[G5] International Strategy (Introduction to international strategy (Why…
[G5] International Strategy
Entering Foreign Markets
Foreign Direct Investment
local cost or production advantage
Low transit or tariffs
easier to transfer and protect capabilities
High managerial cost
perception of foreignness
May be costly or risky
Domestic political advantage
ships products to a host country market
fixed cost structure stays roughly the same
high transportation cost
less control over the marketing
encounter high import tariffs
Licensing and Alliances
Gain local cost or production davantage
Political influence or taste knowledge
Lower transit cost
Reduce profit potential
Lose control on product quality
reduce customize potential
Divergent goals between partner
partner may acquire capabilities
Introduction to international strategy
Why we need internationalization
It cause all industries to compete on a global scale
Rise in global competition
Flat or lumpy?
More efficiently or effectively, but the location is important.
Require adaptation to local conditions.
Rise of internationalization
Difficult and rewarding,it has opportunities and risks.
Foreign entry can cause stunning reversals of fortune.
Company can enter other country which has a potential market.
How to set up a international strategy (take IKEA for example)
Identify a market where was potential for high revenue growth
Located and purchase land on the outskirts of the major city.
Sell these highly standardized products
Different manage way
Where to Compete
Foreign Direct Investment: Entry Mode
minimizes the risk of appropriation
expanded incrementally as the firm learns and grows
greatest control over technology and market
expertise relevant to that new foreign location
engage in local responsiveness
costly to acquire a foreign firm
merge the cultures
requires complex and costly negotiations
international trade (vertical)
high degree of national differentiation .
things potentially don't travel well
products that don't travel very well, over long distances.
foreign direct investment (horizontal)
automobiles or semiconductors or oil exploration
easy to ship all around the world .
can manufacture and create in one place. realize some scale economy
Where should a firm compete?
How should a firm enter and compete in that market?
multi domestic industries