Chapter 8: International Strategy Key Points Chapter 8: International Strategy Some general environmental factors are magnified Political risks, economic risks, cultural differences Understand how the determinants of national advantage affect a firm’s ability to compete internationally Conflicting pressures for global integration and local responsiveness Variety of strategies and modes of entry

Risks Associated with International Expansion Political risks Government instability Attitudes or regulations regarding foreign ownership Potential nationalization of private firm assets Economic risks Interdependent with political risks Currency fluctuations Differences in inflation Cultural differences

Motivations for International Expansion

Related and supporting Figure 8.3: Determinants of National Advantage Factors of production Basic and advanced Generalized and specialized Firm strategy, Structure, and rivalry Cooperation Competition Demand conditions Nature of needs Size of demand Related and supporting industries

The Strategic Imperatives of Global Competition The need to achieve efficiency by exploiting global economies of scale and scope (global integration) The need to respond to national environments (local responsiveness) The need to learn and to transfer knowledge and expertise throughout an organization

Examples of Forces Causing the Need for Global Integration Universal tastes, preferences, or needs Asset and/or technology intensity Global competitors Global suppliers and customers

Examples of Forces Causing the Need for Local Responsiveness Differing local tastes, preferences, or needs Differing distribution channels Government intervention Economics of flexible manufacturing technologies

High Global Strategy Transnational Strategy Multidomestic Strategy Low Integration Multidomestic Strategy Low Low High Local Responsiveness

High Global Integration Low Low High Local Responsiveness

Table 8.1: Entry Modes Type of Entry Characteristics Exporting high cost, low control Licensing low cost, low financial risk, little control, low returns Strategic alliances shared costs, shared resources, shared risks, integration problems (e.g., different corporate cultures) Acquisition quick access to new market, high cost, complex negotiations, problems merging with domestic operations New wholly owned complex, most costly, time consuming, high risk, Subsidiary (greenfield maximum control, potential above-average returns venture)