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International Expansion and Building & Exploiting Global Presence -…
International Expansion and Building & Exploiting Global Presence
Internationalization theories
Process theory Uppsala model * First theory
Internationalization is a gradual process
Eclectic economic same time as uppsala
Internationalization depends on Location Ownership and internalization
International entrepreneurship 90´s
Entreupreuneurial behavior brings new opportunities
Network theorie * Jhonson AND Matsson 80=s
Exploitation of a network advantage
Internationalization process (Uppsala model)
the company undergoes a knowledge development process under which the company's market knowledge and knowledge of various market channels gradually improve
1; small exports to few close markets
Export via independent representatives
Direct export
Direct manifacturing
Uppsala mechanisms
the company undergoes a knowledge development process under which the company's market knowledge and knowledge of various market channels gradually improve
Three exceptions
▪When the company has large resources
▪When market conditions are stable and homogeneous
▪When the company has significant experience in markets with similar conditions.
Criticism
Does not take into accountthe mutual dependence between different countries markets (the world becomes more homogeneous)
▪Mergers & Acquisitions; Born-globals
▪Firms today has easier access to knowledge ex. Through information technologies
.▪Reduce uncertainty: buy knowledge about legal and financial standards from international consulting firms.
Building Global Presence
Choice of products for launching globalization
Required degree of local adaptation
+Expected Payoffs from Globalization
Transplanting the corporate DNA
Clarify and define core beliefs and practices
Transplanting core beliefs and practices to the new subsidiary
Embedding the core beliefs and practices in the new subsidiary
Mode of entry
100% export of finished goods
•Export of components but localized assembly
•100% local production.
Winning the local Battle
This requires the global company to anticipate, shape,and respondto the needs and actions of three sets of Players in the host country:
➢The host country customers
➢The host country competitors
➢The host country government
Choice of strategic market
The strategic importance of the market•Current and future market size as well as the learning opportunities offered by that market.
The firm’s ability to exploit the market
•Depends on the height of entry barriers and the intensity of competition within the market
Speed of global expansio
Exploiting Global Presence
BOOK + lectures
-Responding to local market differences
•Exploiting economies of global scale
•Exploiting economies of global scope
•Tapping the most optimal locations for activities and resources
•Maximizing knowledge transfer across locations
•Playing the global chess game (Global competition)
Economies of scale lower cost /unit concentration of activities in one or two locations : + lower costs - requires massive reconstructing = dependencies requires building world class competencies at theses locations - costs of transportation and tariffs - strategic decision about the location
Economies of scope reusing a resource in another country for exemple car amnifactures using the same engine in different models coordinating services of global scope to customers exemple shell provide same safety equipement worldwide , market power over competitors greater consitancy and quality
+adapting to the market more users more revenue neutralize local competition ---- but costs more and could be misguided
Actions to create a global competitive advantage star framework:
Network architecture is the number of locations where that activity is performed
Designing an optimal architecture ( concentration in 1 location , centres of excellence , regional or local units
Building world class competencies
ensuring coordination of global activities
The Ansoff growth market
IR framework
Articles
Ghoshal, S. (1987). Global strategy: An Organizing Framework, Strategic Management Journal, 8(5):425-440.
The goal of a MNC is to develop a competitive advantage
This can be developed thourgh 3 things :
Economies of scale
Economies of scope
Difference in inputs and outputs (currency differences- salaries)
The strategy is to balance the goals with the means
Develop internal learning capabilities so that it can innovate and adapt
Mitigate risk only the risks that can not be diversified or shared or shifted through a readily available markets that are concidered change over time
Political risks
Competitive response
Macro and micro risks
Contractual
Effeciency
Higher value outputs for lower costs
Integration responsivness
Book chapter1
Born global : Pursue consumers everywhere from almost day
Globalization= every industry global industry ever business knowledge business
Only the companies who are leaders at exploiting their industry´s globalization will win
4 success factors for global leadership
Convert presence into global competitive advantage
Cultivate global mindset : view diversity as opportunity and exploit it
Identify and pursue opportunities worldwide and establish presence in key countries
Take the rapid growth of emerging economies like china and India in their global strategies
Why china and india : 4 realities :
Mega market sell every product
opportunoity to reduce costs
innovation
emergence of intense competition from theses countries
-
Globalization country level
: the extent of the interlinkage between and country´s economy and that of the rest of world
- Globalization industry
: the extend of which a company´s competitive position is interlinked to competitive position in another country
Corporate globality :
globalization of market presence
globalization of supply chain
globalization of capital base
globalization of corporate mindset.
Drivers of globalization :
Economic liberalization
technological developments
shift from concentration in developed to developing economies
Globalized competition
Globalization implication for companies :
Economic map of the world will change
the composition of the 1000 largest companies in the world will change
Technology will make coordination of global operation easy
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Tallman article Internationalization, globalization, and capability-based strategy
Framework for sustaining competitive advantage by building and developing internal capabilities " dynamic capabilities"
2 Types of resource related capabilities
Business level component capabilities :
relates to firm doing business ability from knowledge to actions and structures
competitive advantage through capability processes
Capacity building :
create new capabilities to replace compromised capacities
Capacity Leverage :
exploitation of exsiting capacities
MNC strategies and capabilities processes
International expansion
: Build presence in foreign markets
New markets = acquisition of new capabilities and knowledge + exploitation of existing capacities ( Business level componements)
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Global integration :
consolidating international markets and operations into a single strategic units
-Architectural capabilities are essential = facilitate knowledge transfer build capacities
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Corporate-level architectural capabilities
: coordination capabilities
