Chp 8 Flashcards
International strategy
Strategy through which the firm sells its goods or service outside its domestic market
Incentives to use international strategy
- Extends a product’s life cycle
- Gain easier access to raw materials
- Opportunities to integrate operations on a global scale
- Opportunities to better use rapidly developing technologies
- Gain access to consumers in emerging markets
Benefits of being an international players
- Increased market size
- Greater returns on major capital investments or new products or processes
- Greater economies of scale, scope or learning
- A competitive advantage through location
Increasing market size
- Potential to enhance the firm’s size and performance
- Limited growth opportunities in domestic market
- Larger market sizes pose less risk for the firm (just a random note)
Economies of scale and learning
Continual improvements in processes by reducing costs and increasing value of goods/services.
Location advantages
- Locating facilities outside domestic market can help reduce costs
- Lower labour, energy, and other natural resource costs
- Access to critical supplies and consumers
Type of international strategies
1) International business-level strategy
2) International corporate-level strategy
International business-level strategies
Each business must develop a competitive strategy focused on its own domestic market because capabilities & core competencies can be pursued in international markets since they’re foundations
Determinants of national advantage
- Factors of production
- Demand conditions
- Firm strategy, structure, and rivalry
- Related and supporting industries
International corporate-level strategy
Expanding the firm’s operations through geographic diversification.
Multidomestic strategy
International strategy in which strategic and operating decisions are decentralized to the strategic business units in individual countries or regions for allowing each unit the opportunity to tailor products to the local market
Global strategy
International strategy in which a firm’s home office determines the strategies that business units (SBUs) are to use in each country or region
Transnational strategy
International strategy through which the firm seeks to achieve both global efficiency and local responsiveness
Choice of international strategy mode
- Exporting
- Licensing
- Strategic alliance
- Acquisitions
- New wholly owned subsidiary
Exporting
Firm sends products it produces in its domestic market to international markets
- High cost, low control
Licensing
An agreement is formed that allows a foreign company to purchase the right to manufacture and sell a firm’s products within a host country’s market or a set of host countries’ markets
- Low cost, low risk, little control, low returns
Strategic alliance
Firm collaborating with another company in a different setting in order to enter one or more international markets
- Shared costs, shared resources, shared risks, problems of integration
Acquisitions
A cross-border acquisition in which a firm from one country acquires a stake in or purchases all of a firm located in another country
- Quick access to new markets, high costs, complex negotiations, problems of merging with domestic operations
New wholly-owned subsidiary (greenfield venture)
Firm invests directly in another country or market by establishing a new wholly-owned subsidiary
- Complex, often costly, time consuming, high risk, max control, potential above-average returns
Political risks
- Instability in national governments
- War, both civil and international
- Potential nationalization of a firm’s resources
Economic risks
- Differences and fluctuations in the value of different currencies
- Differences in prevailing wage rates
- Difficulties in enforcing property rights
- Unemployment
