Lesson 10: Developing International Strategies Flashcards
What are the drivers of internationalisation?
1) Market drivers:
Similar customer needs, global customers, transferable marketing
2) Cost drivers
Scale economies, country-specific differences, favourable logistics
3) Competitive drivers
Interdependence between countries, competitors’ global strategies
4) Government drivers
Trade policies, technical standards, host governement policies
What conditions work against globailisation?
It takes something extra to be international.
Language and culture are still important
International economic and political crises
Trand of anti-globalisation among consumers.
What are the national sources of competitive advantages?
Porter’s Diamond model:
1) Firm strategy, structure and rivalry
2) Demand conditions: home markets
3) Related and supporting industries: easy help from other industries.
4) Factor conditions: labour, knowledge, eg. Silicon Valley
What is Porter’s diamond?
1) Factor conditions:
Wages, knowledge and raw material etc.
2) Demand conditions
Costumers demands
3) Related industries = supporting industries
4) Firms strategies and rivalry:
Strong competition at the home market create firms with low cost and unique products and services.
A good home market for international expansion is a market with strong factor conditions, demanding customers, strong related industries and a strong rivalry.
What are international sources for competitive advantages?
1) Cost advantages:
Wages, access to raw materials
2) Unique resources and competences
Education system, knowledge centres, location
3) National characteristics
Language, culture
What arestrategies for internationalisation?
1) Export strategy
2) Multi-domestic strategy
3) Global strategy
4) Transnational strategy
What is export strategy?
Weak pressure for local responsiveness and weak pressure for global integration.
Activities and capabilities such as R&D, production and marketing are located and centralised in home country.
Companies with distinctive capabilities and a strong brand name such as Google apply this strategy succesful
What is multi-domestic strategy?
Strong pressure for local responsiveness and weak pressure for global integration
Activities such as production are geographic dispersed in many countries.
Often professional service firms iwthin auditing, law, consultancy and hotel chains etc.
What is global strategy? @
Pressure for local responsiveness is weak but pressure for global integration is strong.
Products and services are standardised and capture of scale of economics through standardisation is straong.
Companies like IKEA follow this strategy
What is transnational strategy?
A strong pressure for both local responsiveness and globa integration.
Maximise learning and knowledge exchange between units.
Eg. GE-Electric and ABB
What is evalution between markets?
Political conditions: stability and freedom
Economic conditions: size and distribution
Social conditions: customers and employees
Law conditions: institutions and agreements
What is the evaluation between markets and one’ss own business?
CAGE framework:
Cultural distance: norms and behaviour
Administrative distance: administrative, political and legal traditions
Geographical distance: time and communication
Economic distance: distribution of income
What is the evaluation of competitor reactions?
Power
Market attractiveness need to be combined with estimation of competitors’ reaction
Competitors can be more or less willing to react towards new entrance in an industry
Competitors can react with more or less power
What are the different ways of entrance into new markets?
1) Export
2) Joint venture & alliances
3) Licenses
4) Direct investments
What is the effect of international competitor reaction?
If market A is the most attractive to enter, but it has a very powerful competitor. Market B is also attractive and the competitor does not have the pwoer to retaliate.
What is exporting?
Simple and limit commitment
Economic of scale in own production
The firm does not take advantages of international conditions
What are joint ventures and alliances?
Risk shared with partner, fast access to markets, difficult to find partners and manage the relationship.
What is licensing?
Contractual agreement
Limit the economic risk
Difficult to find partners
Can create a new competitor
What is foreign direct investment?
Fast and direct control
Possibility of taking advantage of internation condition
Expose the firm for high risk
Eg. Production facilities in USA –> you get lots of info on the market.
What is internationalisation and performance?
There is a trade-off between scale of economics (through internationalisation) and cost of coordination (complexity).
ON the other hand Yip has showed that firms with more than 40% of their activities being international perform better than domestic firms.
ORgansations that provide service yield often have less advantages of being international because of local laws, culture, production and lack of scale of economics.
What are the roles in international portfolios?
1) Strategic leaders
2) Strategic contributors
3) Strategic implementer
4) Black holes
What are strategic leaders?
Subsidiary companies on important markets with many resources and competences
Very important for the implementation of the strategy of internationalisation.
What are strategic contributors?
Subsidiary companies with plenty of resources on less important markets
Les important for the strategy of internationlisation
What is a strategic implementer?
Subsidiary companies on insignificant markets with few resources
Contribute to the overall strategy implementation
Play the same role as cash cows with the BCG model
What are black holes,
Subsidiary companies on significant markets with few resources
They have the same status as question marks
Ought to be either liquidated, sold or supplied with resources.
