International Studies

Why internationalize?

- resources: natural resources, personnel, etc.

- markets: product commercialization, access to new markets

- efficiency: economies of scale, outsourcing manufacturing

- strategic assets: strengthen competitive position, business diversification

Global industry vs. multi-country industry

Global:

- few big competitors worldwide

- specialized product offerings

- few barriers to international trade

- similar consumers worldwide

Multi-country:

- multidomestic, local

- fragmented competition

- difficulty to access new countries

- different environments

Going International

1. country selection

2. product

3. entry mode

going international: country selection

- market research (size, sales potential, consumer profiles, competition)

- country risk (political risk, admin risk, social stability, etc.)

- international distance (geographic distance, cultural distance)

going international: product

- characteristics of the product (potential benefits, strong position, resource availability, usages of product)

- product life cycle

- standardization vs. adaptation

going international: entry mode

- degree of control and risks/resources

- types (direct/indirect exports, licensing/franchise/management contracts, joint venture, wholly owned subsidiary)

expanding globally allows firms to increase profitability and profit growth in ways no available to purely domestic enterprises by...

1. leveraging products and competencies

2. location economies (optimal location)

3. experience effects

4. leveraging subsidiary skills (earn a greater return)

what are experience effects

- experience curve: systematic reductions in product costs over life of product

- learning effects: cost savings from learning by doing

- economies of scale: reductions in unit costs achieved by producing a large volume of a product

2 conflicting types of competitive pressures

- pressures for cost reductions: forced to lower unit costs

- pressures to be locally responsive: require firms to adapt its product to meet different local demands in each country

Global/ethnocentric strategy

characteristics:

- high perception of global pressures

- world as market

- same products diff sellers

- centralization of operations, resources, key responsibilities

competitive advantage:

- search for cost advantages

assets/capabilities:

- global configuration of assets, centralization of operations

role of subsidiaries:

- implement strategies defined by central headquarters

- R&D kept at headquarters

localization strategy

characteristics:

- high perception of local pressures

- strategy country focused

- product adaptation

- decentralized

- duplication of activities, structures, resources

- low communication between units

competitive advantage:

- same pursue as headquarters

assets/capabilities:

- centralization of core competences and decentralization of operations, related to marketing adaptation

role of subsidiaries:

- implementation of general strategies and small adaptations to local markets

- innovation, R&D kept at headquarters

transnational strategy

characteristics:

- simultaneous perception of local and global pressures

- global integration and local sensitivity

- interdependence on business units, international teams

- knowledge of country of multinational

- intense communication between subsidiaries (knowledge sharing, information, products, etc.)

- differentiated profiles of subsidiaries directly related to the competitiveness of them in local market

competitive advantage:

- global efficiency, flexibility, knowledge transfer at global level

asset capabilities:

- dispersed, interdependent, and specialized assets and capabilities

role of subsidiaries:

- differentiated contributions from different national units, ops. integrated at a global level

- shared development of knowledge and innovation