Strategic Management

Part II: Strategic Actions: Strategy Formulation

Chapter 6: International Strategy/ Competing in Foreign Markets

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The Strategic Management Process

You have no choice but to operate in a world shaped by globalization and the information revolution. There are two options: Adapt or die.

Andrew S. Grove

Chapter Roadmap

Why Companies Expand into Foreign Markets Cross-Country Differences in Cultural, Demographic, and Market Conditions The Concepts of Multi-country Competition and Global Competition

Strategy Options for Entering and Competing in Foreign Markets The Quest for Competitive Advantage in Foreign Markets Profit Sanctuaries, Cross-Market Subsidization, and Global Strategic Offensives Strategic Alliances and Joint Ventures with Foreign Partners Strategies That Fit the Markets of Emerging Countries

Chapter 8: International Strategy (IS)

Overview: Eight content areas

Traditional vs. emerging motives Four major benefits of International Strategies (IS) Four factors as basis for international business strategy Three international corporate-level strategies Environmental trends affecting IS Five alternative modes for entering international markets Effects of international diversification on returns & innovation 2 major risks of international diversification 5

Introduction

Shanghai Automotive Industry Corp (SAIC): Reaching for Global Markets

One of Chinas oldest automotive companies and among top three auto companies in China

Goal: Become one of the worlds top 10 auto companies Of note, as all major auto co.s compete in US market

Produces autos, tractors, motorcycles, trucks and is also involved with car leasing and financing Successful joint ventures (JV) with GM and VW Owns 51% of Korean automaker SsangYong, IP right to Rover SAIC learned much from partnerships and with licensed technology launched own branded vehicles
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Introduction

Many firms choose direct investment in assets over indirect investment

Provides better protection for assets

Opportunities and Outcomes of International Strategy

Opportunities/ Reasons For Pursuing International Strategies

The Four Big Strategic Issues in Competing Multinationally

Whether to customize a companys offerings in each different country market to match preferences of local buyers or offer a mostly standardized product worldwide Whether to employ essentially the same basic competitive strategy in all countries or modify the strategy country by country Where to locate a companys production facilities, distribution centers, and customer service operations to realize the greatest locational advantages How to efficiently transfer a companys resource strengths and capabilities from one country to another to secure competitive advantage

Identifying International Opportunities:

Incentives to Use an International Strategy (IS)

International Strategy (IS): firm sells its goods or services outside the domestic market Reasons for an IS

International markets yield potential new opportunities International diversification: innovation occurs in homecountry market, especially in an advanced economy, and demand for product develops in other countries, so exports provided by domestic organization Multinational strategy: Secure need resources 12 Other motives exist (i.e., pressure for global integration, borderless demand for globally branded products)

Identifying International Opportunities:

Incentives to Use an International Strategy (IS) (Contd)

Four primary reasons

1. Increased market size Domestic market may lack the size to support efficient scale manufacturing facilities
2. Return on Investment (ROI)

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 13 preempt imitators

Identifying International Opportunities:

Incentives to Use an International Strategy (IS) (Contd)

Four primary reasons

(Contd)

3. Economies of Scale and Learning

Expanding size or scope of markets helps to achieve economies of scale in manufacturing as well as marketing, R&D, or distribution
Costs are spread over a larger sales base Profit per unit is increased

4. Location advantages: Low cost markets may

aid in developing competitive advantage

achieve better access to critical resources:

14 i.e., raw materials, lower cost labor, key customers, energy

Why Do Companies Expand into Foreign Markets?

Obtain access to valuable natural resources Achieve lower costs and enhance competitiveness Spread Capitalize business risk across on core wider competencies market base Gain access to new customers

Types Of International Strategies

International Strategies (IS)

Firms choose one or both of two basic type of IS: Business level and/or corporate level

1. International business-level strategy Follows generic strategies of cost-leadership, differentiation, focused or broad 2. International corporate-level strategy (N=3) Home country usually most important source of competitive advantage

Resources and capabilities frequently allow firm to pursue markets in other countries The determinants of national advantage includes17 4 factors

Determinants of National Advantage

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Types of International Corporate Level Strategies

International Corporate-Level Strategies

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International Strategies (IS)

(Contd)

(Contd)

International Corporate-level Strategies (N=3)

1. MULTIDOMESTIC

Decentralized strategic & operating decisions by Strategic Business-unit (SBU) in each country allows units to tailor products to local markets Focuses on variations of competition within each country Customized products to meet local customers specific needs and preferences Takes steps to isolate the firm from global competitive forces

