Post on 18-Dec-2015
International Issues in Strategy
Porter’s Determinants of National AdvantagePorter’s Determinants of National Advantage
Home country Home country of origin is crucial to of origin is crucial to International successInternational success
Factor ConditionsFactor ConditionsFactor ConditionsFactor Conditions
Basic FactorsBasic Factors- Land, labor- Land, labor
Advanced FactorsAdvanced Factors- Highly educated workers- Highly educated workers- Digital communications- Digital communications
Generalized FactorsGeneralized Factors- Capital, infrastructure- Capital, infrastructure
Specialized FactorsSpecialized Factors- Skilled personnel- Skilled personnel
Porter’s Determinants of National AdvantagePorter’s Determinants of National AdvantageHome country Home country of origin is crucial to International successof origin is crucial to International success
Factor ConditionsFactor Conditions
Basic FactorsBasic Factors- Land, labor- Land, labor
Advanced FactorsAdvanced Factors- Highly educated workers- Digital communications- Highly educated workers- Digital communications
Generalized FactorsGeneralized Factors- Capital, infrastructure- Capital, infrastructure
Specialized FactorsSpecialized Factors- Skilled personnel- Skilled personnel
Demand Demand ConditionCondition
ss
Demand Demand ConditionCondition
ssHome country Home country may support may support scale efficient scale efficient operations by operations by
itselfitself
Porter’s Determinants of National AdvantagePorter’s Determinants of National AdvantageHome country Home country of origin is crucial to International successof origin is crucial to International success
Demand ConditionsDemand
ConditionsHome country may support scale efficient operations by itself
Home country may support scale efficient operations by itself
Factor ConditionsFactor Conditions
Basic FactorsBasic Factors- Land, labor- Land, labor
Advanced FactorsAdvanced Factors- Highly educated workers- Digital communications- Highly educated workers- Digital communications
Generalized FactorsGeneralized Factors- Capital, infrastructure- Capital, infrastructure
Specialized FactorsSpecialized Factors- Skilled personnel- Skilled personnel
Related & Supporting Related & Supporting IndustriesIndustries
Related & Supporting Related & Supporting IndustriesIndustries
- Japanese cameras & copiers- Japanese cameras & copiers- Italian shoes & leather- Italian shoes & leather
Home country Home country of origin is crucial to International successof origin is crucial to International success
Porter’s Determinants of National AdvantagePorter’s Determinants of National Advantage
Demand ConditionsDemand
ConditionsHome country may support scale efficient operations by itself
Home country may support scale efficient operations by itself
Factor ConditionsFactor Conditions
Basic FactorsBasic Factors- Land, labor- Land, labor
Advanced FactorsAdvanced Factors- Highly educated workers- Digital communications- Highly educated workers- Digital communications
Generalized FactorsGeneralized Factors- Capital, infrastructure- Capital, infrastructure
Specialized FactorsSpecialized Factors- Skilled personnel- Skilled personnel
Firm Strategy, Structure Firm Strategy, Structure & Rivalry& Rivalry
Firm Strategy, Structure Firm Strategy, Structure & Rivalry& Rivalry
Intense rivalry fosters Intense rivalry fosters industry competitionindustry competition
Porter’s Determinants of National AdvantagePorter’s Determinants of National Advantage
Related & Supporting Industries
Related & Supporting Industries
- Japanese cameras & copiers- Italian shoes & leather- Japanese cameras & copiers- Italian shoes & leather
Home country Home country of origin is crucial to International successof origin is crucial to International success
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Three Three Corporate Corporate StrategiesStrategies Global Strategy
Transnational Strategy
Multi-Domestic Strategy
Multi-Domestic Strategy
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Strategy and operating decisions are Strategy and operating decisions are decentralizeddecentralized to strategic business units (SBU) in each countryto strategic business units (SBU) in each country
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Multi-Domestic Strategy
Strategy and operating decisions are decentralized Strategy and operating decisions are decentralized to strategic business units (SBU) in each countryto strategic business units (SBU) in each country
Products and services are Products and services are tailoredtailored to local markets to local markets
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Multi-Domestic Strategy
Strategy and operating decisions are decentralized Strategy and operating decisions are decentralized to strategic business units (SBU) in each countryto strategic business units (SBU) in each country
Products and services are tailored to local marketsProducts and services are tailored to local markets
Business units in each country are Business units in each country are independentindependent of of each other each other
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Multi-Domestic Strategy
Strategy and operating decisions are decentralized Strategy and operating decisions are decentralized to strategic business units (SBU) in each countryto strategic business units (SBU) in each country
Products and services are tailored to local marketsProducts and services are tailored to local markets
Business units in each country are independent of Business units in each country are independent of each other each other Assumes Assumes markets differ markets differ by country or regionsby country or regions
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Multi-Domestic Strategy
Strategy and operating decisions are decentralized Strategy and operating decisions are decentralized to strategic business units (SBU) in each countryto strategic business units (SBU) in each country
