IBUS2101 International Business Strategy - Course Outline PDF

IBUS2101 International Business Strategy - Course Outline Course Overview Course Title: IBUS2101 International Business Strategy Instructor: Dr. Wu Zhan Institution: University of Sydney Business School Main Topics Covered: 1. International Entry Strategy (I & II)...

IBUS2101 International Business Strategy - Course Outline Course Overview Course Title: IBUS2101 International Business Strategy Instructor: Dr. Wu Zhan Institution: University of Sydney Business School Main Topics Covered: 1. International Entry Strategy (I & II) 2. Frameworks in International Business Strategy Course Modules: 1. Module 1: Globalization and International Business 2. Module 2: Strategy & Global Strategy 3. Module 3: International Business Strategy Primary Agenda: 1. Reasons for and against expanding internationally. 2. The "4W1H" of entry strategies: When, Where, What, and How to enter. 3. A holistic view of international market entry strategies. 4. Case Study: DuPont’s Entry Strategies in China. Detailed Module Breakdowns Module 1: Globalization and International Business Key Topics Globalization: Impact on business operations, challenges, and strategic opportunities. International Market Forces: Drivers behind the push for internationalization, including technological advancements, trade liberalization, and the growth of emerging markets. Module 2: Strategy & Global Strategy Core Components Strategic Factors for Going Abroad ○ Market Development: Expansion to access growth and efficiency. ○ Resource Access: Securing critical, often low-cost resources.  ○ Management Coordination: Streamlining global activities across markets. ○ Learning and Innovation: Acquiring advanced technology, learning from sophisticated and challenging markets. Case Analysis: DuPont’s Entry into China ○ DuPont’s Experience: Known for its experience in international strategy. ○ Entry Strategies Employed: Partnerships: Formed partnerships like the one with Shanghai Photomask Precision Company for photomasks. Joint Ventures: Partnered with BASF to bypass trade barriers. Wholly Owned Subsidiaries (WOS): Established for products requiring proprietary technology. Diverse Strategies: Adapted strategies based on goal requirements, highlighting that no single strategy fits all situations. Agenda 1. Why Go Abroad? Strategic Drivers for Internationalization ○ Market Development: Opens pathways for growth and operational efficiency. ○ Access to Resources: Essential for securing key resources cost-effectively. ○ Global Coordination: Easier management of transnational operations. ○ Learning Opportunities: Access to cutting-edge technology and the chance to navigate sophisticated, competitive markets. Reference Source: Mellahi, K. 2005. Global Strategic Management, Chapter 7, pp. 189-190. 2. Challenges of Going Abroad - Liability of Foreignness (LOF) Definition: The inherent disadvantages foreign companies face in host countries due to their outsider status. LOF Manifestations: ○ Institutional Differences: Variances in formal and informal rules (regulatory, cultural, linguistic). ○ Customer Discrimination: Host countries may display formal or informal bias favoring local firms. Success Factors to Overcome LOF: ○ Superior Technology ○ Branding and Marketing Capabilities ○ Efficient Logistics and Organization ○ In-Depth Knowledge of Cultural/Institutional Nuances 3. Propensity and Readiness to Internationalize  Determinants: Not all firms, despite similar market drivers, are ready for international expansion. ○ Premature Internationalization Risks: Small firms, in particular, face high failure risks due to limited resources. ○ Readiness Criteria: Sustainable competitive advantage, IB complexity understanding, and a robust strategy are critical. 4. Location Choice for International Expansion (Where) Factors Influencing Choice: ○ Cost and Tax Factors: Transportation, wages, land availability and costs, construction, materials, financing, tax incentives, profit repatriation costs. ○ Demand Factors: Market size, growth potential, customer presence, competitive landscape. ○ Strategic Factors: Investment infrastructure, supply/distribution linkages, workforce productivity, complementary industries. ○ Regulatory/Economic Factors: Policies around foreign direct investment (FDI), availability of special economic zones.  ○ Sociopolitical Factors: Political stability, cultural openness, government efficiency, attitudes toward foreign businesses, community characteristics, and pollution control regulations. Strategic Location Considerations: Location must align with global integration goals and market orientation. Example: Maquiladoras in the Mexico-U.S. border zone as a location-specific advantage. 5. Cultural and Institutional Distance  Definitions: ○ Cultural Distance: The measurable gap between two cultures based on dimensions like power distance. ○ Institutional Distance: The regulatory, normative, and cognitive similarities or dissimilarities between countries. Impact of Distance on Entry Decisions: ○ Stage Model Approach: Enter culturally similar countries first, expanding to more distant ones over time. ○ Alternative View: Prioritizes market, efficiency, and strategic goals over cultural/institutional distance. 6. Location-Specific Advantages Examples of Geographical and Economic Advantages: ○ Unique benefits tied to a location (e.g., Singapore, Austria, Turkey, Miami). ○ Clustering of Economic Activities (Agglomeration): Knowledge Spillover: Firms located nearby benefit from mutual learning. Labor Force Pooling: Access to a skilled regional workforce. Supplier and Buyer Networks: Concentration of specialized suppliers and buyers. 7. Timing of Entry (When) Importance of Timing: Affects risks and potential investment returns. Early Mover Advantages: Establishing market power, exploiting early opportunities, gaining competitive edge. Early Mover Disadvantages: Encountering regulatory hurdles, underdeveloped infrastructure, resource scarcity, and lack of market stability. Case Study Example: Chinese Automobile Industry ○ First Mover Success: Volkswagen ○ Late Mover Success: GM ○ Late Mover Failure: Ford Conclusion: First-mover advantages can vary significantly by industry and region. 8. Entry Mode Selection (How) Definition of Entry Modes: Specific forms of entry used to achieve goals in a target country. Types of Entry Modes: ○ Trade-Related Modes: Exporting and importing for low-investment market access. ○ Transfer-Related Modes: Licensing and franchising, often less resource-intensive. ○ Foreign Direct Investment (FDI) Modes: Joint ventures and wholly owned subsidiaries for deeper control and market presence. Comparison of Entry Modes 1. Exporting Description: Shipping goods/services to a foreign market. Advantages: Minimal investment, accessible for small firms. Disadvantages: Limited customer feedback, exposure to tariff costs. 2. Licensing Description: Allowing a foreign company to use IP in return for fees. Advantages: Avoids direct entry costs; suitable for firms focused on R&D. Disadvantages: Limited control over the licensee’s operations and quality. 3. Franchising Description: Allowing another party to operate using franchisor's brand. Industries: Common in fast-food, hotels, and retail sectors. Advantages: Scalable, adaptable to local markets with low direct costs. Contract Agreements 4. Joint Ventures (JV) Description: Two or more partners sharing ownership in a new entity. Types: ○ Equity JVs: Involve shared financial stakes. ○ Non-Equity JVs: No ownership stake, just collaboration. Advantages: Risk-sharing, access to local market insights. 5. Wholly Owned Subsidiaries (WOS) Description: Complete ownership by a multinational corporation (MNC). Advantages: Full control, direct market engagement. Disadvantages: High investment risks, potential local labor conflicts. 6. Alliances and Mergers Description: Cross-border equity exchanges or partnerships. Advantages: Combines competitive strengths, resources, and expertise. Requirement among Entry Modes Entry Mode Trade-Offs Factor Exporting Licensin Joint Venture Wholly Owned Subsidiary g Investment Low Low Medium High Control Low Low Medium High Risk Low Medium High High Speed of Entry High Medium Medium Low Technology Limited High Medium High Transfer Strategic Choices and Dynamic Approach to Entry Strategy Variety in Strategy Choices: Firms adapt entry strategies based on specific country conditions and business objectives. Evolution of Entry Strategies: Initial choices may shift as companies gain market knowledge. ○ Examples: Starbucks: Transitioned from franchising to joint ventures, then wholly owned subsidiaries. Haier in the U.S.: Started with exports, later established green-field FDI projects. Importance of Post-Entry Strategy: Adaptations post-entry are essential for sustained success.