8 - International Strategy Flashcards
main benefits of IS
increased market size
return on investment (ROI)
economies of scale + learning
location advantages
incentives for IS
extend a product’s life cycle
gain easier access to RM
gain access to consumers in emerging markets
opportunities to integrate operations on a global scale
opportunities to better use rapidly developing technologies
basic types of IS
business level strategy
- follows generic strategies: CL, differentiation…
corporate level strategy
- focuses on the scope of a firm’s operations through geographic diversification
determinants of national advantage + basis for international business-level strategies
factors of production
demand conditions
related + supporting industries
firm strategy, structure + rivalry
IS corporate level strategies
x: need for local responsiveness
y: need for global integration
global strategy (low, high)
transnational strategy (high, high)
multi-domestic strategy (high, low)
multi-domestic strategy
strategic + operating decisions are decentralized by SBU in each country
- tailor products to local markets
- do not allow for economies of scale = more costly
- focuses on competition within each country
global strategy
firm’s home office determines the strategies that business units are to use in each country/region (centralized decision making)
- integration accross SBUs (interdependent)
- economies of scale
- lower risk
- less responsive to local market needs + preferences
- less effective learning process
transnational strategy
firm seeks to achieve both global integration + local responsiveness
- requires global coordination + local flexibility = flexible coordination
- increasingly needed due to: greater information flow, desire for specialized products…
flexible coordination
building a shared vision + individual commitment through an integrated network
- vital for transnational strategies
environmental trends impacting choice of IS
liability of foreignness: costs of…
- unfamiliar operating environments
- economic, administrative + cultural differences
- challenges of coordination over distances (cultural, administrative, economic + geographic)
regionalization:
- focus on particular regions (increase understanding, achieve economies + trade agreements)
main international entry modes
exporting licensing strategic alliances acquisitions new wholly owned subsidiary
exporting
send products produced to international markets
- high transportation costs
- low set up costs
- low control
- tariffs may be imposed
- involves contractual agreement
licensing
foreign company purchases the right to manufacture + sell a firm’s products
- low cost to expand internationally
- licensee absorbs risks
- low control
- lower potential returns
- risk of licensee imitating tech + product for own use
- may have inflexible ownership agreement
strategic alliance
firms collaborating in a different setting in order to enter international markets
- shared risks + resources
- facilitate development of core competencies
- difficult to manage
- potential incompatibility + conflict
acquisitions
firm acquires another company to enter an international market (cross-border acquisition)
- costly
- quick access to market
- complex negotiations + requirements
- possible integration difficulties
