International Perspectives in Export Management PDF

**CHAPTER 2: INTERNATIONAL PERSPECTIVES IN EXPORT MANAGEMENT** Exporting helps businesses grow AND also makes them more productive and profitable. Companies that trade internationally are about 20% more productive than those that don't (ONS, 2018). Plus, exporters tend to grow almost twice as fast...

**CHAPTER 2: INTERNATIONAL PERSPECTIVES IN EXPORT MANAGEMENT** Exporting helps businesses grow AND also makes them more productive and profitable. Companies that trade internationally are about 20% more productive than those that don't (ONS, 2018). Plus, exporters tend to grow almost twice as fast as businesses that stick to domestic markets (HBSC, 2022). So, what is the best way to approach export management in today's international but more fragmented context? These answers will be discussed in this chapter. **DEFINING MNCs** Multinational company (MNC) = "*Enterprise that engages in foreign direct investments (FDI) and which owns or, to a certain extent, controls value-added activities in several countries.*" (Dunning and Lundan, 2008, p. 3) Multinational companies (MNCs) operate through subsidiaries, including wholly owned subsidiaries (where the MNC owns most or all shares), minority equity investments (holding a minority stake), and joint ventures (collaborating with another company). Still, they vary widely in size and reach, from smaller overseas investors to extensive networks managing subsidiaries across numerous countries. MNCs operate with flexible boundaries, often collaborating with local businesses and engaging independently with various stakeholders (suppliers, distributors, clients, governments). **STATUS QUO OF MNCs** **Multipolarity and Major Powers** In 2024, the world is becoming more multipolar, meaning power is distributed among more countries, making the global system more complex. The EU, the US, and China will continue to be the dominant forces, greatly shaping the global landscape. With 719 multinational firms, the United States has the most of any nation. Of all the MNCs in the world, it represents 33%. Japan with 264 MNCs (12%) follows the United States (Investment Monitor, 2024). **Geopolitical Swing States** Countries like India, Saudi Arabia, Turkey, South Africa, and Brazil, which aren't firmly aligned with any major power, will gain more influence. These \"swing states\" will have the power to sway international agendas and decisions. **Impact of Smaller Countries and Non-State Actors** Smaller nations and non-state actors (like influential organizations or movements) will seize chances to shape their regions. They will play increasingly important roles, whether by redrawing boundaries or asserting their influence in other ways. **RESPONDING TO PRESSURES IN GLOBAL MARKETS** **Cost Reduction** Cost reduction pressures are common in competitive global markets, urging firms to minimize the cost of value creation through strategies like outsourcing to low-cost countries or optimizing production locations for economies of scale and learning effects. Many American companies outsource call centers to India and the Philippines to leverage lower labor costs. **Local Responsiveness** Pressures for local responsiveness stem from differences in consumer tastes, infrastructure, government regulations, and distribution channels across nations. Differences in infrastructure, such as electrical systems, require product adaptations in various markets. For industries like automobiles, varying consumer preferences necessitate localized product customization. **So, What's the Solution?** Well, to address these dual pressures effectively, multinational firms typically adopt one of four international strategies: global standardization, localization, transnational, or international strategies. **STRATEGIES PURSUED BY MNCs** 1. **International Strategy** - - - 2. **Multi-Domestic / Localization Strategy** - - - 3. **Global (Standardization) Strategy** - - - 4. **Transnational Strategy** - - - **CURRENT STATE OF GLOBALIZATION** - **Globalization Concerns:** On the backdrop Russia\'s invasion of Ukraine, there\'s speculation about the end of globalization, reminiscent of early pandemic fears. Still, global flows have rebounded strongly since COVID-19\'s onset. - **DHL Global Connectedness Index:** Tracks globalization via trade, capital, information, and people flows. Pre-war trends set a baseline for understanding current shifts. - - - **ERPG FRAMEWORK** The EPRG framework, developed by Howard V. Perlmutter and Wind Yoram, provides a structured way to understand the different strategies companies use when expanding internationally. It breaks down into four distinct approaches: Ethnocentric, Polycentric, Regiocentric, and Geocentric. Each approach represents a different philosophy on managing international operations and these dimensions interact in unique ways to shape a company's global strategy. 1. **Ethnocentric Approach** - **Focus:** Prioritizes the home country's needs and practices. - **Control:** Centralized decision-making and control over foreign operations. - **Example:** A U.S. tech firm maintaining consistent product features and marketing strategies globally to ensure brand uniformity. - **Pro:** Provides a consistent brand experience and operational efficiency across all markets. - **Con:** Risks ignoring local market preferences and cultural differences, potentially reducing local market appeal. 2. **Polycentric Approach** - **Focus:** Treats each country as a unique market with distinct needs. - **Strategy:** Adapts products, marketing, and business practices to local conditions. - **Example:** McDonald's offers local menu variations, such as vegetarian options in India, to cater to local tastes and dietary restrictions. - **Pro:** Builds strong local connections and meets specific customer needs, improving market penetration and customer loyalty. - **Con:** Increases complexity and operational costs due to the need for localized strategies and products. 3. **Regiocentric Approach** - **Focus:** Considers regions rather than individual countries as the primary market segments. - **Strategy:** Integrates and coordinates marketing programs within regions, not across them. - **Example:** European car manufacturers developing specific models for the EU market, reflecting regional regulations and consumer preferences. - **Pro:** Balances regional efficiency with some level of local adaptation, making it easier to manage compared to fully localized strategies. - **Con:** May still overlook finer nuances within individual countries, potentially missing opportunities for deeper local engagement. 4. **Geocentric Approach** - **Focus:** Combines global product concepts with local market adaptations. - **Strategy:** Implements a globalization approach, offering standardized products with local customization where necessary. - **Example:** Global fashion brands aligning global trends with local tastes to appeal to diverse markets while maintaining brand coherence. - **Pro:** Leverages global efficiencies and scale while remaining sensitive to local market conditions and consumer preferences. - **Con:** Requires sophisticated management and coordination to effectively balance global and local needs. **KEY TAKEAWAYS** - - - - - - - -