Transcript Chapter_Seven

International
Strategies
Chapter 7
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Chapter Seven Learning Outcomes
7.1 Describe international strategy, and explain
why it’s important.
7.2 Explain the issues that arise as organizations
go international.
7.3 Describe the important international
strategy alternatives and explain how they’re
implemented and evaluated.
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Learning Outcome 7.1
• Describe international strategy, and explain
why it’s important.
• Doing business internationally is not new
– Countries and organizations have been trading
with each other for centuries
– Companies, including smaller firms, are finding
newer ways to do business internationally
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What is an International Strategy?
• It is a corporate strategy that describes
companies that do business in multiple
countries simultaneously.
• Can involve
– the marketplace,
– people, or
– finances
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Importance of International
Strategies
• One of the important reasons why companies
pursue international strategies—potential
new customers
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Review Learning Outcome 7.1
• Explain international strategy.
• Describe the possible advantages of being
international.
• Describe the potential drawbacks of being
international.
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Learning Outcome 7.2
• Explain the Issues That Arise As Organizations
Go International
– International strategy is part of the strategic
management process. As such, there will be
opportunities and threats to consider.
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The Legal-Political Environment
• The legal-political environment is not the
same on a global basis
– Australia, Germany, Japan, and Spain are similar to
the US
– Others are unstable – Bosnia, Nigeria, North Korea
– Still others are failed states – Somalia, Haiti, Sudan
– Each country has its own unique legal-political
environment that must be understood
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The Economic Environment
• Free Market Economy - resources are
primarily owned and controlled by the private
sector
• Planned Economy - economic decisions are
planned by a central government
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Inflation and Tax Policies
• Inflation Rates
– The rising cost for products and services
– This affects interest rates, exchange rates, cost of
living, and confidence in a country’s systems
– Strategic managers must monitor inflation rates to
anticipate changes in monetary policy and make
good decisions
• Diverse tax policies
– Can be restrictive or not, will determine tax
obligations
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The Cultural Environment
• Cultural differences are less obvious
– Companies that fail to understand the national
culture will fail to operate effectively
– Values and attitudes shared by individuals from a
specific country shape their beliefs and actions
– Strategic managers must be familiar with cultural
differences between the countries in which it does
business
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Review Learning Outcome 7.2
• What aspects of the legal-political
environment do strategic decision makers
need to examine?
• What economic issues might affect a
company’s international strategy?
• Discuss why it’s important to understand
national culture.
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Learning Outcome 7.3
• Describe the Important International Strategy
Alternatives and Explain How They Are
Implemented and Evaluated
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Multi-country Approach
• A firm with a multi-country approach varies its
strategies according to the country in which it
does business
– This is based on differentiation, products are
tailored to fit consumer tastes and preferences
– Marketing and distribution are adapted
– Competitive actions are chosen to fit the unique
circumstances of the market
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Global Approach
• A Global Approach is one where the strategies
are the same in all countries where the firm
does business
– This effort seeks to develop a low cost advantage
– More emphasis is placed on globally integrating
operations than on local market responsiveness
– Products will have minor variations
– Emphasis is on coordination between functions
and sharing of capabilities and technologies
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International Strategy Alternatives
• Expanding beyond domestic borders requires
considering several alternatives for growth:
– Exporting
– Importing
– Licensing
– Franchising
– Direct Investment
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International Strategy Alternatives –
cont’d
• Exporting
– A business makes products in its home country,
transports them to another country for sale
through an existing distribution channel
• Importing
– Selling products at home that were made in
another country
• Licensing
– The right to manufacture or sell for a fee
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International Strategy Alternatives –
cont’d
• Franchising
– Mainly used by retailers or service brands, the
company will sell limited rights to use its brand
name in return for a payment and share of profits
• Foreign Subsidiary
– Directly invest in a foreign country by setting up a
separate and independent facility or office
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Implementing and Evaluating
International Strategies
• Structuring International Organizations
– Multinational corporation (MNC) is any type of
international company that maintains operations
in multiple countries
– Multidomestic corporation, a type of MNC which
decentralizes management and other decisions to
the local country
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Structuring International
Organizations cont’d
• Global company, a MNC which centralizes its
management and other decisions in the home
country
• Transnational, or borderless, organization,
type of MNC that eliminates artificial
geographical barriers
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Other International Strategy
Implementation and Evaluation
Decisions
• International companies must address
implementation issues that concern various
aspects of its functional and competitive
strategies including
– Production/operations
– Marketing
– Human resources
– Information systems and financial-accounting
systems
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Learning Review: Learning
Outcome 7.3
• Contrast the multi-country and global
approaches
• What are the five international strategy
alternatives?
• Describe other international strategy
implementation and evaluation decisions
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