Transcript International Strategy

Globalization
Globalization
refers todrive
the
distribution
of the
ofsystem
goodsofand
Globalization
all those
processes
by production
which
the peoples
The
present worldwide
toward
a globalized
economic
services,
through
reduction of
barriers
to international
trade
as tariffs,
the world
incorporated
into
a single
world
global
dominated
byare
supranational
corporate
trade
and society,
banking
institutions
export
and import quotas.
Globalization
has or
accompanied
society
that
arefees,
not accountable
to democratic
processes
national and
allegedly contributed to rapid economic growth in developing countries
governments.
through
increased
application
of the beings
principle
Globalization
is aspecialization
term used toand
describe
how human
areof
comparative
advantage
becoming
more
intertwined
with eachweak
othercountries
around the
world
The
process of
exploiting
economically
by connecting
and
culturally.
theeconomically,
economies ofpolitically,
the world,
forcing
dependence on (and ultimately
Globalization
is the
growing
economic
interdependence of countries
servitude
to) the
western
capitalist
machine.
worldwide
through
increasing
and variety
crossborder
Globalization
broadly
refers volume
to the expansion
of of
global
linkages, the
transactions
in goods
and
freescale,
international
organization
of social
lifeservices,
on a global
and thecapital
growthflows,
of a and
more
rapid
and widespread
diffusion
technology. of world society.
global
consciousness,
hence
to the of
consolidation
Ethical Considerations in
International Operations
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Cultural relativism holds that ethical truths are

Cultural normativism holds that there are
determined by the culture where decisions and
actions occur.
universal standards of behavior that apply
everywhere.
Ethical Considerations
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
Bribery consists of payments, or promises to pay
cash or something else of value, to public
officials and/or other people of influence.
The U.S. Foreign Corrupt Practices Act of 1997:
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
outlaws the payment of bribes by U.S. firms to foreign
officials, political parties, party officials, or party candidates
applies to firms registered in the U.S. and to any foreign
firms that are quoted on any U.S. stock exchange
was extended in 1998 to include bribery by foreign firms
operating in U.S. territory
Ethical Considerations
Child Labor

According to the International Labor Organization:
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more than 250 million children between 5 and 17 are working
worldwide
nearly three-quarters of those children who work are very
young or are working in ways that endanger their health or
well-being because of hazards, sexual exploitation, trafficking,
and/or debt bondage
Those who argue in favor of child labor claim that in many
instances if the children were not employed, they would in
fact be worse off.
While some firms simply avoid operating in countries where
child labor is used, other firms work to establish responsible
operating policies in those locales.
International Strategy
Strategy Formulation
International
Complementarity
International
Global
Multidomestic
Transnational
Diversification
Business Level
Synergy
Related
Unrelated
Complementarity: the filling-out, balancing, or extension of
strategy to increase strategic opportunities.
Competitive
Advantage
Low Cost
Differentiated
Focused/Broad
Integrated
Speed
International Strategy
International Business – Conducts business
across national boundaries
Multinational Corporation (MNC) – Controls
business activities in more than one country
Assumptions
Strategies that favor global operations and
brands are based on three assumptions:
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Customer needs and preferences worldwide
are becoming more homogenous
Customers worldwide prefer higher quality
at lower prices
Economies of production and marketing can
be achieved through global operations
Benefits of International Strategy
Four C’s
 Customers – expand markets
 Costs –economies of scale and scope
 Competition – utilization of resources
 Capabilities – opportunities for learning
Risks of International Strategy

Political
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Economic
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trade barriers; tariffs and subsidies; property
rights laws
Management
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government instability; social unrest; terrorism;
absence of law
differences in culture and customs, language,
customer preferences, distribution systems
Currency

exchange rate changes
Porter’s National Diamond
Extends and adapts theory of comparative
advantage to take account of three factors:

International competitive advantage is about
companies not countries—the role of the national
environment is providing a home base for the
company.

Sustained competitive advantage depends upon
dynamic factors-- innovation and the upgrading of
resources and capabilities

The critical role of the national environment is its
impact upon the dynamics of innovation and upgrading.
Choices in International Strategy
Respond to Two Pressures
• Pressure to Reduce Costs
• Pressure for Local Adaptation
Results in Four Strategic Choices
• International
• Global
• Multidomestic
• Transnational
Pressures and Strategies
Strengths and Limitations of Strategies
Strategy
International
Strengths
• Leverage and diffuse
parent’s knowledge and
core competencies.
• Lower costs because of
less need to tailor
products and services.
• Greater level of
worldwide coordination
Limitations
• Limited ability to adapt to
local markets.
• Inability to take advantage
of new ideas and
innovations occurring in
local markets.
Strengths and Limitations of Strategies
Strategy
Global
Strengths
• Strong integration across
various businesses.
Limitations
• Limited ability to adapt to
local markets.
• Standardization leads to
• Concentration of activities
higher economies of scale
may increase dependence
which lowers costs.
on a single facility.
• Helps to create uniform
standards of quality
throughout the world.
• Single locations may lead
to higher tariffs and
transportation costs.
Strengths and Limitations of Strategies
Strategy
Strengths
Multidomestic • Ability to adapt products
and services to local
market conditions.
• Ability to detect potential
opportunities for
attractive niches in a
given market, enhancing
revenue.
Limitations
• Less ability to realize cost
savings through scale
economies.
• Greater difficulty in
transferring knowledge
across countries.
• May lead to “overadaptation”
as conditions change.
Strengths and Limitations of Strategies
Strategy
Transnational
Strengths
• Ability to attain
economies of scale.
• Ability to adapt to local
markets.
Limitations
• Unique challenges in
determining optimal
locations of activities to
ensure cost and quality.
• Ability to locate activities • Unique managerial
challenges in fostering
in optimal locations.
knowledge transfer.
• Ability to increase
knowledge flows and
learning.
Entry Modes of International Expansion
Wholly Owned
Subsidiary
Extent of Investment Risk
High
Joint Venture
Strategic Alliance
Franchising
Licensing
Exporting
Low
Low
High
Degree of Ownership and Control