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(ASM)G3-International Strategy (Where to Compete? (How should we compete…
(ASM)G3-International Strategy
FDI: Entry Mode
Greenfield
Advantages
Operation can be expanded incrementally as the firm learns
Appropriation of values by others least likely
Greatest control over technology, marketing and distribution
Disadvantages
Need to acquire additional expertise relevant to host country
Local responsive limited during ramp-phase
Acquisition
Advantages
Appropriation risks still limited
Perception of"foreignness' overcome more easily
Enables firm make repaid entry
May be able to use acquired firms political influence
Disadvantages
Usually requires complex and costly negotiations
Difficult to merge disparate cultures
Costly to acquire firm
Patterns of Internationalization
Internationalization
International Trade
Exporting of goods to foreign customers
in another countries
Foreign Direct Investment
Establishing operations through
acquisition or start-up in foreign locations
Patterns
Sheltered Industries
railroads, hairdressers, dairy
International Industries
aerospace, agriculture
Multi-Domestic Industries
packed foods, consulting
Global Industries
automobiles, semiconductors
Inter-Industry competition
Be aware of previously unrelated ideas or business
BAE system
Guided missiles➡️Office machinery
I-Robot
Household appliances ➡️Aerospace & defense
Introduction to International Strategy
Internationalization
The potential for a firm to enter a foreign market, or inverse
Can be difficult but rewarding
Risk
Opportunities
Can cause stunning reversal of fortune
Easy to globalize
The rise in global competition and interaction
Technology
Key points
Global integration
Standardization of the production of goods or the provision of services
Globalize in a efficient way
Ex: jet engines, consumer electronics, automobile
Local responsiveness
Products or services would require adaptation at that local level
Ex: service, retail banking, funeral parlors
Depends on different industries
Entering Foreign Markets
EFM:Foreign Direct
what
A firm establishes a controlling stake in a host country entity to manufacture or sell its products
Advantage
lower cost
tariffs cost
capability
transfer
protect
control tightly
local cost &producing advantage
Disadvantage
financial
risk
cost
higher cost
managerial
bureaucratic costs
liability of foreigness
EFM:Licensing and alliances
what
A firm authorizes a host-country firm to make and sell its products in exchange for a royalty or some other form of profit sharing
Why
lower costs
Advantage
lower cost
tariffs& taxes
transportation costs
production advantage
distribution channels
local preferences
Disadvantage
margins will be lower
lose some control
product quality
customization potential
diverge in terms of goals
host-country partner may acquire capabilities and compete
Example
Theme park vs characters
How to enter the Market?
Foreign Direct Investment(FDI)
Exporting
A firm manufactures products in its own country and ships to a host country market.
Advantages of exporting
-Make use of excess domestic capacity or build economies of scale.
-Rapidly enter new international markets.
-Establish distribution channels through contracts.
-No need to establish operations in other country.
Disadvantages of exporting
-May have high transportation cost.
-May encounter high import tariffs.
-Cannot take advantage of better costs.
-Less control over marketing/ distribution.
-Product customization harder.
Licensing/Alliances
Where to Compete?
How should we compete in each market?
Location of production(manufacturing and service)
Degree of adaption to local conditions
Relationship with other firms
Modes of foreign direct investment(FDI)
What market should we enter?
Nature of the market opportunity
Firm's ability to create value
Capabilities?
Foreign Market knowledge?
Approach to Management
How to compete locals and succeed?
Valuable Competitive Position
Low F.D.I. & I.T.
Low F.D.I.; High I.T.
High I.T.& F.D.I.
High I.T.; Low F.D.I.