Ch8-1 Chapter 8 International Strategy Michael A. Hitt R. Duane Ireland Robert E. Hoskisson ©2000 South-Western College Publishing Ch8-2 Competitiveness Chapter 3 Internal Environment Chapter 2 External Environment The Strategic The Strategic Management Management Process Process The Strategic The Strategic Management Management Process Process Strategic Intent Strategic Mission Strategic Competitiveness Above Average Returns Feedback Strategy Formulation Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 6 Corporate-Level Strategy Chapter 8 International Strategy Chapter 9 Cooperative Strategies Chapter 7 Acquisitions & Restructuring Strategy Implementation Chapter 10 Corporate Governance Chapter 11 Structure & Control Chapter 12 Strategic Leadership Chapter 13 Entrepreneurship & Innovation Strategic Inputs Strategic Actions Strategic Outcomes Ch8-3 International Strategy Opportunities and Outcomes International Strategy Opportunities and Outcomes Identify Identify International International Opportunities Opportunities Explore Explore Resources and Resources and Capabilities Capabilities Use Core Use Core Competence Competence Strategic Strategic Competitiveness Competitiveness Outcomes Outcomes International International Strategies Strategies Modes of Modes of Entry Entry Increased Increased Market Size Market Size Return on Return on Investment Investment Economies of Economies of Scale and Scale and Learning Learning Location Location Advantage Advantage International International Business-Level Business-Level Strategy Strategy Multidomestic Multidomestic Strategy Strategy Global Global Strategy Strategy Transnational Transnational Strategy Strategy Exporting Exporting Establishment of Establishment of New Subsidiary New Subsidiary Exporting Exporting Strategic Strategic Alliances Alliances Acquisition Acquisition Management Management Problems Problems and Risk and Risk Management Management Problems Problems and Risk and Risk Higher Higher Performance Performance Returns Returns Innovation Innovation Increased Increased Market Size Market Size Return on Return on Investment Investment Economies of Economies of Scale and Scale and Learning Learning Location Location Advantage Advantage Ch8-4 Selling Products or Services Outside a Firm’s Domestic Market Selling Products or Services Outside a Firm’s Domestic Market International Strategy Lifecycle International Strategy Lifecycle Firm Introduces Firm Introduces Innovation in Innovation in Domestic Market Domestic Market 1 Product Demand Product Demand Develops and Develops and Firm Exports Firm Exports Products Products 2 Foreign Foreign Competition Competition Begins Production Begins Production 3 Firm Begins Firm Begins Production Abroad Production Abroad 4 Production Becomes Production Becomes Standardized and is Standardized and is Relocated to Low Cost Relocated to Low Cost Countries Countries 5 Ch8-5 Example: Example: Aircraft manufacturers Boeing or Airbus Aircraft manufacturers Boeing or Airbus Example: Example: Japanese electronics or Japanese electronics or automobile manufacturers automobile manufacturers Motivations for International Expansion Motivations for International Expansion Increase Market Share Increase Market Share Domestic market may lack the size to support efficient Domestic market may lack the size to support efficient scale manufacturing facilities scale manufacturing facilities Large investment projects may require global markets to justify Large investment projects may require global markets to justify the capital outlays the capital outlays Weak patent protection in some countries implies that firms Weak patent protection in some countries implies that firms should expand overseas rapidly in order to preempt imitators should expand overseas rapidly in order to preempt imitators Return on Investment Return on Investment Ch8-6 Motivations for International Expansion Motivations for International Expansion Economies of Scale or Learning Economies of Scale or Learning Expanding size or scope of markets helps to achieve Expanding size or scope of markets helps to achieve economies of scale in manufacturing as well as marketing, economies of scale in manufacturing as well as marketing, R & D or distribution R & D or distribution - Can spread costs over a larger sales base - Can spread costs over a larger sales base - Increase profit per unit - Increase profit per unit May achieve better access to: May achieve better access to: - Raw materials - Raw materials - Lower cost labor - Lower cost labor - Key suppliers - Key suppliers - Key customers - Key customers - Energy - Energy - Natural resources - Natural resources Location Advantages Location Advantages Low cost markets may aid in developing Low cost markets may aid in developing competitive advantage competitive advantage Ch8-7 Factor Conditions Factor Conditions Basic Factors Basic Factors - Land, labor - Land, labor Advanced Factors Advanced Factors - Highly educated workers - Highly educated workers - Digital communications - Digital communications Generalized Factors Generalized Factors - Capital, - Capital, infrastructure infrastructure Specialized Factors Specialized Factors - Skilled personnel - Skilled personnel Demand Demand Conditions Conditions Home country may Home country may support scale efficient support scale efficient operations by itself operations by itself Related & Supporting Related & Supporting Industries Industries - Japanese cameras & copiers - Japanese cameras & copiers - Italian shoes & leather - Italian shoes & leather Firm Strategy, Structure & Firm Strategy, Structure & Rivalry Rivalry Intense rivalry fosters Intense rivalry fosters industry competition industry competition Porter’s Determinants of National Advantage Porter’s Determinants of National Advantage Home Country Home Country of Origin Is Crucial to International Success of Origin Is Crucial to International Success Ch8-8 International Strategy Opportunities and Outcomes International Strategy Opportunities and Outcomes Identify Identify International International Opportunities Opportunities Explore Explore Resources and Resources and Capabilities Capabilities Use Core Use Core Competence Competence Strategic Strategic Competitiveness Competitiveness Outcomes Outcomes International International Strategies Strategies Modes of Modes of Entry Entry Increased Increased Market Size Market Size Return on Return on Investment Investment Economies of Economies of Scale and Scale and Learning Learning Location Location Advantage Advantage International International Business-Level Business-Level Strategy Strategy Multidomestic Multidomestic Strategy Strategy Global Global Strategy Strategy Transnational Transnational