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Strategy Abroad
Strategic Management Management of Strategy
Competitiveness and Globalization: Concepts Seventh Concepts and Cases and Casesedition
Michael A. Hitt R. Duane Ireland Robert E. Hoskisson
PowerPoint Presentation by Charlie Cook The University of West Alabama 2007 Thomson/South-Western. All rights reserved.
KNOWLEDGE OBJECTIVES Studying this chapter should provide you with the strategic management knowledge needed to:
1. Explain traditional and emerging motives for firms to pursue international diversification.
2. Explore the four factors that lead to a basis for international business-level strategies. 3. Define the three international corporate-level strategies: multidomestic, global, and transnational. 4. Discuss the environmental trends affecting international strategy, especially liability of foreignness and regionalization.
82
KNOWLEDGE OBJECTIVES (contd) Studying this chapter should provide you with the strategic management knowledge needed to:
6. Name and describe the five alternative modes for entering international markets.
7. Explain the effects of international diversification on firm returns and innovation. 8. Name and describe two major risks of international diversification. 9. Explain why the positive outcomes from international expansion are limited.
83
FIGURE
8.1
84
85
86
Return on Investment
Large investment projects may require global markets to justify the capital outlays. Weak patent protection in some countries implies that firms should expand overseas rapidly in order to preempt imitators.
87
88
Energy
89
FIGURE
8.2
Source: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Competitive Advantage of Nations, by Michael E. Porter, p. 72. Copyright 1990, 1998 by Michael E. Porter. 2007 Thomson/South-Western. All rights reserved.
810
Basic factors
Natural and labor resources
Advanced factors
Digital communication systems and an educated workforce
811
812
813
814
FIGURE
8.3
816
Multidomestic Strategy
Multidomestic strategy Strategy and operating decisions are decentralized to strategic business units (SBU) in each country. Products and services are tailored to local markets. Business units in one 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.
817
Global Strategy
Global strategy
Products are standardized across national markets. Business-level strategic decisions are centralized in the home office. Strategic business units (SBU) are assumed to be interdependent. Emphasizes economies of scale. Often lacks responsiveness to local markets. Requires resource sharing and coordination across borders (hard to manage).
818
Transnational Strategy
Transnational strategy
819
Environmental Trends
Liability of Foreignness
Legitimate concerns about the relative attractiveness of global strategies Global strategies not as prevalent as once thought Difficulty in implementing global strategies
Regionalization
Focusing on particular region(s) rather than on global markets
TABLE
8.1
Type of Entry
Exporting
Characteristics
High cost, low control
Licensing
Strategic alliances
Acquisition
Quick access to new market, high cost, complex negotiations, problems of merging with domestic operations
Complex, often costly, time consuming, high risk, maximum control, potential above-average returns
821
Optimal Solution
Export
822
Optimal Solution
Licensing
823
Optimal Solution
Strategic Alliance
824
Optimal Solution
Strategic Alliance
825
Optimal Solution
Strategic Alliance
826
Optimal Solution
Wholly-owned Subsidiary
827
May achieve economies of scale and experience, location advantages, increased market size and opportunity to stabilize returns.
828
829
830
Economic Risks
Differences and fluctuations in the value of different currencies Differences in prevailing wage rates Difficulties in enforcing property rights Unemployment
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?
831
FIGURE
8.4
832
833