Establish protected market positions Compete in industry segments most affected by differences among local countries
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Deals with uncertainty due to differences across markets

International Strategies (IS)

2. GLOBAL

(Contd)

Firm offers standardized products across country markets, with the competitive strategy being dictated by the home office
Emphasizes economies of scale Facilitated by improved global reporting standards (i.e., accounting and financial)

Strategic & operating decisions centralized at home office

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International Strategies (IS)

2. GLOBAL

(Contd)

(Contd)

Involves interdependent SBUs operating in each country

Home office attempts to achieve integration across SBUs, adding management complexity

Produces lower risk

Is less responsive to local market opportunities Offers less effective learning processes (pressure to conform and standardize)

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International Strategies (IS)

3. TRANSNATIONAL

(Contd)

Firm seeks to achieve both global efficiency and local responsiveness these are competing goals! Requires both global coordination and local flexibility with this strategy/structure combination Flexible Coordination: Building a shared vision and individual commitment through an integrated network Challenging, but becoming increasingly necessary to compete in international markets Growing number of global competitors heightens need to keep costs down while greater information flow and desire for specialized products pressures firms to differentiate and even customize products nonetheless, 24 Increasingly used as a strategy

International v/s. Global Competition

International v/s. Global Competition

International Competitor
Company operates in a select few foreign countries, with modest ambitions to expand further Company markets products in 50 to 100 countries and is expanding operations into additional country markets annually

Global Competitor

Cross-Country Differences in Cultural, Demographic, and Market Conditions

Cultures and lifestyles differ among countries

Differences in market demographics and income levels Variations in manufacturing and distribution costs Fluctuating exchange rates Differences in host government economic and political demands

How Markets Differ from Country to Country

Consumer tastes and preferences Consumer buying habits Market size and growth potential

Distribution channels
Driving forces Competitive pressures

How Markets Differ from Country to Country (cont.)

One of the biggest concerns of companies competing in foreign markets is whether

to customize their product offerings in each different country market to match the tastes and preferences of local buyers or whether to offer a mostly standardized product worldwide.
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Different Countries Have Different Locational Appeal

Manufacturing costs vary from country to country based on

Wage rates
Worker productivity Inflation rates Energy costs Tax rates Government regulations

Quality of business environment varies from country to country Suppliers, trade associations, and makers of complementary products often find it advantageous to cluster their operations in the same general location

Fluctuating Exchange Rates Affect a Companys Competitiveness

Currency exchange rates are unpredictable

Competitiveness of a companys operations partly depends on whether exchange rate changes affect costs favorably or unfavorably

Lessons of fluctuating exchange rates

Exporters always gain in competitiveness when the currency of the country where goods are manufactured grows weaker Exporters are disadvantaged when the currency of the country where goods are manufactured grows stronger

Test Your Knowledge

Which one of the following statements concerning the effects of fluctuating exchange rates on companies competing in foreign markets is true?
A. Japan-based manufacturers exporting goods to the U.S. would be disadvantaged if the Japanese yen grows weaker in relation to the U.S. dollar. B. Fluctuating foreign exchange rates greatly reduce the risks of competing in foreign marketsthe big problem occurs when exchange rates are fixed at unreasonably low levels. C. Domestic companies under pressure from lower-cost imports are benefited when their governments currency grows weaker in relation to the currencies of the countries where the imported goods are being made. D. Chinese exports to Europe would likely be grow in volume if the Chinese currency because much stronger relative to the euro. E. If the exchange rate of U.S. dollars for euros changes from $1.25 per euro to $1.30 per euro, then it is correct to say that the U.S. dollar has grown stronger.

Differences in Host Government Trade Policies

Local content requirements

Restrictions on exports
Regulations on prices of imports Import tariffs or quotas Other regulations

Technical standards

Product certification
Prior approval of capital spending projects Withdrawal of funds from country

Ownership (minority or majority) by local citizens

Two Primary Patterns of International Competition

Multi-country

Competition

Global Competition

Characteristics of Multi-Country Competition

Market contest among rivals in one country not closely connected to market contests in other countries Buyers in different countries are attracted to different product attributes Sellers vary from country to country Industry conditions and competitive forces in each national market differ in important respects
Rival firms battle for national championships winning in one country does not necessarily signal the ability to fare well in other countries!

