INTERNATIONAL STRATEGY

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CHAPTER 5

• INTERNATIONAL STRATEGY

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Introduction

• The end of product of strategic decisions is
  deceptively simple a combination of products and
  markets is selected for the firm.
• How companies begin to decide which products to
  sell overseas, and which markets to target?
• As commercial organization the driving force will
  be the need to increase profits and the market
  value of the company,
• And so care must be made taken to avoid expensive
  mistakes.

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Introduction

• One way of minimizing the risk of making a
  strategic mistake is construct a detailed matrix
  of alternative product and market combinations,
• And to formally assess each alternative.
• The criteria for assessment will reflect
  managements attitude to risk, their priorities,
  and their understanding of current market and
  competitive conditions.
• The final selection that is made at board level
  represents t he strategy for the organization.

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Stages in the Strategic Planning Process

• The strategic planning process shows that
  strategies need to be developed at a number of
  different levels within a company.
• It is therefore helpful to begin consideration of
  international strategy with a clarification of
  the different levels of strategy within any
  organization.

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Levels of Strategy

• It is the responsibility of senior management to
  ensure strategic consistency across different
  sections of a company.
• Consequently, it is helpful to understand the
  distinction between corporate, business and
  functional strategies.

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Levels of Strategy

• 1- Corporate Strategy asks the question what
  should be our portfolio of business.
• 2- Business Strategy asks the question how do
  we compete?
• 3- Functional Strategy asks the question how
  does this function, e.g. marketing need to be
  organized so that business and corporate
  strategies are fulfilled?

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Is International Strategy Any Different?

• Yes and No.
• Yes, because it involves analysis of a more
  complex environment.
• No, because ultimately is still has the same aim
  identification of a competitive advantage.
• Let us look at each of these issues in a little
  more detail.
• The product / market choice at an international
  level is made more complex because of the greater
  level of information required to make informed
  decisions.

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Is International Strategy Any Different?

• The different geographic regions of the world
  exhibit political, cultural, legal and economic
  differences all of which have both strategic and
  operational implications.
• Good background research is required by companies
  to ensure that they understand the new market
  they are entering.

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Is International Strategy Any Different?

• Differences between international and domestic
  operations which may have strategic implications
  include
• 1- Cost structure of operations
• Wage rates in Germany are higher than in the UK,
  which means that the cost structure of overheads
  direct costs will not be the same for the German
  and UK plant of BMW / Rover, even though they may
  be producing the same motors.

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Is International Strategy Any Different?

• 2- Competitive strategies
• Local forms of competition may vary.
• Example it is suggested that penetration of
  Japanese markets is very difficult because of
  difficulty of accessing distribution outlets for
  consumer goods
• Control of competition takes the form of access
  to customers.

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Is International Strategy Any Different?

• 3- Organizational structure and control systems
• Companies may need to be more flexible in
  specifying performance measures for international
  operations than it would be in the domestic
  environment.

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Going International Why Bother?

• So far we have reached a point at which it is
  possible to conclude
• 1- Strategy is concerned with competitive
  advantage.
• 2- Functional and general strategies need to be
  fully integrated.
• 3- Formulation of an international strategy can
  present additional challenges to management.
• 4- The extent of variations in strategies across
  national boundaries is dependent upon the type of
  product / service.

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Reasons for Internalisation

• All companies are different, and so the precise
  reasons for internationalizing will vary across
  organizations to reflect their individual
  circumstances.
• Nonetheless, a number of common themes emerge,
  which highlight a mix of factors seen as
  influencing the decision to sell or produce
  internationally.
• Table 5.2 summarized factors influencing the
  internationalization of a company

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