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  2. 2. INTRODUCTION • International business strategies are a normal part of doing business no matter where your business is located in the world • Global businesses will compete with you, do business with you, and even put you out of business if you aren't careful • Businesses, large and small, must formulate international business strategies to function in the global economy. • Global business activity is just as normal today as doing business in your local community was 50 years ago
  3. 3. APPEALING FACTORS  Build a broader customer base.  Prevent adverse effects of seasonal business swings.  Utilize excess manufacturing capacity sitting idle at home.  Lower production costs by using lower priced labour abroad
  4. 4. A global strategy requires significant coordination between the activities of the centre and those of subsidiaries. An international strategy does not require strong coordination from the centre The global strategy assumes that the centre should standardize its operations and products in all the different countries. An international strategy assumes that the subsidiary should respond to local business The global strategy plans and executes competitive battles on a global scale The international strategy gives subsidiaries the independence to plan and execute competitive moves independently A global strategy takes ‘an integrated approach’ An international strategy treats competition on a ‘stand-alone basis’ GLOBAL STRATEGY INTERNATIONAL STRATEGY
  5. 5.  Companies go international for a variety of reasons but the typical goal is company growth or expansion  Overseas operations are often attractive to executives seeking to reduce their budgets  The majority of an industry's business may shift overseas, making global expansion all the more desirable.
  6. 6. WHY GLOBALIZATION?  Economic ‘globalization’ is a historical process.  Refers to the increasing integration of economies around the world.  As globalization accelerates there will be increased opportunities for collaboration between nations, multinational corporations and communities.
  7. 7. How does globalization relate to strategy, especially in large companies? Two prime characteristics:  It involves growing interdependency between countries  It is multi-faceted with many different business aspects. There can be no doubt that both world trade and foreign direct investment have been growing over the last twenty years: World trade exports amounted to US$ 4,261 billion in 1990, US$ 7,036 billion in year 2000 and US$ 12,461 billion in 2005 Foreign direct investment outflows were US$ 230 billion in 1992 and US$ 779 billion in 2005
  8. 8. • The multifaceted nature of globalization  Political Sociological  Technology Culture Finance Production
  9. 9. COSTS OF GOING GLOBAL Transaction C O S T
  10. 10. Tariff and non tariff costs COST Know your business Identify and understand your marketplace and customer Create your business plan Find and evaluate the people Think local, act local
  11. 11. •Global strategy •Multi national strategy •Transnational strategy
  12. 12. Foreign Entry Modes
  13. 13. Exporting & Importing Licensing Or Franchising Joint VenturesStrategic Alliance Foreign Direct Investment
  14. 14. Contract Manufacturing Management contracting Turnkey contracts Mergers & Acquisitions Counter Trade Other Expansion Modes
  15. 15. • This case study analyses how IKEA adapted its strategies to expand and become profitable in China. It also assesses some lessons the company learnt in China that might be useful in India. • What did IKEA do? It innovated to stay in business. It learnt how to design its own furniture, bought raw material from suppliers in Poland, and created its own exhibitions. Today, IKEA is the world's largest furniture retail chain and has more than 300 stores globally.
  16. 16. • IKEA identified the strategic challenges and made attempts to overcome them. One of the main problems for IKEA was that its prices, considered low in Europe and North America, were higher than the average in China. • IKEA built a number of factories in China which resolved the problem of high import taxes in China. The company also started performing local quality inspections closer to manufacturing to save on repair costs.
  17. 17. • Since 1999, IKEA has been working on becoming more eco-friendly. It has been charging for plastic bags, asking suppliers for green products, and increasing the use of renewable energy in its stores. All this proved difficult to implement in China. Price-sensitive Chinese consumers seem to be annoyed when asked to pay extra for plastic bags and they did not want to bring their own shopping bags.
  18. 18. CONCLUSION • International Business Strategy is a homework any firms aiming to expand international market must take seriously. • After carefully scaling the pressures for cost reduction and local responsiveness, firms are to finely position their international business strategy. • Globalization of business has led to the emergence of global strategic management. • The firm with the choice of an effective global strategy that takes into consideration its strengths and weaknesses in the face of the opportunities and threats in the environment, will survive.