1. Welcome to week 09: Multi-disciplinary strategic management

2. Multi-Disciplinary Strategic Management
1 December 2018
Multi-Disciplinary Strategic Management
Today’s agenda: February 18, 2014
Housekeeping: Welcome the guest, Classroom Management.
Reflecting on “IKEA’s successful Overall Cost Leadership Strategy”
Topic: International Strategy, Creating Value in Global Markets(Chapter 07)
Review of today’s lesson: Summary
Homework and wrap up
Sharmin Shamaly

3. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
International Expansion:
An opportunity to expand or a risk to face?
An opportunity to expand and exploit the new markets with strategy to minimize risk.
Sharmin Shamaly

4. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
What are the risks?
Sharmin Shamaly

5. Multi-Disciplinary Strategic Management international strategy
Sharmin Shamaly
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Going global involves both risk and opportunities:
Opportunities
Open Economies > Closed Economies
New Economy
Transfer of resources
Risks
Disparity in income and wealth distribution across the world
Broader economic factors like Interest rates, Inflation and Unemployment

6. Multi-Disciplinary Strategic Management international strategy
Sharmin Shamaly
1 December 2018
Multi-Disciplinary Strategic Management international strategy
The Diamond of National Advantage:

7. Multi-Disciplinary Strategic Management international strategy
Sharmin Shamaly
1 December 2018
Multi-Disciplinary Strategic Management international strategy
India’s Diamond in Software Industry:

8. Multi-Disciplinary Strategic Management international strategy
Sharmin Shamaly
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Motivations for going GLOBAL:
Increase the size of potential markets
Attain economies of scale, reducing R&D cost
Extend the life cycle of a product
Opportunities for arbitrage

9. Multi-Disciplinary Strategic Management international strategy
Sharmin Shamaly
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Motivations for going GLOBAL:
Optimize the physical location for every activity in its value chain
Performance enhancement
Cost reduction: maquiladoras
Risk reduction

10. Multi-Disciplinary Strategic Management international strategy
Sharmin Shamaly
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Risks for going GLOBAL:
Political and economic risk
Social unrest
Military turmoil
Demonstrations
Violent conflict and terrorism
Laws and their enforcement

11. Multi-Disciplinary Strategic Management international strategy
Sharmin Shamaly
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Risks for going GLOBAL:
Currency risks: Currency exchange fluctuations
Management risks : Culture ; Customs; Language
Income levels
Customer preferences
Distribution system

12. Multi-Disciplinary Strategic Management international strategy
Sharmin Shamaly
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Three assumptions
Problems
Customer needs and interests worldwide are becoming more homogeneous
People (worldwide) prefer lower prices at high quality
Economies of scale in production and marketing can be achieved through supplying global markets
Product markets vary widely between nations
In many product and service markets there appears to be a growing interest in multiple product features, quality and
Technology permits flexible production, cost of production may not be critical to product cost, and firm’s strategy should not be product-driven

13. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Two opposing Pressure:
Low cost standardized product
Tailoring of the product to the local demand
Sharmin Shamaly

14. Multi-Disciplinary Strategic Management international strategy
Sharmin Shamaly
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Opposing Pressures and Four Strategies
Opposing Pressures and Four Strategies
Opposing Pressures and Four Strategies
Opposing Pressures and Four Strategies

15. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
International Strategy:
Diffusion and adaptation of parent’s compny’s knowledge and resource
Country units enjoy little independence
Different activities in the value chain have different optimal locations
Examples
Ericsson from Sweden.
Sharmin Shamaly

16. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Global Strategy:
Competitive strategy is centralized and controlled largely by corporate office
Emphasizes on economies of scale, standard product
Works well when focus is to reduce cost
Examples
Aircraft, Pharmaceuticals
Sharmin Shamaly

17. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Multi-domestic Strategy:
Emphasis is differentiating products and services to adapt to local markets
Authority is more decentralized
Examples
Honda Motorcycle
Sharmin Shamaly

18. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Transnational Strategy:
Optimization of tradeoffs associated with efficiency, local adaptation, and learning
Firm’s assets and capabilities are dispersed according to the most beneficial location for a specific activity
Examples
Nestle: Downstream primary activities are decentralized
Upstream primary activities are centralized
Sharmin Shamaly

19. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Pros and Cons of these 4 Strategies:
Sharmin Shamaly

20. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Pros and Cons of these 4 Strategies:
Sharmin Shamaly

21. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Entry Modes of International Expansion:
Sharmin Shamaly

22. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Entry Modes of International Expansion: Exporting: Relatively inexpensive way to enter foreign market, minimal risk, win-win situation Licensing and Franchising: Franchisor receives a royalty or fee, Franchisee gets to use trademark, patent, trade secret or other valuable intellectual property
Sharmin Shamaly

23. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Entry Modes of International Expansion:
Strategic Alliances and Joint Ventures: Partnerships that enable firms to share risks and potential revenues and profits
Wholly Owned Subsidiaries:
Acquire an existing company in the home country
Develop a totally new operation (greenfield venture)
Most expensive and risky of all global entry strategies
Greatest control over all activities
Sharmin Shamaly

24. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Pros and Cons of each Mode:
Type of Entry
Advantages
Disadvantages
Exporting
Fast entry, low risk
Low control, low local knowledge, potential negative environmental impact of transportation
Licensing and Franchising
Fast entry, low cost, low risk
Less control, licensee may become a competitor, legal and regulatory environment must be sound
Partnering and Strategic Alliance
Shared costs reduce investment needed, reduced risk, seen as local entity
Higher cost than exporting, licensing, or franchising; integration problems between two corporate cultures
Greenfield Venture (Launch of a new, wholly owned subsidiary)
Gain local market knowledge; can be seen as insider who employs locals; maximum control
High cost, high risk due to unknowns, slow entry due to setup time
Sharmin Shamaly

25. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Global Dispersion of Value Chains:
Offshoring:
Offshoring occurs when a firm decides to shift an activity that it was performing in a domestic location to a foreign location.
Outsourcing
Outsourcing occurs when a firm decides to utilize other firms to perform value-creating activities that were previously performed in-house
Sharmin Shamaly

26. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Entry Modes of International Expansion:
Strategic Alliances and Joint Ventures: Partnerships that enable firms to share risks and potential revenues and profits
Wholly Owned Subsidiaries:
Acquire an existing company in the home country
Develop a totally new operation (greenfield venture)
Most expensive and risky of all global entry strategies
Greatest control over all activities
Sharmin Shamaly

27. Multi-Disciplinary Strategic Management international strategy
1 December 2018
Multi-Disciplinary Strategic Management international strategy
Review of today’s lesson
Sharmin Shamaly

28. Multi-Disciplinary Strategic Management
1 December 2018
Multi-Disciplinary Strategic Management
Home Work for Week 10:
Read Chapter 8 in the textbook
Read Blackboard readings/activities
Complete Competitive Dynamic discussion on Blackboard ( March 04 midnight to March 11 midnight)
Individual assignment two due on 15th March, Saturday midnight. (Info on BB)
Sharmin Shamaly