International Strategies

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International Strategies

Chapter 7

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

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Chapter Seven Learning Outcomes

7.1 Describe international strategy, and explain why it’s important.7.2 Explain the issues that arise as organizations go international.7.3 Describe the important international strategy alternatives and explain how they’re implemented and evaluated.


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Learning Outcome 7.1

• Describe international strategy, and explain why it’s important.

• Doing business internationally is not new– Countries and organizations have been trading

with each other for centuries– Companies, including smaller firms, are finding

newer ways to do business internationally


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What is an International Strategy?

• It is a corporate strategy that describes companies that do business in multiple countries simultaneously.

• Can involve– the marketplace,– people, or – finances


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Importance of International Strategies

• One of the important reasons why companies pursue international strategies—potential new customers


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Review Learning Outcome 7.1

• Explain international strategy.• Describe the possible advantages of being

international.• Describe the potential drawbacks of being

international.


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• Explain the Issues That Arise As Organizations Go International– International strategy is part of the strategic

management process. As such, there will be opportunities and threats to consider.



The Legal-Political Environment

• The legal-political environment is not the same on a global basis– Australia, Germany, Japan, and Spain are similar to

the US– Others are unstable – Bosnia, Nigeria, North Korea– Still others are failed states – Somalia, Haiti, Sudan– Each country has its own unique legal-political

environment that must be understood

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The Economic Environment

• Free Market Economy - resources are primarily owned and controlled by the private sector

• Planned Economy - economic decisions are planned by a central government


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Inflation and Tax Policies• Inflation Rates– The rising cost for products and services– This affects interest rates, exchange rates, cost of

living, and confidence in a country’s systems– Strategic managers must monitor inflation rates to

anticipate changes in monetary policy and make good decisions

• Diverse tax policies– Can be restrictive or not, will determine tax

obligations


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The Cultural Environment

• Cultural differences are less obvious– Companies that fail to understand the national

culture will fail to operate effectively– Values and attitudes shared by individuals from a

specific country shape their beliefs and actions– Strategic managers must be familiar with cultural

differences between the countries in which it does business


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Review Learning Outcome 7.2

• What aspects of the legal-political environment do strategic decision makers need to examine?

• What economic issues might affect a company’s international strategy?

• Discuss why it’s important to understand national culture.


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• Describe the Important International Strategy Alternatives and Explain How They Are Implemented and Evaluated


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Multi-country Approach

• A firm with a multi-country approach varies its strategies according to the country in which it does business– This is based on differentiation, products are

tailored to fit consumer tastes and preferences– Marketing and distribution are adapted– Competitive actions are chosen to fit the unique

circumstances of the market


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Global Approach

• A Global Approach is one where the strategies are the same in all countries where the firm does business– This effort seeks to develop a low cost advantage– More emphasis is placed on globally integrating

operations than on local market responsiveness– Products will have minor variations– Emphasis is on coordination between functions

and sharing of capabilities and technologies


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International Strategy Alternatives

• Expanding beyond domestic borders requires considering several alternatives for growth:– Exporting– Importing– Licensing– Franchising– Direct Investment


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International Strategy Alternatives – cont’d

• Exporting– A business makes products in its home country,

transports them to another country for sale through an existing distribution channel

• Importing– Selling products at home that were made in

another country• Licensing– The right to manufacture or sell for a fee


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International Strategy Alternatives – cont’d

• Franchising– Mainly used by retailers or service brands, the

company will sell limited rights to use its brand name in return for a payment and share of profits

• Foreign Subsidiary– Directly invest in a foreign country by setting up a

separate and independent facility or office


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Implementing and Evaluating International Strategies

• Structuring International Organizations– Multinational corporation (MNC) is any type of

international company that maintains operations in multiple countries

– Multidomestic corporation, a type of MNC which decentralizes management and other decisions to the local country


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Structuring International Organizations cont’d

• Global company, a MNC which centralizes its management and other decisions in the home country

• Transnational, or borderless, organization, type of MNC that eliminates artificial geographical barriers


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Other International Strategy Implementation and Evaluation

Decisions• International companies must address

implementation issues that concern various aspects of its functional and competitive strategies including – Production/operations– Marketing– Human resources– Information systems and financial-accounting systems


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Learning Review: Learning Outcome 7.3

• Contrast the multi-country and global approaches

• What are the five international strategy alternatives?

• Describe other international strategy implementation and evaluation decisions


International Strategies

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