8 - Internationalisation strategy Flashcards
there are 4 patterns of internationalization
- trading industries
- global industries
- sheltered industries
- multi-domestic industries
characteristics of Trading industries
- high international trade
- low FDI
these industries are: military hardware, mining, agriculture
characteristics of Global industries
- high international trade
- high FDI
these industries are: cars, oil, semiconductors, consumer electronics
characteristics of Sheltered industries
- low international trade
- low FDI
these industries are: railroads, hairdressing, laundries/dry cleaning, milk
characteristics of Multi-domestic industries
- low international trade
- high FDI
these industries are: packaged groceries, investment banking, hotels, consulting
what are the factors for globalization
- structure of the supply
2. market accesibility
what is the structure of the supply dependent on?
on:
1. competitive structure
2. degree of domestic specialization
what is the market accesibility dependent on?
on:
1. entry barriers to a country
2. similarity of demand
what can competitive structure depend on
number of competitors
&
size of competitors
what can degree of domestic specialization be
widespread & specialized
what can entry barriers be
open & closed
what can the similarity of demand be
homogenous & heterogenous
theory of comparative advantage
a country has a relative efficiency (comparative) advantage in those products that make intensive use of resources that are abundant within that country
when exchange rates are well-behaved
comparative advantage translates into competitive advantage
ALTERNATIVE STRATEGIES FOR INTERNATIONAL COMPETITION: factors that determine how a firm competes on the international stage
- pressure to lower costs
2. pressure for local adaptation
how to achieve lower costs (alternative strategy of international competition)
- geographic location where the use of key production factors is cheaper
- the aim being to standardise the products
pressure for local adaptation (alternative strategy of international competition)
- different strategies for each country
- making the necessary changes in human resources, the features of products, marketing…
- additional expenditure
the interaction between the pressure to lower costs and the pressure for local adaptation gives rise to three international competitive strategies
- global strategy
- transnational strategy
- multi-domestic strategy
basic features of global strategy
- emphasis on lowering costs
- economies of scale through standardised products
- headquarters → coordination and integration across value chain activities in the various countries
- transferring the skills of headquarters or of each domestic business units to all other locations
benefits of global strategy
- cost benefits of scale & replication
- serving global customers
- exploiting national resources
- learning benefits
- competing strategically
on cost benefits of scale & replication (global. strategy)
accessing global scale economies in purchasing, manufacturing, product development, marketing. replicating knowledge assets
on serving global customers (global strategy)
multinational companies may prefer suppliers that can serve their global needs
on exploiting national resources (global strategy)
the international firm can access better or cheaper natural, human and technological resources
on learning benefits (global strategy)
global strategy alows you to access & integrate knowledge from multiple locations
on competing strategically (global strategy)
exploiting global strength to win local wars
basic features of multi-domestic strategy
- emphasis is on differentiating its product or service to adapt to local market
- the firm needs to consider: language & cultural differences, level of income, customers’ preferences, advertising, distribution channels & local legislation
- decisions are made on a decentralized basis in domestic business units
basic features of transnational strategy
- it tries to balance the efficiency of the global strategy with the local adaptation of multi-domestic strategy
- flexibility by capitalizing on communications & knowledge flows throughout the organization
- the aim for each individual business to think globally, act locally
in Ghemawat’s CAGE framework what is CAGE
Cultural distance
Administrative & political distance
Geographical distance
Economic differences
key strategic questions for choosing modes of overseas market entry
- Is the firm’s competitive advantage based on firm-specific or country-specific resources?
- Is the product tradable and what are the barriers to trade?
- Does the firm possess the full range of resources and capabilities needed to establish a competitive advantage in the overseas market?
- Can the firm directly appropriate the returns to its resources?
- What transaction costs are involved?
strategic alliances
are collaborative arrangements between firms
International alliances
are strategic alliances involving partners from different countries
International joint ventures
are where partners from different counties form a new, jointly-owned company
Main motivation for international alliances & joint ventures is
multinationals desire access to: market knowledge & distribution capabilities of local companies
local partner desires access to: technology, brands & product development of the multinational
international location of production - 3 major factors
- NATIONAL RESOURCE CONDITIONS: What are the major resources which the product requires? Where are these available at low cost?
- FIRM-SPECIFIC ADVANTAGES: to what extent is the company’s competitive advantage based upon firm-specific resources and capabilities, and are these transferable?
- TRADABILITY ISSUES: Can the product be transported at economic cost? If not, or if trade restrictions exist, then production must be close to the market
