1. 1-1 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak Chapter 16 Strategy in an international context

2. 1-2 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak Traditional approach to internationalisation Ricardo’s theory of internationalisation Adapted from Vernon (1966) Similar to the RBV, nations have natural advantages (e.g. oil) This permits local firms to dominate in industries where there is advantage With this advantage and dominance, foreign expansion is successful

3. 1-3 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak Traditional theory of internationalisation and free trade For the traditional model to operate, free trade is required. Trade barriers negate the comparative advantage of other countries and allow nations to inefficiently produce where they have no comparative advantage.

4. 1-4 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak 16.2 Chiquita Bananas Chiquita came to dominate the banana industry (prior to WWI) using the US comparative advantages of transportation and disease control. Those advantages are now diluted and Central America now has the comparative advantage with labour costs, land and climate. Why does Chiquita still dominate the banana industry?

5. 1-5 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak Resources: Capabilities 16.2 Chiquita Bananas

6. 1-6 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak International strategies follow two vectors: need for local adaptation need to reduce costs high low high low global strategytransnational strategy export strategymulti domestic strategy

7. 1-7 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak Export strategy Rationale: leverage home-based core competencies in foreign markets. Multi domestic strategy Rationale: favour adaptation to local markets through decentralization at country-level Global strategy Rationale: standardizing products and services to maximize scale and location economies Transnational strategy Rationale: attempt to capture the ‘best of both worlds’ through scale and location economies and adaptation. Leveraging innovation and learning throughout the organization

8. 1-8 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak Position WineRidge and justify answer 16.6 WineRidge’s international strategy need for local adaptation need to reduce costs high low high low global strategytransnational strategy export strategymulti domestic strategy

9. 1-9 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak 16.6 WineRidge’s international strategy need for local adaptation need to reduce costs high low high low global strategytransnational strategy export strategymulti domestic strategy US JVAustralian winemaking International distribution

10. 1-10 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak The rule of dinosaurs: mature industry structure and problems with the traditional model Firm size Large Small Firm number Large Small Chiquita Bananas

11. 1-11 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak Comparative advantage, internationalisation and free trade Free trade provided great benefit for large firms. The resources and capabilities that mattered were experience, scale, distribution and capital rather than capabilities based on domestic comparative advantage.

12. 1-12 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak A theory for large firms, mature industries and developed economies. Free trade + Size, experience, capital etc. = Options of: 1.Export 2.Multi domestic 3.Global 4.Transnational The traditional model does not explain the internationalisation of firms in small or developing economies.

13. 1-13 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak The strategies of firms in smaller or developing nations resources and capabilities industry pressure to internationalise transferable abroad customised to home market high low dodger strategy contender strategy defender strategy extender strategy

14. 1-14 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak Dodger strategy Avoid competing directly with multinationals: –collaborate through JVs, become a supplier, sell out Contender strategy Aims to accelerate growth and compete on equal terms with foreign giants through: –cooperation with top suppliers and customers –foreign acquisitions Defender strategy identifies a niche market where it can serve the local customer better than the multinationals. Extender strategy Use a strong base in the home market to expand in similar markets abroad (selective internationalization).

15. 1-15 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak 16.14 The Embraer case need for local adaptation need to reduce costs high low high low global strategy transnational strategy export strategy multi domestic strategy resources and capabilities industry pressure to inter- nationalise transferable abroad customised to home market high low dodger strategy contender strategy defender strategy extender strategy Where does Embraer fit within each model

16. 1-16 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak 16.14 The Embraer case need for local adaptation need to reduce costs high low high low global strategy transnational strategy export strategy multi domestic strategy resources and capabilities industry pressure to inter- nationalise transferable abroad customised to home market high low dodger strategy contender strategy defender strategy extender strategy Where does Embraer fit within each model

17. 1-17 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak Smaller economy internationalisation Tendency to succeed in niche areas or new industries. Tendency to become global very quickly without dominating the domestic market. Known as “born global” firms.

18. 1-18 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak 16.16 Incat’s global strategy Use industry maturity to explain why Incat is so successful whereas naval contracts have led to very modest exports

19. 1-19 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak 16.16 Incat’s global strategy Aluminium, wave piercing, high-speed large craft is effectively a new industry. There are no giants in this industry Traditional ship-building is a consolidated, mature industry dominated by a few giants

20. 1-20 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak Everything old is new again? Many of today’s giants in mature industries started as ‘born globals, for example: Microsoft Nestle Today’s ‘born globals’ may be tomorrow’s dinosaurs.