International Business Strategies

International Strategies

• International strategies are plans used by companies to expand into foreign markets and compete internationally
• The purpose is to maximize competitive advantage

Types of International Strategies

• Global strategy: Focuses on efficiency and lower costs, rather than local responsiveness
• Multidomestic strategy: Focuses on local responsiveness and adapting products to local markets
• Transnational strategy: Seeks a balance between global efficiency and local responsiveness

International Strategy Components

• Market entry strategies define how to enter new markets
• Global integration focuses on achieving economies of scale and lower costs
• Local responsiveness focuses on adapting products and services to local needs
• Cross-cultural challenges focus on managing cultural differences

Factors Affecting a Nation's Competitiveness

• Nation's competitiveness is influenced by education, innovation, infrastructure, institutions, and economic policies
• These factors collectively determine the ability to produce goods and services efficiently and sustainably

Economic Factors in Competitiveness

• Education and Human Capital: A skilled and well-educated workforce is crucial for innovation and productivity
• Innovation and Technology: A nation's ability to develop and adopt new technologies drives competitiveness
• Infrastructure: Strong transportation, energy, and communication networks are essential for efficient production and trade
• Economic Policies: Sound fiscal and monetary policies and a stable, predictable regulatory environment attract investment and foster economic growth
• Entrepreneurship: A vibrant entrepreneurial ecosystem drives innovation and creates new jobs
• Competition: A competitive market environment encourages businesses to innovate and improve efficiency

Institutional Factors in Competitiveness

• Good Governance: Strong, transparent, and accountable institutions create a stable and predictable business environment
• Rule of Law: A fair and effective legal system protects property rights and enforces contracts
• Corruption: High levels of corruption undermine competitiveness by creating an unfair playing field and discouraging investment

Social Factors in Competitiveness

• Social Infrastructure: Access to healthcare, education, and other social services improves the quality of life and workforce productivity
• Income Inequality: High levels of income inequality can lead to social unrest, instability, and negatively impact competitiveness
• Public Goods: Provision of essential public goods like clean water and sanitation is important for public health and productivity

International Expansion: Company Motives

• Companies pursue international expansion to increase profitability, access new markets and customer bases, expand brand recognition, and diversify operations

Reasons for International Expansion

• Market Diversification: Spreading business risk across different geographic regions mitigates dependence on a single market
• Higher Profits: Seeking opportunities to increase revenue and profit margins by entering new markets with high demand
• Access to New Markets: Entering new geographic areas reaches a larger customer base and exploits untapped market potential
• Access to Talent: Recruiting skilled employees from diverse global talent pools gains new perspectives and expertise
• Brand Recognition: Building brand awareness and credibility on a global scale is a key benefit
• Economies of Scale: Achieving cost advantages by producing goods in countries with lower labor costs
• Product Lifecycle Extension: Introducing products to new markets with high demand extends their life cycle
• Customer Demand: Responding to existing demand from international customers
• Innovation and Learning: Exposure to different cultures and business practices fosters innovation and improves product development
• Political Risk Mitigation: Diversifying operations across different countries mitigates political risks in any one region

Risks of International Expansion

• Political Risk: Changes in government, civil unrest, and conflicts in a foreign country can disrupt business operations
• Economic Risk: Fluctuations in the local economy can affect profitability, including inflation and interest rate changes
• Currency Risk: Exchange rate fluctuations can impact the value of revenue and profits when converting to the home currency
• Cultural Barriers: Misinterpreting cultural nuances can lead to marketing issues, communication breakdowns, and customer dissatisfaction
• Regulatory Compliance: Navigating different legal and regulatory frameworks in foreign markets can be complex and lead to compliance issues
• Market Competition: Entering a new market may face established competitors with strong brand recognition and local market knowledge
• Intellectual Property Concerns: Protecting intellectual property rights in a foreign country can be challenging
• Market Research Issues: Lack of thorough market research can lead to misjudging market demand and competition
• Language Barriers: Communication challenges can arise due to language differences, potentially impacting customer service and marketing efforts

Managerial Motives Can Erode Value Creation

• Managerial motives can undermine value creation when managers prioritize personal interests (job security, power, prestige) over the company's long-term benefit
• This leads to decisions that may not maximize shareholder value, such as excessive diversification, empire-building, or using anti-takeover tactics instead of focusing on core competencies

