The document provides an overview of international business strategies for multinational corporations. It discusses key concepts such as global vs international strategies, strategic alternatives for market entry including exporting, licensing, franchising and foreign direct investment. Factors for market selection and partnership selection for strategic alliances are also covered at a high level. The document appears to be teaching materials for a course on international business strategies.
INTERNATIONAL BUSINESS STRATEGIC MANAGEMENT MARKET ENTRY MODES CHOICE
1. 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
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3. 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
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7. 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.
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10. 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.
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11. 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.
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16. 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.
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17. 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.
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18. 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.
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19. 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.
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20. 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.
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24. 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
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25. 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.
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26. 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.
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27. 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
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29. 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
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36. 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.
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37. 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
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38. 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.
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39. 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).
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40. 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).
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42. 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.
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47. 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.
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54. 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.
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56. 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.
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57. 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.
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