International Management Exam 2 Review

New Product or Service and First-Mover Advantage

Being the first to introduce a product or service: - Must be innovative and comprehensive • Comprehensive: Must meet customer expectations in areas such as warranty, customer service & expected components. Without these, its easy for competitors to imitate. • Technological leadership: being first to use or introduce a new technology; most common source of advantage; gives a head start for further innovations Benefits: Access to resources and relationships Brand loyalty & switching costs make reluctant to change

Competitive Strategies in International Markets:

- Offensive strategies: include Direct Attacks (price cutting, adding new features, or going after poorly served markets), End-run Offensives (avoid direct competition by seeking unoccupied, ignored, or underserved markets) Preemptive Competitive Strategies (being first to obtain particular advantageous position), Acquisitions (buying out a competitor share) - Defensive strategies: attempts to discourage, reduce risk of attack from offensive strategies. Ex: convince to seek other targets, exclusive contracts w/best suppliers, new models, willingness to fight publicly stated. - Counter-parry: fending off a competitor's attack in one country by attacking in another country. Ex: in a response to attack in the U.S., Goodyear attacked Michelin in Europe

Ready to Go and Connected: A Synopsis

-Finding the right overseas partner: the most important step -Find a good wedge to break into a new market New-Venture Strategies for Small Multinational Companies: -Entry wedge: a strategic competitive advantages for breaking into the established pattern of commercial activity • New Product or Service and First Mover Advantage • Copycat Businesses

Outsourcing

-Outsourcing: a deliberate decision to have outsiders/ strategic allies perform certain activities in the value chain • Offshoring: Outsourcing to a foreign country - Increasingly, MNCs outsource across borders to take advantage of lower costs in other countries. - Outsourcing is a popular and controversial way to correct internal cost disadvantages. • When should a multinational company outsource? • makes sense if an outsider can perform a value-chain task better or more cheaply • Outsource tasks that are not crucial to the company's ability to achieve competitive advantage

Regiocentric and Polycentric IHRM

-Regiocentric IHRM: region-wide HRM policies adopted -Polycentric IHRM: firm treats each country-level organization separately for HRM purposes -Greater responsiveness to host country differences Benefits: • Reduces training expenses • Fewer language and adjustment issues • Lessened hiring and relocation costs Costs: - Coordination problems with headquarters - based on cultural, language, loyalty differences - Limited career-path for host country & regional managers -Limited international experience for home country managers

Choosing Participation Strategy: Strategic Considerations

1. Company's strategic intent regarding profits vs. learning 2. Company capabilities 3. Local government regulations 4. Characteristics of the target product and market 5. Geographic and cultural distance 6. Financial risk of the investments 7. Need for control

Categories of Global Drivers

1. Global markets: Are there common customer needs? global customers? Can you transfer marketing? 2. Costs: Are there global economies of scale? global sources of low-cost raw materials? cheaper sources of highly skilled labor? Are product-development costs high? 3. Governments: Do the targeted countries have favorable trade policies? regulations that restrict operations? 4. Competition: What strategies do your competitors use? volume of imports and exports in the industry?

Matrices Questions:

All matrices help answer basic strategy formulation question such as: • Are businesses in attractive industries? • Are most businesses growing? • Are there sufficient cash cows to finance other businesses? • Is business portfolio well positioned for the future? • Are there some strategic synergies among businesses?

Licensing Decision

Based on three factors: - Characteristics of the products • Best products are older or soon-to-be replaced - Characteristics of the target country • Situation in target country - Nature of the licensing company • Company may lack resources to go international Disadvantages of Licensing: -Gives up control - May create new competitors -Often generates only low revenues -Opportunity costs (barriers to other participation strategies)

Copycat Business (another wedge)

Copycat Business (The "me too" strategy): - Competitive advantage comes from varying the nature, or how the firm provides a product or service. Successful copycats do not copy existing business identically. They find a niche or slight innovation to attract customers Successful copycat moves: • Be the first to a new standard • Go after the toughest customers • Play to different customer needs • Transfer the location • Become a dedicated supplier or distributor • Seek abandoned or ignored markets • Acquire existing business

