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G2 - [ABS-2] International Strategy (Patterns of Internationalization…
G2 - [ABS-2] International Strategy
Introduction
from local to global
what market should we enter
evaluate the market oppotunities
how can we create values compare to other local firms
which capabilities we have and relevant
foreign market knowledge
management skills overseas
how should a firm compete in each market?
degree of adaptation
relationships with other local firms
location of production
modes of FDI
the key to international strategy
How to compete against local firms?
Patterns of Internationalization
International Industries
haven't a high degree of national differentation
travels well
potentially benifits from high degree of economies of scale
Multi-domestic Industries
Don't travel well
Need local presece
High degree of national differentation
Sheltered Industries
don't travel well
highly specialized to that domestic location
Sheltered from a lot of foreign competition
High degree of national differentation
The nature of products/services
Global Industries
high degree of FDI and international trade
two companies which are originally in totally different market segments, don't compete directly with each other
through internationalization
they're in a close industry competitive space
Enter Modes
Licensing / Alliances
authorizes a host-country firm to make and sell its products in exchange for a royalty or other form of profit sharing.
Pros
Local partner provides political influence
and knowledge of local tastes
Low transit costs/tariffs
Gain local cost /production advantages
Cons
Reduced profit potential
Firm-specific assets may be hard to transfer
Lose control over product quality
Customization potential may be limited
Divergent goals may exist or arise between partners
Host-country partner may acquire capabilities and compete
FDI
A firm established a controlling stake in a host-country entity to manufacture or sell its products.
Acquisition
Pros
quicker way to get in foreign countries
have existing customers from the original company
May be able to use acquired firm’s political influence
Cons
very costly to acquire firms
Difficult to merge disparate cultures
requires complex and costly negotiations
Greenfield
Cons
need additional expertise relevant to host country
local responsiveness limited during ramp-up phase
Pros
greatest control over technology, marketing, and distribution
firm can be expanded incrementally when it learns
The value most unlikely to allocate to other people
Exporting
a firm manufactures its own products in home country and ships to a host country market
pros
build EOS(economic of scale)
enter new international market
maximize domestic capacity
obtain more distribution channels
no need to establish operations overseas
cons
high tariffs
cannot go for better costs advantage
high transportation costs
less control of the quality
hard to execute customization