INTERNATIONAL BUSINESS STRATEGIC MANAGEMENT MARKET ENTRY MODES CHOICE
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INTERNATIONAL BUSINESS STRATEGIC MANAGEMENT MARKET ENTRY MODES CHOICE

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THIS PRESENTATION OF INTERNATIONAL BUSINESS CONSIST ON DIFFERENT STRATEGIES LIKE BUSINESS, CORPORATE, FUNCTIONAL. IT ALSO COVERS FOREIGN MARKET ENTRY MODES.

THIS PRESENTATION OF INTERNATIONAL BUSINESS CONSIST ON DIFFERENT STRATEGIES LIKE BUSINESS, CORPORATE, FUNCTIONAL. IT ALSO COVERS FOREIGN MARKET ENTRY MODES.

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INTERNATIONAL BUSINESS STRATEGIC MANAGEMENT MARKET ENTRY MODES CHOICE INTERNATIONAL BUSINESS STRATEGIC MANAGEMENT MARKET ENTRY MODES CHOICE Presentation Transcript

  • International Business Strategic Management Faisal Shahzad MBA (Marketing) MSc in Economics and Business Administration VAASA University Finland Practice Lecturer Helsinki Business College Helsinki, Finland. 00358 440778692 email: faisalshahzad63@gmail.com/faisal.shahzad@ myy.haaga-helai.fi 11/14/2013 Prepared By: Faisal Shahzad 1
  • Learning Outcomes 11/14/2013 Prepared By: Faisal Shahzad 2
  • Learning Outcomes What is International Business? Why we study IB? What is Strategy? Drivers of Internationalisation Geographic Sources of Advantage Location Advantage: Porter’s Diamond PESTEL Anaylsis CAGE Framework How many Strategic Alternatives available for MNCs? Market Entry Modes and selection 11/14/2013 Prepared By: Faisal Shahzad 3
  • What is International Business? 11/14/2013 Prepared By: Faisal Shahzad 4
  • What is International Business? Prepared By: Faisal Shahzad 11/14/2013 5
  • Why Study International Business? 11/14/2013 Prepared By: Faisal Shahzad 6
  • Why Study International Business? In today’s globalizing world, firms are increasing looking towards other region of the world to trade in. What are the steps taken by the exectuives of these firms before deciding on which market to enter? How do they make sure their journey a successful one? Organization which you will join might have international operations. If one day you start your own business and may you will have to buy material foreign-made. 11/14/2013 Prepared By: Faisal Shahzad 7
  • 11/14/2013 Prepared By: Faisal Shahzad 8
  • What is Strategy? 11/14/2013 Prepared By: Faisal Shahzad 9
  • What is Strategy? “A plan of action or policy designed to achieve a major or overall aim.” The essence of strategy is choosing a unique and valuable position rooted in systems of activities that are much more difficult to match. 11/14/2013 Prepared By: Faisal Shahzad 10
  • International vs. Global Strategy International strategy refers to a range of options for operating outside an organization’s country of origin. Global strategy is only one kind of international strategy, it involves high coordination of extensive activities dispersed geographically in many countries around the world. 11/14/2013 Prepared By: Faisal Shahzad 11
  • International Strategy Framework Internationalization Drivers Mode of Entry Geographic Advantages Market Selection 11/14/2013 12
  • Drivers of Internationalization Market Drivers    Similar customer needs Global customers Transferable marketing Cost Drivers  Scale economies  Country-specific differences  Favorable logistics 11/14/2013 Government drivers  Trade policies  Technical standards  Host government policies Competitive drivers Interdependence between countries  Competitors global strategies Prepared By: Faisal Shahzad 13
  • Geographic Source of Advantage 11/14/2013 14
  • Firm strategy, structure and rivalry Government Factor conditions Demand conditions Related and supporting industries 11/14/2013 Prepared By: Faisal Shahzad Chance 15
  • Location Advantage: Porter's Diamond Demand Conditions 1) The nature of the domestic customers can become a source of competitive advantage. 2) Dealing with sophisticated and demanding customers at home helps train a company to be effective in foreign markets. 11/14/2013 Prepared By: Faisal Shahzad 16
  • Diamond Conditions Example Italian ceramic industry after World War second, There was post war housing boom. Consumers wanted cool floors due to hot climate conditions. Japanese knowledgeable consumers of electric and electronics products made that industry innovative and grow tremendously. French wine industry, French people are sophisticated wine consumers which forced firms to produce high quality wine. Sophisticated local customers in France and Italy have helped keep their local fashion industries at the leading edge for many decades. 11/14/2013 Prepared By: Faisal Shahzad 17
  • Factor Conditions These refer to the “factors of production” that go into making a product or service (raw material, labor an land). There are two types of factors. Basic Factors: Natural resources, climate, demographics Advanced Factors: Communication infrastructure, skilled labor, research and development facility etc. 11/14/2013 Prepared By: Faisal Shahzad 18