Strategy Strategy Exporting Exporting Establishment of Establishment of New Subsidiary New Subsidiary Exporting Exporting Strategic Strategic Alliances Alliances Acquisition Acquisition Management Management Problems Problems and Risk and Risk Management Management Problems Problems and Risk and Risk Higher Higher Performance Performance Returns Returns Innovation Innovation Ch8-9 International Differentiation International Differentiation Countries with advanced or specialized factor Countries with advanced or specialized factor conditions most likely to use this strategy conditions most likely to use this strategy Example: Example: Japan, Germany, U.S. Japan, Germany, U.S. International Low Cost International Low Cost Usually located in home country Usually located in home country Export to international markets Export to international markets Low value added operations in foreign countries Low value added operations in foreign countries High value added operations in home country High value added operations in home country Business-Level International Strategies Business-Level International Strategies Ch8-10 International Focus Strategies International Focus Strategies International Integrated Low Cost/Differentiation International Integrated Low Cost/Differentiation Can be most effective in dealing with diverse markets Can be most effective in dealing with diverse markets Often relies upon flexible manufacturing, total quality Often relies upon flexible manufacturing, total quality management or rapid communication networks management or rapid communication networks Technologically advanced firms follow focused Technologically advanced firms follow focused low cost strategy low cost strategy Focused differentiation firms compete on the Focused differentiation firms compete on the basis of image & design basis of image & design Third group competes on low price by imitating Third group competes on low price by imitating Business-Level International Strategies Business-Level International Strategies [...]... International Corporate Strategy When is each strategy appropriate? High Need for Global Integration MultiDomestic Low Low High Need for Local Market Responsiveness Ch8- International Corporate Strategy When is each strategy appropriate? High Global Strategy Need for Global Integration MultiDomestic Low Low High Need for Local Market Responsiveness Ch8- International Corporate Strategy When is each strategy appropriate?... at high cost Ch8- International Strategy Opportunities and Outcomes Identify International Opportunities Explore Resources and Capabilities Use Core Competence International Modes of Entry Strategies Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage International Business-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Management... and learning Ch8- International Strategy Opportunities and Outcomes Identify International Opportunities Explore Resources and Capabilities Use Core Competence International Modes of Entry Strategies Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage International Business-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Management... Business-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Management Problems and Risk Strategic Competitiveness Outcomes Exporting Higher Performance Returns Exporting Strategic Alliances Acquisition Innovation Establishment of New Subsidiary Management Problems and Risk Ch8- Choice of International Entry Mode Exporting Exporting Common way to enter new international markets... dictate business-level strategies from the home office and coordinate resource sharing across units Three Corporate Strategies Multi-Domestic Strategy Global Strategy Transnational Strategy Ch8- Corporate-Level International Strategies Multi-Domestic Strategy Strategy and operating decisions are decentralized to strategic business units (SBU) in each country Products and services are tailored to local... Global Strategy Transnational Need for Global Integration MultiDomestic Low Low High Need for Local Market Responsiveness Ch8- International Strategy Opportunities and Outcomes Identify International Opportunities Explore Resources and Capabilities Use Core Competence International Modes of Entry Strategies Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage International. .. partners or experience divergent goals Ch8- Choice of International Entry Mode Acquisitions Acquisitions Enable firms to make most rapid international expansion Can be very costly Legal and regulatory requirements may present barriers to foreign ownership Usually require complex and costly negotiations Potentially disparate corporate cultures Ch8- Choice of International Entry Mode New Wholly-Owned Subsidiary... Corporate-Level International Strategies Transnational Strategy Seeks to achieve both global efficiency and local responsiveness Difficult to achieve because of simultaneous requirements for strong central control and coordination to achieve efficiency and local flexibility and decentralization to achieve local market responsiveness Must pursue organizational learning to achieve competitive advantage Ch8- International. .. Strategic Competitiveness Outcomes International diversification facilitates innovation in the firm Provides larger market to gain more and faster returns form investments in innovation May generate resources necessary to sustain a largescale R&D program Generally related to above-average returns, assuming effective implementation and management of international operations International diversification... each country are independent of each other Assumes markets differ by country or regions Focus on competition in each market Prominent strategy among European firms due to broad variety of cultures and markets in Europe Ch8- Corporate-Level International Strategies Global Strategy Products are standardized across national markets Decisions regarding business-level strategies are centralized in the home . Advantage Advantage International International Business-Level Business-Level Strategy Strategy Multidomestic Multidomestic Strategy Strategy Global Global Strategy Strategy Transnational Transnational Strategy Strategy Exporting Exporting Establishment. Advantage Advantage International International Business-Level Business-Level Strategy Strategy Multidomestic Multidomestic Strategy Strategy Global Global Strategy Strategy Transnational Transnational Strategy Strategy Exporting Exporting Establishment. Advantage Advantage International International Business-Level Business-Level Strategy Strategy Multidomestic Multidomestic Strategy Strategy Global Global Strategy Strategy Transnational Transnational Strategy Strategy Exporting Exporting Establishment