The document discusses the importance and evolution of international strategies for firms, emphasizing how these strategies have become essential for competitive advantage in a global market. It highlights various benefits such as gaining access to new customers, low-cost production factors, and developing new core competencies, while also addressing challenges firms face when entering foreign markets. The success of international strategies relies on a firm's ability to adapt and learn from experiences in diverse environments, leveraging resources effectively to maximize economic potential.

1. University of chakwal International
Strategies
Presented By :
Group No : 05
Moqudas Akram 04
Maria Azam 28
Anam Fatima 47
Hifza Khalid 49
Presented To:
MaamSehrish
Department:
BBA 7th semester
Date:
05-01-2024

2. INTRODUCTION
• Just like in international sports, business competition can come from numerous sources around the world.
In anticipation of these challenges, manyfirms proactively engage in international strategies.
• Firms that operate in multiple countries simultaneously are implementing international strategies.
International strategies are actually a special case ofthe corporate strategies already discussed in Part 3 of
this book. That is, firms can vertically integrate, diversify, form strategic alliances, and implement mergers
and acquisitions, all across national borders.
• At some level, international strategies have existed since before the beginning of recorded time. Certainly,
trade across country borders has been an important determinant ofthe wealth ofindividuals, companies,
and countries throughout history. The search for trading opportunities and trade routes was
aprimarymotivation for the exploration of much of the world. Therefore, itwould be inappropriate to
argue that international strategies are aninvention ofthe late twentieth century.

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• In the past, however, the implementation of international strategies was limited to relatively
small numbers of risk-taking individuals and firms. Today these strategies are becoming
remarkably common.. Numerous non-U.S. firms have invested around the world as well. For
example, the U.S.market provides the largest percentage of the sales of such firms as Nestle (a
Swiss food company), Toyota (a Japanese car company), and Royal Dutch/Shell Group (an
energy company headquartered in both the United Kingdom and the Netherlands).
• The increased use of international strategies by both large and small firms suggests that the
economic opportunities associated with operating in multiple geographic markets can be
substantial. However, to be a source of sustained competitive advantages for firms, these
strategies must exploit a firm's valuable, rare, and costly to imitate resources and capabilities.
Moreover, a firm must be appropriately organized to realize the full competitive potential of
these resources and capabilities.

4. The Value of International
Strategies
• As suggested earlier,international strategies are an example of corporate
strategies. So to be economically valuable, they must meet the two value
criteria They must exploit real economics of scope,and it must be costly for
outside investors to realize these economies of scope on their own. Many of
the economies of scope discussed in the context of vertical
integration,corporate diversification, strategic alliances, and merger and
acquisition strategies can be created when firms operate acrossmultiple
businesses. These same economies can also be created when firms operate
across multiple geographic markets.
• More generally, to be valuable, strategies must enable a firm toexploit
environmental opportunities or neutralize environmental threats. To the extent
that international strategies enable a firm to respond to its environment, they
will also enable a firm to reduce its costs or increase the willingness of its
customers to pay compared to what would have been the case if that firm did
not pursue these strategies. Several potentially valuable economiesof scope
particularly relevant for firms pursuing internationalstrategies are summarized

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• 1. Togain accessto new customers for current products or services
• 2. Togain access to low-cost factors of production
• 3. Todevelop new core competencies
• 4. Toleverage current core competencies in new ways
• 5. To manage corporate risk

6. To Gain Access to
New Customers for
Current Products or
Services
• The most obvious economyof scope that
may motivate firms to pursue an interna
tional strategy is the potential new
customers for a firm's current products or
services that such a strategy might
generate. To the extent that customers
outside a firm's domestic market are
willing and able to buy a firm's current
products or services,implementing an
international strategy can directly increase
a firm's revenues.

7. internationalization and Product Life Cycles
• Gaining access to new customers not only can directly increasea firm's revenues but also can enable a firm
to manage its products or services through their life cycle. . Different stages intius life cycle are defined by
different growth rate in demand for a product. Thus, in the first emerging stage(called introduction in
thefigure), relatively few firms are producing a product, thereare relatively few customers, and the rate of
growth in demand for the product is relatively low. In the second stage (growth) of the product life cycle,
demand increases rapidly, and many new firms enter to begin producing the product or service. In the
third phase of the product life cycle (maturity), the number of firms producing a product or service
remains stable, demand growth levels off, and firms direct ttieirinvestment effortstoward refining the
process by which a product or service is created and away from developing entirelynew products.In the
finalphase ofthe product lifecycle (decline), demand drops offwhen a technologically superior product or
serviceisintroduced.
• From an international strategy perspective, the critical observation about productlifecycles is that a
productorservice canbe at different stages of its life cycle in different countries. Thus, a firm can use the
resources and capabilities it developed duringa particularstage ofthelife cycle in itsdomestic market during
that samestageof the life cycle in a nondomestic market. This can substantially enhance a firm's economic
performance.