Ways Managerial Motives Erode Value Creation

• Growth for Growth's Sake: Pursuing rapid expansion even if it means sacrificing profitability to appear successful
• Excessive Egotism: Overconfidence in personal decision-making, ignoring input from others, and prioritizing self-image
• Anti-takeover Tactics: Implementing strategies to prevent hostile takeovers that deter potential investors and hinder value creation
• Short-Term Focus: Prioritizing immediate gains over long-term investments that may yield greater value
• Empire Building: Expanding via acquisitions or diversification beyond core competencies, driven by a desire to control a larger organization, not to increase value
• Perks and Compensation Misalignment: Incentivizing managers with excessive personal benefits to make decisions that benefit them at the expense of shareholders

Mitigating Managerial Issues

• Strong Corporate Governance: Implement systems to monitor management actions, align executive compensation with long-term shareholder value, and establish independent boards
• Performance-Based Incentives: Link managerial compensation to KPIs that reflect sustainable value creation
• Transparency and Disclosure: Ensure clear communication with stakeholders about strategic decisions and financial performance
• Ethical Leadership: Promote a culture of integrity and accountability where managers prioritize the company's long-term success over personal gain

Recognizing Entrepreneurial Opportunities

• Identifying potential ways to grow a business or start a new venture which is key to entrepreneurial success.

How to Recognize Opportunities

• Environment Scanning: Look for market opportunities including new trends, unmet needs, and shifts in consumer behavior
• SWOT Analysis: Identify strengths, weaknesses, opportunities, and threats
• Brainstorming: Generate new ideas for products, services, or business processes
• Market Research: Gather information about the market and your target audience
• Social Listening: Monitor customer feedback about your business and competitors
• Innovation: Spot emerging trends and create new solutions to meet customer needs
• Growth: Introduce new products and services to expand your customer base and market share
• Brand Loyalty: Build strong customer relationships by meeting their needs
• Competitive Advantage: Anticipate market shifts and outmaneuver competitors
• Entrepreneurial Mindset: Embrace change, recognize opportunities, and drive innovation

Entrepreneurial Strategy

• It is a plan for creating, growing, and managing a business that involves making decisions about customers, technology, organization, and competition.

Key Components of Entrepreneurial Strategy

• Opportunity Recognition: Finding market opportunities
• Innovation: Developing new ways to provide value to customers
• Agility: Adapting to change and taking risks

Entrepreneurial Strategy Strategies

• Networking: Building connections to gain resources and knowledge
• Experimentation: Trying out ideas before committing too much time or money
• Focus on a Target Customer Base: Identify and target a specific group of customers
• Market Research: Surveys, interviews, and data help understand customers
• Value-added Services: Partner with established players to provide services to existing customers

Entrepreneurial Strategy Success Tips

• Get senior management support for innovative and risk-taking initiatives
• Provide value to customers through free trials, samples, and educational content
• Keep customers informed about new features and updates

Entrepreneurial Strategy Framework

• This helps entrepreneurs make key decisions to turn their ideas into reality

Coca-Cola

• John Pemberton created the initial version in 1886, later Candler acquired the name and recipe in 1889
• Its growth is primarily due to innovative marketing and advertising
• It is considered a national symbol of America and is set apart by its marketing campaign and unique flavor

Apple

• Founded in the 1970s by Steve Jobs, Steve Wozniak, and Ronald Wayne
• It is regarded as one of the most significant global corporations
• After initially oversupplying the American market, Apple opened its first facility outside the US in Tokyo, Japan and used the marketing catchphrase "Think Different"

Amazon

• Established in 1994 by Jeff Bezos, is an online retailer offering products like tablets, Kindle e-readers, gadgets, books, and e-books
• Known as the world's biggest internet store, its success is due to the vast inventory offered at low rates
• Customers can access a range of products, including streaming television shows and movies

McDonald's

• Maurice and Richard McDonald transformed their barbeque joint into a hamburger and milkshake business
• The success is attributed to its consistent business model and there are 38,000 restaurants in over 120 nations

Financial Times

• Owned by the Japanese holding corporation Nikkei
• Its goal is to provide unbiased economic and investing information
• They had a difficult time entering the global market initially and prioritized expanding into India