Repatriation Problem

Difficulties faced coming back to their home countries and reconnecting with their old jobs. • Three basic cultural problems ("Reverse culture shocks"): - Adapt to new work environment and culture of home office - Relearning to communicate with others in home and organizational cultures - Need to adapt to basic living environment (water, temperature, humidity, etc)

BCG Share Matrix

Division into four categories based on market share and relative market share • Stars: the most successful firm • Dogs: businesses with low market shares in low-growth industries • Cash cows: businesses in slow-growth industries where company has strong market-share position • Problem children: businesses in high-growth industries where company has a poor market share

Duties and the Personal Life of the Small-Business CEO

For a small firm, opening new markets is CEO's responsibility. • CEO must bear social and business costs: -Increased travel, stress from undertaking a new venture, can adversely affect family life, risk whole business. -Job restructuring, retraining, new skills for international business requirements .

Multinational Strategies: Dealing with the Global-Local Dilemma

Global-local dilemma: choice between a local-responsiveness or global approach to a multinational's strategies • Local-responsiveness solution: customize to country or regional differences • Global integration solution: conduct business similarly throughout the world "Glocal"

Human Resource Management & Basic HRM Functions

Human resource management (HRM): deals with the _overall__ relationship of the employee with the organization • Recruitment: process of identifying and attracting qualified people to apply for vacant positions • Selection: process of filling vacant positions in the org. • Training and development: giving employees the knowledge, skills, and abilities to perform successfully • Performance appraisal: system to measure and assess employees' work performance • Compensation: organization's entire reward package, including financial rewards, benefits, and job security • Labor relations: ongoing relationship between an employer and those employees represented by labor organizations

Basic Strategy for the Multinational Company: An alternate framework

Important strategic areas Components of Strategy (DAVES)- -Arenas: a company needs to be able to decide which businesses it wants to be in -Vehicles: a properly stated strategy also needs to include the vehicles a company will use to create a presence in specific markets or products -Differentiators: decide what ways it will use to win over customers -Economic Logic: how to make profits -Sequencing: a company also needs to decide in what sequence and at what pace major decisions will be made

Small Business Global Start-up or Born-Global Firms

Key elements favoring global start-ups - Dispersed human resources - International sources of venture capital - The existence of a global demand - The lack of a geographically protected market - The necessity of worldwide sales to support the venture - The potential to avoid later resistance to internationalization *- Electronic commerce: buying and selling products /services over electronic systems (Internet, other computer networks)

Foreign Direct Investment (FDI)

Most experienced international firms choose FDI Advantages: - Greater control - Lower costs of supplying host country - Avoid import quotas - Greater opportunity to adapt product to local markets - Better local image of the product Disadvantages of FDI: • Increased capital investment • Increased investment of managerial & other resources • Greater exposure to political and financial risks

Motivations & Key Considerations for Strategic Alliances

Motivations: • Partner's knowledge of the market, Government requirements • To share risks, To share technology • Economies of scale, Low cost raw materials or labor Key Considerations: • Other participation strategies better satisfy strategic objectives? • Does firm have management &capital resources to contribute? • Can partner benefit the company's objectives? • What is expected payoffs?

Formulating Entry Mode Strategy- choice options

Must take into account several issues: - Basic functions of each participation/entry mode strategy - Strategic considerations and intent of compan - How best to support company's multinational strategy

Multinational Strategy and IHRM

One way is to examine its IHRM orientation, or philosophy. • IHRM Orientation: A company's basic tactics and philosophy for coordinating IHRM activities for managerial and technical workers. Successful IHRM is a 21st century challenge 4 orientations- poly, region, ethno, global

Getting Connected to the International Market

Participation strategies (or entry mode): - Same participation options as larger firms - Exporting, licensing, joint ventures, and foreign direct investment • Most small businesses often emphasize exporting, and use services of ETCs or EMCs to get their product to international markets

Industry and Competitive Analysis: Porter five forces model

Porter's five forces model: a popular technique that can help a multinational firm understand the major forces at work in the industry and the degree of attractiveness of the industry 1. The degree of competition among existing competitors in the industry 2. The threat of new entrants 3. The bargaining power of buyers 4. The bargaining power of suppliers 5. The threat of substitutes if all are high, industry is unattractive to new comers