Characteristics of Global Competition

Competitive conditions across country markets are strongly linked Many of same rivals compete in many of the same country markets A true international market exists A firms competitive position in one country is affected by its position in other countries Competitive advantage is based on a firms worldwide operations and overall global standing
Rival firms in globally competitive industries vie for worldwide leadership!

Strategy Options for Competing in Foreign Markets

Strategy Options for Competing in Foreign Markets

1. Exporting
2. Licensing

3. Franchising Strategy
4. Multi-country Strategy 5. Global Strategy

6. Strategic Alliances Or Joint Ventures

1. Export Strategies

Involve using domestic plants as a production base for exporting to foreign markets Excellent initial strategy to pursue international sales Advantages

Conservative way to test international waters Minimizes both risk and capital requirements Minimizes direct investments in foreign countries

1. Export Strategies (cont.)

An export strategy is vulnerable when

Manufacturing costs in home country are higher than in foreign countries where rivals have plants High shipping costs are involved Adverse fluctuations in currency exchange rates

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2. Licensing Strategies

Licensing makes sense when a firm

Has valuable technical know-how or a patented product but does not have international capabilities to enter foreign markets Desires to avoid risks of committing resources to markets which are

Unfamiliar Politically volatile Economically unstable

2. Licensing Strategies (cont.)

Disadvantage

Risk of providing valuable technical know-how to foreign firms and losing some control over its use

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3. Franchising Strategies

Often is better suited to global expansion efforts of service and retailing enterprises

Advantages

Franchisee bears most of costs and risks of establishing foreign locations Franchisor has to expend only the resources to recruit, train, and support franchisees

3. Franchising Strategies

Disadvantage

Maintaining cross-country quality control

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4. & 5. Localized Multicountry Strategies or a Global Strategy?

Strategic Issue

Whether to vary a companys competitive approach to fit specific market conditions and buyer preferences in each host county OR Whether to employ essentially the same strategy in all countries

Companys Strategic Options for Dealing with Cross-Country Variations in Buyer Preferences and Market Conditions

A Companys Strategic Options for Dealing with Cross-Country Variations in Buyer Preferences and Market Conditions

1. Think Local, Act Local

2. Think Global, Act Global 3. Think Global, Act Local

Fig. 7.1: A Companys Strategic Options for Dealing with Cross-Country Variations in Buyer Preferences and Market Conditions

1. What Is a Think-Local, Act-Local Approach to Strategy Making?

A company varies its product

offerings and basic competitive

strategy from country to country

in an effort to be responsive to

differing buyer preferences and

market conditions.

Characteristics of a Think-Local, Act-Local Approach to Strategy Making

Business approaches are deliberately crafted to

Accommodate differing tastes and expectations of buyers in each country

Stake out the most attractive market positions vis-vis local competitors

Local managers are strategy-making latitude

given

considerable

Plants produce different for different local markets

Marketing and distribution to fit local customs and cultures are

products
adapted

When Is a Think-Local, Act-Local Approach to Strategy Making Necessary?

Significant country-to-country differences customer preferences and buying habits exist Host governments enact regulations requiring products sold locally meet strict manufacturing specifications or performance standards

in

Trade restrictions of host governments are so diverse and complicated they preclude a uniform, coordinated worldwide market approach

Drawbacks of a Think-Local, Act-Local Approach to Strategy Making

Poses problems of transferring

competencies across borders

Works against building a

unified competitive advantage

2. What Is a Think-Global, ActGlobal Approach to Strategy Making?

A company employs the same basic competitive approach in all countries where it operates.

Characteristics of a Think-Global, Act-Global Approach to Strategy Making

Same products under the same brand names are sold everywhere Same distribution channels are used in all countries Competition is based on the same capabilities and marketing approaches worldwide Strategic moves are integrated and coordinated worldwide Expansion occurs in most nations where significant buyer demand exists Strategic emphasis is placed on building a global brand name Opportunities to transfer ideas, new products, and capabilities from one country to another are aggressively pursued

Fig. 7.2: How a Localized or Multicountry Strategy Differs from a Global Strategy

3. What Is a Think-Global, Act-Local Approach to Strategy Making?

A company uses the same basic competitive theme in each country but allows local managers latitude to . . . 1. Incorporate whatever country-specific variations in product attributes are needed to best satisfy local buyers and 2. Make whatever adjustments in production, distribution, and marketing are needed to compete under local market conditions

Test Your Knowledge

The stand-out characteristic of multicountry competition is
A. The varying driving forces from country to country. B. varying competitive pressures from country to country. C. varying buyer requirements and expectations from country to country. D. that there is so much cross-country variation in market conditions and in the companies contending for leadership that the market contest among rivals in one country is not closely connected to the market contests in other countriesas a consequence, there is no global or world market, just a collection of self-contained country markets. varying degrees of product differentiation from country to country.

