Transcript Document

CH15: International Strategies
Global Strategy
Firms who define international competitiveness as
no more than low-cost manufacturing are aiming
at the wrong target.
World-scale manufacturing may provide the
necessary armament, and government support may
be a tactical advantage, but winning the war
against global competition requires a broader view
of global strategy.
Global Strategy
The competitive advantages to be gained
from location, world-scale volume, or
global brand distribution are arrayed
against the three kinds of strategic intent:
1. Building a global presence
2. Defending a domestic dominance
3. Overcoming national fragmentation
Global Strategy by Firms in TV
1. Building a global presence: Japanese
companies such as Sony, Matsushita, Mitsubishi,
2. Defending a domestic position: American
companies such as RCA, GE, Zenith
3. Overcoming national fragmentation:
European companies such as Philips of
Netherlands, CSF Thomson of France
Historic Focus of FDI
1. Why do firms go overseas as direct
2. How can foreign firms compete with local
3. Why do firms enter foreign markets as
Micro-Economic FDI Theory
1. Monopolistic Competition: Since the
local firm has natural cost advantages based
on location, the MNE must enjoy offsetting
advantages based on either on its
differentiated product or gained through the
capturing of scale economies that are from
production, distribution and marketing.
Micro-Economic FDI Theory
2. Oligopolistic Behavior: A firm
producing in an oligopolistic industry is
compelled to follow a rival overseas even
though the firm’s assessment of the profit
potential of the venture is far less optimistic
than that of the rival.
Micro-Economic FDI Theory
2. Product Life Cycle: Any initial
competitive advantage enjoyed by
innovating enterprise might be eroded or
eliminated by the superior competence of
firms in other countries to produce the
products based on them.
Micro-Economic FDI Theory
3. Internalization: Firms opt to exploit
market opportunities as direct investors
because it is the best way to minimize
transaction costs in the production of
information and to appropriate maximum
returns on its investment in new
Micro-Economic FDI Theory
4. Eclectic Paradigm: The eclectic
paradigm of international production sets up
a generalized framework for explaining the
level and pattern of the cross-border valueadded activities of firms. It postulates that,
at any given point of time, the stock of
foreign assets, owned and controlled by
MNEs, is determined by O, L, I.
Macro-Economic FDI Theory
1. Exchange Rate Theory: Structural
imperfections in the foreign exchange
market allow firms to make foreign
exchange gains through the purchase or
sales of assets in an undervalued or
overvalued currency.
Macro-Economic FDI Theory
2. Dynamic Comparative Advantage
Theory: A country’s FDI outflows are
motivated by losing comparative
advantages in its domestic market and then
looking for other locational advantages in
foreign countries with transferring its
ownership advantages.
Newly Created Types of FDI
1. Defensive import-substituting
investments: These investments are derived
from the increased L advantages of member
countries by the tariff realignment in a
trading bloc. FDI inflows are created by the
foreign firms to shift their strategies from
trade-based to investment-based for not
loosing their market shares within the bloc.
Newly Created Types of FDI
2. Reorganization investments: According to
the increased L advantages within the
members, intra-region FDIs are stimulated
to encourage the reallocation of economic
activity according to member states’
comparative advantage. Because the
movement of FDI is within a bloc, there is
no FDI inflow from outsides non-members,
but increasing intra-FDI.
Newly Created Types of FDI
3. Rationalized investment: Major parts of
the advantages by an economic integration
are also derived from cost reduction and
efficient gain by regrouping of production
facilities in fewer locations where more
favorable costs are found. So, outsiders’
FDIs are coming to the area to look for
those advantages.
Newly Created Types of FDI
4. Offensive import-substituting investment: If a
country becomes a member of a trading bloc, the
whole market of the bloc will be considered as one.
As a result, these kinds of investments are derived
from market expansion, demand growth, technical
progress and FDI inflows would come to take
these advantages of growing demand and opening
up of new markets.
IHRM Strategies
1. Before the Expatriation
Relationship between headquarters and
Matching style to operations
Job Description
Communication Skills
IHRM Strategies
2. During the Expatriation
Keep the relationship with headquarters
IHRM Strategies
3. After the Expatriation
Career movement
Training programs