“ INTERNATIONAL

STRATEGY ”
SUBMITTED BY

ARVIND GUPTA (8123)

KNOWLEDGE OBJECTIVES
1. Identifying International Opportunities: Incentives to use an
International strategy
2. Explore the four factors that lead to a basis for international
business-level strategies.
3. Define the three international corporate-level strategies:
multidomestic, global, and transnational.
4. Choices of International Entry Mode
5. Strategic Competitive outcomes
6. Risks in an International Environments

 International Strategy Opportunities &
Outcomes
nternational Opportunities
Explore Use Core Strategic
Resources & Competence Competitiven
Capabilitie ess
s Outcomes
Internatio Modes of Management
nal Entry Problems , Risk , and
Strategies First Steps
Increased Internation Exporting
Market al
Size Bus .- Level Higher
Return on Strategy Licensing Performance
Investment Multidomest Returns
ic Strategy Strategic
Economies Alliances
of Scale Global
and Strategy Acquisitio Innovation
Learning n
Location Transnation Establishmen
Advantage al Strategy t of New Sub .
Management
Problems , Risk ,
and First
Steps
IDENTIFY INTERNATIONAL
OPPORTUNITIES
Mainly for three reasons firms go international
1.Lower Production cost
 E.g. :- Clothing, Electronics, watch making
2.To secure needed resources
 E.g.:- Gems & Jwellery (Europe:- Roseyblu, Eurostar),
Minerals and Energy
3.To extend a product`s life cycle
 E.g.:- Bajaj Auto (Sri Lanka, Bangladesh & China)
Benefits of International
Strategies
Increased market size.
Greater returns on major capital
investments or new products or
processes.
Greater economies of scale, scope or
learning.
A competitive advantage through
location.

1. INCREASED MARKET SIZE
Expand the size of potential market
Ex. General motors- Asia, Pharmaceutical
Firms (85% Firms)- FDI- China

Firms competing in Domestic markets have
limited growth opportunities
Ex. Pepsi and Coca-cola

Invest in R&D to build competitive
advantaages
Ex. Ranbaxy in Africa


2. RETURN ON INVESTMENT
Large markets needs heavy investment
Ex.: R&D, Plant and capital

Reverse Engineering

Above average return on Investments






3. ECONOMIES OF SCALE AND
LEARNING
Economies of scale:- Refers to reduction in
unit cost by producing a large volume of a
product

Firm can standardize products across
country Borders
Ex. Production and R&D across country---
Pepsi & coke

Allow price their product competitively to
gain market share
Ex. Automobile Industry such as Toyota, GM

Exploit core competencies in international
4. LOCATION ADVANTAGES
Lower the basic costs of the goods and
services
Lower labour cost, energy and natural
resources
Access to critical suppliers and to customers
Help to earn positive returns.
Ex.: GM- Asia
 Help in differentiation of products from
competitors



 International Strategy Opportunities &
Outcomes
Identify Explore Use Core Strategic
Internationa Resources & Competence Competitiven
l Capabilitie ess
Opportunitie s Outcomes
s Internatio Modes of Management
nal Entry Problems , Risk , and
Strategies First Steps
Increased Internation Exporting
Market al
Size Bus .- Level Higher
Return on Strategy Licensing Performance
Investment Multidomest Returns
ic Strategy Strategic
Economies Alliances
of Scale Global
and Strategy Acquisitio Innovation
Learning n
Location Transnation Establishmen
Advantage al Strategy t of New Sub .

Management
Problems , Risk ,
and First
Steps
International Strategies
International Business Level Strategies
International Corporate Level Strategies
§ Multi-domestic Strategy
§ Global Strategy
§ Transnational Strategy

International Business Level
Strategies

International Low Cost

 Usually located in home country
 Export to international markets
 Low value added operations in foreign
countries
 High value added operations in home
country
International Differentiation
 Countries with advanced or specialized
factor conditions most likely to use this
strategy


 Example: Japan, Germany, U.S.