Global IHRM Orientations

Recruiting and selecting worldwide and Assigning the best managers to international assignments regardless of nationality Benefits: - Bigger talent pool - Develops international expertise - Helps build transnational organizational cultures managers are selected and trained to manage cultural diversity inside and outside the company. Costs: - Difficulty in importing managerial/technical employees (not always possible) - Added expense

Using the Small Business Advantage

Speed becomes the small business advantage: - Faster innovation - Can change products and internal operations faster - Speed can overcome size disadvantages - Larger firms must often overcome bureaucratic delays - First to market allows capture of market share before larger companies can react. Future - falling barriers for small businesses: - Barriers are becoming easier to overcome - Govt. support programs for small businesses increasing - High impact Trade agreements are making trade easier - Information easily available to small business

Small Business Stage Model: Six Stages

Stage 1: Passive exporting : - Company fills international orders but does not seek export business Stage 2: Export management: - Specifically seeking exports—usually rely on indirect exporting Stage 3. Export department: - Significant resources dedicated to seek increased sales from exports Stage 4: Sales branches: - High demand justifies setting up local sales office Stage 5: Production abroad: - Use licensing, joint ventures of direct investment (Difficult stage because of the risk of failure) Stage 6: The transnational: - Develop global integrated network

Strategy Formulation: Traditional approaches

Strategy formulation: process by which managers select the strategies to be used by their company • Popular analysis techniques: -Competitive dynamics of the industry -Company's competitive position in the industry -Opportunities and threats faced by their company -Company's strengths and weaknesses

Sustaining Competitive Advantage

Sustainable: strategies not easily defeated by competitors (long lasting) • Four characteristics of capabilities that lead to competitive advantage (Barney's RBV): - Valuable - Rare - Difficult to imitate - Non-substitutable - *Exploitability*

Political Risk: Managerial Implications

To manage political risk, consider: • Insurance from private or government agencies if available and affordable, for Political risk, Political violence, Foreign currency inconvertibility, Expropriation, Interference with business operations • Take a high involvement strategy by developing a network of government, business and public partners to help face local political risks.

Internationalization & the Small Business

Two models: 1. Small business stage model: process of following incremental stages of internationalization 2. Global start-up or Born-global firm: company that begins as a multinational company

International Assignments for Women: Disadvantages and Advantages

Women in international assignments are strikingly rare. (12% of expatriate managers, but 45% of management. • Women face a glass ceiling at home, and an expatriate glass ceiling worldwide, because of 2 myths: Myth 1: Women do _not wish_ to take international assignments. Myth 2: Women will fail in international assignments because of the foreign culture's prejudices against local women. • Successful women expatriates emphasize nationality not gender • The issues that arise in cross-cultural interactions depend more on how foreigners react to those of a different nationality. (Foreign not female) • Don't assume that people from foreign cultures apply the same gender role expectations to foreign workers that they do to local women.

The Woman's Advantage

Women may have advantages in expatriate positions: • Being unique means she becomes more visible. • Local business people from traditional cultures assume that she is the best person for the job. • Women are more likely to excel in relational skills, a major factor in expatriate success. • Local men speak at ease with a woman about more topics than men, leading to more interaction. • Women have higher self-transcendence scores than men.

What Is a Small Business?

• "Small" business - many definitions • OECD & UN: less than 500 employees • The popular press: less than 100 employees • U.S. small business administration has more complex definitions - Definition varies by industry, sales revenue, and the number of people Usually based on "N" , more stable measure of size

Importance of Small Business

• "Small" businesses: - Over 98% businesses in Europe, N. America, and Japan - Employ more than 50% of local populations - Produce nearly 50% of the countries' GNPs - Create more than 2/3 of new job

Competitive Advantage and the Value Chain

• A firm can gain competitive advantage by finding differentiation or low costs in its activities • Value chain is a convenient way of looking at the firm's activities • Value chain: all the activities that a firm used to design, produce, market, deliver, and support its product -Can be used to benchmark against other firms -Can be used to identify internal cost structure

International Human Resource Management (IHRM)

• All HRM functions, adapted to the international setting • Two added complexities compared to domestic HRM - Must choose a mixture of international employees - Must decide the extent of adaptation to local conditions

