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1. INTERNATIONA
L STRATEGY
CHAPTER 8

2. An international strategy is a strategy
through which the firm sells its goods
or services outside its domestic market.
In some instances, firms using an
international strategy become quite
diversified geographically as they
compete in numerous countries or
regions outside their domestic market.
WHAT IS INTERNATIONAL STRATEGY?

3. INCENTIVES BASIC BENEFITS
EXTEND A PRODUCT’S LIFE
CYCLE
INCREASED MARKET SIZE
GAIN EASIER ACCESS TO RAW
MATERIALS
ECONOMIES OF SCALE AND
LEARNING
OPPORTUNITIES TO INTEGRATE
OPERATIONS ON GLOBAL SCALE
LOCATION ADVANTAGES
OPPORTUNITIES TO BETTER USE
RAPIDLY DEVELOPING
TECHNOLOGIES
GAIN ACCESS TO CONSUMERS
IN EMERGING MARKETS

4. 1. Increased Market Size Firms can expand the size of their
potential market—sometimes dramatically—by using an
international strategy to establish stronger positions in
markets outside their domestic market.
2. Economies of Scale and Learning By expanding the
number of markets in which they compete, firms may be
able to enjoy economies of scale, particularly in
manufacturing operations.
3. Location Advantages Locating facilities outside their
domestic market can sometimes help firms reduce costs.
THREE BASIC BENEFITS OF INTERNATIONAL STRATEGY:

5. Firms choose to use one or both basic types
of international strategy:
(1)business-level international strategy
(2) corporate-level international strategy
INTERNATIONAL STRATEGIES

6. Firms considering the use of any international strategy first
develop domestic-market strategies (at the business level
and at the corporate level if the firm has diversified at the
product level).
Business-level strategy refers to companies' deliberate and
purposeful actions to achieve competitive advantage within
their specific market segments.
1.BUSINESS-LEVEL
INTERNATIONAL STRATEGY

7. DETERMINANTS OF NATIONAL ADVANTAGE:

8. Corporate-level strategies give individual country
units the authority to develop their own business-
level strategies.
2. CORPORATE-LEVEL INTERNATIONAL STRATEGY

9. Multi-domestic Strategy is an international strategy in which
strategic and operating decisions are decentralized to the
strategic business units in individual countries or regions for
the purpose of allowing each unit the opportunity to tailor
products to the local market.
Global Strategy is an international strategy in which a firm’s
home office determines the strategies that business units
are to use in each country or region.
Transnational Strategy is an international strategy through
which the firm seeks to achieve both global efficiency and
local responsiveness.

10. ENVIRONMENTAL TRENDS
Although the transnational strategy is difficult to
implement, an emphasis on global efficiency is
increasing as more industries, and the
companies competing within them, encounter
intensified global competition. Magnifying the
scope of this issue is the fact that,
simultaneously, firms are experiencing demands
for local adaptations of their products.

11. LIABILITY OF FOREIGNNESS
This is the liability of foreignness, a set of costs associated
with various issues firms face when entering foreign
markets, including unfamiliar operating environments;
economic, administrative, and cultural differences; and the
challenges of coordination over distances.
REGIONALIZATION
Regionalization is a second global environmental trend
influencing a firm’s choice and use of international
strategies. This trend is becoming prominent largely
because where a firm chooses to compete can affect its
strategic competitiveness.

12. Five modes of entry into international markets
are available to firms:
1.Exporting
2.Licensing
3.Strategic Alliances
4.Acquisitions
5.New Wholly Owned Subsidiary
CHOICE OF INTERNATIONAL ENTRY
MODE

13. 1.Exporting For many firms, exporting is the initial
mode of entry used. Exporting is an entry mode
through which the firm sends products it produces in
its domestic market to international markets. Exporting
is a popular entry mode choice for small businesses to
initiate an international strategy.
2.Licensing is an entry mode in which an agreement is
formed that allows a foreign company to purchase the
right to manufacture and sell a firm’s products within a
host country’s market or a set of host countries’
CHOICE OF INTERNATIONAL ENTRY MODE

14. 3. Strategic Alliances Increasingly popular as an entry mode
among firms using international strategies, a strategic alliance
finds a firm collaborating with another company in a different
setting in order to enter one or more international markets.
4. Acquisitions When a firm acquires another company to enter
an international market, it has completed a cross-border
acquisition. Specifically, a cross-border acquisition is an entry
mode through which a firm from one country acquires a stake
in or purchases all of a firm located in another country.
5. New Wholly Owned Subsidiary A greenfield venture is an
entry mode through which a firm invests directly in another
country or market by establishing a new wholly owned
CHOICE OF INTERNATIONAL ENTRY MODE

15. 1.Political Risks “denote the probability of
disruption of the operations of multinational
enterprises by political forces or events whether
they occur in host countries, home country, or
result from changes in the international
environment.
2.Economic Risks include fundamental weaknesses
in a country or region’s economy with the potential
to cause adverse effects on firms’ efforts to
successfully implement their international
RISKS IN AN INTERNATIONAL ENVIRONMENT

16. An international diversification strategy is a strategy
through which a firm expands the sales of its goods
or services across the borders of global regions and
countries into a potentially large number of
geographic locations or markets.
International Diversification and Returns Evidence
suggests numerous reasons for firms to use an
international diversification strategy, meaning that
international diversification should be related
positively to a firm’s performance as measured by the
returns it earns on its investments.
STRATEGIC COMPETITIVENESS OUTCOMES

17. Enhanced Innovation The only way for
individual nations and individual firms to
sustain a competitive advantage is to
upgrade it continually through innovation.
Innovation is the process of creating
something new or original.
STRATEGIC COMPETITIVENESS OUTCOMES

18. Effectively using international strategies
creates basic benefits and contributes to the
firm’s strategic competitiveness.
A firm using international strategies to
pursue strategic competitiveness often
experiences complex challenges that must be
overcome.
THE CHALLENGE OF INTERNATIONAL STRATEGIES

19. There are two challenges of International
Strategies:
(1)Complexity of Managing International
Strategies
(2)Limits to International Expansion
THE CHALLENGE OF INTERNATIONAL STRATEGIES

20. Pursuing international strategies, particularly an
international diversification strategy, typically leads to
growth in a firm’s size and the complexity of its
operations. In turn, larger size and greater operational
complexity make a firm more difficult to manage.
THE CHALLENGE OF INTERNATIONAL STRATEGIES
1.COMPLEXITY OF MANAGING INTERNATIONAL STRATEGIES
2.LIMITS TO INTERNATIONAL EXPANSION
Learning how to effectively manage an international
strategy improves the likelihood of achieving positive
outcomes such as enhanced performance

21. Thank You for
Listening!
-Group 7