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9. Internationalization
and Firm Revenues
• If customers outside a firm's domestic
market are willing and able to purchase its
products or services, then selling into
these markets will increase the firm's rev
enues. However, it is not always clear that
the products and services that a firm sells
in its domestic market will also sell in
foreign markets

10. Are Nondomestic Customers Willing to Buy?
• It may be the case that customer preferences vary significantly in a firm's domestic and foreign markets.
These different preferences may require firms seeking to internationalize their operations to substantially
change their current products or services before nondomestic customers are willing to purchase them.
• This challenge faced many U.S. home appliance manufacturers as they looked to expand their operations
into Europe and Asia. In the United States, the physical size of most home appliances (washing machines,
dryers, refrigerators, dishwashers, and so forth) has become standardized, and these standard sizes are
built into new homes, condominiums, and apartments. Standard sizes have also emerged in Europe and
Asia. However, these non-U.S. standard sizes are much smaller than the U.S. sizes, requiring U.S.
manufacturers to substantially retool their manufacturing operations in order to build products that might
be attractive toAsianand Europeancustomers.^
• Different physical standards can require a firm pursuing international opportunities to change its current
products or services to seUthem into a nondo mestic market. Physical standards, however, can easily be
measured and described.Differencesin tastes can be much more challengingTor firms looking to seUtheir
products or services outside the domestic market.

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• " When Coca-Cola was first introduced in China, it was
translated into Ke-kou-ke-la, which turns out to mean
either "bite the wax tadpole" or "female horse stuffed with
wax," depending on which dialect one speaks. Coca-Cola
reintroduced its product with the name Ke-kou-ko-le,
which roughly translates into "happiness in the mouth."
Coca-Colais not the only beverage firm to run into
problems internationally. Pepsi's slogan "Come alive with
the Pepsi generation" was translated into "Pepsi willbring
your ancestors back from the dead" in Taiwan.

12. Are Nondomestic Customers Able to Buy?
• Customers in foreign markets might be willing to buy a firm's current products or services
but be imable to buy them. This can occur for at least three reasons: inadequate
distribution channel, trade barriers, and insufficient wealth to make purchases.
Inadequate distribution channel may make it difficult, if not impossible, for a firm to
make its products or services available to customers outside its domestic market. In some
international markets, adequate distribution networks exist but are tied up by firms
already operating in these markets. Many European firms face the situationas they try to
enter the U.S. market. In such a situation,firms pursuing international opportunities must
either build their own distribution networks from scratch (avery costly endeavor) or work
with a local partner to utilize the networks that are already in place.

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• However, the problem facing some firms pursuing
international opportuni ties is not that distribution
networks are tied up by firms already operating in
a market. Rather, the problem is that distribution
networks do not exist or operate in ways that are
very different from the operation of the
distribution networks in a firm's domestic market.
This problem can be serious when firms seek to
expand their operations into developing
economies. Inadequate transportation, ware
housing, and retail facilities can make it difficult to
distribute a firm's products or services in to a new
geographic market. These kinds of problems have
hampered investment in Russia, China, and India.
For example, when Nestle entered the Chinese
dairy market, it had to build a network of gravel
roads connecting the vil lages where dairy farmers
produce milk and factory collection points.
Obtaining the right to build this network of roads
took 13 years of negotiations with Chinese
government officials.

14. Internationalization
and Cost Reduction
• Gaining access to new customers for a firm's current
products or servicescan increase a firm's sales. If aspects of
a firm's production process are sensitive to economies of
scale, this increased volume of sales can also reduce the
firm's costs and enable the firm to gain cost advantages in
both its nondomestic and its domestic markets. Many firms
intheworldwide automobile industry haveattempted
torealize manufacturing economies of scale through their
international operations. According to one estimate, the
minimumefficient scale of a single compact-car
manufacturing plant is 400,000 imits per year.^^ Such a
plant would produce approximately 20 percent of all the
automobiles sold in Britain, Italy, or France. Obviously, to
exploit this400,000 car-per-year manufacturing efficiency,
European automobde firms have had to sell cars in more
than just a single coimtry market. Thus, the
implementation of an international strategy has enabled
thesefirms to realize animportant manufacturing economy
ofscale.^^

15. To Gain Access to
Low-Cost Factors of
Production
• Justas gaining access tonewcustomers
canbean important economy ofscope for
firms pursuing international
opportunities,soisgaining access tolow-
cost factors of production such as raw
materials, labor,and technology

