1. Welcome to class of International Strategy Formulation
Dr. Satyendra Singh
Professor, Marketing and International Business
University of Winnipeg
CANADA

2. We need to balance the 3 Pressures to formulate a good international business strategy
Industry-Specific Pressure
Country-Specific Pressure
Company-Specific Pressure 2

3. Industry-Specific Pressure (+)…
Universal Customer Needs
People see it, so want it  product or services
Irrespective of country of origin!
MNCs do not miss out opportunities
eg watches, jeans, pizza, cell phone, computers…
B2B (Industrial) Customers
If GM goes international, so do suppliers
Suppliers are expected to respond
Close working relationship
Otherwise suppliers miss out the opportunity 3

4. Industry-Specific Pressure (+)
High Investment Intensity
↑ investment  recoup  time, $, R&D  standardize  USP
eg MACH3 razor, Boeing,…
Amortize development cost through rapid globalization
Cost Reduction Need
Minimum vol. needed for certain unit cost
Economies of scale (30% domestic + 70% international)
However, in newspaper industry, local content and responsiveness
is more important than economies of scale or production efficiency 4

5. Country-Specific Pressure (±)…
Trade Barrier (Tariff Barrier)
Because governments want
Investments (FDI)  jobs, technology, ↑QOL
MNCs to establish autonomous operations
Preserve culture, sovereignty, foreign exchange
In sum, compete through FDI rather than trade
If a country becomes a trading block
Its competitiveness becomes vital  loss of tariff
So governments begin subsidizing local industry
Thus governments may resort to nontariff barrier
eg EU, steel; US Sugar…, Production
eg Different industry standards: DVD-RAM (Toshiba, DVD-RW (Sharp), DVD+RW (Sony) 5

6. Country-Specific Pressure (±)…
Cultural Differences
Nationalism may deter globalization
Preserve culture and sovereignty
Tradition and religious beliefs run deep
eg McDonald in India  No beef
eg Kelloggs in UAE  tested for pork derivatives
eg Wrigley’s chewing gum  tested and found ok
Local taste
eg KFC vs. tandoori chicken in India
McDonalds versus Burger King in Jamaica
Income Disparity
People cannot afford
Imitation and Piracy
Microsoft, AutoCAD, SAP software…. 6

7. Country-Specific Pressure (±)
Anti-Globalization Activities
It is not globalization. if so, it is very limited
High awareness of issues  Mecca Cola
Website and fundraising capabilities
Powerful social networking  uprising
So MNCs beef up public relations
eg Coca-Cola in Africa
Internet – May be, No need to go abroad
Competitive advantage vs. core competencies
Cost of maintaining physical structure can be ↑ overseas 7

8. Ten % of profit goes to Humanity/charity causes8

9. 9

10. 10

11. In fact, It was Turkey's Halal Chicken but led to temporary closure
BBC Nov 2015
In fact, It was Turkey's Halal Chicken but led to temporary closure 11

12. 12

13. 13

14. Company-Specific Pressure (±)…
Organizational Resistance to Change
Justification for globalization
Country managers lose control/autonomy
HO is overestimating the impact of globalization
Eg GM, Philips, IBM, Nestle  all have country managers
Union can resist too
International Professionals in Short Supply
Not many cross-culturally competent managers
Personal reason, so no to globalization
Do not wish to travel
In some countries, need to take vaccinations and medicines eg Malaria, Yellow Fever, Hepatitis A/B, meningitis…
Do not wish to be away from families
Region (security) or religion – do not feel safe 14

15. Company-Specific Pressure (±)
Transportation Difficulty
↓ value-to-weight is not suitable globalization
eg Dairy, bread product – short shelf-lives
eg Seafood, flowers  packaging, refrigeration
Costs may outweigh benefits of globalization
New Production Technique
JIT  within hours of assemble, ↓ holding cost
Flexible manufacturing system
Low set up time, Multiple Line of Business (LOB) in single factory
Customization is efficient
Integration: Vertical versus Horizontal 15

16. Vertical vs. Horizontal Integration…16

17. Vertical vs. Horizontal Integration17

18. Mapping Industry for Strategy Formulation
Globalization  Our goal is to move up; ie ↑ integration quadrant
Cement: globalization limited by low value to weight ratio
Globalization and Localization vary from industry to industry 18

19. Three International Strategies…
Multi-Domestic
HO develops product  affiliates replicate  Country Managers
Very popular after WWII  High tariff
After 80s ↓ Trade barriers  Globalization
Regional
Maximize economies of scale at regional level
Homogenous market demand, trading blocks
Stepping stone to full blown global strategy
Local staffing, ↓ turnover, ↑ morale, regional decision-making
eg GM, Safeway 19

20. Three International Strategies
Global
Maximize international efficiency
Locate activities in low cost countries
Standardize product, and manufacture world-class products
MNCs have bargaining power
Reconfigure value-adding activities between countries
MNCs can move operations elsewhere
So governments want to retain MNCs
Tax break and infra structure support
↑ investment, ↑ incentive offered 20

21. Questions?