  • Related and supporting industries •Local “clusters” of related and mutually supporting industries can be an important source of competitive advantage. •These are often regionally based and making personal interaction easier. For example: Leather footwear industry, leatherworking machinery industry and the design services which connect them together in the same regional cluster to each others mutual benefit. 11/14/2013 Prepared By: Faisal Shahzad 19
  • Firm strategy, structure and rivalry The characteristics strategies, industry structures and rivalries in different countries can also be bases of advantage. German companies strategy of investing in technical excellence gives them a characteristics advantage in engineering industries and creates large pool of expertise. A competitive local industry structure is also helpful, like swis pharmaceuticals industry became strong in part because each company had to compete with several strong local rivals. 11/14/2013 Prepared By: Faisal Shahzad 20
  • Government and Chance 11/14/2013 Prepared By: Faisal Shahzad 21
  • International Strategies 11/14/2013 Prepared By: Faisal Shahzad 22
  • 11/14/2013 Prepared By: Faisal Shahzad 23
  • Global Strategy The firm views the world as a single marketplace and its primary The firm views the world as a single marketplace and its goal is to create standardized goods and services that will address the primary goal is to create standardized goods and services that needs of customers worldwide. will address the needs of customers worldwide. I.Strategies form at HQ Strategies form at HQ II.Economies of Scale and Scope Economies of Scale and Scope III.Global Advertising and Marketing Campaigns Global Advertising and Marketing Campaigns 11/14/2013 Prepared By: Faisal Shahzad 24
  • Home Replication Strategy In this approach, a firm utilize the core competency or firm-specific advantage it developed at home as its main competitive weapon in the foreign markets that it centers. Example: Mercedes-Benz relies on its well-known brand name and its reputation for building well engineered, luxurious cars capable of traveling safely at very high speeds. 11/14/2013 Prepared By: Faisal Shahzad 25
  • Multidomestic Strategy A multi-domestic corporations vies itself as a collection of relatively independent operating subsidiaries, each of which focuses on a specific domestic market. In addition, each of these subsidiaries is free to customize its products, its marketing campaign, and its operations techniques to best meet the needs of its local differences among national market. 11/14/2013 Prepared By: Faisal Shahzad 26
  • Transnational Strategy The transnational corporations attempt to combine the benefits of global scale efficiencies, such as those pursued by a global corporations, with the benefits and advantage of local responsiveness, which is the goal of multi domestic corporations. Example: IKEA 11/14/2013 Prepared By: Faisal Shahzad 27
  • 11/14/2013 Prepared By: Faisal Shahzad 28
  • The Staged International Expansion Model The Staged International Expansion model proposes a sequential process whereby companies gradually increase their commitment to newly entered markets, as they build market knowledge and capabilities. However, the gradualism of staged international expansion model is now challenged by two phenomena: 1. Born global firms 2. Emerging country multinationals 11/14/2013 Prepared By: Faisal Shahzad 29
  • Market Selection and Entry 11/14/2013 Prepared By: Faisal Shahzad 30
  • PESTEL Framework Political Economic Social Legal 11/14/2013 Prepared By: Faisal Shahzad 31
  • CAGE Framework Cultural Distance Geographical Distance 11/14/2013 Administrative Distance Economic Prepared By: Faisal Shahzad 32
  • Market Entry Modes 11/14/2013 PREPARED BY: FAISAL SHAHZAD 33
  • Choosing a Mode of Entry Decision Factors Ownership Advantage Location Advantage Internalization Advantage Other Factors exporting 11/14/2013 Internatioanl licensing International frenchising PREPARED BY: FAISAL SHAHZAD Foreign direct investment Specialized modes 34
  • Market Entry Modes 11/14/2013 PREPARED BY: FAISAL SHAHZAD 35
  • Export Eporting is the process of sending goods or services from one country to other countries for use or sale there. Exporting offers several advantages and disadvantages to the firms. 11/14/2013 PREPARED BY: FAISAL SHAHZAD 36
  • Export Advantages Disadvantages Increase sales and profits Incur added administrative cost Eploit corporate technology and knowhow Allocate personal for travel Gain global market share Extend the sales potential of existing products Stabilize seasonal market fluctuations Enhance potential for corporate expansion Modify your product or packaging Payments delay Vulnerability to tariffs and NTBs Potential conflicts with distributors Gain information about foreign market competition 11/14/2013 PREPARED BY: FAISAL SHAHZAD 37
