International Firm's Competitive Strategies Flashcards
Why go international?
- Competitive advantage
- Growth
- Profits
- New markets
- Bigger market
What are the different strategic intentions?
- Global scale efficiency: scope, scale
- Multi-national flexibility/responsiveness: adaptability
- Worldwide learning and innovation: R+D and Idea sourcing
What are the three means to achieve competitive advantage?
EOS
Scope economies (cost advantages through sharing, putting in common resources, common distribution channels, sharing R+D)
National differences: culture, tastes, behaviours, local competitors, cost and currency stability
What is the international structural model?
Adopting different structures at different stages at international expansion
Depending on foreign sales as % of total sales and foreign product diversity
Why is it difficult to manage internationally?
- Culture: food, language, ethnicities, religion, trust, values
- Competition
- Legal barriers
- Taxation
- Coordination
- Currency exchange
- Government policies
- Distance
- Politcal instability
What is administrative distance?
- Different legal frameworks
- Different judiciary
- Different political structure
- Different human rights practices
- Currency convertibility
- Trade restrictions
What are the different legal systems?
Civil law - Europe
Common law - based on legal precedents set by courts (UK, US)
Religious law - ethical and moral codes taught by religion - Saudi
Pluralistic systems - multiple systems within a population (India)
What is economic distance?
- GDP/PPP differences
- Labour cost and other manufacturing costs
- Financial resources, Human Resources, infrastructure or knowledge
Is it worth operating internationally?
Yes, if it makes a difference to the competitive performance of the firm. It must align and strengthen the choice of how you compete strategically.
What is the integration and responsiveness matrix in terms of strategic choice?
Need for global coordination vs need for local adaptation
- Global (high global, low local)
- International (low global, low local)
- Multi-national (low global, high local)
- Transnational (high global, high local)
What does international strategy involve?
Strategic orientation: exploiting knowledge from the parent company by transferring it to foreign markets; expects to use innovations to reduce costs, enhance revenues, or both
- Configuration of assets and capabilities: core competencies centralised and others decentralised
E.g American companies exploit home country innovations abroad
What does global strategy involve?
Strategic orientation: global efficiency, assumes that the best cost position is the key source of competitiveness
Configuration of assets and capabilities; centralised and locally scaled
E.g Japanese companies like Toyota, Canon
What does multinational strategy involve?
Strategic orientation: flexibility to respond to differences in national markets, sees differentiation as the primary way to enhance performance
Configuration of assets and capabilities; decentralised and self-sufficient: localisation focus
E.g European companies such as Unilever, Nestle
What is transnational strategy?
Strategic orientation: global efficiency, flexibility, worldwide learning simultaneously
Efficiency and innovation important.
Configuration of assets and capabilities; dispersed, interdependent, specialised
How are transnational strategies implemented?
1) Decide which resources/capabilities should be centralised in home country (protection, supervision)
2) Decide which to locate abroad
- World-scale production plants for labour intensive countries might be in lower wage countries e.g Vietnam
- Sony relocated treasury operations to London
What are the history and heritage biases and preferences?
European - multinational
American - international
Japanese - global
Not born transnational but can grow there
What are the limitations of the integration responsiveness framework?
- Strategy choice is independent of industry context
- Strategy can vary over time
- Matrix organisation structures can lead to gridlock
How does transnational strategy rely on rational view?
- Assumes rational behaviour due to thorough analysis of data (ignores manager biases)
- Data only exists on the past (or at best present) decisions have to be made for future
- Fallacy of prediction, one truth about forecasts is that they are always wrong
What is an easy definition of transnational strategy?
Pursuing simultaneously efficiencies (scope and scale) and flexibility and learning logically
Integrated network managed through a matrix structure
What makes a transnational strategy hard to actually implement?
- Historical/cultural bias
- Matrix gridlock
- Flawed decision making: primacy of home-based thinking, strength of voice = weight of argument
- Local adaptation is only relevant locally
What are some examples of transnational companies?
Unilever
Syngenta
Standard Chartered
How is innovation the most important source of competitive advantage?
- Learning from and in the world
- Not all knowledge is in one place
- Knowledge is valueless unless it is applied
- Cost of distance is falling
- Prospect for untapped knowledge sources globally
- Create product knowledge through experimentation
- Connect and leverage knowledge source
- Transcend not cross borders
What is meta national?
Beyond transnational -
To develop flexibility:
- create specialised roles
- Create special teams
- Introduce boundary spinning roles
- Disperse responsibilities
- Legitimise diversity
- Manage complexity
What is the alternative view, 3A strategies?
Aggregation: pursuit of increased scale to achieve greater efficiencies (sourcing) or effectiveness (brand recognition)
Arbitrage: pursuit of flexibility in sourcing and market access in order to increase CA (adjusting the balance of supplier from different countries)
Adaptation: pursuit of insight and innovation from markets, moving knowledge between markets to apply elsewhere for CA
What does Ghemawat (2007) sat about managing differences in terms of managing differences and the challenge of global strategy?
Must decide which elements of the 3A strategy meet business needs, not feesible to do all 3
Many companies emphasise different As at different times of their evolution
One or two As should be pursued at once
What is the 3A triangle?
A strategy map for managers =
- The % of sales spent on advertising indicates how important adaption is
- % Spent on R+D indicates importance for aggregation
- % spent on labour helps huge importance of arbitrage
What is cage distance?
Cultural, Administration, Geographic and Economic distance