16. Raw Materials
• Gaining access to low-cost raw materials
is,perhaps, the most traditional reason why firms
begin international operations. For example, in
1600, the British East India Company was formed
with an initial investment of $70,000 to manage
trade between England and the Far East, including
India. In 1601, the third British East India Company
fleet sailed for the Indies to buy cloves, pepper,
silk, coffee, salt peter,and other products.This fleet
generated a return on investment of 234 per
cent.These profits led to the formation of the
Dutch East India Company in 1602 and the French
EastIndia Company in 1664. Similar firms were
organized to man age trade in the NewWorld.
TheHudson Bay Company was chartered in 1670
to manage the fur trade,and the rival NorthWest
Company was organized in 1784 for the
same purpose. All these organizations were
created to gain access to low cost raw material
that were available only in nondomestic markets.

17. Labor
• In addition to gaining access to low-costraw materials,firms also begin
interna tional operations in order to gain accessto low-costlabor. After
World WarII, Japanhad some of the lowest laborcosts, and highest
laborproductivity, in the world. Overtime, however, the improving
Japanese economy and the increased value of the yenhas had the effect of
increasing labor costs in Japan, and South Korea, Taiwan, Singapore, and
Malaysia all emerged as geographic areas with inexpensive and highly
productive labor. More recently, China, Mexico, and Vietnam have taken
this role in the world economy.
• Numerous firms haveattempted togain theadvantages oflowlaborcosts by
moving their manufacturing operations. For example, Mineba, a Japanese
ball bearing andsemiconductor manufacturer, attempted to exploit low
labor costs by manufacturing ballbearingsinJapan in the1950s andearly
1960s, inSingapore in the 1970s, and since 1980 has been manufocturing
them inThailand. Hewlett-Packard operates manufacturing and assembly
operations inMalaysia and Mexico, Japan s Mitsubishi Motors recently
opened an automobile assembly plantin Vietnam, General Motors
operates assembly plants inMexico, and Motorola has begun oper ationsin
China. Alltheseinvestments weremotivated, at leastpartly, by the avail
ability of low-cost labor in these coimtries.^^ Some of the ethical issues
associated with search for low-cost labor are discussed in the Ethics and
Strategy feature.

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• Although gaining access to low-cost labor can be an
important determinant of a firm's international efforts,
thisaccess by itself is usually notsufficient tomotivate entry
into particular countries. After all, relative labor costs can
change overtime. For example. South Korea used tobethe
country inwhich mostsportsshoes were man ufactured.
In1990, Korean shoe manufacturers employed 130,000
workersin302 fac tories. However, by1993, only 80,000
Koreans were employed inthe shoe indushy, and only 244
fectories (most employing fewer than 100 people)
remained. Asignifi cant portion of the shoe-manufacturing
industry had moved from Korea to China because
ofthelabor-cost advantages ofChina (approximately $40
peremployee per month) compared to Korea
(approximately $800 per employee per month).

19. Technology
• Another factor ofproduction thatfirms cangain low-cost access tothrough oper ations
istechnolo^. Historically,Japanese firms have tried togain access totech nology
bypartnering witii non-Japanese firms. Although the non-Japanese firms have often been
looking togain access tonew customersfor their current products or services by operating
in Japan, Japanese firms have used thisentryinto the Japanese market togain access to
foreign technology.^

20. To Develop
New Core
Competencie
• One of the most compelling reasons for firms to begin
operations outside their domestic markets is to refine their
current core competencies and to develop new core
competencies. By beginning operations outside their
domestic markets, firms can gain a greater understanding
of the strengths and weaknesses of their core
competencies. By exposing these competencies to new
competitive contexts, traditional competencies can be
modified, and new competencies can be developed.
• Of course, for international operations to affect a firm's
core competencies, firms must leam from their experiences
in nondomestic markets. Moreover, once these new core
competencies are developed, they must be exploited in a
firm's other operations in order to realize their ftill
economic potential.

21. Learning from International Operations
• Learning from international operations is anything but automatic. Many firms that begin
operations in a non domestic market enconter challenges and difficulties and then
immediately withdraw from their international efforts. Other firms continue to try to
operate internationally but are unable to leam how to modify and change their core
competencies

22. Determinants of the Abilityof a firm to
Learn from Its International Operations
1. The intent to
learn
2.The
transparency of
business partners
3. Receptivity to
learning

23. The Intent to
Learn
• A firm that has a strong intent to leam firom its
intemational operations is more likely to leam than a fim
without this intent. Moreover, this intent must be
commiinicated to all those who work in a firm's
intemational activities.

