1. International Strategy Chapter 7
Jeff Stambaugh
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2. In what country is Nokia headquartered?
U.S.
France
Finland
Italy

3. What percentage of Coca Cola’s 2006 sales came outside the U.S.
25%
35%
50%
66%

4. A few years ago Lenovo bought IBM’s laptop business
A few years ago Lenovo bought IBM’s laptop business. Where is Lenovo headquartered?
U.S.
Italy
Japan
China

5. Boeing has orders for ~900 787s. How many have U.S. airlines ordered?
~ 100
~ 250
~ 400
~ 600

6. Today’s Objectives Know why firms expand across borders
Understand the basic international strategies
Know the basic entry modes and the pros / cons of each
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7. Why Go Global Area Population USA 300M S. America 375M Europe 710M
Russia
110M
Asia
3.9B
China
1.4B
India
1.1B
Africa
930M
Spread of Capitalism
Decreasing transportation costs
Decreasing communication costs
Internet
Regionalization vs Globalization
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8. Porter’s National Competitiveness Diamond
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9. Motives Grow markets (economy of scale) Tap world-wide talent
Extend product life cycle
Optimize location for each element of value chain
Enhance performance through locations
Cost reductions
Risk reductions
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10. Risks Political / economic Currency flux
Cultural buffoonery / misunderstandings
Distance is more than physical
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11. Business Considerations Beyond the Market Size
What is their time horizon?
How is power distributed in organizations?
The “great English-speaking, western-talking” executive may be powerless!
How does the culture negotiate?
What types of representations are binding?
Are foreigners disadvantaged?
Key governmental / legal considerations?
Other players: unions, professional associations, institutional norms?
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12. Strategies for International OpsX
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13. Pro/Cons of Strategies
Strategy Strengths Limitations
Global
Strong integration across businesses.
Standardization leads to higher economies of scale.
Uniform quality standards world-wide.
Limited ability to adapt to local markets (less demand for products).
Concentration of activities may increase dependence on a single facility.
Single locations may lead to higher tariffs and transportation costs.
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14. Pro/Cons of Strategies
Strategy Strengths Limitations
Multidomestic
Adapt to local market conditions (increased demand).
Detect potential niche markets
Less cost savings through scale economies.
Greater difficulty in transferring knowledge
May lead to “overadaptation”
Transnational
Economies of scale.
Adapt to local markets.
Locate activities in optimal locations.
Increased knowledge flows
Unique challenges in determining optimal locations.
Unique managerial challenges in fostering knowledge transfer.
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15. Extent of Investment Risk
Entry Strategies
Extent of Investment Risk
High
Low
Wholly Owned
Subsidiary
Joint Venture
(Toyota in San Antonio)
Toyota in MS
Strategic Alliance
Franchising
Licensing
Exporting
Low High
Degree of Ownership and Control
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16. Summary
Several reasons to cross borders: markets, tap talent, optimize value chain
Three major strategies: global, transnational, multi-domestic
Several ways to enter foreign markets: exporting, licensing, franchising, alliances, JVs, wholly-owned subsidiaries (greenfield, acquisitions)
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17. Next Class
Risk and Restructuring
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