1. 1

2. MULTINATIONAL STRATEGIES AND THE GLOBAL-- LOCAL DILEMMA
The local responsiveness solution
The global solution 2

3. LOCAL SOLUTION
Customize organizations and products to country or regional differences 3

4. GLOBAL SOLUTION
Reduce costs with worldwide standardized products, uniform promotional strategies and distribution channels
Seek lower costs or higher quality anywhere in the value chain and in the world 4

5. FOUR BROAD MULTINATIONAL STRATEGIES
Solutions to the global--local responsiveness dilemma
Multilocal
Transnational
International
Regional 5

6. Gives top priority to local responsiveness issues
MULTILOCAL STRATEGY
Gives top priority to local responsiveness issues
A form of the differentiation strategy
Not limited to large multinationals 6

7. TRANSNATIONAL STRATEGY
Gives two goals top priority:
Seeking location advantages
Gaining economic efficiencies from worldwide network 7

8. INTERNATIONAL STRATEGY
A compromise approach
Global products, similar marketing techniques worldwide
Upstream and support activities remain concentrated at home country 8

9. Attempts to gain economic advantages from regional network
REGIONAL STRATEGY
A compromise strategy
Attempts to gain economic advantages from regional network
Attempts to gain local adaptation advantages from regional adaptation 9

10. REGIONAL TRADING BLOCKS
Encourage regional strategies
Reduce differences in government and industry required specifications for products 10

11. 11

12. Seldom do companies adopt pure forms
MIXED STRATEGIES
Seldom do companies adopt pure forms
Different strategies for each business
Different strategies for product differences 12

13. THE LOCAL VERSUS GLOBAL DILEMMA: DIAGNOSTIC QUESTIONS
How global is the industry?
What makes an industry global?
Global drivers
Four categories of global drivers:
Markets, costs, governments, and competition 13

14. Are there common customer needs? Are there global customers?
GLOBAL MARKETS
Are there common customer needs?
Are there global customers?
Can you transfer marketing?
What is the volume of imports and exports in the industry? 14

15. global economies of scale? global sources of low cost raw materials?
COSTS
Are there:
global economies of scale?
global sources of low cost raw materials?
cheaper sources of high skilled labor?
high product development costs? 15

16. Do the targeted countries have favorable trade policies?
GOVERNMENTS
Do the targeted countries have favorable trade policies?
Do the target countries have regulations that restrict operations?
The competition 16

17. COMPETITIVE ADVANTAGE IN THE VALUE CHAIN
Upstream advantages
Favor transnational strategy or an international strategy
Downstream advantages
Favor multilocal strategy 17

18. Competitive strength upstream in industries for local adaptation
MIXED CONDITIONS
Competitive strength downstream in industry with strong globalization drivers
Competitive strength upstream in industries for local adaptation
Favor regional strategy
See summary next 18

19. 19

20. SELECT AN INTERNATIONAL STRATEGY OVER A TRANSNATIONAL WHEN
Cost savings of centralization offset the lower costs or high quality raw materials and labor of worldwide locations 20

21. THE PARTICIPATION STRATEGIES
The choice of how to enter each international market
Exporting, licensing, strategic alliances, and foreign direct investment 21

22. Important-see following examples
EXPORTING
The easiest
Passive exporting
Important-see following examples 22

23. 23

24. EXPORT STRATEGIES
Indirect exporting
Direct exporting 24

25. EXPORT MANAGEMENT COMPANY (EMC)/EXPORT TRADING COMPANY (ETC)
Specialize in products, countries or regions
Provide ready-made access to markets
Have networks of foreign distributors 25

26. Requires more contact with foreign companies
DIRECT EXPORTING
More aggressive
Requires more contact with foreign companies
Uses foreign sales representatives, distributors, or retailers
May require branch offices in foreign countries 26

27. CHANNELS IN DIRECT EXPORTING
Sales representatives: use the company's promotional literature and samples
Foreign distributors: resell the products
Sell directly to foreign retailers or end users 27

28. DECIDING ON AN EXPORT STRATEGY
Assess control needs for: sales, customer credit, and the eventual sale of the product
Assess financial and human resources capabilities
to manage export operations 28

