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International Strategy: Lecture - SPUP - Marjorie L. Bambalan

Globalization has increased interdependence between countries through cross-border trade. When developing an international strategy, organizations must consider to what extent they can standardize products versus adapting to local differences. They must also determine their risk tolerance and desired level of control over foreign operations. Effective strategies localize product offerings, distribution, and promotions based on national differences. Management's view of opportunities and risks abroad affects the choice of market entry. Achieving efficiency, managing risks, and fostering innovation are key strategic objectives for multinational organizations.

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59 views28 pages

International Strategy: Lecture - SPUP - Marjorie L. Bambalan

Globalization has increased interdependence between countries through cross-border trade. When developing an international strategy, organizations must consider to what extent they can standardize products versus adapting to local differences. They must also determine their risk tolerance and desired level of control over foreign operations. Effective strategies localize product offerings, distribution, and promotions based on national differences. Management's view of opportunities and risks abroad affects the choice of market entry. Achieving efficiency, managing risks, and fostering innovation are key strategic objectives for multinational organizations.

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zesrtyryytshrt
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© © All Rights Reserved
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International Strategy

Lecture| SPUP| Marjorie L. Bambalan


Globalization
• globalization is the word used to describe the
growing interdependence of the world’s
economies, cultures, and populations, brought
about by cross-border trade in goods and
services, technology, and flows of investment,
people, and information. Countries have built
economic partnerships to facilitate these
movements over many centuries.
Perspective on Globalization

• A crucial issue for oragnizations that


operate across international boarders is to
what extent they can develop global brands
and global products for all markets.

• To what extent must their international


strategy recognize and adapt to
international diversities ex. Consumer
preferences

• Belief of standardization of consumer taste


and preferences – homogeneous market
Perspective on Globalization

• Another issue is the level of risk is


prepared to countenance and the amount
of control it requires over its international
operation as a basis of entry mode
strategy it requires.

Another consideration if the existing


resources is sufficient to enable the
operations across boarders
Localization

In formulating international strategies,


national differences between countries are
important considerations:

It affects:
Product offerings
Distribution
Product promotions
Localization

In formulating international strategies,


national differences between countries are
important considerations:

It affects:
Product offerings
Distribution
Product promotions
Organizational Factors

Role of Management Team


- assessment of management team about
• Saturation of the domestic market
• Large fixed cost – ex. R& D cost, cost of
plants and equipments
-to achieve economies of scale and
economies of scope

- the extent to which managers possess


knowledge and experience of overseas
market
Organizational Factors

Role of Management Team


- management perception of risks
involved in overseas activities
• Affect types of market entry undertaken
• Locational advantage (could be a
competitive advantage)
- cost of labor
- presence of resources
Organizational Factors

Firm Specific Factor


- size of the firm
- international appeal of organization’s
product
(Co Ca coca, Star bucks, Armani, Nike)
Environmental Factors

Unsolicited Proposals
- organization being approached by foreign
government, distributors, or customers.
- Is triggered because of widespread use of
technology

Bandwagon Effect
- organizations that follow competitors who
have gone international
-* organizations are moving to China and
India
Environmental Factors

Attractiveness of the Host Country


- market size
- Favorable regime towards foreign direct
investment

*India and China


Globalization Framework

The organization have achieved efficiency


in its current operations

Has the ability to managed the risks


inherent to its operations

Has developed the learning capabilities


that allow it to innovate and adapt to the
future
Globalization Framework

Strategic Objectives of Multinationals

The organization have achieved efficiency


in its current operations

Has the ability to managed the risks


inherent to its operations

Has developed the learning capabilities


that allow it to innovate and adapt to the
future
Globalization Framework

Strategic Objectives of Multinationals

Achieving Efficiency

• Efficiency is the ratio of the value of its


output to the cost of all inputs

Can be achieved by
- Low production cost (materials, labor and
FOH)
- Efficiency in manufacturing process
Globalization Framework

Strategic Objectives of Multinationals

Managing Risks
Macro economic risks – risks that exists
outside the organization
Ex. Political risks
Competitive risks
Resource Risks
Globalization Framework

Strategic Objectives of Multinationals

Innovation, learning and adaptation


Multinational corporations by virtue of the
different and varied environments in which it
is operating, it is able to develop diverse
capabilities and better learning opportunities
than a domestic companies

• Culture of learning for it to innovate


Globalization Framework

Tools in building competitive advantage

• It can exploit differences in input and output


market that exist in different countries. (ex.
low production cost and wider market)

• It can benefit from economies of scale in its


different activities

• It can take advantage synergies aor the


economies of scope from diversified
activities
Globalization Framework

Tools in building competitive advantage


• National Differences
Sometimes called as locational advantage
examples
Avalability of resources ( ex. A petroleum Co.
would go to Russia or Middle East to extract oil)
A technology Co. would go to Silicon Valley in
California because of the clustering of suppliers
and technology firms
Globalization Framework

Tools in building competitive advantage


• Economies of Scale –
as the firm increases the volume of its
output, so it is able to achieve reduction
in its unit cost

As the firm produce ever larger outputs,


so their learning experience accumulates.
Globalization Framework

Tools in building competitive advantage


• Economies of Scope –
• It arises from understanding that the
cost of undertaking two activities
together is sometimes less than the cost
of undertaking them separately

• Car manufacturer
• Manufacturer like Nestle, Uniliver,
Procter and Gamble, San Miguel
Types of International
Strategy

Tools in building competitive advantage


• Economies of Scope –

Flexible manufacturing – allows


organization to produced small units/
customized products at relatively low unit
cost.
Globalization Framework

• Multi Domestic Strategy

Aimed at adapting a product that for the


use of national market and thereby
corresponding more effectively to the
changes in the local demand conditions.

This assumes that each national market is


unique and independent of the activities
of other national markets.
Globalization Framework

• Multi Domestic Strategy

The benefit of this is the value chain


activities can more closely reflect local
market conditions.

The disadvantage is that increased variety


of product increased also the cost
Globalization Framework

Global Strategy

Examples of global industries are


aerospace, pharmaceutical, consumer
electronics, and semiconductors
companies.
Globalization Framework

International Strategy

Based upon an organization exploiting its


core competencies and distinctive
capabilities in other countries.

Capabilities inherent within the


organization will be centralized in the
home country while other activities would
be based in other countries.
Globalization Framework

Tools in building competitive advantage


• Economies of Scope –

Flexible manufacturing – allows


organization to produced small units/
customized products at relatively low unit
cost.
• Thank you Very Much!

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