What are the dilemmas of innovation?
Innovation is more than just an invention, the users are to take the invention/change into use.
Four dilemmas of innovation:
1) Driven by technology or customer needs?
2) Focus on product or process innovation
3) Open or closed innovation
4) Innovating a small part or th whole business model
What is the balance between technology and customer needs?
Is it the technical staff that develop the product and afterwards hand it over the sales people?
Or is it the sales people who see new opportunities and ask the technical staff?
Too much focus on technique do not engage the customers
Too much focus on the customers do not create radical innovations
Often the balance is needed, which involves both technicians and sales people.
What is the balance between product and process innovation?
Product innovations focus on product features: eg. Apple
Process innovations focus on production and distribution: eg. Dell
Product innovations are often followed by process innovations in order to make the production of the new products are more efficient
Small firms and new industries often focus on product innovations
Mature corporations and industries often focus on process innovation
What are the dilemmas of open vs closed innovation?
1) Advantages of in-house innovations:
Full control over the process, hidden from competitors, best with new technology leading to lock-in
2) Advantages of open platforms:
Access to much knowledge outside the firm, sometimes faster.
Also open for competitors
Best for continued improvements
What is the balance between focused innovation and the development of the business models?
To what extent should the innovation be about changes of the business model
A business model can be described as a value chain and by the relationships toward the customers.
EasyJet change the business model of the industry by letting the customers buy their rickets through the internet.
The business model is often connected to the SBU and to the choice of competitive strategy
What is the diffusion of innovation?
The speed of diffuse innovations can be of importance and it can be managed by the organsation through both the supply and demand side.
What are supply condition that increase diffusion?
Innovation improve the customers’ situation
The degree of compatibility with existing products
The degree of simplicity of customers
Customers’ possibility to experiment with the innovation
The customer’s access to information
What are the demand conditions that increase diffusion?
The markets awareness of the innovation
Influencing signficant customers and distributors
The customers’ willingsness to adapt something new.
How does diffusion take place?
Diffusion often follows an S-curve
The height of the curve expresses the size of the diffusion
The length of the curve expresses the speed of the diffusion
What are the phases in the diffusion?
The start-up, growth, mature and exit phase
The tipping point is often between the startup and growth phase. Demand increase significantly
Often take place in lock-in situations
The curve illusitrates that growth is rarely linear and the diffusion is seldom a 100%
The curve also illustrate an end of the diffusion
What are the advantages of being an innovator?
Advantages of the experience curve
Advantages of scale of eocnomics
Can make use of nearly unlimited resources
Advantages of image
Can build in shifting costs
What are the advantages of being a follower?
It is possible to imitate the innovator
Does not have to make the same mistakes as the innovator.
Should we be number one or two?
It can be an advantage to be the follower if the innovation is easy to copy.
It can be an advantage to be a follower if one has the necessary resources as for instance capital, production and distribution systems.
It can be an advantage to be the innovator if one has an innovative culture.
If markets develop very fast both innovator and followers have to innovate.
What about innovators and the big established corporation?
The innovator is often a threat for the established
The established develop in an incremental way
New technology often come from small firms and from where we do not expect it.
What is the response of the big established corporations?
They develop a portfolio of real options
A real option is a limited investment following a new technology
They develop independent business units
Independent business unites escape bureaucracy.
What is a portfolio of innovation options?
Options where the market is known/attractive but where technology is uncertain (positioning option). Experiment with new technologies
OPtions where the technology is known/strong but where markets are uncertain = scouting options for new market possibilities
Options where both markets and technologies are uncertain = stepping stones. Be open for new options and where they would lead you.
What are the 4 stages of entrepreneurships?
1) Start-up: the challenge is to get capital, the solution is centure capitalist.
2) Growth: the challenge is management and the soltuion could be to leave management to others
3) Mature: the challenge is continued innovation and the soluetion could be diversification
4) Exit: the solution is to redraw by selling the firm
What is the entrepreneurship relation?
We often look at the entrepreneur as a technician
Often the entrepreneur has many relationships and the strong network
They typically have strong connections to the big corporation within the industry
Some entrepreneurs worked in these big corporations earlier on
What does the big company do?
It is often difficult for big old corporation to innovate themselves.
Therefore they create corporate centuring with entrepreneurs which mean that they invest in them
Or they create an eco-system of entrepreneurs and make strategic alliance with some of the entrepreneurs.
What are social entrepreneurs?
People or groups that create independent organisations to help social poorly situated people with helping themselves create a better future
Social entrepreneurs are driven by a social mission
Built on a business model
Micro loans to women in India is an example.
