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International Business

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International Business

  1. 1. INTERNATIONAL BUSINESS STRATEGY
  2. 2. Multidomestic Transnational or Global Strategy?
  3. 3. Multidomestic <ul><li>“ is an organisation with multicountry affiliates, each of which formulates its own business strategy based on perceived market differences” </li></ul><ul><li>(Source: International Business, The Challenge of Global Competition) </li></ul><ul><li>Operates in different countries but – Products, Manufacturing Process and Business Strategy are adjusted to suit the local conditions. </li></ul><ul><li>Polycentric Orientation – must adapt to succeed. </li></ul>
  4. 4. Multidomestic <ul><li>Differences in the various market places. </li></ul><ul><li>Markets demand different strategies. </li></ul><ul><li>Different Products </li></ul><ul><li>Different Marketing </li></ul><ul><li>Different Processes </li></ul><ul><li>Also called Multinational </li></ul>
  5. 5. Transnational <ul><li>The term Transnational and Multinational are now used synonymously. </li></ul><ul><li>1970’s and 1980’s the U.N. when studying the impact of ‘TNC’s’ found: </li></ul><ul><li>“ considerable complexity” in defining Transnational corporations. </li></ul><ul><li>“ Agreement on a specialised definition was never achieved” </li></ul><ul><li>(Source: United Nations Conference on Trade and Development, www.unctad.org ) </li></ul>
  6. 6. Transnational <ul><li>“ corporation comprising parent enterprises and their foreign affiliates” </li></ul><ul><li>(Source: International Business, The Challenge of Global Competition) </li></ul><ul><li>Combination of MDC and Global Company </li></ul><ul><li>Highly responsive to local Globalise Functions </li></ul><ul><li>Conditions </li></ul>
  7. 7. Transnational <ul><li>Merger of two firms from different countries </li></ul><ul><li>Example: </li></ul><ul><li>Unilever (Dutch – English Food) </li></ul><ul><li>Shell (Dutch – English Oil) </li></ul><ul><li>Might also be called “ Binational” </li></ul>
  8. 8. Transnational - Example <ul><li>Royal Dutch / Shell </li></ul><ul><li>Binational Dutch – British Heritage </li></ul><ul><li>Headquarters – The Hague and London </li></ul><ul><li>“ National operating company has significant autonomy” </li></ul><ul><li>“ a distinctive global culture” </li></ul><ul><li>(Source: Managing the Multinational, Humes, Samuel, 1993) </li></ul>
  9. 9. Global <ul><li>An Overused and Misused term </li></ul><ul><li>A Global organisation attempts to: </li></ul><ul><li>Have a Worldwide Presence </li></ul><ul><li>Standardise its operations Worldwide (1 function at least) </li></ul><ul><li>Integrate its operations Worldwide </li></ul>
  10. 10. Global <ul><li>Assumption: </li></ul><ul><li>Customers around the world are similar. </li></ul><ul><li>Geocentric Orientation – markets are similar and it is possible to have a global strategy that transcends local differences. </li></ul><ul><li>Worldwide Standardisation in: </li></ul><ul><li>- Marketing </li></ul><ul><li>- Technical Functions </li></ul><ul><li>- Production </li></ul><ul><li>Production Plants located around the World </li></ul>
  11. 11. Global <ul><li>What is a Global Firm not? </li></ul><ul><li>Borderless </li></ul><ul><li>Stateless </li></ul><ul><li>“ Each country has a home government and tax authority” </li></ul><ul><li>(Source: International Business, The Challenge of Global Competition) </li></ul><ul><li>Also most are owned by shareholders from one nation. </li></ul>
  12. 12. Factors to consider when deciding on International Strategy (Source: Strategic Marketing Management, Lambin, Jean-Jacques, McGraw Hill, England, 1997)