E.

For Discussion: Your Opinion

Assume you are in charge of developing the strategy for a multinational company selling products in several different countries around the world.
A. If your companys product is personal computers, do you think it would make better strategic sense to employ a multicountry strategy or a global strategy? Why? B. If your companys product is dry soup mixes and canned soups, would a multicountry strategy seem to be more advisable than a global strategy? Why? C. If your companys product is washing machines, would it seem to make more sense to pursue a multicountry strategy or a global strategy? Why? D. If your companys product is basic work tools (hammers, screwdrivers, pliers, wrenches, saws), would a multicountry strategy or a global strategy seem to have more appeal? Why?

Ways To Gain Competitive Advantage In Foreign Markets

The Quest for Competitive Advantage in Foreign Markets

Three ways to gain competitive advantage

1. Locating activities among nations in ways that lower costs or achieve greater product differentiation Efficient/effective transfer of competitively valuable competencies and capabilities from company operations in one country to company operations in another country

2.

3.

Coordinating dispersed activities in ways a domestic-only competitor cannot

1. Locating Activities to Build a Global Competitive Advantage

Two issues
1.

Whether to

Concentrate each activity in a few countries or Disperse activities to many different nations

2.

Where to locate activities

Which country is best location for which activity?

2. Concentrating Activities to Build a Global Competitive Advantage

Activities should be concentrated when

Costs of manufacturing or other value chain activities are meaningfully lower in certain locations than in others

There are sizable scale economies in performing the activity

2. Concentrating Activities to Build a Global Competitive Advantage (cont.)

There is a steep learning curve associated with performing an activity in a single location
Certain locations have

Superior resources Allow better coordination of related activities or Offer other valuable advantages
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3. Dispersing Activities to Build a Global Competitive Advantage

Activities should be dispersed when

They need to be performed close to buyers Transportation costs, scale diseconomies, trade barriers make centralization expensive or

Buffers for fluctuating exchange rates, supply interruptions, and adverse politics are needed

4. Transferring Valuable Competencies to Build a Global Competitive Advantage

Transferring competencies, capabilities, and resource strengths across borders contributes to

Development of broader competencies and capabilities Achievement of dominating depth in some competitively valuable area

4. Transferring Valuable Competencies to Build a Global Competitive Advantage (cont.)

Dominating depth in a competitively valuable capability is a strong basis for sustainable competitive advantage over

Other multinational or global competitors and

Small domestic competitors in host countries

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5. Coordinating Cross-Border Activities to Build a Global Competitive Advantage

Aligning activities located in different countries contributes to competitive advantage in several ways

Choose where and how to challenge rivals

Shift production from one location to another to take advantage of most favorable cost or trade conditions or exchange rates

5. Coordinating Cross-Border Activities to Build a Global Competitive Advantage (cont.)

Use online systems to collect ideas for new or improved products and to determine which products should be standardized or customized Enhance brand reputation by incorporating same differentiating attributes in its products in all markets where it competes

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Profit Sanctuaries

What Are Profit Sanctuaries?

Profit sanctuaries are country markets where a firm

Has a strong, protected market position and

Derives substantial profits

Generally, a firms most strategically crucial profit sanctuary is its home market

Profit sanctuaries are a valuable competitive asset in global industries!

Fig. 7.3: Profit Sanctuary Potential of Domestic-Only, International, and Global Competitors

Test Your Knowledge

Profit sanctuaries are valuable competitive assets because
A. they enable a company pursuing a think global, act local type of strategy to be more successful. B. a domestic competitor with multiple profit sanctuaries can wage and generally win a competitive offensive against a global competitor whose profits are scattered across many different countries. C. they provide the financial strength to support strategic offensives in selected country markets and can help fuel a companys race for global market leadership. D. without having at least two profit sanctuaries a company is virtually precluded from competing globally. E. they enable a company pursuing a global strategy to compete on an equal footing with companies employing a multicountry strategy.

Cross-Market Subsidization

What Is Cross-Market Subsidization?