Selecting Expatriate Managers four assignment conditions:

• Assignment length -Short assignments focus on technical and professionals skills • Cultural similarity • Required interaction and communication with locals • Job complexity and responsibility (Still...challenges of choosing school, drivers license, grocery, bank accounts, housing, community -Mentorship and buddy programs in home and host country advised)

Multinational Diversification Strategy

• Business-level strategies: strategies for a single business operation • Corporate-level strategies: how companies choose their mixture of different businesses • Related diversification: companies acquire businesses that are similar in some way to their original or core business Ex.: Nike adding clothing line to its shoe operations • Unrelated diversification: firms acquire businesses in any industry. Main concern is if it's a good financial investment Firms choose related diversification for 3 reasons: • Sharing activities • Transferring core competencies • Developing market power

Expatriate Compensation

• Compensation packages must be attractive to skilled managers, but also consider the increasing costs. • Compensation packages tend to include many common factors includes: - Local market cost of living - Housing - Taxes - Benefits

Expatriate Performance Appraisal

• Conducting reliable performance appraisal for the expatriate is very challenging (no direct & intense contact, so poor understanding of manager situation) • Seldom can the firm use same performance criteria • Challenges Fit of intl. operation in multinational strategy (Xprofits) • Unreliable data - Complex and volatile environments - Time difference and distance separation - Local cultural situation(accepted work practices) (Fit evaluation criteria to strategy, finetune, multiple sources & periods)

Organizations Alike: Globalization and Convergence

• Convergence: increasing similarity of mgt practices • Convergence is most apparent with transnational firms • Multinational firms competing in the same industry tend to have similar structures and strategies regardless of the location of the company's headquarters • How Globalization pushes organizations to be > similar: - Global customers and products - Growing levels of industrialization and economic development - Global competition and global trade - Gross-border mergers, acquisitions, and alliances - Cross-national mobility of managers - Internationalization of business education

International Strategic Alliances

• Cooperative agreements between firms from different countries to participate in business activities • May include any value-chain activity Types of ISA's: • Equity International Joint Ventures (IJV): two or more firms from different countries have an equity position in a separate company (varieties of this) • International Cooperative Alliance (ICA): two or more firms from different countries agree to cooperate in any value-chain activity

Selecting Expatriate Managers: cross cultural intellgence

• Cross-cultural social intelligence: the ability of an individual to gauge and understand verbal and non-verbal cues from a variety of cultures. • Cross-cultural intelligence implies that the individual can make accurate social inferences from the cultural situation and is able to behave in appropriate ways to address the verbal and non verbal cues.

Two primary ways to gain a competitive advantage:

• Differentiation strategy: providing superior value to customers- higher price for higher value Ex: BMW competing in the world market by providing high-quality and performance sports cars • Low-cost strategy: producing at a lower cost than competitors - profits come from cost savings Ex: Korean semiconductor firms

Export strategies: Indirect

• Direct exporting: direct contact with customers in the foreign market - More aggressive exporting strategy - Requires more contact with foreign companies - Uses foreign sales reps, distributors, or retailers - May require branch offices in foreign countries • Channels in direct exporting - Sales representatives use the company's promotional literature and samples - Foreign distributors resell the products - Sell directly to foreign retailers or end users

Corporate Strategy Selection

• Diversified corporation has a portfolio of businesses • Major issue is which businesses to invest in and which businesses to divest (portfolio approach) • The basic tool: matrix analyses • The most popular is the growth-share matrix of the Boston Consulting Group (BCG).

Deciding on Export Strategy

• Does management need to control sales, customer credit, and sale of the product? - If yes, choose direct exporting • Does company have resources to manage export operations? - If not, use indirect exporting • Does company have resources to design/execute international promotional activities? - If not, use foreign intermediaries and indirect exporting • Does company have resources to support extensive international travel or possibly an expatriate sales force? - If so, choose direct exporting. • Does company have time and expertise to develop overseas contacts and networks? - If not, rely on foreign intermediaries or indirect exporting. • Will time and resources affect domestic operations? - If not, choose direct exporting.

