Export strategy2 ite


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Export strategy2 ite

  1. 1. Export Strategy • MULTINATIONAL STRATEGIES AND THE GLOBAL - DILEMMA • The local responsiveness solution • The global integration solution • LOCAL SOLUTIONS • Customize organizations and products to country or regional differences • GLOBAL INTEGRATION • Reduce costs with worldwide standardized products, uniform promotional strategies and distribution channels • Seek lower costs or higher quality anywhere in the value chain and in the world www.StudsPlanet.com
  2. 2. FOUR BROAD MULTINATIONAL STRATEGIES • Solutions to the global--local responsiveness dilemma • multidomestic • transnational • international • regional www.StudsPlanet.com
  3. 3. MULTIDOMESTIC AND TRANSNATIONAL STRATEGY MULTI DOMESTIC: •Gives top priority to local responsiveness issues •A form of the differentiation strategy •Not limited to large multinationals TRANSNATIONAL •Gives two goals top priority: • seek location advantages • global platforms • gain economic efficiencies from worldwide networks www.StudsPlanet.com
  4. 4. INTERNATIONAL & REGIONAL STRATEGY INTERNATIONAL: •A compromise approach •Global products, similar marketing techniques worldwide •Upstream and support activities remain concentrated at home country REGIONAL •A compromise strategy •Attempts to gain economic advantages from regional network •Attempts to gain local adaptation advantages from regional adaptation REGIONAL TRADING BLOCK: •Encourage regional strategies •Reduce differences in government and industry required specifications for products www.StudsPlanet.com
  5. 5. EXHIBIT 6.1 MULTINATIONAL STRATEGY CONTENT Content Transnational International Multidomestic Regional Worldwide markets Yes Yes No No Worldwide location of separate value chain activities Yes No No No Global products Yes Yes No No Global marketing Yes Yes No No Global competitive moves Resources from any country used to attack or defend Attacks and defenses in all countries - resources HQ No, competitive moves planned and financed by country units No, but resources from region can be used www.StudsPlanet.com
  6. 6. MIXED STRATEGIES & COMPETITION • Seldom do companies adopt pure forms • Different strategies for each business • Different strategies for product differences • COMPETITION • Successful strategies of competitors • Volume of imports and exports in industry www.StudsPlanet.com
  7. 7. THE LOCAL-GLOBAL DILEMMA: DIAGNOSTIC QUESTIONS FOR STRATEGY FORMULATION • The KEY question: • how global is the industry? • What makes an industry global • Globalization drivers • four categories of global drivers: • markets, costs, governments, and competition • GLOBAL MARKETS AND CUSTOMERS: • Are there? • common customer needs? • global customers? • Can you transfer marketing? • What is the volume of imports and exports in the industry www.StudsPlanet.com
  8. 8. WHAT MAKES AN INDUSTRY GLOBAL? • COSTS? • Are there? • global economies of scale? • global sources of low cost raw materials? • cheaper sources of high skilled labor? • high product development costs? • GOVERNMENTS? • Do the targeted countries have favorable trade policies? • Do the target countries have regulations that restrict operations?www.StudsPlanet.com
  9. 9. COMPETITIVE ADVANTAGE IN THE VALUE CHAIN • Upstream advantages • favor transnational strategy or an international strategy • Downstream advantages • favor multidomestic strategy MIXED CONDITIONS: • Competitive strength downstream in industry with strong globalization drivers • Competitive strength upstream in industries with local adaptation pressures • both favor regional strategieswww.StudsPlanet.com
  10. 10. Global/ Local Pressures Primary Source of Competitive Advantage in Value Chain Upstream Downstream High Pressures for Global- ization Transnational Strategy or International Strategy Regional Strategy Compromise High Pressures for Local Responsive -ness Regional Strategy Compromise Multidometic Strategy www.StudsPlanet.com
  11. 11. SELECT AN INTERNATIONAL STRATEGY OVER A TRANSNATIONAL WHEN: • Cost savings of centralization offset the lower costs or higher quality raw materials or labor available from worldwide locations www.StudsPlanet.com
  12. 12. PARTICIPATION STRATEGIES • The choice of how to enter each international market • exporting, licensing, strategic alliances, and foreign direct investment • EXPORTING • The easiest • Passive exporting • Active export strategies www.StudsPlanet.com
  13. 13. EXPORT STRATEGIES • Indirect exporting • uses intermediaries • Direct exporting Export Management and Trading Companies (EMCs and ETCs) • Specialize in products, countries or regions • Provide ready-made access to markets • Have networks of foreign distributors www.StudsPlanet.com
  14. 14. DIRECT EXPORTING • More aggressive • Requires more contact with foreign companies • Uses foreign sales representatives, distributors, or retailers • May require branch offices in foreign countries www.StudsPlanet.com
