PORTER’S COMPETITIVE

ADVANTAGE OF NATIONS
• Firm Strategy, Structure & Rivalry
• Factor Conditions
• Demand Conditions
• Role of Government
• Related & Supporting Industries
• Serendipity
• This has been called the National
Diamond
CONTEXT FOR
INTERNATIONALISATION
• Since World War II international tradehas grown
dramatically
• Technological developments have eased
transportation
• Improvement in Communications Technology
• Falling of Tariff Rates
• Globalisation of markets, trade, finance,
technology, communications & labour(Partially)
SOME EXAMPLES FROM
INDIA
• Indian IT industries got a boost from
availability of IT labour at lower costs
• They looked for foreign customers to
outsource
• Semi-conductor industries for computer
hardware
• City clusters of IT companies
• Global market led to economies of scale
TYPES OF INTERNATIONAL
STRATEGIES
• Cost Pressures impel companies to look for
economies of scale and locational advantage- a
globally standardised product being produced
in a single location with a world-wide market
• Pressures for local responsiveness- catering to
the local market with its preferences, Govt.
policies etc.,
• That seem to be against each other but the
latter provides a cushion against global fluxes
and upheavals
SOME EXAMPLES FROM
INDIA
• Indian Pharma industries benefited
from the protectionist policies
through 70s & 80s
• Upstream Supplier industries
• Large population- large market for
medicines
• Large & small companies in the
organised and unorganised sectors
FOUR TYPES OF
INTERNATIONAL STRATEGIES
• “International” Strategy- transfer products
& services, tight control, standardised
products across with little or no
differentiation
• Multidomestic Strategy- have autonomous
or semi-autonomous companies in
different countries with each having its
own supply chain within that country
FOUR TYPES OF
INTERNATIONAL STRATEGIES
• Global Strategy- emphasis on low costs,
locating its various operations in optimum
locations irrespective of political borders and
operating as if the whole world was one unit
• Transnational Strategies- a combination of low
costs and high local responsiveness- the flow
of expertise from developed countries to
developing companies both ways- global
learning
INTERNATIONAL ENTRY MODES

• Direct & Indirect Export Mode

• Contractual Entry Modes- non-equity
associations between the company and
an international partner with some legal
standing like licensing, franchising,
technical agreements, service contracts,
contract manufacturing, turn-key projects,
BOT arrangements
INTERNATIONAL ENTRY MODES

• Investment Entry Modes: joint ventures,

strategic alliances, independent ventures or
wholly owned subsidiaries
• There is a gradation of risks in al these modes
and a company has to weigh the options
accordingly- export and licensing are low risk,
strategic alliances are medium risk, stronger
but higher risk is joint ventures and wholly
owned subsidiaries
BORN GLOBAL
• A new phenomenon- from its inception
this kind of a company assumes the
whole world as its stage
• Many non profit organisations have
this characteristic, the NGOs etc.
• Thousands of Indian IT professionals in
the Silicon Valley have formed IT
services companies which are born
global
STRATEGIC DECISIONS
• Which international markets to enter?- weigh
the benefits, costs & risks
• Timing of the entry- are you the first mover?-
helps you to build your brand name, build
demand, generate sales revenue, get market
share, create entry barriers
• Early Entry or First Mover entails higher risks
and incurring pioneering costs
• Scale of entry- small scale entry helps in
testing the waters and a large scale entry has
big impact
ADVANTAGES OF EXPANSION
THROUGH THIS ROUTE
• Gains economies of scale
• Realises economies of scope- domestically
developed competencies get stretched and
generates additional competencies of operating
globally- scope of the competencies get magnified
yielding economies
• Market expansion and extension, realising location
economies- the comparative advantage f some
countries becomes the competitive advantage of
the company which has internationalised, access
to resources abroad- natural, financial and human
DISADVANTAGES OF
EXPANSION THROUGH THIS
ROUTE
• Higher risks stemming from political, cultural
and economic uncertainties of the new country
• Difficulty in managing cultural diversity
• Higher bureaucratic costs for linking home
office and overseas operations
• Higher Distribution Costs- differences between
the distribution channels abroad and those at
home
• Trae Barrier- despite liberalisation there are still
written and unwritten trade barriers