Involves supporting competitive offensives in one market with resources/profits diverted from operations in other markets

Competitive power of cross-market subsidization results from a global firms ability to

Draw upon its resources and profits in other country markets to mount an attack on single-market or onecountry rivals and

What Is Cross-Market Subsidization? (cont.)

Try to lure away their customers with Lower prices Discount promotions Heavy advertising Other offensive tactics

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For Discussion: Your Opinion

Assume that you are a multinational soft-drink company with a large, well-protected profit sanctuary in your home country (and perhaps some smaller profit sanctuaries in other countries as well). Further assume that you are interested in entering an important new foreign market in which the leading soft drink competitors are all domestic companies.

Do you think that a cross-market subsidization strategy based on under-pricing local competitors might be an appealing way to gain a market foothold? Why or why not? If you were one of the local competitors being attacked, what strategic moves might you make to defend your market position?

Options for Global Strategic Offensives

Global Strategic Offensives

Three Options 1. Attack a foreign rivals profit sanctuaries

Approach places a rival on the defensive, forcing it to

Spend more on marketing/advertising Trim its prices Boost product innovation efforts Take actions raising its costs and eroding its profits

2. Employ cross-market subsidization

Attractive offensive strategy for companies competing in multiple country markets with multiple products

3. Dump goods at cut-rate prices

Approach involves a company selling goods in foreign markets at prices

Well below prices at which it sells in its home market or Well below its full costs per unit

Strategic Alliances

Achieving Global Competitiveness via Cooperation

Cooperative agreements with foreign companies are a means to

Enter a foreign market or Strengthen a firms competitiveness in world markets

Purpose of alliances

Joint research efforts Technology-sharing Joint use of production or distribution facilities

Marketing / promoting one anothers products

Strategic Appeal of Strategic Alliances

Gain better access to attractive country markets from host countrys government to import and market products locally Capture economies of scale in production and/or marketing Fill gaps in technical expertise or knowledge of local markets Share distribution facilities and dealer networks Direct combined competitive energies toward defeating mutual rivals Take advantage of partners local market knowledge and working relationships with key government officials in host country Useful way to gain agreement on important technical standards

Pitfalls of Strategic Alliances

Overcoming language and cultural barriers

Dealing with diverse or conflicting operating practices

Time consuming for managers in terms of communication, trust-building, and coordination costs

Mistrust when collaborating in competitively sensitive areas

Clash of egos and company cultures

Dealing with conflicting objectives, strategies, corporate values, and ethical standards
Becoming too dependent on another firm for essential expertise over the long-term

Competing in Foreign Markets

Characteristics of Competing in Emerging Foreign Markets

Tailoring products for big, emerging markets often involves

Making more than minor product changes and Becoming more familiar with local cultures

Companies have to attract buyers with bargain prices as well as better products Specially designed and/or specially packaged products may be needed to accommodate local market circumstances Management team must usually consist of a mix of expatriate and local managers

Strategic Options: How to Compete in Emerging Country Markets

Prepare to compete on the basis of low price

Be prepared to modify aspects of the companys business model to accommodate local circumstances
Try to change the local market to better match the way the company does business elsewhere

Stay away from those emerging markets where it is impractical or uneconomic to modify the companys business model to accommodate local circumstances

Fig. 7.4: Strategy Options for Local Companies in Competing Against Global Challengers

1. Strategic Options for Local Companies: Use Home-Field Advantages

Concentrate on advantages enjoyed in the home market

Cater to customers who prefer a local touch

Accept loss of customers attracted to global brands Astutely exploit its local orientation based on

Familiarity with local preferences

Expertise in traditional products

Long-standing customer relationships

Cater to the local market pose difficulties for global rivals

in

ways

that

2. Strategic Options for Local Companies: Transfer Expertise to Cross-Border Markets

When a local company trying to defend against a global challenger has resource strengths and capabilities suitable for competing in other country markets, then it should consider

Launching initiatives to transfer its expertise to cross-border markets Becoming more of an international competitor

2.Strategic Options for Local Companies: Transfer Expertise to Cross-Border Markets (Cont.)

