International Management

Question 1

What is internationalisation?

Answer 1

Internationalisation is the process of adding value through activities in another country.

Question 2

What are the pros and cons of Internationalisation?

Answer 2

The advantages are economies of scale, expansion of market and access to overseas assets. The disadvantages are higher risks, trade barriers, and managing cultural diversity. Also, it requires managers to learn new ways of doing business in unfamiliar territory.

Question 3

Why might companies operate internationally?

Answer 3

• If domestic market is saturated, small or has low growth.
• Because of cost factors, competitive forces, or customer demands.

At a Corporate Level, firms may choose to undertake one of two growth strategies (Ansoff): Market Development which brings existing products to new markets or Diversification which seeks to bring new products to new markets.

Question 4

What are the 4 key elements of the International Strategy Framework?

Answer 4

1) Drivers
2) Geographic Advantages
3) Market Selection
4) Modes of Entry

Question 5

What are the International Strategy drivers ?

Answer 5

1) Cost drivers: Scale of economies, favourable logistics.
2) Competitive drivers: Interdependence between countries, competitor’s global strategies
3) Market drivers: Similar customer needs, global customers, transferable marketing.
4) Government drivers: Trade policies, tech standards, host government policies.

Question 6

What is Globalisation and related pressure?

Answer 6

Refers to the linkages between markets that exist across national borders (i.e. economical, political, social), and where impacted impacts all markets. The cost pressure refers to keeping the unit cost down through global synergies by taking advantage of shared value chain.

Question 7

What is Localisation and related pressure?

Answer 7

The opposite of globalisation where products & services have limited scope, similarity and integration across markets. The firm tailors strategies to accommodate local pressures.

Question 8

What needs to be considered and assessed when choosing foreign markets?

Answer 8

A market’s benefits, costs and risks must considered. Furthermore, a market’s attractiveness must be considered in relation to the form’s capabilities and PESTEL factors.

Question 9

What are the 3 key decisions that must be made when wanting to enter foreign markets?

Answer 9

1) Timing of Entry - earlier or later than competition
2) Scale of entry - Resource commitment level
3) Mode of Entry - Exporting, Licensing, Join ventures, direct investment

Question 10

What key factors might determine the Modes of Entry?

Answer 10

• Competitive Advantage: Rely on own capabilities or must rely on others?
• Tradability: Rely on trading relationship rather than relay on self (i.e. transport from home country to market).

Question 11

When does one use Exporting and what are the pros and cons?

Answer 11

• Use when product is easily transported and home competitive advantage is sufficiently broad.
• Pros: Speed of entry, no need for foreign operations, economies of scale.
• Cons: Dependency on export intermediaries, trade barriers, transport costs.

Question 12

When does one use Licensing and what are the pros and cons?

Answer 12

• Use when legal environment is safe and competitive advantage is too low.
• Pros: Contractual income, limited financial exposure and risk
• Cons: Loss of competitive advantage, risk of loosing IP, difficult to find a good partner.

Question 13

When does one use Join Ventures and what are the pros and cons?

Answer 13

• Use when competitive advantage is narrow, cannot trust with IP, and legal environment is safe.
• Pros: Shared investment risk, tech sharing, and maybe a gov requirement.
• Cons: Hard to find a good partner, risk of imitation, culture clashes

Question 14

When does one use Direct Investment and what are the pros and cons?

Answer 14

• Use when competitive advantage is broad, transport is difficult, and/or gov’ has trade policies.
• Pros: Full control, rapid entry via acquisitor, integrated network.
• Cons: Large financial commitment, may create integration issues.

Question 15

What are the impacts for each of the International Strategies?

Answer 15

1) International: VC is domestic only.
2) Global: Maximise efficiency through shared activities and global sourcing (use the best option globally)
3) Multi-Domestic: VC is replicated for each local.
4) Transitional: Some activities are shared and some are unique to locale.

Question 16

What is a Global Strategy and provide an example?

Answer 16

A global strategy (low cost) seeks to emphasise efficiency over localisation where the world is treated as a single, centralised, strategic unit where the product is standardised. An example is Microsoft who offer the same software across the the world but matches local language.

Question 17

What is a Transitional Strategy and provide an example?

Answer 17

A transitional strategy seeks a balance between global and multi-domestic strategy by managing a global network but utilising specialised assets and capabilities and localise where needed. An example is McDonalds who use their brand name and core menu across the world but adapt the menu to local tastes.

Question 18

What is a International Strategy and provide an example?

Answer 18

An international strategy uses specific home country advantages in foreign markets where products are developed at home with little adaptation and then exported. Treats overseas as offshoots of domestic strategy and uses sales subsidiaries. An example is to go where locals do not have your skills.

Question 19

What is a Multi-domestic Strategy and provide an example?

Answer 19

A multi-domestic strategy sacrifices efficiency for local responsiveness by treating the world as a portfolio of national opportunities where markets are not fully coordinated and all value creating activities are local. An example is MTV who create content for local markets rather than force US content on foreign markets.