Products and services are tailored to local marketsProducts and services are tailored to local markets
Business units in each country are independent of Business units in each country are independent of each other each other Assumes markets differ by country or regionsAssumes markets differ by country or regions
Focus on competition in Focus on competition in each marketeach market
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Multi-Domestic Strategy
Global Strategy
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Products are Products are standardizedstandardized across national markets across national markets
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Global Strategy
Products are standardized across national marketsProducts are standardized across national markets
Decisions regarding business-level strategies are Decisions regarding business-level strategies are centralizedcentralized in the home office in the home office
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Global Strategy
Products are standardized across national marketsProducts are standardized across national markets
Decisions regarding business-level strategies are Decisions regarding business-level strategies are centralized in the home officecentralized in the home office
Strategic business units (SBU) are assumed to be Strategic business units (SBU) are assumed to be interdependentinterdependent
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Global Strategy
Products are standardized across national marketsProducts are standardized across national markets
Decisions regarding business-level strategies are Decisions regarding business-level strategies are centralized in the home officecentralized in the home office
Strategic business units (SBU) are assumed to be Strategic business units (SBU) are assumed to be interdependentinterdependentEmphasizes Emphasizes economies of scaleeconomies of scale
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Global Strategy
Products are standardized across national marketsProducts are standardized across national markets
Decisions regarding business-level strategies are Decisions regarding business-level strategies are centralized in the home officecentralized in the home office
Strategic business units (SBU) are assumed to be Strategic business units (SBU) are assumed to be interdependentinterdependentEmphasizes economies of scaleEmphasizes economies of scale
Often Often lacks responsiveness lacks responsiveness to local marketsto local markets
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Global Strategy
Products are standardized across national marketsProducts are standardized across national markets
Decisions regarding business-level strategies are Decisions regarding business-level strategies are centralized in the home officecentralized in the home office
Strategic business units (SBU) are assumed to be Strategic business units (SBU) are assumed to be interdependentinterdependentEmphasizes economies of scaleEmphasizes economies of scale
Often lacks responsiveness to local marketsOften lacks responsiveness to local markets
Requires resource sharing and Requires resource sharing and coordinationcoordination across across borders (which also makes it difficult to manage)borders (which also makes it difficult to manage)
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Global Strategy
Transnational Strategy
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Seeks to achieve both Seeks to achieve both global efficiency global efficiency and and local local responsivenessresponsiveness
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Transnational Strategy
Seeks to achieve both global efficiency and local Seeks to achieve both global efficiency and local responsivenessresponsiveness
Difficult to achieve because of simultaneous Difficult to achieve because of simultaneous requirements for strong central requirements for strong central controlcontrol and and coordinationcoordination to achieve efficiency and local to achieve efficiency and local flexibilityflexibility and decentralization to achieve local and decentralization to achieve local market responsivenessmarket responsiveness
International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies
Transnational Strategy
International Corporate StrategyInternational Corporate Strategy
When is each strategy appropriate?When is each strategy appropriate?
Need for Need for Global Global
IntegrationIntegration
Need for Local Market ResponsivenessNeed for Local Market Responsiveness
Low
High
Low High
International Corporate StrategyInternational Corporate Strategy
When is each strategy appropriate?When is each strategy appropriate?
Need for Need for Global Global
IntegrationIntegration
Need for Local Market ResponsivenessNeed for Local Market Responsiveness
Low
High
Low High
International Corporate StrategyInternational Corporate Strategy
When is each strategy appropriate?When is each strategy appropriate?
Need for Need for Global Global
IntegrationIntegration
Need for Local Market ResponsivenessNeed for Local Market Responsiveness
Low
High
Low High
International Corporate StrategyInternational Corporate Strategy
When is each strategy appropriate?When is each strategy appropriate?
Need for Need for Global Global
IntegrationIntegration
Need for Local Market ResponsivenessNeed for Local Market Responsiveness
Low
High
Low High
International Corporate StrategyInternational Corporate Strategy
When is each strategy appropriate?When is each strategy appropriate?
Need for Need for Global Global
IntegrationIntegration
Need for Local Market ResponsivenessNeed for Local Market Responsiveness
Low
High
Low High
International Corporate StrategyInternational Corporate Strategy
When is each strategy appropriate?When is each strategy appropriate?
