Vlerick Session 2 For Upload

TODAY – SESSION 2
INTERNATIONAL STRATEGY ARCHETYPES

KEY QUESTIONS OF INTERNATIONAL
STRATEGY
CASE – YUSHAN BICYCLE
© Vlerick Business School

THREE INTERNATIONAL STRATEGIES
AUGMENT/ ADAPT AGGREGATE ARBITRAGE
Competitive advantage FSA (differentiation/ Combination of FSA CSA (factor costs like
price leadership) and CSA (offered by labour, tax rates,
global scope and natural resources
Product: local scale) etc.)
responsiveness over
global efficiency Product: global
efficiency over local
responsiveness
Most relevant trade-off Product Country Activity
Critical strategic How much to adapt? Where to sell? Where to locate parts
decision of the value chain?
Examples Unilever soap, Lipton Toyota, Honda in the Setting up
Iced Tea, holidays 1980s, Intel chips, manufacturing in
Rolex, Dior, HSBC Vietnam
Who tends to use it? High advertising High R&D Labour and capital
expenses intensive companies

THREE INTERNATIONAL STRATEGIES
AUGMENT/ ADAPT AGGREGATE ARBITRAGE
Implementation: By country/ region By business By function

Coordination/ unit/customer for
Organization structure multi-business
company, by function
for single business
Implementation: Too much complexity or Excessive Narrowing spreads
Controls: extremes to variety standardization
watch out for
Implementation: Who Country chiefs All powerful unit or Functional heads
blocks change? account heads

EXERCISE
Airbnb Netflix Ikea Ahold McKinsey McDonalds L’oreal
Competitive
Advantage
Responsiveness or
Efficiency
Primary and
secondary (if) IS
strategy
Organization
Structure (check on
their website)

KEY POINTS
Local responsiveness: key decision is how

much to adapt the product/ service
Global efficiency/ arbitrage: where to
compete, and how to coordinate and manage
tasks effectively across geographies

HOW MUCH TO ADAPT?
Accommodate
Global market
Demand? differences?
Characterise If no, then
-- Common -- Limit
market adapt to local
segment economic
differences markets
-- Satisfy significance
universal needs -- Platform
product

PLATFORM SOLUTION
Used by many MNCs facing tensions. Platform

contains those element of a product/ service
that:
Does not need to differ between countries
Subject to scale economies (e.g. car engine)
Is irrelevant or invisible to consumer (e.g. wiring
in a refrigerator)
Are at the beginning of the production line
EXERCISE
Vlerick Business School: opening a campus in

new locations
Sugar Cosmetics: focuses on different skin
tones in India
TestGorilla: dutch HR startup
Your own choice!

WHICH COUNTRY?
Which country to compete in?

Key questions:
How to compare merits of different countries?
Can you win in the market you choose?
How to allocate resources among countries?
What organizational form to take? MoE..
When to enter? Timing..

MARKET ATTRACTIVENESS
COUNTRY
PESTLE framework
CAGE framework
Industry
Porter’s 5 forces

PESTLE AND PORTER’S 5 FORCES

CAGE DISTANCE FRAMEWORK
© Vlerick Business School Ghemawat, 2007

EXERCISE
Consider the elements of distance discussed and identify the ones
that are relevant to an organisation you have worked for/ want to
work for and why, in Asia-Pacific, Europe and North America, Africa
and South America. Which is the most and least attractive country
from a distance perspective? Why?
How does this analysis affect your understanding of your
organisation’s current approach (or potential plans) to operate
internationally. Would you change it?
Choose one country in each region if you like.

