International Environment and Strategy

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International Environment and Strategy
C H A P T E R
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Table of Contents

• Chapter Vignette
• Cultural Aspects of Strategy
• International Environmental Forces
• Host Government, Political and Legal Issues
• The Competition
• Generic MNC Strategies
• Global Integration Strategy
• Host Country Focus Strategy
• Hybrid International Strategy
• Industry Characteristic and Strategy
• Global Industries
• Multi-domestic Industries
• International Industries

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Chapter Vignette

• Samsung
• Chaebol
• Korean culture
• Shift in strategic orientation
• From low-cost to more differentiation
• Higher perceived quality
• More prestigious distribution outlets
• Competitiveness with Sony

4
Strategy Formulation Process
Mission and goals
External environmental scanning (opportunities/thr
eats)
Internal capability assessment (strengths/weakness
es)
Goals, objectives, strategy alternatives
Implementation
Control
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Cultural Aspects of Strategy

• Identification of environmental forces that
  influence on the organization
• Environmental Scanning
• Gathering of Information
• Relationship with the Environment
• Relationship Among People

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International Environmental Forces

• Cultural difference (the Chapter on Culture)
• International Finance, and Currency Exchange
  Rates (International Finance course)
• Host Government, Political, and Legal Issues
• Competition from
• local Businesses,
• Host Government
• Other MNCs

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Host Governments and Political/Legal Issues

• Host governments use sovereign power by assisting
  or restricting MNCs.
• Could provide incentives to attract and maintain
  MNCs
• Could impose restrictions on MNCs if goals are
  not met
• Developing countries and the MNCs
• Some welcome MNCs
• Others feel that the objectives of the MNCs are
  not compatible with the host country objectives.

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Host Governments and Strategic Goals of MNCs

• Host Gov.
• Increase National Income
• Employment
• Skill development
• Support of domestic firms
• Diversification of economic activities

• MNC
• ROI
• Efficient, low-costs
• Selective hiring
• Specialization of production
• Acquisition of indigenous capacity

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Host Governments and Strategic Goals of MNCs

• Domestic RD
• Investment in backward areas
• Balance of payments.
• Control of pattern of econ develop
• Maximize revenues

• Location of RD
• Locate in large cities
• Currency convertibility
• Free trade and investment
• Minimize tax

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Developing Countries and MNCs

• Love-Hate Relationship
• Wealth expectation
• Value incongruity
• Technology transfer
• Host Gov Concerns
• MNC flexibility
• Interdependency and control

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Host Government Concerns

• The Flexibility of MNCs
• Interdependency and Control
• Efficiency
• The Effect on the Domestic Strategic Industries
• Taxation
• MNC headquarters as the decision center

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Characteristics of MNC-Host Country Relationships

• MNCs Bargaining Power
• Bargaining Power of Host Countries
• Deterioration of Relationships
• Nationalization
• Expropriation
• Creeping Expropriation
• Confiscation
• Domestication
• Political Risk

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The Competition

• Competition from Domestic and State-Controlled
  Firms
• Competition from Other MNCs

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Generic MNC Strategies

• Global Integration Strategy
• Capitalize on the economies of scale take
  advantage of diverse opportunities for cost
  reduction.
• The efficiency choice
• Host Country Focus Strategy
• The effectiveness option.
• Subsidiaries are treated as autonomous national
  firms.
• Hybrid International Strategy
• Benefits of combining benefits of global
  integration and host country focus strategies.

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Industry Characteristics and MNC Strategy

• Product and Market Requirements
• 1. Product Specifications
• Size, Color, Shape, Taste, Function, Features
• 2. Market Characteristics
• Distribution Channels, Service Needs and
  Expectations

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Industry Characteristics and MNC Strategy

• Operational Requirements
• Gain Competitive Position
• Examples
• Economies of Scale
• Investment Requirements in RD and Manufacturing
  Facilities

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Industry Characteristics and MNC Strategy
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Industry Characteristics and MNC Strategy

• World Market
• Made of three industries Global, International
  and Multidomestic
• Global Industries
• Exploit economies of scale and experience,
  location, product differentiation, process
  technology and control of distribution channels.
• Highly centralized large scale manufacturing and
  RD
• Products are produced, sold and serviced
  worlwide, without many variations.

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Industry Characteristics and MNC Strategy

• Multidomestic Industries
• Local product and market requirements
• National, cultural, social and political
  differences lead to diverse product standards and
  different consumer tastes.
• National subsidiaries behave like domestic firms.
• Host country focus - appropriate strategy for
  Multidomestic industries.

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Industry Characteristics and MNC Strategy

• International Industries
• Characteristics
• Technological forces
• Need to develop and distribute innovations in
  multiple markets
• Success depends on ability to exploit
  technological forces, produce new products,
  duplicate the process in different national
  markets.