Transcript Strategic Management: Competitiveness and Globalization

Knowledge Objectives
• Understand the 4 strategies
for foreign expansion
• Understand the benefits from
foreign expansion
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Opportunities and Outcomes
of International Strategy
Identify International
Opportunities
Increased market
size
Return on
investment
Economies of
scale and learning
Advantage in
location
Explore Resources
and Capabilities
International
Strategies
Use Core
Competence
Modes of Entry
International
business-level
strategy
Exporting
Multidomestic
strategy
Strategic
alliances
Global strategy
Acquisitions
Transnational
strategy
Establishment of
a new subsidiary
Licensing
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Opportunities and Outcomes
of International Strategy
Use Core
Competence
Modes of Entry
Exporting
Management
problems and
risk
Licensing
Strategic
alliances
Acquisitions
Establishment
of a new
subsidiary
Strategic
Competitiveness
Outcomes
Better
performance
Innovation
Management
problems and
risk
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Motivations for International
Expansion
• Increase Market Share
– domestic market may lack the size to support
efficient scale manufacturing facilities
• Return on Investment
– large investment projects may require global
markets to justify the capital outlays
– weak patent protection in some countries implies
that firms should expand overseas rapidly in order
to preempt imitators
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Motivations for International
Expansion
• Economies of Scale or Learning
– expanding size or scope of markets helps to
achieve economies of scale in manufacturing as
well as marketing, R & D or distribution
– can spread costs over a larger sales’ base
– increase profit per unit
• Location Advantages
– low cost markets may aid in developing
competitive advantage
– may achieve better access to:
• Raw materials
• Key customers
• Lower cost labor
• Energy
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International Business-Level
Strategy: Determinants of National
Advantage
• Factors of production: the inputs necessary to
compete in any industry
–
–
–
–
–
–
–
labor
land
natural resources
capital
infrastructure
basic factors include natural and labor resources
advanced factors include digital communication
systems and educated workforce
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Average Scientists &
Engineers in R&D (per mil
persons)
Average Total R&D Expenditure: Top 20 Economies
1997 - 2000 (Bil of International $)
Japan
$90.5b
5000
Finland
$3.6b
Sweden
$7.2b
United States
$230.8b
4000
Russia
$9.3b
Australia $6.7b
Switzerland
$5.3b
Belguim
$4.6b
3000
Canada $13.8b
Germany $47.2b
France $29.6b
United Kingdom $23.9b
2000
Austria
$3.7b
Spain $6.5b
Netherlands
$7.7b
South Korea
$16.2b
Israel $3.6b
Italy $13.7b
1000
China $34.4b
Brazil $9.8b
0
0.0
0.5
1.0
1.5
2.0
2.5
Average R&D Expenditure (% of GDP)
3.0
3.5
4.0
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International Business-Level
Strategy: Determinants of National
Advantage
• Demand conditions: characterized by the
nature and size of buyers’ needs in the home
market for the industry’s goods or services
– size of market segment can lead to scale-efficient
facilities
– efficiency can lead to domination of the industry in
other countries
– specialized demand may create opportunities
beyond national boundaries
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International Business-Level
Strategy: Determinants of National
Advantage
• Related and supporting industries: supporting
services, facilities, suppliers and so on
– support in design
– support in distribution
– related industries as suppliers and buyers
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International Business-Level
Strategy: Determinants of National
Advantage
• Firm strategy, structure, and rivalry: the
pattern of strategy, structure, and rivalry
among firms
– common technical training
– methodological product and process improvement
– cooperative and competitive systems
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Source:
MIT
Sloan
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Source:
MIT
Sloan
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Source:
MIT
Sloan
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Need for Global Integration
International Corporate-Level
Strategy
High
Global
strategy
Transnational
strategy
Multidomestic
strategy
Low
Low
High
Need for Local Responsiveness
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International Corporate-Level
Strategy: Multidomestic Strategy
• Strategy and operating decisions are
decentralized to strategic business units
Multidomestic
(SBU) in each country
strategy
• Products and services are tailored to local
markets
• Business units in one country are
independent of each other
• Assumes markets differ by country or
regions
• Focus on competition in each market
• Prominent strategy among European firms
due to broad variety of cultures and markets
in Europe
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International Corporate-Level
Strategy: Global Strategy
Global
strategy
• Products are standardized across
national markets
• Decisions regarding business-level
strategies are centralized in the home
office
• Strategic business units (SBU) are
assumed to be interdependent
• Emphasizes economies of scale
• Often lacks responsiveness to local
markets
• Requires resource sharing and
coordination across borders (which also
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makes it difficult to manage)
International Corporate-Level
Strategy: Transnational Strategy
Transnational
strategy
• Seeks to achieve both global
efficiency and local responsiveness
• Difficult to achieve because of
simultaneous requirements
 strong central control and
coordination to achieve efficiency
 decentralization to achieve local
market responsiveness
• Must pursue organizational learning
to achieve competitive advantage
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Strategic Competitiveness
Outcomes: Returns
• International diversification and returns: firm
expands the sales of its goods or services across the
borders of global regions and countries into different
geographic locations or markets
– may increase a firm’s returns
– such firms usually achieve the most positive stock
returns
– firm may achieve economies of scale and
experience, location advantages, increased market
size and opportunity to stabilize returns
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Strategic Competitiveness
Outcomes: Innovation
• International diversification and innovation: firm
expands the sales of its goods or services across the
borders of global regions and countries into different
geographic locations or markets
– potentially greater returns on innovations (larger
markets)
– generate additional resources for investment in
innovation
– exposed to new products and processes in
international markets, generates additional
knowledge leading to innovations
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