24. Transparency and Learning
• It has also been shown that firms were more likely to leam from their international
operations when they interacted with what have been called transparent business
partners. Some international business partners are more open and accessiblethan others.
This variance in accessibility can reflect different organizational philoso phies, practices,
and procedures, as well as differences in the culture of a firm's home country.For
example, knowledge in Japanese and most other Asian cultures tends to be context
specific and deeply embedded in the broader social system. This makes it difficult for
many Western managers to understand and appreciate the subtlety ofJapanese business
practices and Japanese culture. This,in turn, lim its the ability of Western managers to
leam from their operations in the Japanese marketor fromtheirJapanese partners.

25. Receptivity to Learning
Firms also vary in their receptiveness to learning. A firm's
receptiveness to team ing is affected by its culture, its
operating procedures, and its history. Research on
organizational learning suggests that, before firms can leam
from their intemational operations, they must be prepared
to unleam. Unlearning requires a firm to modify or abandon
traditional ways of engaging in business. Unlearning can be
difficult, especially if a firm has a long history of success
using old patterns of behavior and if those old patterns of
behavior are reflected in a firm's organiza tional stmcture,
itsmanagement control systems, and itscompensation
policies.
Even if unlearning is possible, a firm may not have the
resources it needs to leam. If a firm is using all of its available
managerial time and talent, capital, and technology just to
compete on a day-to-day business, the additional task of
team ing from intemational operations can go undone.
Although managers in this sit uation often acknowledge the
importance of learning from their intemational operations in
order to modify their current core competencies or build
new ones, they simplymayhot have the timeor energyto do
so.

26. Leveraging New Core Competencies in Additional
Markets
• Once a firm has been able to leam from its intemational operations and modify its
traditional core competencies or develop new core competencies, it must ^en leverage
those competenciesacrossits operations, both domestic and intemational in order to
realize their full value. Failure to leverage tiiese "lessons learned" can substantially reduce
the return associated with implementing an international strategy.

27. To Leverage Current Core Competencies in New Ways
• International operations can also create opportunities for firms to leverage tiheir
traditional core competenciesin new ways. This ability is related to, though differ ent
from, using international operations to gain access to new customers for a firm's current
products or services.When firms gain accessto new customers for their current products,
they often leverage their domestic core competencies across country boundaries. When
they leverage core competencies in new ways, they not only extend operations across
country boundaries but also leverage their competencies across products and services in
ways that would not be economi cally viable in their domestic market.

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• , for example, Honda. There is widespread agreement tiiat Honda has developed core competencies in the
design and manufacture of power trains. Honda has used this core competence to facUitate entry into a
variety of product markets—^including motorcycles, automobiles, and snow blowers—^both in its
domestic Japanese market and in nondomestic markets such as the United States. However, Honda has
begun to explore some competence-leverage opportunities in the United States that are not available in
the Japanese market. For example, Honda has begun to design and manufacture lawn mowers of
varioussizes for the home in the U.S. market—lawn mowers clearly build on Honda's traditional power
train competence. However, given the crowded living conditions in Japan, consumer demand for lawn
mowers in that country has never been very great. Lawns in the United States,however, can be very large,
and consumer demand for high-quality lawn mowers in that market is substantial. The opportunity for
Honda to begin to leverage its power train competencies in the sale of lawn mow ers to U.S. homeowners
exists only because Honda operates outside its Japanese home marke

29. To Manage Corporate Risk
The value of risk reduction for firms pursuing a corporate
diversification strategy was evaluated previously. It was
suggested that, although diversified operations across
businesses with imperfectly correlated cash flows can reduce
a firm's risk, outside equity holders can manage this risk
more efficiently on their own by investing in a diversified
portfolio of stocks. Consequently equity holders have little
direct interest in hiring managers to operate a diversified
portfolio of busi nesses, the sole purpose of which is risk
diversification.
Similar conclusions apply to firms pursuing international
strategies with two qualifications. First, in some
circumstances, it may be difficult for equity hold ers in one
market to diversify their portfolio of investments across
multiple mar kets. To the extent that such barriers to
diversification exist for individual equity holders but not for
firms pursuing international strategies, risk reduction can
directly benefit equity holders. In general, whenever barriers
to international capital flows exist, individual investors may
not be able to diversify their portfolios across country
boundaries optimally. In this context, individual investors can
indirectly diversify their portfolio of investments by
purchasing shares in diversified multinationals.

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• This justification ofdiversification for risk reduction
purposes isparticu larly relevant in the international
contextbecause, as described in the Research Made
Relevant feature, many of the economies of countries
around the world are dominated by private companies
owned by large families. Not surprisingly, these family-
owned firms tend to be much more diversified than the
publicly traded firms that are more common in the United
States and the United Kingdom