, suppliers

and so onand so on

support in designsupport in design

support in distributionsupport in distribution

related industries as suppliers and buyersrelated industries as suppliers and buyers


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Firm strategy, structure, and rivalry:Firm strategy, structure, and rivalry: thethe

pattern of strategy, structure, and rivalrypattern of strategy, structure, and rivalry

among firmsamong firms

common technical trainingcommon technical training

methodological product and processmethodological product and process

improvementimprovement

cooperative and competitive systemscooperative and competitive systems


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What two strategic emphases have

created opportunities for the threedifferent international corporate-

level strategies and structures?


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International Corporate-LevelInternational Corporate-Level

StrategyStrategy

Need for Local ResponsivenessNeed for Local Responsiveness

Need

forGl o

balI

ntegr

ation

Need

forGl o

balI

ntegration

LowLow

HighHigh

LowLow HighHigh

GlobalGlobal

strategystrategy


strategystrategy


strategystrategy


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StrategyStrategy Type of corporate strategy selected willType of corporate strategy selected will

have an impact on the selection andhave an impact on the selection andimplementation of the business-levelimplementation of the business-level

strategiesstrategies Some corporate strategies provideSome corporate strategies provide

individual country units with flexibility toindividual country units with flexibility tochoose their own strategieschoose their own strategies

Others dictate business-level strategiesOthers dictate business-level strategiesfrom the home office and coordinatefrom the home office and coordinateresource sharing across unitsresource sharing across units


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strategystrategy


Strategy:Strategy: Multidomestic StrategyMultidomestic Strategy

Strategy and operating decisions areStrategy and operating decisions aredecentralized to strategic business units (SBU)decentralized to strategic business units (SBU)

in each countryin each country

Products and services are tailored to localProducts and services are tailored to localmarketsmarkets Business units in one country are independentBusiness units in one country are independent

of each otherof each other Assumes markets differ by country or regionsAssumes markets differ by country or regions

Focus on competition in each marketFocus on competition in each market Prominent strategy among European firmsProminent strategy among European firmsdue to broad variety of cultures and marketsdue to broad variety of cultures and markets

in Europein Europe


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product characteristicsproduct characteristics

tailored to localtailored to local

preferencespreferences

isolation from globalisolation from globalcompetitioncompetitionestablish protectedestablish protected

market positionsmarket positionscompete in industrycompete in industry

segments mostsegments most

affected byaffected by

differences amongdifferences among

local countrieslocal countries

Worldwide Geographic AreaWorldwide Geographic Area

Structure:Structure:

MultinationalMultinational

HeadquartersHeadquartersEuropeEurope

UnitedUnited

StatesStates

MiddleMiddle

East/East/

AfricaAfrica

AsiaAsia

AustraliaAustralia

LatinLatin

AmericaAmerica

Multidomestic StrategyMultidomestic Strategy


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Strategy:Strategy: Global StrategyGlobal Strategy

GlobalGlobal

strategystrategy

Products are standardized across nationalProducts are standardized across nationalmarketsmarkets

Decisions regarding business-level strategiesDecisions regarding business-level strategies

are centralized in the home officeare centralized in the home office Strategic business units (SBU) are assumed toStrategic business units (SBU) are assumed tobe interdependentbe interdependent

Emphasizes economies of scaleEmphasizes economies of scale Often lacks responsiveness to local marketsOften lacks responsiveness to local markets

Requires resource sharing and coordinationRequires resource sharing and coordinationacross borders (which also makes it difficultacross borders (which also makes it difficult

to manage)to manage) Historically prominent among Japanese firmsHistorically prominent among Japanese firms


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standardized productsstandardized products

across countriesacross countries

economies of scopeeconomies of scope

and scaleand scale outsource someoutsource some

primary or supportprimary or support

activities to theactivities to the

worlds best providersworlds best providers

decision-makingdecision-making

authority centralizedauthority centralized

in worldwide divisionin worldwide division

headquartersheadquarters

Worldwide Product DivisionalWorldwide Product Divisional

Structure:Structure:

GlobalGlobal

CorporateCorporate

HeadquartersHeadquarters

WorldwideWorldwideProductsProductsDivisionDivision






Global StrategyGlobal Strategy


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strategystrategy


Strategy:Strategy: Transnational StrategyTransnational Strategy

Seeks to achieve both global efficiency andSeeks to achieve both global efficiency andlocal responsivenesslocal responsiveness

Difficult to achieve because of simultaneousDifficult to achieve because of simultaneous

requirementsrequirements strong central control and coordination tostrong central control and coordination to

achieve efficiencyachieve efficiency decentralization to achieve local marketdecentralization to achieve local market

responsivenessresponsiveness

Must pursue organizational learning toMust pursue organizational learning toachieve competitive advantageachieve competitive advantage


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What other significant trends havebeen influencing the strategies?