  15. 15. CHANNELS IN DIRECT EXPORTING • Sales representatives: use the company's promotional literature and samples • Foreign distributors: resell the products • Sell directly to foreign retailers or end users LICENSING • International licensing is a contractual agreement between a domestic licensor and a foreign licensee OTHER CONTRACTUAL AGREEMENTS: • International franchising • Contract manufacturing • Turnkey opera • www.StudsPlanet.com
  16. 16. THE INTERNATIONAL STRATEGIC ALLIANCE • Cooperative agreements between two or more firms from different countries to participate in a business activity TWO BASIC TYPES • Equity international joint ventures (IJV) • International cooperative alliance (ICA) www.StudsPlanet.com
  17. 17. FOREIGN DIRECT INVESTMENT (FDI) • FDI means that companies own and control directly a foreign operation • symbolizes the highest stage of internationalization • Mergers and acquisitions versus greenfield REASONS FOR FDI ABROAD; • To extract raw materials • To find low cost sources of labor, components, parts, or finished goods • To penetrate new markets, the major motivation www.StudsPlanet.com
  18. 18. DECIDING ON AN EXPORT STRATEGY • Assess control needs for: sales, customer credit, and the eventual sale of the product • Assess financial and human resources capabilities • to manage export operations • to design/execute international promotional activities • to support extensive international travel or possibly an expatriate sales force • to develop overseas contacts and networks www.StudsPlanet.com
  19. 19. WHEN SHOULD COMPANIES LICENSE? • Based on three factors 1. characteristics of the product 2. characteristics of the target country 3. nature of the licensing company DISADVANTAGES OF LICENSING; • Gives up control • May create new competitors • Often generates only low revenues • Opportunity costs (barriers to other participation strategies www.StudsPlanet.com
  20. 20. WHY SEEK STRATEGIC ALLIANCES? • Partner’s different capabilities • Partner's knowledge of the market • Government requirements • To share risks • To share technology • Economies of scale • Low cost raw materials or labor www.StudsPlanet.com
  21. 21. KEY CONSIDERATIONS FOR ALLIANCES • Pick partners carefully • Seek win-win ventures-last much longer • Assess need for the alliance • Estimate ability to succeed Plan for design and management • WHICH TYPE IS BETTER? • IJV probably more secure • ICA probably more flexible and less visible www.StudsPlanet.com
  22. 22. ADVANTAGES & DISADVANTAGES OF FDI ADVANTAGES •Greater control •Lower costs of supplying host country •Avoid import quotas •Greater opportunity to adapt product to the local markets •Better local image of the product DISADVANTAGES •Increased capital investment •Increased investment of managerial and other resources •Greater exposure of the investment to political and financial risks www.StudsPlanet.com
  23. 23. STRATEGIC INTENT & COMPANY CAPABILITY • Immediate profit, or.. • Other goals • e.g., being first in a market with potential or learning a new technology • Company Capability • What can a company afford? • Human resources • Production capabilities • Commitment to using resources www.StudsPlanet.com
  24. 24. LOCAL GOVERNMENT REGULATIONS • Import or export tariffs, duties, or restrictions • Laws regarding foreign ownership • Other legal and regulatory issues • patent, consumer protection, labor, and tax laws www.StudsPlanet.com
  25. 25. CHARACTERISTICS OF THE TARGET PRODUCT /MARKET (E.G.S) • Products that spoil quickly or are difficult to transport • poor candidates for exporting • Products that need little local adaptation • good candidates for licensing, joint ventures, or FDI www.StudsPlanet.com
  26. 26. GEOGRAPHIC AND CULTURAL DISTANCE • Transportation costs • Management of FDI and equity strategic alliances more difficult • CULTURAL DISTANCE; • With very different cultures, direct investment more risky • Joint ventures, licensing and exporting • local partners deal with local cultural issues www.StudsPlanet.com
  27. 27. RISK & KEY CONCERNS • Financial risk • Economic risk • currencies, markets, etc. • Political risk • governments change • policies regarding foreign firms change • Key areas for concern • product quality in the manufacturing process, product price, advertising and other promotional activities, where the product is sold, and after market servic www.StudsPlanet.com
  28. 28. THE CONTROL VERSUS RISK TRADEOFF www.StudsPlanet.com
  29. 29. High Low Risk Control Direct Export Indirect Export Licensing Strategic Alliances FDI Low High www.StudsPlanet.com
  30. 30. MULTINATIONAL AND PARTICIPATION STRATEGIES • What is the strategic reason to be in the market? • location advantages versus market penetration • e.g., source of raw materials, R&D, production, etc. www.StudsPlanet.com
  31. 31. CONCLUSIONS • Dealing with the global--local responsiveness dilemma • Four strategies • multidomestic • transnational • international • regional www.StudsPlanet.com