Chp 8: International Strategy

What are the three international corporate level strategies? What are the advantages and disadvantages associated with these strategies?

A multi-domestic strategy focuses on competition within each country in which the firm competes. - decentralize strategic and operating decisions to the business units operating in each country so that each unit can tailor its products to local conditions A global strategy assumes more standardization of products across country boundaries; centralized and controlled by the home office Transnational strategy seeks to achieve both global efficiency and local responsiveness

Multidomestic Strategy

An international strategy in which strategic and operating decisions are decentralized to the strategic business units in individual countries or regions for allowing each unit the opportunity to tailor products to the local market

New Wholly Owned Subsidiary Characteristics

Complex, often costly, time consuming, high risk, maximum control, potential above-average returns

What 5 entry modes do firms use to enter international markets? What is the typical sequence in which firms use these entry modes?

Exporting, Licensing, Strategic Alliances, Acquisitions, and New Wholly Owned Subsidiaries (greenfield ventures) Begin with exporting or licensing b/c of lower costs.Later tend to use strategic alliances and acquisitions. The most expensive and risky means is thru new wholly owned subsidiary, but max control and greatest returns

What incentives influence firms to use international strategies?

Extend a products lifecyle Gain access to critical raw materials, sometimes including relatively inexpensive labor Integrate a firm's operations on a global scale to better serve customers in different countries Better serve customers whose needs appear to be more alike today as a result of global communications media and the Internet's capabilities to inform Meet increasing demand for goods and services that is surfacing in emerging markets

What four factors are determinants of national advantage and serve as a basis for international business-level strategies?

Factors of production Demand conditions Related and supporting industries Patterns of firm strategy, structure, and rivalry

The benefits of expanding into international markets include each of the following opportunities EXCEPT increasing the size of the firm's potential markets economies of scale and learning location advantages favorable tax concessions and economic incentives by home-country governments

Favorable tax concessions and economic incentives by home-country governments

What are two important issues that can potentially affect a firm's ability to successfully use international strategies?

Greater geographic dispersion across country borders increase the cost of coordination between units and the distribution of products Trade barriers, logistical costs, cultural diversity, and other differences by country greatly complicate the implementation of an international strategy

Exporting Characteristics

High cost, low control

What are the strategic competitiveness outcomes firms can achieve through international strategies, and particularly through an international diversification strategy?

Improved Performance and Enhanced Innovation International diversification facilitates innovation b/c it provides a larger market to gain greater and faster returns from investments in innovation - can generate the resources necessary to sustain large scale R&D International diversification helps achieve above average returns, but this assumes that the diversification is effectively implemented and that the firm's international operations are well managed. Greater economies of scale and learning which along with greater innovation produce above average returns

What are the three basic benefits firms can gain by successfully implementing an international strategy?

Increase market size Economies of scale and learning Location advantages

What are some global trends affecting the choice of international strategies, particularly international corporate level strategies?

Liability of Foreignness - requires firms to analyze how distance between their domestic market and international markets affects their ability to compete Regionalization

Licensing Characteristics

Low cost, low risk, little control, low returns

What are political risks and what are economic risks? How should firms deal with these risks?

Political Risks - concerned with the probability that a firm's operations will be disrupted by political forces or events whether they occur in the firms domestic market of the market the firm has entered Economic Risks - resulting from fundamental weakness in a country's or region's economy with the potential to adversely affect a firms ability to implement its international strategy

Acquisition Characteristics

Quick access to new markets, high costs, complex negotiations, problems of merging with domestic operations

Strategic Alliances Characteristics

Shared costs, shared resources, shared risks, problems of integration (eg two corp cultures)

International Diversification Strategy

a strategy through which a firm expands the sales of its goods or services across the borders of global regions and countries into a potentially large number of geographic locations or markets

International Strategy

a strategy through which the firm sells its goods or services outside its domestic market

Greenfield Venture

an entry mode through which a firm invests directly in another country or market by establishing a new wholly owned subsidiary

Global Strategy

an international strategy in which a firm's home office determines the strategies that business units are to use in each country or region.

Transnational Strategy

an international strategy through which the firm seeks to achieve both global efficiency and local responsiveness.

Moving into international markets is a particularly attractive strategy to firms whose domestic markets

are limited in opportunities for growth

A global corporate level strategy emphasizes

economies of scale

The location advantages associated with locating facilities in other countries can include all of the following EXCEPT low-cost labor access to critical supplies access to customers evasion of host country governmental regulations

evasion of host country governmental regulations

A transnational corporate-level strategy seeks to achieve

global efficiency and local resonsiveness

A global corporate-level strategy differs from a multi-domestic corporate level strategy in that a global strategy

is dictated by the home office

The transnational strategy is becoming increasingly necessary to compete in international markets for all of the following EXCEPT the growing number of competitors heightens the requirements to keep costs down the desire for specialized products to meet consumer needs differences in culture and institutional environments also require firms to adapt their products and approaches to local environments it is easy to use

it is easy to use

The choices that a firm has for entering the international market include al of the following EXCEPT exporting licensing leasing acquistion

leasing

The two important environmental trends that influence a firm's choice and use of international corporate-level strategies are ___ and ____

liability of foreignness regionalization

A multi domestic corporate-level strategy has ______ need for global integration and ___ need for local market responsiveness

low; high

The four aspects of Porter's model of international competitive advantage include all of the following EXCEPT factors of production demand conditions political and economic institutions related and supporting industries

political and economic institutions

International strategy refers to a(an)

strategy through which the firm sells products in markets outside the firm's domestic market

International corporate level strategy focuses on

the scope of operations through both product and geographic diversification

A large domestic market can provide the country's industries a chance at dominating the world market because

they have been able to develop economies of scale at home

All of the following are international corporate-level strategies EXCEPT multidomestic universal global transnational

universal