INTERNATIONAL MANAGEMENT

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INTERNATIONAL MANAGEMENT

• STRATEGIES FOR INTERNATIONAL COMPETITION

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Steps in Foreign Market Entry

• Identify the companys objective in its foreign
  market entry
• Preliminary country screening
• What are the opportunities and constraints in the
  target market?
• What capabilities, resources, and skills are
  needed to succeed in the foreign market?
• Does the company have the core capabilities and
  resources to score high on the key success
  factors? What are our strengths and weaknesses
  on the key success factors?
• Should the company enter the target market, and
  how?
• Compare and rank the targeted countries

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Fig 6-3 Managing a Portfolio of International
Subsidiaries
High
Growth Strategies
Collaborative Strategies
Host Country Attractiveness
Cross-Subsidization Strategies
Defensive Strategies
Low
High
Low
Firm-Level Competitive Strength in Each Host
Country
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Measuring the Firms Competitive Strength in Host
Country
Factors include

• Relative Market Share
• Relative Market Support
• Technology Fit with the Host Country
• Relative Contribution Margin
• Brand Recognition

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Fig 6-4International Risk-Return Portfolio
High (Under- Developed Countries)
Harvest Divest or Licensing
Increase Resources To Match Risk or IJVs
Medium (Emerging Economies
Host Country Risk
Selectively Grow
Low (Developed Countries)
Cross- Subsidize
Industry Leadership
Grow
Negative to Low Medium
High
Expected Profits in Each Host Country
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Fig 6-5 Strategic Orientations of International
Firms
High
Transnational Orientation (Pharmaceuticals,
Telecommunications, Financial Services)
Global Orientation (Chemicals, Heavy
Metals, Extractive Industries)
Global Integration and Coordination Pressures
Multidomestic Orientation (Consumer Non-Durables)
International Orientation (Cement, Fabric Mills)
Low
Low
High
Local Responsiveness Pressures
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The Value Chain
The value chain groups a firms activities into
several categories, distinguishing between those
directly involved in producing, marketing,
delivering and supporting a product or service
those that create, source, and improve inputs and
technology and those performing overarching
functions such as raising capital, or overall
decision making
Michael Porter
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Fig 6-6 Upstream, Support, and Downstream
Activities and Competitive Advantage
Firm Infrastructure
Human Resource Management
Support Activities
Technology Development
Value What buyers are willing to pay?
Procurement
M a r
g i n
Marketing and Sales
After-Sales Service
Inbound Logistics
Outbound Logistics
Operations
Primary Activities
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Principles in Redesigning Value Chains for
International Firms (Gupta and Govindarajan)

• Redesigning the set of activities as well as the
  interfaces across activities, such as supplier
  and customer linkages
• Redesigning in order to accrue significant gains
  in the firms cost structure, asset investment
  and/or speed of responsiveness to external
  environmental changes
• Redesigning to ensure rapid growth in market
  share and economies of scope expansion into other
  related products and services

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Factors Inducing the Dispersal of Value Chain
Activities

• Comparative advantage of the country (competitive
  input costs, low levels of political risk, market
  size, proximity to major markets or supply
  sources, availability of knowledge and skills in
  the population, etc.)
• Efficiency gains from economies of scale and
  scope derived from an increased internal
  functional specialization and international
  division of labor
• Competitive pressures from domestic and
  foreign-based companies and the necessity to
  compete in the competitors home and third
  country markets

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Factors Inducing the Dispersal of Value Chain
Activities (contd.)

• The benefits of flexibility and risk reduction
  derived from multiple sourcing points and
  destination points for components, products, and
  capital
• The opportunities to innovate and learn from
  diverse cultures and economic systems
• The fact that human, capital, material, and
  knowledge-based resources are dispersed
  throughout the world and not concentrated in any
  one country or region and tariff and non-tariff
  barriers that prevent market penetration via
  exports

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Level of Integration of Value Chain Activities

• Stand-alone
• Simple integration
• Complex integration

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Fig. 6.2 Value Chain Relationships for
Related Businesses
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Fig. 6.3 Value Chains for Unrelated
Businesses
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International Outsourcing
Outsourcing is performing some activities in the
value chain in foreign countries and linking them
to work done elsewhere, mainly in the home
country. International outsourcing is the
farming out of some value chain activities to
countries other than the home country and the
major market countries of the product or service
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Fig 6-1International Orientations
The Ethnocentric Firm
The Polycentric Firm
The Geocentric Firm
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Types of Firm Orientation

• Ethnocentric
• It looks at everything that originates from an
  organizations home country as the best in the
  world. Extreme orientation.
• Polycentric
• There are vast differences among the various
  countries because of differences in culture,
  language, race, and in their economic, political,
  and legal systems. Because of these great
  differences, it would be impossible for the home
  country nationals to really understand the
  foreign environments. Hence, management in the
  parent company should give foreign subsidiaries
  as much freedom as is possible to manage their
  own affairs. Extreme opposite of ethnocentrism.
• Geocentric
• There is no predisposition regarding degree of
  control or centralization. Rather, there is
  emphasis on interdependence among headquarters
  and all foreign subsidiaries. World-oriented
  attitude.

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Ex 6-1 An Analytical Hierarchy Approach to
International Expansion (2003)
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Glocalization

• Firm-level strategic response that parallels the
  industry-level, total firm transnational
  orientation
• Thinking globally but acting locally