  13. 13. SEGMENTATION <ul><li>Potential customers with similar buying behaviour. </li></ul><ul><li>Approaches: </li></ul><ul><li>Identify Clusters of Countries </li></ul><ul><li>Identify Segments that exist in many/most countries </li></ul><ul><li>Different Segments/Different Countries/Same Product </li></ul><ul><li>Segment </li></ul><ul><li>Group of Countries </li></ul><ul><li>Group of Customers </li></ul>
  14. 14. Competitive Advantage <ul><li>FIRM STRATEGY, </li></ul><ul><li>STRUCTURE, </li></ul><ul><li>RIVALRY </li></ul><ul><li>FACTOR DEMAND </li></ul><ul><li>CONDITIONS CONDITIONS </li></ul><ul><li>RELATED AND </li></ul><ul><li>SUPPORTING </li></ul><ul><li>INDUSTRIES </li></ul>
  15. 15. Competitive Advantage Forces Driving Competition <ul><li>Potential Entrants </li></ul><ul><li>Industry </li></ul><ul><li>Competitors </li></ul><ul><li>rivalry amongst existing firms </li></ul><ul><li>Suppliers Customers </li></ul><ul><li>Substitutes </li></ul>
  16. 16. Communication - Advertising <ul><li>2 Approaches </li></ul><ul><li>Standardised Localised </li></ul><ul><li>Consumers have Cultural Empathy </li></ul><ul><li>same needs/wants Required </li></ul><ul><li>Universal Individual </li></ul>
  17. 17. Communication – Advertising Alternative Strategies <ul><li>1. Brand Globally and Advertise Globally </li></ul><ul><li>- standardise both brand and advertising </li></ul><ul><li>- global forces strong / local forces weak </li></ul><ul><li>2. Brand Globally but Advertise Locally </li></ul><ul><li>- standardise brand but localise advertising </li></ul><ul><li>- both global and local forces are strong </li></ul><ul><li>3. Brand Locally and Harmonise Advertising Locally </li></ul><ul><li>- standardise advertising but localise brand </li></ul><ul><li>- focus on brand value / name doesn’t matter </li></ul><ul><li>4. Brand Locally and Advertise Locally </li></ul><ul><li>- local forces strong / global forces weak </li></ul>
  18. 18. EXAMPLES <ul><li>1. Brand Globally and Advertise Globally? </li></ul><ul><li>2. Brand Globally but Advertise Locally? </li></ul><ul><li>3. Brand Locally and Harmonise Advertising Locally? </li></ul><ul><li>4. Brand Locally and Advertise Locally? </li></ul>
  19. 19. Going International Factors Summary <ul><li>‘ Controllable’s ’ </li></ul><ul><li>Cost </li></ul><ul><li>Price </li></ul><ul><li>Advertising </li></ul><ul><li>Distribution </li></ul><ul><li>‘ Uncontrollable's’ </li></ul><ul><li>Political </li></ul><ul><li>Economic </li></ul><ul><li>Social </li></ul><ul><li>Technological </li></ul><ul><li>Demographics </li></ul><ul><li>Legal Factors </li></ul><ul><li>Competition </li></ul><ul><li>International Trade Agreements </li></ul>
  20. 20. Multidomestic, Transnational or Global? The Best Commercial Approach
  21. 21. Benefits of going International <ul><li>Reduced costs through moving production to lower cost countries </li></ul><ul><li>Increase company size through Merger and Acquisition = economies of scale </li></ul><ul><li>Increase sales by opening up new markets = economies for the manufacturing system </li></ul><ul><li>Question is: Global or Multidomestic (Transnational) </li></ul>
  22. 22. The extent of Globalisation as a Strategy <ul><li>Seven Global Dimensions </li></ul><ul><li>(Source: International Business, Ball et al.) </li></ul><ul><li>* dimensions that can be standardised – from MDC to Globalised or in between. </li></ul><ul><li>Product </li></ul><ul><li>Markets </li></ul><ul><li>Promotion </li></ul><ul><li>Where value is added to the product (F.A.B.) </li></ul><ul><li>Competitive Strategy </li></ul><ul><li>Use of non-home country personal </li></ul><ul><li>Extent of Global ownership of the firm </li></ul>