Need for Need for Global Global
IntegrationIntegration
Need for Local Market ResponsivenessNeed for Local Market Responsiveness
Low
High
Low High
International Corporate StrategyInternational Corporate Strategy
When is each strategy appropriate?When is each strategy appropriate?
Need for Need for Global Global
IntegrationIntegration
Need for Local Market ResponsivenessNeed for Local Market Responsiveness
Low
High
Low High
International Corporate StrategyInternational Corporate Strategy
When is each strategy appropriate?When is each strategy appropriate?
Need for Need for Global Global
IntegrationIntegration
Need for Local Market ResponsivenessNeed for Local Market Responsiveness
Low
High
Low High
International Corporate StrategyInternational Corporate Strategy
When is each strategy appropriate?When is each strategy appropriate?
Need for Need for Global Global
IntegrationIntegration
Need for Local Market ResponsivenessNeed for Local Market Responsiveness
Low
High
Low High
National government instability may create potential National government instability may create potential problems for internationally diversified firmsproblems for internationally diversified firms
Major Risks of International DiversificationMajor Risks of International Diversification
Political Risk
National government instability may create potential National government instability may create potential problems for internationally diversified firmsproblems for internationally diversified firms
Major Risks of International DiversificationMajor Risks of International Diversification
Potential changes in attitudes or regulations Potential changes in attitudes or regulations regarding foreign ownershipregarding foreign ownership
Political Risk
National government instability may create potential National government instability may create potential problems for internationally diversified firmsproblems for internationally diversified firms
Major Risks of International DiversificationMajor Risks of International Diversification
Legal authority obtained from previous administra-Legal authority obtained from previous administra-tion may become invalid tion may become invalid
Potential changes in attitudes or regulations Potential changes in attitudes or regulations regarding foreign ownershipregarding foreign ownership
Political Risk
National government instability may create potential National government instability may create potential problems for internationally diversified firmsproblems for internationally diversified firms
Major Risks of International DiversificationMajor Risks of International Diversification
Legal authority obtained from previous administra-Legal authority obtained from previous administra-tion may become invalid tion may become invalid
Potential changes in attitudes or regulations Potential changes in attitudes or regulations regarding foreign ownershipregarding foreign ownership
Potential for nationalization of private firms’ assetsPotential for nationalization of private firms’ assets
Political Risk
Economic Risk
Major Risks of International DiversificationMajor Risks of International Diversification
Economic risks are interdependent with political risksEconomic risks are interdependent with political risks
Major Risks of International DiversificationMajor Risks of International Diversification
Economic Risk
Economic risks are interdependent with political risksEconomic risks are interdependent with political risks
Differences and fluctuations in international Differences and fluctuations in international currencies may affect value of assets and liabilities currencies may affect value of assets and liabilities and affect prices and ultimately the ability to compete and affect prices and ultimately the ability to compete
Major Risks of International DiversificationMajor Risks of International Diversification
Economic Risk
Economic risks are interdependent with political risksEconomic risks are interdependent with political risks
Differences in inflation rates may affect internationally Differences in inflation rates may affect internationally diversified firms’ ability to competediversified firms’ ability to compete
Differences and fluctuations in international Differences and fluctuations in international currencies may affect value of assets and liabilities currencies may affect value of assets and liabilities and affect prices and ultimately the ability to compete and affect prices and ultimately the ability to compete
Major Risks of International DiversificationMajor Risks of International Diversification
Economic Risk
Stages of International Development
• Domestic company—some exporting
• Domestic company—export division
• Domestic company—international division
• Multinational corporation—multidomestic emphasis
• Multinational corporation—global emphasis
Geographic Area Structure for a Multinational Corporation
Board of Directors
President
Corporate StaffR & D
Operating Companies
U.S.
Operating Companies
Europe*
Operating Companies
Africa
Operating Companies
Asia*
Product Group
B
Operating Companies
Latin America
Product Group
A
Product Group
C
Product Group
B
Product Group
D
*Note: Because of space limitations, product groups for only Europe and Asia are shown here.
Strategy Implementation
Hofstede’s Dimensions of
NationalCulture
Power distance (PD)
Uncertainty avoidance (UA)
Individualism-collectivism (I-C)
Masculinity-femininity (M-F)
Long-term orientation (LT)
Strategy Implementation
International issues in staffing:– Considerable planning– Can be very costly– Cultural differences must be considered– Experience through international
assignments
Strategy Implementation
International issues in staffing:– Effective management of foreign
assignments:• Focus on transferring knowledge and
developing global leadership• Foreign assignments to people with technical
skills matched or exceeded by cross-cultural abilities
• Deliberate repatriation at end of assignment with career guidance and jobs