MGMT 466 Chapter 8

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International Strategy
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related and supporting industriesSupporting services, facilities, suppliers, etc. Support in design Support in distribution Related industries as suppliers and buyersFirm strategy, structure, and rivalrythe pattern of strategy, structure, and rivalry among firms. Common Technical Training Methodological product and process improvement Cooperative and competitive SystemsSelecting an International Corporate-Level Strategythe type selected will have an impact on the selection and implementation of the business-level strategiesInternational Corporate Level Strategy• Focuses on the scope of operations - Product diversification - Geographic diversification • Required when the firm operates in: - multiple industries - multiple countries or regions • Headquarters unit guides the strategy, - but business or country-level managers can have substantial strategic input.multidomestic strategya strategy in which operating decisions are decentralized to each country to enhance local responsiveness Assumes markets differ by country or regions.Global StrategyProducts are standardized across national markets. Business-Level strategic decisions are centralized in the home office Emphasizes economies of scaleTransnational Strategyseeks to achieve both global efficiency and local responsivenessliability of foreignnessLegitimate concerns about the relative attractiveness of global strategies Global strategies not as prevalent as once thought Difficulty in implementing global strategiesRegionalizationFocusing on particular region(s) rather than on global markets Better understanding of the cultures, legal and social normsSituation: The firm has no foreign manufacturing expertise and requires investment only in distribution.Optimal Solution: ExportingSituation: The firm needs to facilitate the product improvements necessary to enter foreign markets.Optimal Solution: LicensingSituation: The firm needs to connect with an experienced partner already in the targeted market and to reduce its risk through the sharing of costsOptimal Solution: Strategic AllianceSituation: The firm needs rapid cross-border access to new international marketsOptimal Solution: AcquisitionsSituation: The firm's intellectual property rights in an emerging economy are not well protected, the number of firms in the industry is growing fast, and the need for global integration is high.Optimal Solution: Wholly-owned SubsidiaryRisk in an International EnvironmentPolitical Risks Economic RisksExpanding sales of goods and services across global regions and countries into different geographic locations or marketsMay increase a firm's returns (such firms usually achieve the most positive stock returns) May achieve economies of scale and experience, location advantages, increased market size, and opportunity to stabilize returnsComplexity of Managing Multinational FirmsExpansion into global operations in different geographic locations or markets: Makes implementing international strategy increasingly complex Can produce greater uncertainty and risk May result in the firm becoming unmanageable May cause the cost of managing the firm to exceed the benefits of expansion Exposes the firm to possible instability of some national governmentsLimits to International ExpansionManagement Problems Cost of coordination across diverse geographical business units Institutional and cultural barriers Understanding strategic intent of competitors The overall complexity of competition