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Environmental TrendsEnvironmental Trends

Liability of Foreignness security risks

tighter immigration policies

Regionalization location can affect value creation

may wish to narrow focus to a particular

region of the world enter regional markets sequentially,

beginning with the most familiar market


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Which international entry modes areleast risky and why? Which

international entry modes provide thebest control over operations? Underwhat situations do you use one modeversus another?


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Type of EntryType of Entry CharacteristicsCharacteristics

ExportingExporting High cost, low controlHigh cost, low control

LicensingLicensing Low cost, low risk, little control, lowLow cost, low risk, little control, low

returnsreturns

Strategic alliancesStrategic alliances Shared costs, shared resources, sharedShared costs, shared resources, shared

risks, problems of integrationrisks, problems of integration

AcquisitionAcquisition Quick access to new market, high cost,Quick access to new market, high cost,

complex negotiations, problems ofcomplex negotiations, problems ofmerging with domestic operationsmerging with domestic operations

New wholly ownedNew wholly owned

subsidiarysubsidiary

Complex, often costly, time consuming,Complex, often costly, time consuming,

high risk, maximum control, potentialhigh risk, maximum control, potential

above-average returnsabove-average returns

Global Market Entry: Choice ofGlobal Market Entry: Choice of

Entry ModeEntry Mode

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What are the potential overall

benefits and risks of internationaldiversification?


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Value Creation Outcomes:Value Creation Outcomes: ReturnsReturns

International diversification and returnsInternational diversification and returns::firm expands the sales of its goods or servicesfirm expands the sales of its goods or services

across the borders of global regions and countriesacross the borders of global regions and countries

into different geographic locations or marketsinto different geographic locations or markets may increase a firms returnsmay increase a firms returns

such firms usually achieve the most positivesuch firms usually achieve the most positive

stock returnsstock returns

firm may achieve economies of scale andfirm may achieve economies of scale andexperience, location advantages, increasedexperience, location advantages, increased

market size and opportunity to stabilize returnsmarket size and opportunity to stabilize returns


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Value Creation Outcomes:Value Creation Outcomes: InnovationInnovation

International diversification and innovationInternational diversification and innovation::firm expands the sales of its goods or servicesfirm expands the sales of its goods or services

across the borders of global regions and countriesacross the borders of global regions and countries

into different geographic locations or marketsinto different geographic locations or markets potentially greater returns on innovations (largerpotentially greater returns on innovations (larger

markets)markets)

generate additional resources for investment ingenerate additional resources for investment in

innovationinnovation exposed to new products and processes inexposed to new products and processes in

international markets, generates additionalinternational markets, generates additional

knowledge leading to innovationsknowledge leading to innovations


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Risks in an InternationalRisks in an International


Political RisksPolitical Risks Economic RisksEconomic Risks

Political risks includePolitical risks include instability in national governmentsinstability in national governments

war, both civil and internationalwar, both civil and international potential nationalization of a firms resourcespotential nationalization of a firms resources

Political RisksPolitical Risks


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Risks in an InternationalRisks in an International


Economic RisksEconomic Risks

Economic risks are interdependent with politicalEconomic risks are interdependent with political

risks and includerisks and include

differences and fluctuations in the value of differentdifferences and fluctuations in the value of differentcurrenciescurrencies

differences in prevailing wage ratesdifferences in prevailing wage rates

difficulties in enforcing property rightsdifficulties in enforcing property rights

unemploymentunemployment

Political RisksPolitical Risks

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Limits to International Expansion:Limits to International Expansion:

Management ProblemsManagement ProblemsCost of coordination across diverseCost of coordination across diverse

geographical business unitsgeographical business units

Institutional and cultural barriersInstitutional and cultural barriers

Understanding strategic intent ofUnderstanding strategic intent of

competitorscompetitors

The overall complexity of competitionThe overall complexity of competition

ch09 discussion blue

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