29. to design and execute international promotional activities
to support extensive international travel or possibly an expatriate sales force
to develop overseas contacts and networks 29

30. LICENSING
International licensing is a contractual agreement between a domestic licensor and a foreign licensee 30

31. WHEN DO COMPANIES LICENSE?
Based on three factors
The characteristics of the product
The characteristics of the target country
The nature of the licensing company 31

32. OTHER CONTRACTUAL AGREEMENTS
International franchising
Contract manufacturing
Turnkey operations 32

33. THE INTERNATIONAL STRATEGIC ALLIANCE
Cooperative agreements between two or more firms from different countries to participate in a business activity 33

34. Equity international joint ventures (IJV)
TWO BASIC TYPES
Equity international joint ventures (IJV)
International cooperative alliance (ICA) 34

35. Partner’s different capabilities Partner's knowledge of the market
WHY SEEK ALLIANCES?
Partner’s different capabilities
Partner's knowledge of the market
Government requirements
To share risks
To share technology
Economies of scale
Low cost raw materials or labor 35

36. KEY CONSIDERATIONS FOR ALLIANCE
Pick their partners carefully
Win-win ventures last much longer
Need for the alliance
Ability to succeed in the alliance
Plans for design and management 36

37. IJV probably more secure ICA probably more flexible and less visible
WHICH TYPE?
IJV probably more secure
ICA probably more flexible and less visible 37

38. FOREIGN DIRECT INVESTMENT
FDI symbolizes the highest stage of internationalization
FDI means that companies own and control directly a foreign operation
Acquisitions versus greenfield 38

39. REASONS TO INVEST IN FOREIGN COUNTRIES
To extract raw materials
To find low cost sources of labor, components, parts, or finished goods
To penetrate new markets, the major motivation 39

40. POSSIBLE ADVANTAGES OF FDI
Greater control
Lower costs of supplying host country
Avoiding import quotas
Greater opportunity to adapt product to the local markets
Better local image of the product 40

41. POSSIBLE DISADVANTAGES OF FDI INCLUDE
Increased capital investment
Increased investment of managerial and other resources
Greater exposure of the investment to political and financial risks 41

42. FORMULATING A PARTICIPATION STRATEGY42

43. MULTINATIONAL STRATEGY AND PARTICIPATION STRATEGY
Why is the company in the market?
E.g. Source of raw materials, R&D, Production, etc.
Location advantages versus market penetration 43

44. OTHER REASONS 44

45. Profit always major goal Other goals
STRATEGIC INTENT
Profit always major goal
Other goals
E.g., Being first in a market with potential or learning a new technology 45

46. What can a company afford? Human resources Production capabilities
COMPANY CAPABILITIES
What can a company afford?
Human resources
Production capabilities
Commitment to using resources 46

47. LOCAL GOVERNMENT REGULATIONS
Import or export tariffs, duties, or restrictions
Laws regarding foreign ownership
Other legal and regulatory issues
Patent, consumer protection, labor, and tax laws 47

48. CHARACTERISTICS OF THE TARGET PRODUCT AND ITS MARKET (examples)
Products that spoil quickly or are difficult to transport
Poor candidates for exporting
Products that need little local
Good candidates for licensing, joint ventures, or FDI 48

49. GEOGRAPHIC DISTANCE Transportation costs
More difficult for managers to communicate face-to-face and local managers may feel "out of the loop" in corporate decision making 49

50. With very different cultures, direct investment more risky
CULTURAL DISTANCE
With very different cultures, direct investment more risky
Joint ventures, licensing and exporting
Local partners deal with local cultural issues 50

51. POLITICAL AND FINANCIAL RISK
Economic risk
Currencies, markets, etc.
Political risk
Governments change
Policies regarding foreign firms change 51

52. NEED FOR CONTROL Key areas for concern
Product quality in the manufacturing process, product price, advertising and other promotional activities, where the product is sold, and after market service 52

53. THE CONTROL VERSUS RISK TRADEOFF53

54. 54

55. Dealing with the global--local responsiveness dilemma Four strategies
CONCLUSIONS
Dealing with the global--local responsiveness dilemma
Four strategies
Transnational
Multilocal
International
Regional 55

56. Participation strategies All can be used for sales
Others serve more value chain activities 56