MARKET ATTRACTIVENESS
Ability to execute
Country compatibility
CAGE FRAMEWORK
Managerial and resource bandwidth

RESOURCE ALLOCATION
Existing footprint
Portfolio diversification and balance
Risk and return
Growth and return
Competitive interactions

EXISTING FOOTPRINT

Collis, 2014
PORTFOLIO DIVERSIFICATION AND BALANCE
Balance between growth and profitability

Collis, 2014
PORTFOLIO DIVERSIFICATION AND BALANCE
Risk and return

Correlations between financial performance
across countries
Auto companies' portfolios
100
90
80
70
60
50
40
30
20
10
Source: Goldman Sachs
0 BRIC: Brazil, Russsia, India,
Ford Honda Toyota Nissan VW Hyundai China
Mature markets: Western
Rest of world BRIC Mature markets Europe, US, Japan
COMPETITIVE INTERACTIONS
Building footholds and cross-parrying

Stay away from a competitor’s home base and
they will stay away from yours!
Pepsi and Coca-Cola
Mimetic diversification
Copy your competitor!

STRATEGIC FIT
Aggregate: Overall contribution to the

portfolio, instead of standalone attractiveness
Large markets are key to this, regardless of
profitability
Adapt: standalone attractiveness if

multidomestic, combination of standalone and
portfolio at the regional level if regional
MODE OF ENTRY
Time
Risk Greenfield
Cost
Acquisition
Joint Venture
HIERARCHY
License
Distribute
Export CONTRACT
Control
Learning
Management involvement

MODE OF ENTRY CHOICE: COUNTRY FACTORS
Country Company Product/

specific factors position Service
• Laws and • Company size • Nature of
regulations • Resources competitive
• Prevent foreign • State of advantage
competition competition • Tangible vs.
• Import tariffs intangible (e.g.
• Crowded market
• Distance consulting
(e.g. retail companies,
• Managerial fit stores – Amazon)
• Ability to execute Walmart in the
UK)

TIMING OF ENTRY
EARLY LATE
FAVOURED WHEN:
First mover advantage Rapid/ Easy Imitation
Certainty Ambiguity

CASE: YUSHAN BICYCLES
What is the motivation behind Yushan’s expansion abroad?

How effective is it in achieving its strategy?
What do you think of JH’s objectives for Yushan Australia?
How well do they fit with Yushan’s internationalization
strategy?
What is the source of YA’s operating and financial shortfalls?
How should Zonghan and Hamilton resolve their differences?
What actions should they take to improve YA’s performance?

YUSHAN BICYCLES
Class: What is the source of tension between

Hamilton and Zonghan?
Breakout: Hamilton and Zonghan
Foursomes: Negotiated solutions.
Where are the opportunities to compromise in
terms of key issues identified?
What Zonghan’s and Hamilton’s priorities be, and
what compromises should they be willing to
make?
COMING UP..
International strategy when you have limited

resources
International Management: Managing cultural
differences

ESHA MENDIRATTA
[email protected]

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TODAY – SESSION 2

INTERNATIONAL STRATEGY ARCHETYPES

© Vlerick Business School

© Vlerick Business School

Implementation: By country/ region By business By function

© Vlerick Business School

© Vlerick Business School

Local responsiveness: key decision is how

© Vlerick Business School

© Vlerick Business School

Used by many MNCs facing tensions. Platform

Vlerick Business School: opening a campus in

© Vlerick Business School

Which country to compete in?

© Vlerick Business School

© Vlerick Business School

© Vlerick Business School

© Vlerick Business School Ghemawat, 2007

© Vlerick Business School

© Vlerick Business School

© Vlerick Business School

© Vlerick Business School

Balance between growth and profitability

© Vlerick Business School

Risk and return

Building footholds and cross-parrying

© Vlerick Business School

Aggregate: Overall contribution to the

Adapt: standalone attractiveness if

© Vlerick Business School

Country Company Product/

© Vlerick Business School

First mover advantage Rapid/ Easy Imitation

© Vlerick Business School

What is the motivation behind Yushan’s expansion abroad?

© Vlerick Business School

Class: What is the source of tension between

International strategy when you have limited

© Vlerick Business School

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