Chapter 9 Flashcards
what is international strategy?
International strategy refers to a range of options for operating outside an organisation’s country of origin.
what is global strategy? within international strategy
Global strategy involves high coordination of extensive activities dispersed geographically in many countries around the world.
Which are the Internationalisation drivers?
- Market drivers - Similar customer needs (e.g. credit cards), Global customers (e.g. car components), Transferable marketing (e.g. Coca-Cola).
- Cost drivers − Scale economies (e.g. R&D in aircraft manufacturing), Country specific differences (e.g. clothing: manufacturing in Bangladesh/ design in Paris), Favourable logistics (e.g. low cost of transporting microchips).
- Governmemt drivers − Trade policies (e.g. reduction of trade barriers in the EU; WTO policies); The liberalisation and adoption of free markets; Technical standardisation (e.g. in electronics).
- Competitive drivers − Interdependence (e.g. global coordination between subsidiaries in different countries); Global competitors (e.g. rivals may use profits to cross subsidise aggressive moves).
What is the porter’s diamond? and its four drivers?
Porter’s Diamond – explains why some locations tend to produce firms with competitive advantages in some industries more than others.
The four drivers in Porter’s Diamond arise from:
* Local factor conditions;
* Local demand conditions;
* Local related and supporting industries;
* Local firm strategy ,industry structure and rivalry.
What is global sourcing and its advantages?
Global sourcing refers to purchasing services and components from the most appropriate suppliers around the world, regardless of their location.
The advantages include:
* Cost advantages:for example, labour costs, transportation and communications costs, taxation and investment incentives.
* Unique local capabilities: for example, centres of excellence in R&D clusters globally.
* National market characteristics and national reputation for a particular product. Differentiated product offerings aimed at different market segments for example
what’s the global-local dilemma?
The global–local dilemma relates to the extent to which products and services may be standardised across national boundaries or need to be adapted to meet the requirements of specific national markets.
4 basic International Strategies
Export strategy, Multi-domestic strategy, Global strategy, Transnational strategy
Export strategy
- Leverages home country capabilities, innovations and products in foreign markets.
- Used when pressure for both global integration and local responsiveness is low.
- Suitable for companies with strong brands (e.g. Google).
- The key risk is a home country-centred view in contrast to skilled local rivals.
Multi-domestic strategy:
Multi-domestic strategy:
* Maximises local responsiveness – different product offerings for different countries.
* A low level of international coordination.
* Organisation is like a collection of relatively independent units.
* Commonly found in marketing-orientated companies (e.g. food companies).
* Risks include manufacturing inefficiencies and brand dilution.
Global strategy:
Global strategy:
* Maximises global integration with little or no local adaptation of products/services.
* Standardised products are deemed to suit all markets and efficient production is emphasised through economies of scale.
* Geographically dispersed activities are centrally controlled from headquarters.
* Common for commodity products
(e.g. cement) but also might include IKEA.
Transnational strategy:
Transnational strategy:
* Complex strategy that try to maximise local responsiveness and global coordination.
* Aims to exploit learning and knowledge exchange between dispersed units.
* Efficient operations but products/services adapted to local conditions.
* Very hard to achieve but General Electric is a possible example.
What is the cage framework?
CAGE framework emphasises the importance of cultural, administrative, geographical and economic distance, as follows:
* Cultural distance – differences in language, ethnicity, religion and social norms.
* Administrative and political distance – compatibility of administrative, political or legal traditions.
* Geographic distance – not just miles but also aspects such as size, sea-access and the quality of communications.
* Economic/wealth distance – wealth and income differences.
What are the criteria by which a country may be assessed regarding competitiveness?
Competitive characteristics
Country markets can be assessed according to three criteria:
* Market attractiveness to the new entrant.
* The likelihood and extent of defender’s reaction.
* Defenders’ clout – the relative power of defenders to fight back.
The staged international expansion model
The staged international expansion model proposes a sequential process whereby companies gradually increase their commitment to newly entered markets, as they build market knowledge and capabilities. This is challenged by two phenomena:
* ‘Born-global firms’–new, small firms that internationalise rapidly (usually in new technology industries). For such firms, waiting till they have enough international experience is not an option: international strategy is a condition of existence
* Emerging-country multinationals – building unique capabilities in the home market but exploiting them in international markets very quickly.
What are the entry mode strategies?
Export, Licensing and franchising, Joint ventures, Wholly owned subsidiaries