  23. 23. To what extent can you Globalise (Standardise)? <ul><li>‘ Seven Dimensions’ </li></ul><ul><li>Full Global Strategy </li></ul><ul><li>Scale </li></ul><ul><li>Transnational </li></ul><ul><li>Multidomestic </li></ul>
  24. 24. To what extent can you Globalise (Standardise)? <ul><li>Product </li></ul><ul><li>Segment Markets </li></ul><ul><li>Promotion </li></ul><ul><li>Where value is added </li></ul><ul><li>Competitive Strategy </li></ul><ul><li>Non-Home country personal </li></ul><ul><li>Extent of Global ownership </li></ul><ul><li>e.g. Coca Cola </li></ul><ul><li>e.g. Teenagers </li></ul><ul><li>Advertising Limitations </li></ul><ul><li>Features / Benefits </li></ul><ul><li>‘ Uncontrollable’s’ </li></ul><ul><li>Employ local people </li></ul><ul><li>Normally have at least an equity stake </li></ul>
  25. 25. Example – Limitations on Global Advertising <ul><li>Language – interpretation / use of foreign words </li></ul><ul><li>Media Availability – Regulation / Viewing Habits </li></ul><ul><li>Legal Considerations – Alcohol, Allowed in Sweden, Limited in Ireland, Banned in Belgium </li></ul><ul><li>Symbols </li></ul><ul><li>Colours </li></ul><ul><li>Family Structure </li></ul><ul><li>Consumer Habits – Orange Juice for Breakfast? </li></ul><ul><li>Social Roles – Middle East, Shopping always done by women </li></ul><ul><li>(Source: Strategic Marketing Management, Lambin, Jean-Jacques) </li></ul>
  26. 26. Conclusion <ul><li>Why fight over it? </li></ul><ul><li>A Global company meets these criteria: </li></ul><ul><li>- Worldwide Presence </li></ul><ul><li>- Standardised operations </li></ul><ul><li>- Integrated operations </li></ul><ul><li>- Culturally diverse </li></ul><ul><li>- Production worldwide </li></ul><ul><li>- Allows free flow of people – “multicultural multinational” </li></ul><ul><li>- Exploits its technologies worldwide </li></ul><ul><li>It still must – be responsive to its local customers if only for cultural reasons </li></ul><ul><li>Does this mean it cannot be a Global company? </li></ul>
  27. 27. Example – Proctor & Gamble <ul><li>Head & Shoulders - Oil of Ulay – Ariel - Pampers </li></ul><ul><li>1837 – Cincinnati, Ohio </li></ul><ul><li>1933 – England </li></ul><ul><li>1940 – Cuba, Philippines, Indonesia </li></ul><ul><li>1963 – Brussels, European Technical Centre </li></ul><ul><li>R&D, Purchasing, Engineering, Manufacturing </li></ul><ul><li>1983 – Japan </li></ul><ul><li>Since 1983 – Acquisitions </li></ul><ul><li>25 person Board with 8 non-Americans </li></ul>
  28. 28. Example – Proctor & Gamble <ul><li>Edwin L. Artzt, CEO; </li></ul><ul><li>“ manage our brands locally” </li></ul><ul><li>“ these are world brands, with appropriate regional tailoring of product aesthetics and form” </li></ul><ul><li>“ whatever it takes to best satisfy local consumer demand for quality and value” </li></ul><ul><li>(Source: Managing the Multinational, Humes, Samuel, Prentice Hall, 1993) </li></ul><ul><li>Example: ‘Wash & Go’ – sold in 60 countries under 6 different brand names. </li></ul>
  29. 29. Sources <ul><li>International Business, The Challenge of Global </li></ul><ul><li>Competition, Ball, Donald A., Mc Culloch, Wendell H., </li></ul><ul><li>Frantz, Paul L., Geringer, J. Michael, Minor, Michael S., Mc </li></ul><ul><li>Graw Hill, New York, 2004 </li></ul><ul><li>Strategic Marketing Management, Lambin, Jean-Jacques, </li></ul><ul><li>Mc Graw Hill, London, 1997 </li></ul><ul><li>Managing the Multinational, Confronting the Global – Local </li></ul><ul><li>Dilemma, Humes, Samuel, Prentice Hall International, </li></ul><ul><li>London, 1993 </li></ul>
  30. 30. Sources <ul><li>www.unctad.org , 09-12-2007 </li></ul><ul><li>www.wto.org , 09-12-2007 </li></ul>

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