  • Modes of Entry Licensing Generally, a licensing agreement involves the granting of rights to intangible property, such as patents, copyrights, trademarks, or producers. An agreement is made between the owner (licensor) of the property and a user of (licensee) to specify the terms of use and payment terms. 11/14/2013 PREPARED BY: FAISAL SHAHZAD 38
  • Basic Issues in Licensing 1) Specifying the agreement boundaries (Heineken is exclusively licensed to manufacturer and sell Pepsi-Cola in the Netherlands). 2) Determining Compensation (royalty is usually paid to the licensor in the form of flat fee, percentage of the unit sold). 11/14/2013 Prepared By: Faisal Shahzad PREPARED BY: FAISAL SHAHZAD 39
  • Basic Issues in Licensing 3) Establishing rights, privileges and constraints (if a licensee began using inferior material, if licensee sell information, technology, production method to other firm). 4) Specifying the agreement duration (the licensee built Walt Disney land insisted on a 100-year licensing agreement with the Walt Disney Company). 11/14/2013 PREPARED BY: FAISAL SHAHZAD 40
  • Licensing Advantages 11/14/2013 Disadvantages PREPARED BY: FAISAL SHAHZAD 41
  • Franchising A fenchising agreement allows an independent entrepreneur or organization called the franchisee, to operate a business under the name of another, called the franchisor, in return for a fee. 11/14/2013 PREPARED BY: FAISAL SHAHZAD 42
  • Franchising 11/14/2013 PREPARED BY: FAISAL SHAHZAD 43
  • Foreign Direct Investment 11/14/2013 PREPARED BY: FAISAL SHAHZAD 44
  • Foreign Direct Investment 11/14/2013 PREPARED BY: FAISAL SHAHZAD 45
  • Dunning’s Eclectic Theory 11/14/2013 PREPARED BY: FAISAL SHAHZAD 46
  • The Greenfield Strategy The Greenfield strategy involves starting a new operation from scratch. The firm buy or lease land, constructs new facilities, hires and transfers in managers and employees, and then launches the new operations. Example: Toyota production facility in India represents greenfield investment, Nissan factory in Sunderland England. 11/14/2013 PREPARED BY: FAISAL SHAHZAD 47
  • The Greenfield Strategy Advantages 11/14/2013 PREPARED BY: FAISAL SHAHZAD 48
  • The Greenfield Strategy Disadvantages 11/14/2013 PREPARED BY: FAISAL SHAHZAD 49
  • The Acquisition strategy 11/14/2013 PREPARED BY: FAISAL SHAHZAD 50
  • The Acquisition strategy 11/14/2013 PREPARED BY: FAISAL SHAHZAD 51
  • Joint Ventures 11/14/2013 PREPARED BY: FAISAL SHAHZAD 52
  • Joint Ventures 11/14/2013 PREPARED BY: FAISAL SHAHZAD 53
  • Joint Ventures Advantages Disadvantges I. JV provides a means to spread large capital needs over a number of parties. Think II. Partners can bring specific skills and know-how to the partnership. III.Succesful joint ventures synergy. 11/14/2013 PREPARED BY: FAISAL SHAHZAD 54
  • Scope of Strategic Alliances 11/14/2013 PREPARED BY: FAISAL SHAHZAD 55
  • Scope of Strategic Alliances • Production Alliances: is a functional alliance in which two or more firms each manufacture products or provide services in shared or common facility. Example NUMMI joint venture between Toyota and GM is housed in a former GM assembly plant in California, which company had shut down. • Marketing Alliances: is a functional alliance in which two or more firms share marketing services or expertise. In most cases. One partner introduces its products or services into a market in which the other partner already has a presence. Example: U.S toymaker Mattel and its Japanese rival Bandai established a strategic marketing alliance in 1999. Bandai agreed to distribute Mattel products like Barbie dolls, Hot wheels toys in Japan while Mattel agreed to market Bandai’s Power Rangers and Digimon in Latin America. 11/14/2013 Prepared By: Faisal Shahzad 56
  • Scope of Strategic Alliances Financial Alliances: is a functional alliance of firms that want to reduce the financial risk associated with a project. May be one partner contribute the bulk of the financing while the other partner or partners provide special expertise or makes other kinds of contribution partially offset its lack of financial investment. Example: The strategic alliance between Boeing and its three Japanese partners was created primarily for financial purposes. Research and Development Alliances: In this alliance partners agree to undertake joint research to develop new products or services. Example: Alliance among Intel, Micron Technology, Samsung, Hyundai, NEC, and Siemens to develop the next generation of DRAM chips. 11/14/2013 Prepared By: Faisal Shahzad 57
  • Selection of Partners 11/14/2013 PREPARED BY: FAISAL SHAHZAD 58
  • Pitfalls of Strategic Alliances 11/14/2013 PREPARED BY: FAISAL SHAHZAD 59
  • Any Questions 11/14/2013 PREPARED BY: FAISAL SHAHZAD 60
  • 11/14/2013 PREPARED BY: FAISAL SHAHZAD 61