1. Exporting

• Easiest way to sell a product in international market • Passive exporter: company that treats and fills overseas orders like domestic orders • Alternatively, a company can put extensive resources into exporting with dedicated export department • Some of the basic motivations for exporting include: - Increased competitiveness - Learn to exploit expertise - Improved ROI - Use full production capabilities - Smooth business cycle

International Entrepreneurship

• Entrepreneur: person who creates new ventures that seek profit and growth - Faces risks and uncertainty of new and untested business • New ventures: exist when firms enter a new market; Offer a new product or services; Introduce a new method technology or innovative use of raw materials -International Entrepreneurship: refers to the "discovery, evaluation and exploitation of market opportunities." across national borders -Family business: Business owned or controlled by members of a family Recent research about entrepreneurship in emerging economies: 1.) The importance and influence of networks 2.) Strong focus on individual entrepreneurial characteristics, such as self-commitment, dynamism, and experience

Entry Mode Strategies: The Content Options

• Entry Mode strategies: the choice of how to enter each international market 1. - Exporting 2. - Licensing 3. - Strategic alliances 4. - Foreign direct investment

Ethnocentric IHRM

• Ethnocentric IHRM: all aspects of HRM for managers and technical workers tend to follow the parent organization's home-country HRM practices Benefits: • Little need to recruit qualified host country nationals for higher management • Greater control and loyalty of home country nationals • Little need to train home country nationals • Key decisions centralized Costs: • May limit career devpt. for host country nationals • Host country nationals may never identify with the home company • Expatriate managers are often poorly trained for international assignments and make mistakes

Types of Employees in Multinational Organizations

• Expatriate: employee from a different country than working in • Home country nationals: expatriate employees from the parent firm's home country • Third country nationals: expatriate workers who come from neither the host nor home country • Host country nationals: local workers who come from the host country where the MNC unit is located • Inpatriots: employees from foreign countries who work in the country where the parent company is located • Flexpatriates: employees who are sent on frequent but short-term international assignments • International Cadre (Globals): Managers who specialize in international assignments. • Commuter Assignments Employees: Employees who live in one country, but spend part of the work week in another country.

Export Strategy *

• Exporting is the easiest and cheapest participation strategy, although it may not always be the most profitable • It is a way to begin to internationalize or to test new markets

Focus Strategy (Mkt segmentation)

• Focus strategy: applying a differentiation or low-cost strategy to a narrow market • Competitive scope: how broadly a firm targets its products or services Focused- Narrow competitive scope for certain buyers or geographic areas Broad- Broad competitive scope when a large range of buyers are targeted

The Expatriate or the Host Country Manager?

• For expatriate managers- Do parent country managers have the appropriate skills?- Are they willing to take expatriate assignments?- Do any laws affect the assignment of expatriates? • For host country managers- Do they have the expertise for the position?- Can we recruit them from outside the company? • Is the Expatriate worth it? High cost 3-4 times the salary Plus Safety issues worldwide High failure rate of US expats than Europe & Japan

Multinational Strategies: Dealing with the Global-Local Dilemma 4 strategies

• Four broad multinational strategies - Multidomestic - Transnational - International - Regional

Competitive Advantage and Multinational Applications of Generic Strategies

• Generic strategies: basic ways to achieve and sustain competitive advantage (Michael Porter) • Competitive advantage: when a company can outmatch its rivals in attracting and maintaining its targeted customers

Developing a Small-Business Global Culture

• Global culture: managerial and worker values that view strategic opportunities as global and not just domestic • Framework to understand international operations • Learning culture: the willingness of the small business to learn from its international experiences to further its future internationalization plans. Characteristics of decision-makers affecting global culture: - Perceived psychological distance to foreign markets - Intl. experience, Risk aversion, Overall attitudes toward international strategies, Global thinking Changing attitudes of key decision-makers: - Begin with sales to countries close in culture & geography - Overcome skepticism regarding the intl. markets - Positive attitudes more necessary for global start-ups

Expatriate Manager Compensation: Other Approaches

• Headquarters-based compensation: paying home country wages regardless of location • Host-based compensation system: adjusting wages to local lifestyles and costs of living • Global pay systems: worldwide job evaluations, performance appraisal methods, and salary scales are used (Attractive enough to relocate, mindful of costs, stability of lifestyle & economic status, fairness, strategy, easy to administer)

Strategic Role of Expatriate Assignments

• Helps managers acquire skills in global context • Helps coordinate and control operations that are dispersed geographically & culturally • Communication of local needs/strategic information to headquarters • Provide crucial information about local markets • Provide important network knowledge • Provide opportunities for management development

When Should a Small Business Go International?

