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Module 8 - International Strategies

This document discusses international strategies and the reasons why firms implement them. It defines an international strategy as selling goods or services outside a firm's domestic market. International strategies allow firms to access new opportunities in larger, global markets. They also help firms secure needed resources and achieve economies of scale. The document then examines different types of international strategies, including multidomestic, global, and transnational strategies, and discusses how international diversification can stabilize returns but also presents political and economic risks.

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363 views13 pages

Module 8 - International Strategies

This document discusses international strategies and the reasons why firms implement them. It defines an international strategy as selling goods or services outside a firm's domestic market. International strategies allow firms to access new opportunities in larger, global markets. They also help firms secure needed resources and achieve economies of scale. The document then examines different types of international strategies, including multidomestic, global, and transnational strategies, and discusses how international diversification can stabilize returns but also presents political and economic risks.

Uploaded by

ian92193
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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MODULE 8

INTERNATIONAL
STRATEGIES
International
Strategy
A strategy through which the firm
sells its goods or services outside
its domestic market. One of the
primary reasons for implementing
an international strategy (as
opposed to a strategy focused on
the domestic market) is that
international markets yield
potential new opportunities.
Another traditional motive for
firms to become multinational is
to secure needed resources.
International Strategy
Identifying International Opportunities Increased Market Size - Firms
can expand the size of their potential market by moving into international
markets. The size of an international market also affects a firm’s willingness
to invest in R&D to build competitive advantages in that market.
Return on Investment - Large markets may be crucial for earning a return
on significant investments, such as plant and capital equipment or R&D.
Therefore, most R&D-intensive industries such as electronics are
international.
International Strategy
Economies of Scale and Learning - firms may be able to enjoy economies of scale,
particularly in their manufacturing operations. To the extent that a firm can standardize
its products across country borders and use the same or similar production facilities,
thereby coordinating critical resource functions, it is more likely to achieve optimal
economies of scale. Firms may also be able to exploit core competencies in
international markets through resource and knowledge sharing between units and
network partners across country borders.
Location Advantages - Firms may locate facilities in other countries to lower the basic
costs of the goods or services they provide. These facilities may provide easier access
to lower-cost labor, energy, and other natural resources. Other location advantages
include access to critical supplies and to customers.
International Strategies
International Business-Level Strategy
In an international business-level strategy, the home country of
operation is often the most important source of competitive advantage
The resources and capabilities established in the home country
frequently allow the firm to pursue the strategy into markets located in
other countries. However, research indicates that as a firm continues its
growth into multiple international locations, the country of origin is less
important for competitive advantage
International Strategies
International Corporate-Level Strategy
 International corporate-level strategy focuses on the scope of a firm’s
operations through both product and geographic diversification.
 required when the firm operates in multiple industries and multiple
countries or regions
The three international corporate-level strategies are multidomestic,
global, and transnational
International Strategies
Multidomestic Strategy
is an international strategy in which strategic and operating decisions
are decentralized to the strategic business unit in each country so as to
allow that unit to tailor products to the local market.
focuses on competition within each country
assumes that the markets differ and therefore are segmented by country
boundaries
International Strategies
Global Strategy
assumes more standardization of products across country markets
is centralized and controlled by the home office
a global strategy emphasizes economies of scale and offers greater
opportunities to take innovations developed at the corporate level or in
one country and utilize them in other markets.
International Strategies
Transnational Strategy
an international strategy through which the firm seeks to
achieve both global efficiency and local responsiveness.
Realizing these goals is difficult: One requires close global
coordination while the other requires local flexibility. “Flexible
coordination”—building a shared vision and individual
commitment through an integrated network—is required to
implement the transnational strategy
International Strategies
Strategic Competitive Outcomes
International Diversification
is a strategy through which a firm expands the sales of its goods or services across the
borders of global regions and countries into different geographic locations or markets
Research has shown that, as international diversification increases, firms’ returns
decrease initially but then increase quickly as firms learn to manage international
expansion
Many factors contribute to the positive effects of international diversification, such as
potential economies of scale and experience, location advantages, increased market
size, and the opportunity to stabilize returns. The stabilization of returns helps reduce a
firm’s overall risk
Strategic Competitive Outcomes
Political Risks
Political risks are risks related to instability in national governments
and to war, both civil and international
uncertainty created by government regulation
the existence of many, possibly conflicting, legal authorities or
corruption
the potential nationalization of private assets.
Strategic Competitive Outcomes
Economic Risks
differences and fluctuations in the value of different
currencies
the security risk posed by terrorists.

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