Chapter 14 (Hill) & Chapter 11 (Daniels) Entry Strategy and Strategic Alliances

Different Strategies for Operating International Market Global View the world as a single market. Tightly controls global operation from headquarter to preserve focus on standardization Transnational Prefers a flexible value chain to facilitate local demand. Adopts complex coordination mechanism to facilitate global integration Pressure for Global Integration High International Uses existing core competencies to exploit opportunities in foreign markets Multidomestic Relies on foreign subsidiaries operating as autonomous units to customize products and processes for local market Low High Low Pressure for National Responsiveness

International Strategy R&D or branding being developed centrally Try to create value by transferring core competencies and unique product where rivals are unable to develop, match and sustain Does not push local responsiveness Limitation: Central role of headquarter often hinder identifying and responding local condition This become costly when the local company emphasize customization based on local demand

Multidomestic Strategy Meet need of individual country and region basis Respond to local culture, legal policy and economic environment Can add value if local government give incentive for local plant Local company can build sales force if there is unfavorable environment Managers follow polycentric view Limitation: Can lead to duplication of management, design, production and marketing Subsidiary is a virtual stand-alone operation, so headquarter must resort persuasion for any change

Global Strategy Create product or service for a world market, manufacture them on a global scale in a few highly efficient plants, and market them with few focused distribution channel Aim to become low cost player in the market Place R&D, production and marketing in most favorable location Firms that follow global strategy face strong pressure for cost reduction but weak pressure for local responsiveness Large operation helps to give standard product in a low price

Transnational Strategy Exploit location economies, leverage core competencies and pay attention to local responsiveness Differentiate capability and contributions from country to country Learn various knowledge (operation, finance, technology, creative idea), integrate and defuse them in global operation Combine the market sensitivity of local responsiveness with the competitive efficiency of global integration Limitation: Difficult to build and prone to shortfall