• If following questions are answered positively, small business is ready. Do we have a global product or service? Do we have the managerial, organizational, and financial resourcesto internationalize? Is there willingness to commit resources to face the risks of internationalization? Is there a country in which the company feels comfortable doing business? Is there a profitable market for product or service? Which country should be entered? Do we have a unique product/service that is not easily copied by multinationals or local entrepreneurs? Do location advantages exist upstream in the value chain?Can we afford not to be a multinational?

Key Success Factors (KSFs)

• Important characteristics of a company or its product that lead to success in an industry (minimum/base) - Innovative technology or products - Broad product line - Effective distribution channels - Price advantages - Effective promotion -Superior physical facilities or skilled labor - Experience of firm in business - Cost position for raw materials - Cost position for production - R&D, Product, and HR quality - Financial assets

Foreign Direct Investment

• In Foreign Direct Investment (FDI), an MNC owns part of all of a foreign operation. -International Joint Ventures (IJVs) are a form of FDI • FDI reflects the highest stage of internationalization • Greenfield investments: using FDI to start a foreign subsidiary from scratch • Acquisition investments: starting foreign operations by purchasing a local company.

Export Strategies

• Indirect exporting: uses intermediaries or go-between firms • The most common intermediaries are Export Management Company (EMC) and Export Trading Company (ETC) - Specialize in products, countries, or regions - Provide ready-made access to markets - Have networks of foreign distributors

Reasons for U.S. Expatriate Failure

• Individual: - Personality of the manager- Lack of technical proficiency- No motivation for assignment • Family: - Spouse or family members fail to adapt- Family members or spouse do not want to be there • Cultural: - Manager fails to adapt- Manager fails to develop relationship with key people due to complexity of cultivating networks with diverse people • Organizational: - Excessively difficult responsibilities- Failure to provide cultural training- Company fails to pick the right person- Company fails to provide the technical support that domestic managers are used to- Excess of difficult responsibilities of international assignment- Failure of company to consider gender equity

3. International Strategy

• International strategy: selling global products and using similar marketing techniques worldwide - A compromise approach - Limited adjustment in product offerings and marketing strategies - Upstream and support activities remain concentrated at home country

Overcoming Small-Business Barriers to Internationalization

• Liabilities of newness: a large percentage of new businesses fail within a year • Liabilities of size: lack of scale to produce goods or services as efficiently as larger companies • Liabilities of foreignness: the lack of familiarity small firms may have when facing the new country environment. • Managers' limited international experience • Managers' negative attitudes: - Belief that venture too risky and not profitable - Competition seen as domestic - Ignoring of international opportunities

Size and Small Business Internationalization

• Liabilities of smallness: challenges facing small businesses in the resources necessary to internationalize • Large firms serve more national markets, have access to resources, can negotiate with geographically dispersed partners, & invest in cross cultural training. • Small firms lack scale to produce goods or services as efficiently as larger companies, and absorb risks. • Size liabilities, however, may exist only in the initial internationalization stage. • Eventually, international sales intensity of small firms exceed that of big firms. - International sales intensity: amount of international sales divided by total sales of the company

2. Licensing

• Licensing: contractual agreement between a domestic licensor and a foreign licensee • Licenser has valuable patent, know-how, or trademark • Foreign licensee pays royalties for use Special licensing agreements: • International franchising: the franchisor grants the use of a whole business operation • Contract manufacturing: production following the foreign companies' specifications • Turnkey operation: MNC makes a project fully operational before the foreign owner takes control

Industry and Competitive Analysis information

• Managers must understand their industry well to formulate good strategies. • Must understand economic characteristics of industries and driving forces • Economic characteristics include: - Market size - Ease of entry - Opportunities for economies of scale

Why is International Entrepreneurship important?