International Business Level
Strategies

International Focus Strategies

 Technologically advanced firms follow focused
low cost strategy
 Focused differentiation firms compete on the
basis of image & design
 Third group competes on low price by imitating
International Integrated Low
Cost/Differentiation
 Can be most effective in dealing with diverse
markets
 Often relies upon flexible manufacturing, total
quality management or rapid communication
networks



 D e te rm in a n ts o f N a tio n a l
A d v a n ta g e
FACTOR OF PRODUCTION

TRATEGY , STRUCTURE AND RIVALRY DEMAND CONDITIONS

Related & Supporting Industries

 Determinants of National
Advantage
 Factors of Production
 Inputs – Labour, land, natural resources, capital &
infrastructure
 Demand Conditions
 The nature and size of he buyers needs in the home
market of goods & services
 Related & Supporting Industries
 Industries in which the target country is considered
the leader
 e.g. Italy - shoes with a supporting leather
industry,
 Japan- cameras & photocopiers,
 Denmark - diary & an industry focused on food
enzymes.
 Firm Strategy, Structure & Rivalry make up
 Germany focused on methodical product & process
improvements,
 Corporate-Level International
Strategies
Type of Corporate Strategy selected will
have an impact on the selection and
implementation of the business-level
strategies
Some Corporate strategies provide
individual country units with flexibility to
choose their own strategies
Others dictate business-level strategies from
the home office andMulti - Domestic
coordinate resource
T h re e
sharing across units Strategy
C o rp o ra
 Global Strategy
te
Transnational
S tra te g i Strategy
Multi-domestic Strategy

Strategy and operating decisions are

decentralized to strategic business units
(SBU) in each country.
Products and services are tailored to local
markets
Business units in each country are
independent of each other
Assumes markets differ by country or
regions
Focus on competition in each market



Global Strategy

Products are standardized across national

markets
Decisions regarding business-level
strategies are centralized in the home
office
Strategic business units (SBU) are assumed
to be interdependent
Often lacks responsiveness to local markets
Requires resource sharing and coordination
across borders (which also makes it
difficult to manage)

Tra n sn a tio n a lS tra te g y

Seeks to achieve both global efficiency and

local responsiveness

Difficult to achieve because of simultaneous
requirements for strong central control and
coordination to achieve efficiency and local
flexibility and decentralization to achieve
local market responsiveness

Eg.FORD

 International Corporate-Level
Strategy
When is each strategy
HIGH
appropriate?

OR GLOBAL INTEGRATION

MULTIDOM-ESTIC
STRATEGY

LOW

LOW HIGH
NEED FOR LOCAL RESPONSIVENESS
 International Corporate-Level
Strategy
When is each strategy
HIGH
appropriate?

GLOBAL
STRATEGY
OR GLOBAL INTEGRATION

MULTIDOM-ESTIC
STRATEGY

LOW

LOW HIGH
NEED FOR LOCAL RESPONSIVENESS
 International Corporate-Level
Strategy
When is each strategy
HIGH
appropriate?

GLOBAL TRANSNATI-ONAL
STRATEGY STRATEGY
OR GLOBAL INTEGRATION

MULTIDOM-ESTIC
STRATEGY

LOW

LOW HIGH
NEED FOR LOCAL RESPONSIVENESS
 International
International Strategy
Strategy Opportunities
Opportunities &
&
Outcomes
Outcomes
Identify Explore Use Core Strategic
Internationa Resources & Competence Competitive
l Capabilitie ness
Opportunitie s Outcomes
s Internatio Modes of Management
nal Entry Problems , Risk , and
Strategies First Steps
Increased Internation Exporting
Market al
Size Bus .- Level Higher
Return on Strategy Licensing Performance
Investment Multidomest Returns
ic Strategy Strategic
Economies Alliances
of Scale Global
and Strategy Acquisitio Innovation
Learning n
Location Transnation Establishmen
Advantage al Strategy t of New Sub .
Management
Problems , Risk ,
and First
Steps
Choice of International Entry Mode
Exporting
Common way to enter new international
markets.
No need to establish operations in other
nations.
Establish distribution channels through
contractual relationships.
May have high transportation costs.
May encounter high import tariffs.
May have less control on marketing and
distribution.
Difficult to customize product.

