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(G1) [ABS] (week2) International Strategy (Team Members (Cindy, Joanna,…
(G1) [ABS] (week2) International Strategy
Introduction to International Strategy
Going global
Opportunities
Risks
Internationalization strategy
Global integration
Local responsiveness
Internalization
Potential
Foreign competitors enter domestic markets
Firm enter foreign markets
Patterns of Internationalization
internationalization strategy
foreign/direct investment
exporting
patterns
1.sheltered industries
high degree of national differentiation
nature of the product or service or the market segment
2.international industries
potentially benefits from a high degree of economies of scale
aerospace
military hardware
3.multi domestic industries
sort of high degree of national differentiation
packaged goods
4.global industries
automobiles
Where to Compete
Internationalization
The potential for a firm to enter a foreign market and compete there
The potential for a firm competitor to enter our market and compete with us
Where to compete
Firm's ability to create valve
Which capabilities are most relevant and do we have those capabilities?
Nature of the market opportunity
How to compete
Degree of adaptation to local conditions
FDI
Location of production
4.Entering Foreign Markets
4-2. Licensing and Alliances
Authorize a host-country firm to make and sell there products in exchange for some other forms
Potential advantage
Less local cost
Political influence
Avoid taxes , tariffs ,fees
Find best way to translate into lower transaction costs...
Production advantage
Meet the local customers need
Potential disadvantage
Split the profit with partner
Less profitability
Lose control over things
Difficult to negotiate or change
Diverge in terms of goal
e.g.agency problem
Partner learn how to compete with you directly
4-3. Foreign Direct Investment (FDI)
Entry Mode
Acquisition
Advantages
Enables firm to make rapid entry
Appropriation risks still limited
Perception and liability of foreignness overcome more easily
Use acquired firm's political influence
Disadvantages
Costly to acquire firms
Requires complex and costly negotiations
Difficult to merge disparate cultures
A firm acquires an established host-country firm
Greenfield development
Advantages
Greatest control over technology, marketing and distribution
Operations can be expanded incrementally as the firm learns
Appropriation of value
Disadvantages
Need to acquire additional expertise relevant to host country
Local responsiveness limited during ramp-up phase
a firm creates a new entity in that new foreign location from scratch
Advantages
Gain local advantages
Capabilities easier to transfer
Capabilities easier to protect
Low transit cost or tariffs
Tight control over operations
Disadvantages
High financial costs and risks
Higher managerial or bureaucratic costs
Domestic firm may be politically advantaged
Perception and liability of foreignness
A firm establishes a controlling stake in a host country entity to manufacture or sell its products.
4-1. Exporting
A firm manufactures products in its country and ships to a host country market
Potential Advantages
Rapidly enter new international markets
Establish distribution channels through contracts
Make use of excess domestic capacity or build economies of scale
No need to establish operations in new country
Disadvantages
Cannot take advantage of better costs/capabilities elsewhere
Less control over marketing/ distribution
May encounter high import tariffs
Product customization harder
May have high transportation costs
Team Members
Cindy
Joanna
Miki
May
Jamie
Andri