Such a move to enter foreign markets can help

Build a bigger customer base (to offset any losses in its home market)
Grow sales and profits Put in a stronger position to contend with global challengers in its home market
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3. Strategic Options for Local Companies: Dodging Rivals by Shifting to a New Business Model or Market Niche

When industry pressures to globalize are high, viable strategic options for a local company trying to defend against global challengers in its home market include

Shifting the business to a piece of the industry value chain where the firms expertise/resources provide a defendable position or maybe even a competitive advantage

Entering a joint venture with a globally competitive partner

Selling out to a global entrant into its home market

90

4. Strategic Options for Local Companies: Contend on a Global Level

If a local company has resources and capabilities that it can transfer to operations in other countries, it can launch a strategy aimed at

Entering markets of other countries as rapidly as possible

Shifting to a more globalized strategy

Building brand recognition and a brand image that extends to more and more countries
Gradually establishing the resources and capabilities to go head-to-head against large global rivals
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Environmental Trends affecting International Strategies

Environmental Trends

Transnational strategy hard to implement

Two new trends

1. Liability of foreignness

Increased after terrorists attacks and Iraq War Global strategies not as prevalent today, still difficult to implement even with Internet-based strategies Regional focus allows firms to marshal resources to compete effectively in regional markets
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Environmental Trends
2. Regionalization

Focus to a particular region of the world Increases understanding of market Achieve some economies Trade agreements (I.e., EU, OAS, NAFTA) promote flow of trade across country boundaries with their respective regions

94

International Entry Modes

International Entry Modes (N = 5)

Follows the selection of an IS Five main entry modes

1. Exporting 2. Licensing 3. Strategic Alliances 4. Acquisitions 5. New Wholly-Owned Subsidiary

96

International Entry Modes (N = 5)

1. Exporting

(Contd)

Involves low expense to establish operations in host country

Often involves contractual agreements Involves high transportation costs May have some tariffs imposed Offers low control over marketing and distribution
97

International Entry Modes (N = 5)

2. Licensing

(Contd)

Involves low cost to expand internationally Allows licensee to absorb risks Has low marketing control over manufacturing returns (shared and with

Offers lower licensee)

potential

Involves risk of licensee imitating technology and product for own use
98

May have inflexible ownership arrangement

International Entry Modes (N = 5)

3. Strategic Alliances

(Contd)

Involve shared risks and resources

Facilitate development of core competencies

Involve fewer resources and costs required for entry

May involve possible incompatibility, conflict, or lack of trust with partner Are difficult to manage
99

International Entry Modes (N = 5)

4. Acquisitions

(Contd)

Allow for quick access to market

Involve possible integration difficulties

Are costly
Have complex negotiations and transaction requirements

100

International Entry Modes (N = 5)

5. New Wholly-Owned Subsidiary

(Contd)

Is costly
Involves complex processes

Allows for maximum control

Has the highest potential returns Carries high risk Greenfield venture: subsidiary Establish entirely new
101

International Entry Modes (N = 5)

(Contd)

Dynamics of Mode of Entry: Use the best suited to the situation at hand; affected by several factors

Export, licensing and strategic alliance: good tactics for early market development Strategic alliance: used in more uncertain situations Wholly-owned subsidiary may be preferred if

IP rights in emerging economy not well protected Number of firms in industry is growing fast Need for global integration is high
102

Acquisitions or greenfield ventures: secure a stronger presence in international markets

Effects Of International Diversification On Returns & Innovation

Strategic Competitive Outcomes(N = 3)

International diversification: firm expands sales of its goods or services across the borders of global regions and countries into different geographic locations or markets Implementation follows selection of international strategy and mode of entry (N=3) 1. International diversification and returns 2. International diversification and innovation 3. Complexity of managing multinational firms

104

Strategic Competitive Outcomes

(N = 3) (Contd)

1. International diversification and returns

As international diversification increases, firms returns initially decrease, but the increase quickly as firm learns to manage international expansion

2. International diversification and innovation

Exposure to new products and markets

Opportunity to integrate new knowledge into operations

Generation of resources to sustain innovation efforts
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Strategic Competitive Outcomes (N = 3)

(Contd)

3. Complexity of managing multinational firms

Geographic dispersion
Costs of coordination Logistical costs Trade barriers Cultural diversity

Host government

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Risks in International Environment

Risks in International Environment

2 major risks
1. Political 2. Economic

Limits to international expansions: management problems

108

Risk in the International Environment

109

Risks in International Environment

(Contd)

1. Political risks

Government instability
Conflict or war Government regulations Conflicting and diverse legal authorities Potential nationalization of private assets

Government corruption
Changes in government policies
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Risks in International Environment

(Contd)

2. Economic risks

Differences and fluctuations in currency values Investment losses due to political risks

Limits to international expansions: management problems

Geographic dispersion Trade barriers Logistical costs Cultural diversity Other differences by country Relationship between organization and host country
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THANK YOU