Strategic Management/ Business Policy Power Point Set #11: International Strategy

Questions Concerning International Strategy What is the economic value of international strategies, according to Richard Caves of Harvard University? Why are some countries more competitive than others in international competition? How do companies diversify internationally? How do you organize an international company?

Value of International Strategies Gain Access to Low-Cost Factors of Production For example, achieving global economies of scale such as can be observed in the automobile industry. Leverage Core Competencies E.g., We saw earlier in the semester Honda developing and leveraging its competencies in producing motors for motorcycles, automobiles, snow blowers and lawn mowers

Value of International Strategies Managing Corporate Risk As global capital markets become more efficient over time, the benefit provided by this corporate strategy diminishes. “Stretching” to Develop New Core Competencies E.g., Learning new skills in international markets Gain Access to New Customers for Current Products or Services Disneyland Tokyo, and Euro Disney

Corporate-level International Strategies Global Strategy (cost leadership strategy) Products are standardized across national markets; Emphasizes economies of scale; Lacks responsiveness to local markets; and Requires resource sharing and coordination across borders

Corporate-level International Strategies Multi-Domestic Strategy (product differentiation strategy) Decentralized strategy; Products and services tailored to local markets; Focus on competition in each market; and is a: Prominent strategy among European firms due to broad variety of cultures and markets in Europe

Corporate-level International Strategies Transnational Strategy Seeks to achieve both global efficiency (cost leadership) and local responsiveness (product differentiation) Difficult to achieve because of simultaneous requirements for strong central control and coordination to achieve efficiency and local flexibility and decentralization to achieve local market responsiveness.

Types of Corporate-Level Strategic Alliances Diversifying Alliances e.g., Samsung Group joins with Nissan to build new automobiles Synergistic Alliances e.g., Sony shares developments with many small firms Franchising e.g., Century 21 or McDonald’s

How Should We Enter A Foreign Country?