In t Strategy

8/13/2019 In t Strategy

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International

StrategyMotives, Market

Entry, Strategies

etc.


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Historical

Development International Trade

The International Company

The Multinational Company

The Transnational CompanyThe Global Company


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Globalisation Debate

Space and time contracting - GlobalVillage

Everywhere is becoming likeeverywhere else

Consumer convergence

Search for scale and cost advantagesWorldwide sourcing for production

Global production

Falling of trade barriers


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Globalisation Cont.

Push Factors- factors that force

a firm to contemplate movingfrom their home market

Pull Factors - those factors that

attract firms into internationalmarkets


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Standardization

Standardization

Push Factors Pull Factors


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Standardization

Standardization


Consumer

Convergence


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Standardization

Standardization


Consumer

Convergence

Global

Village


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Or To Put I t Another Way

Drivers for International or

Global PotentialGovernment Drivers

Competitive Drivers

Market Drivers

Cost Drivers


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I ndustr ial Globalisation Drivers -

Detailed

GOVERNMENT

DRIVERS

COMPETITIVE

DRIVERS

MARKET

DRIVERS

COST

DRIVERS

INDUSTRY

GLOBALISATION

POTENTIAL Global scale

economies

Steep experiencecurve

Low transportation costs

Differences in country costs (incl. Fx)

High product development costs

Need for technology transfer

High exports

High imports

Interdependence of countries

Competitors from different countrie

Globalised competitors

Favourable tradepolicies

Compatibletechnicalstandards

Commonmarketingregulations

Common customer

needs Global customers

Global channels

Transferablemarketing


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BUT I Prefer This

International Development :

Push FactorsPull Factors

Method

Direction


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Push and Pul l Facto rs Affect ing

Internat ional Grow th

International

Growth

Push FactorsMotives

PullFactors

MotivesSaturated home

market

Limited growth

Escape from inflationIncreasing regulation

Costs

Competition in home

market increasing

Follow customer

Internationalisation

of industryCreate international

network

Competitive drivers

Market

liberalisationMethod of

Growth

Licensing

Agents

Franchising

Joint development

Acquisition

New development

Direction of

Growth


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Market Entry

I ssues


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Alternative Methods of Foreign

Market Entry

Production in Home Market

Foreign Production Sources

Indirect ExportDirect Export

Export Trad. Co.

Via Domestic Sales

Export Management Co.

Agents

Distributors

Assembly Operations

Contract Manufacturing

Licensing / Franchising

Joint Ventures

Wholly Owned

Source: Young, Hamil l, Wheeler & Davis


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Modes of Entry into

Foreign Markets

Indirect Direct Licensing JV Direct Investment

Amount of Commitment, Risk, Control and Profit Potential

Source: Kotler P Marketing Management 6th Edition

Low High


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Factors Affecting Foreign Market Entry Mode Decision

Target

Country

Market

Factors

Target

Country

Environmental

Factors

Target

Country

Production

Factors

Home

Country

Factors

Foreign Market Entry Decision

Company

Product

Factors

Company

Resource

Commitment

Factors

Source: Root F, Foreign Entry Strategies, 1982

External Factors

Internal Factors


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The Meaning of Direct

I nvestment

For direct investment to take place, controlmust follow the investment

It usually implies ownership of between 10-25% of the voting stock

BUT

100% of stock does not guarantee control,as the government or vital resource suppliermay exert substantial influence on thecompany


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Direct I nvestment may take many

forms:

A new venture by a company with no

previous interest in for example the UK An extension of an existing subsidiary

A take over of existing assets


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Three basic sources of

Advantage from Direct

I nvestment

Firms ownership advantage

Country specific advantage

Advantages of direct investment overlicensing


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Firms ownership advantages

Usually one of two types:

Those that derive from the structure of the

multinational corporation itself privilege access to materials, finance, or markets

conferred on it by it size and geographical dispersion

Those that derive from an exclusive asset or

expertise possessed by the firm

Proprietary technical knowledge relating to products

and processes


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Country - specif ic advantages

Cost and availability of key resources

The character and size of the domestic

market Governmental line on innovation,

protection of property rights, andcompetition policy

Fiscal incentives for inward investments

Trade restrictions


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Advantages of direct investment

over licensing Firm can maintain control over overseas

production

Firm can internalise the new market,rather than selling off rights to local

company

Exploitation of countries tax regimes andlegal system may be possible


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Economic motives for direct

inward investment To reduce production charges by using

cheaper foreign inputs such as low wage

labour To supply a market that is closed to

imports through trade restrictions

Escape from unfavourable conditions

Avoid import barriers


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Impacts of inward investment

Creation of jobs

More disposable income

Improve standard of living

Balance of payment impact

Cheaper products due to lack of import

restrictions

Possible increase in market share


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Impacts contd.

Possible increase in competition for local

businesses

Other industry

Undermining protectionism efforts


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Why FDI and not Exports into the EU ?

IMPLICATIONS OF 1992

Non Tariffs

Access to Large Market

IMPLICATIONS OF EMU Etc.

IN-TANGIBLE ASSETS

Ownership Advantages

Internalisation Advantages WHAT ABOUT THE REST OF EUROPE?


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Elements of Global Organisation

Global strategy informationsystem

Cross-country co-ordination

Global strategic planning

Global budgeting

Global performance reviewand compensation

ORGANISATION

STRUCTURE

CULTURE

PEOPLEMANAGEMENT

PROCESSES

ABILITY TO DEVELOP

AND IMPLEMENT

GLOBAL STRATEGY

Centralised global authority No international division

Strong business dimension

Use of foreign nationals

Multi-country careers

Frequent travel

Statements and actionsofleaders

Global identity

Commitment to world-wide(v. domestic) employment

Interdependence(v. autonomy) ofbusinesses

Source: Ad apted from YIP, Loewe and Yoshim o (1988)


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Any Quest ions ?

In t Strategy

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