• Most experts consider entrepreneurship the driving force of all small businesses • To get a complete understanding of small businesses in any nation, we need to examine the level of entrep. • Entrepreneurship is also seen as the driver of innovation and economic development for any nation •Entrepreneurship not only creates new job but also generates new wealth and growth •MNC's rely on entrepreneurs and small businesses to do business when entering a new country •assisting existing MNC's in developing or offering new products that can improve productivity

The Expatriate or the Host Country Manager

• Multinationals must decide whether to use expatriates or home country nationals • Depends on firm's multinational strategy • Transnational strategists - worldwide employability; Multidomestic strategists - favor local manager • Need to look at some questions- Given the firm's strategy, what is the preference for the position? (host, home, 3rd country national orientation) IHRM becomes a strategic issue

Distinctive Competencies

• Strengths that allow companies to outperform rivals Ex.: Quality, innovation, customer service (Unique)Come from 2 sources: 1. Resources: inputs into the production or service processes Ex: Buildings, land, equipment, employees 2. Capabilities: the ability to assemble and coordinate resources effectively • Resources provide the organization with potential capabilities. • For long-term success, capabilities must lead to sustainable competitive advantage.

Organizations Alike: Globalization and divergence - Differences due to national context

• National differences still affect the way many firms compete via their choices of strategies • Three important reasons to understand the national differences: - Managers in successful multinational firms must understand and anticipate the strategies of rivals from other countries -Managers in successful multinational firms must understand the strategies of potential business partners -Strategies developed in one national context might be copied and modified to fit another national context

Training and Development

• Predeparture training - reduce failure rate, increase performance of expatriate • Cross-cultural training: increases the relational abilities of future expatriates and their spouses and families • Training rigor: extent of effort by both trainees and trainers required to prepare the trainees for expatriate positions. Depends on Assignment nature • Low rigor training ( Short time period, Lectures and videos on local cultures, Briefings on firm operations) 4-20 hours • High rigor training (Last over a month, Experiential learning, Extensive language training, Includes interactions with host country nationals) 60+ hours Moderate rigor training: 20-60 hours

Components of the Value Chain

• Primary activities: physical actions of creating, selling, and after-sale service of products • Upstream: early activities in the value chain (source) - R&D, Dealing with suppliers • Downstream: later value chain activities (customer) -Sales and dealing with distribution channels • Support activities: systems for human resources management, organizational design and control, and technology

Competitor Analysis

• Profiles of competitor's strategies and objectives Four steps: 1. Identify strategic intent of competitors (broad objectives) 2. Identify current & anticipated generic strategies (ksf) 3. Identify current and anticipated offensive and defensive competitive strategies 4. Assess current positions of competitors

Finding a Fit: IHRM Orientation and the Multinational Strategy

• Properly matching IHRM to the selected multinational strategy is a major requirement for successful strategy implementation. • IHRM decisions show a concern for local responsiveness when companies need people with a superior understanding of host country issues. Or reflect globalization pressures when companies need managers with world-class competence regardless of nationality. • Success of multinational strategy requires the careful assessment of a firm's IHRM practices. • Usually no one orientation exactly fits a company's multinational strategy, and few companies follow any one orientation completely. • Each multination company selects a general approach, combined with specific IHRM practices and procedures from other orientations that, all together, fit its strategic needs.

Strategies for Successful Repatriation

• Provide a strategic purpose for the repatriation • Establish a team to aid the expatriate • Provide parent country information sources • Provide training and preparation for the return - Provide a home-leave policy to encourage expatriates to make regular visits to the home office - Provide support for the expatriate and family on return

Balance Sheet Approach

• Provides a compensation package that attempts to balance purchasing power in the host country with that in the home country. • The expatriate should not be in a better or worse position financially because of the assignment. • The firm provides allowances for adjustments for differences in taxes, cost of living, housing, food, recreation, personal care, clothing, education, home furnishing, transportation, and medical care. • Foreign service premiums (10-20%of base pay) • Hardship allowance (> if difficult posting) • Relocation allowances (> if poor living conditions) • Home-leave allowances (1-2x year paid transportation to return home with family)

Types of employees information

• Recent research suggests the rise of the Self inititated expatriates: employees who independently decide to move to another country to work • They are professionals or managers who seek work in other countries and decide to stay there for an indefinite amount of time. • They provide many advantages. (They are experts in the local culture; They do not require the same expensive packages as regular expatriates; Many of the emerging markets have severe shortages of qualified locals, so using SIE may provide MNC with local experts at minimal costs)

4. Regional Strategy

• Regional strategy: managing raw-material sourcing, production, marketing, and support activities within a particular region - Another compromise strategy - Attempts to gain economic advantages from regional network - Attempts to gain local adaptation advantages from regional adaptation

Transnational or International: Which Way for the Global Company?