Choice of International Entry Mode
Licensing
Firm authorizes another firm to manufacture
& sell its products
Licensing firm is paid a royalty on each unit
produced and sold.
Licensee takes risks in manufacturing
investments.
Least risky way to enter a foreign market.
Licensing firm loses control over product
quality & distribution.
Relatively low profit potential.



Choice of International Entry Mode
Strategic Alliances
 Enable firms to shares risks and
resources to expand into international
ventures.
 Most joint ventures (JVs) involve a foreign corp.
with a new product or technology & a host
company with access to distribution or
knowledge of local customs, norms or politics.
 May experience difficulties in merging disparate
cultures.
 May not understand the strategic intent of
partners or experience divergent goals.
Eg. Maruti udyog and suzuki.

 Dow Jones and Bennett and Coleman & co.

Ltd.
Choice of International Entry Mode
Acquisitions
Enable firms to make most rapid
international expansion.
Can be very costly.
Legal and regulatory requirements may
present barriers to foreign ownership.
Usually require complex and costly
negotiations.
Potentially disparate corporate culture.

Choice of International Entry Mode
New Wholly - Owned Subsidiary

Most costly & complex of entry alternatives.

Achieves greatest degree of control.
Potentially most profitable, if successful.
Maintain control over technology, marketing
and distribution.
May need to acquire expertise & knowledge
that is relevant to host country.


C o u ld re q u ire h irin g h o st co u n try n a tio n a ls

o r co n su lta n ts a t h ig h co st.
 Strategic Competitiveness Outcomes
International diversification facilitates
innovation in the firm.
Provides larger market to gain more and
faster returns form investments in
innovation
May generate resources necessary to
sustain a large-scale R&D program.
Generally related to above-average
returns, assuming effective
implementation and management of
international operations.
International diversification provides
 International Strategy Opportunities &
Outcomes
Identify Explore Use Core Strategic
Internationa Resources & Competence Competitive
l Capabilitie ness
Opportunitie s Outcomes
s Internatio Modes of Management
nal Entry Problems , Risk , and
Strategies First Steps
Increased Internation Exporting
Market al
Size Bus .- Level Higher
Return on Strategy Licensing Performance
Investment Multidomest Returns
ic Strategy Strategic
Economies Alliances
of Scale Global
and Strategy Acquisitio Innovation
Learning n
Location Transnation Establishmen
Advantage al Strategy t of New Sub .
Management
Problems , Risk ,
and First
Steps
 Risks in the International
Environment

ØPolitical instability in indonesia brought about by continuing ethnic strif

ØUncertain future of peace in the middle east because of changes in national

POLITICAL RISK

ØFailure of the european union’s quest for economic superpower status because

ØChina’s difficulty in enforcing intellectual property rights on

POLITICAL RISK

ØRussia’s struggle with low productivity, currency problems and

ØExchange rate exposure due to the U.S.-conadian dollar fluctuati

 Major Risks of International Diversification
Political Risk
National government instability may
create potential problems for
internationally diversified firms.
Potential changes in attitudes or
regulations regarding foreign
ownership.
Legal authority obtained from previous
administration may become invalid.
Potential for nationalization of firms’
assets.

 Major Risks of International
Diversification
E co n o m ic R isk
Econ. risks are interdependent with political
risks.
Differences and fluctuations in international
currencies may affect value of assets &
liabilities.
 This affects prices & thus ability to
compete.
Differences in inflation rates may affect
inter-nationally diversified firms’ ability to
compete.
Enforcing intellectual property rights on CDs,
software, etc.

THANK YOU
