Advanced Strategic Management Internationalization Strategy PDF

Advanced Strategic Management Sessions 16-17: Internationalization Strategy Internationalization Strategy Level of analysis: Corporate Level Focus: Geographical scope of an organization à Internationalization drivers à Geo and firm specific advantages à International strategies...

Advanced Strategic Management Sessions 16-17: Internationalization Strategy Internationalization Strategy Level of analysis: Corporate Level Focus: Geographical scope of an organization à Internationalization drivers à Geo and firm specific advantages à International strategies à Market selection 2 Corporate Strategy Why do firms internationalize? 3 Corporate Strategy Why do firms internationalize? 4 Corporate Strategy YIP’s FACTORS: Assessing international strategy potential Market drivers -> standardization Similarity in customers needs and tastes (es. luxury) Presenence of global customers (es. B2B) Similar marketing logics Cost drivers -> cost savings by: Economies of scale (i.e. increasing volume of production beyond the level that can be granted by the country of origin) Exploiting country specific advantage: cheap labour supply, fiscal incentives (Ireland, Delawere), high quality r&d institutions. Favourable logistics (product are easy trasferrable or production can be “easily” located in different countries es. Cocacola 5 Corporate Strategy YIP’s FACTORS: Assessing international strategy potential Government drivers Favorable international conditions (es. TMEC, EU ETC) Not the same for all sectors (es. Golden share, strategic sectors) Competitive drivers interdependence between country operations increases the pressure for global coordination. Response to the presence of globalised competitors 6 Corporate Strategy (Basic) International Strategies The global–local dilemma → extent to which products and services may be standardized across national boundaries or need to be adapted to meet the requirements of specific national markets. 2 main forces: Pressure for global integration -> need to concentrate and coordinate operations internationally/globally Pressure for local responsiveness -> need to adapt to local demand 7 Corporate Strategy (Basic) International Strategies Export strategy: concentration of activities in one country ( typically the country of origin).+ marketing of the exported product is very loosely coordinated overseas (independent sales agents). Leverages home country capabilities, innovations and products in foreign markets. Used when pressure for both global integration and local responsiveness is low. Suitable for companies with strong brands (e.g. Google). The key risk is a home country-centred view in contrast to skilled local rivals. 8 Corporate Strategy (Basic) International Strategies Multi-domestic strategy: goods and services are produced locally in each national market which is treated independently, with the needs of each local domestic market given priority Maximizes local responsiveness – different product offerings for different countries. A low level of international coordination. Organization is like a collection of relatively independent units. Commonly found in marketing-orientated companies (es. Food)/ consulting). Risks include manufacturing inefficiencies and brand dilution. 9 Corporate Strategy (Basic) International Strategies Global strategy: Maximizes global integration with little or no local adaptation of products/services. Standardized products are deemed to suit all markets and efficient production is emphasized through economies of scale. Geographically dispersed activities are centrally controlled from headquarters. Common for commodity products (e.g. cement) but also might include IKEA 10 Corporate Strategy (Basic) International Strategies Transnational strategy: Complex strategy that try to maximize local responsiveness and global coordination. Aims to exploit learning and knowledge exchange between dispersed units. Efficient operations but products/services adapted to local conditions. Very hard to achieve but General Electric is a possible example. 11  Corporate Strategy Market selection and entry § Which factors should we take into account? § HOW? 12 Corporate Strategy Market selection and entry Market attractiveness to the new entrant FIVE FORCES ANALYSIS (Particular focus on competitor) Defender’s reactiveness PESTEL ANALYSIS (Particular focus on PESL) CAGE FRAMEWORK Defender’s clout 13 Corporate Strategy Market selection and entry IDEA: Similarly to the 5 Forces, the assessment of a country attractiveness should not be based on absolute considerations but on relative assessemt btw the firm and the country. Cultural distance – differences in language, ethnicity, religion and social norms. Administrative and political distance – compatibility of administrative, political or legal traditions. Geographic distance – not just miles but also aspects such as size, sea-access and the quality of communications. Economic/wealth distance – wealth and income differences. 14  Corporate Strategy Market entry The staged international expansion model proposes a sequential process whereby companies gradually increase their commitment to newly entered markets, as they build market knowledge and capabilities. They acquire some local knowledge → they gain Wholly owned Subs knowledge and confidence→ first by a joint venture Extent of investment and risk and finally by creating a wholly owned subsidiary. Alliances Entry modes differ in: in the degree of resource commitment to a Franchising particular market the extent to which an organization is operationally involved in a particular location. Exporting In order of increasing resource commitment, the four Degree of control key entry mode types are: EXPORTING – FRANCHISING – ALLIANCES – WHOLLY OWNED SUBSIDIARIES 15 Corporate Strategy Market entry 16