• Select a transnational over an international strategy when: - Benefits of dispersing activities worldwide offset the costs of coordinating a more complex organization • Select an international strategy over a transnational when: - Cost savings of centralization offset the lower costs of higher quality raw materials/labor from worldwide locations

Selecting Expatriate Managers

• Selecting the wrong person for the job leads to failure. • Selecting the wrong person can be a major expense, costing more than $1 million per expatriate failure. • Improperly selected employees who cannot perform but who remain on assignment can be more damaging to the firm than those who leave prematurely. • Domestic performance does not predict expatriate performance. Selection criteria may differ.

Resolving the Global-Local Dilemma: Formulating a Multinational Strategy

• Selection of strategy depends on degree of globalization in an industry • Globalization drivers: conditions in a industry that favor transnational or international strategies • Four categories of global drivers: markets, costs, governments, and competition

Basic Strategy for the Multinational Company

• Strategy: the central, comprehensive, integrated and externally oriented set of choices structuring how a company exploits its core competencies to achieve its objectives • Multinational companies use many of the same strategies as domestic companies

Company-Situation Analysis: SWOT

• Strengths: distinctive capability, resource or skill • Weaknesses: competitive disadvantage compared to competitors • Opportunities: favorable conditions in the environment • Threats: unfavorable conditions in the environment • More complex than for domestic firms • Multinationals face more complex general and operating environments • Environments vary by country

Selecting Expatriate Managers key select factors:

• Technical and managerial skills • Personality traits (flexible, willing to learn) • Relational abilities (ability to adapt to other cultures) • Family situation (spouse & family willingness to go) • Stress tolerance (ability to maintain composure) • Language ability (speak, read & write the language) • Emotional intelligence (empathize, relate to others)

1. Multidomestic Strategy

• The company attempts to offer products or services that attract customers by closely satisfying their cultural needs and expectations • Emphasizing local-responsiveness issues: Ex: different packages, colors - Costs more to produce, need to charge higher prices to recoup - A form of the differentiation strategy - Not limited to large multinationals

Driving Forces (future change)

• The important changes that have potential to affect an industry: - Speed of new product innovations - Technological changes - Changing societal attitudes and lifestyles

The National Context and Organizational Strategy: Overview and Observations

• The national context (soc instit & cult) affects org. design and strategy formulation and content through the foll. Processes - encourage or discourage certain forms of businesses and strategies in each nation - serve as barriers to the easy transfer of competitive advantages among countries Each nation must rely on its available factor conditions for developing industries & the firms within industries - determine which resources are used, how they are used, and which resources are developed Continuous challenges in MNC strategy formulation

Entry Mode Strategies: Synopsis

• The selection of a participation strategy depends on a complex array of factors, including the company's multinational strategy, its strategic intent, and its need for control of its products • Most multinational companies will choose a mixture of participation strategies to fit different products or different businesses

Finding Customers and Partners: Customer Contact Techniques

• Trade shows • Catalog expositions • International advertising agencies and consulting firms • Government-sponsored trade missions • Direct contact

2. Transnational Strategy

• Two goals get top priority: - Seeking location advantages - Gaining economic efficiencies from operating worldwide • Location advantages: dispersing value-chain activities anywhere in the world where they can be done best or cheapest. Can exist for all activities of value chain. • Global platform: country location where a firm can better perform some of its value-chain activities Comparative advantage: advantages of nations over other nations -No longer only available to domestic firms Absolute advantage: The advantage arising from cost, quality, or resource advantages associated with a particular nation.

Entry Mode Strategies and the Multinational Strategies

• What is the strategic reason to be in the market? - Location advantages vs. market penetration• E.g., source of raw materials, R&D, production, etc. • A mix of participation strategies often support the basic multinational strategy