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SMMCG8[CS-3]LN11-Corporate Strategy-Geographical Expansion, Four quadrants…

- - - - Franchising
      - Strategics alliances
        
        with local partner
        
        continue to expand
        
        e.g
        
        WLGore and Associates
        
        marketing products in Japan
        
        found that the Japan‘s partner is good at the manufacturing process of its products.
        
        1 more item...
      - Licensing
        
        Use a contract
        
        Transfer of foreign rights to the core of value in the company's business
        
        The company needs to monitor its local partners
        
        Ensure benefits and returns
      - Joint ventures
        
        share in the profits of this joint venture
        
        international joint ventures
        
        a foreign firms technology or business capabilities
        
        create significant scale or a combination of resources
        
        have globally competitive
        
        a local firms home market related capabilities or position
        
        e.g.
        
        Starbucks has joint venture with the Tata group.
      - Export
        
        directly
        
        indirectly
        
        via local
        
        Import products and services are resold to local agents
    - - Reduce overall business risk
      - Leverage the company's core capabilities
        
        e.g.
        
        McDonald's or Yum! Brands
      - Access better or lower cost factors
        
        e.g.
        
        Labor
        
        iRobot
        
        Natural resources
        
        Oil industry
        
        Technology
        
        IT development of iRobot
        
        Logistics
      - Develop new capabilities
        
        Location-specific advantages
        
        Learning & spillovers
      - Expand the market
        
        Large economically developed
        
        e.g.
        
        OECD countries
        
        Emerging markets
        
        China & India
    - - Broader economy-wide developments
        
        International activities of individual firms
  - - - deal with new laws and regulations
      - trade and investment barriers
      - institutional differences between countries
      - differences in culture and language
    - - Netflix
        
        Difficulties
        
        Canada's bilingual laws
        
        deal with the different currency
        
        It is more costly to do business in a foreign country.
    - - market entry mode decision depend on company's ability to cope with the liabilities of foreignness
        
        If too much risk or too much liability
        
        exporting or licensing
      - stages model of internationalization
        
        young companies
        
        first expand within their home market
        
        then expand into nearby or similar markets
      - In recent times
        
        born global firms
        
        primary market
        
        international
        
        How to operate and succeed
        
        significant improvements in communication
        
        the Internet
        
        significant International flows of talent and entrepreneurs
        
        a combination of local country specific advantages and supportive government policies
      - Government's help
        
        special export-oriented zones
- - - - Germany and Japan for automobiles
      - Japan and South Korea for consumer electronics
  - - - do with specific characteristics of demand in the firm's domestic market
    - - do with the competitive environment that that firm faces
      - EX.
        
        Volkswagen, BMW, Daimler, all competing in the German market can lead to stronger firm capabilities through competition
    - - Nation's endowments in terms of national, human, and other resources
      - supportive infrastructure and institution
    - - EX.
        
        companies in Switzerland for years were very strong in chemicals, then they moved over into the pharmaceutical industry.
        
        complementarity is that a whole healthcare industry developed in Switzerland
        
        It was very complimentary and reinforcing to the pharmaceutical industry in Switzerland
    - - useful in identifying a potential source of future competition
      - useful in understanding your company's
        own competitive advantages
      - analysis will enable you to understand better how to compete with these foreign competitors
      - consider opening operations in a foreign country in order to take advantage of its specific strengths
- - - - Foreign direct investment
      - productive assets
    - - since the1960s
        
        trade of global GDP 22%->50%
        
        communication and transportation
        improvement
        
        late 1800s and early 1900s.
        
        significant increases
        
        globalization 1.0
        
        Thomas Friedman
  - - - eg. air transport costs
        
        have fallen by nearly 90%
    - - negotiations and treaties->tariff
        
        World Trade Organization in 1994
    - - eg.shipping
        
        the cost of sea freight in real terms has fallen by 80% since 1940
    - - FDI
        
        investment in actual productive assets
        
        build up a production plant in a foreign country , spend money on an R&D center or a sales office , to acquire another company
      - MNEs
        
        conduct operation in at least two countries
        
        procurement,production ,or sale/distribution
        
        MNEs in USA,employ 19% of all US workers and conduct nearly three-quarters of private R&D
- - - - features
        
        different strategies are used in different markets
        
        e.g.
        
        Nestle
      - benefits
        
        maximize the local responsiveness via a multi-domestic strategy
        
        reduces exchange rate exposure or risk
      - risks
        
        duplication or key businesses functions in different countries leads to high cost of implementation
        
        little or no economies of scale
        
        several
    - - features
        
        a value chain where the companies have
        backward integration and forward integration
        
        e.g.
        
        Lenovo's R&D
      - benfits
        
        economies of scale
        
        global division labor based on best-of-class capabilities and low cost
      - risks
        
        little or no product differentiation
        
        some exchange rate exposure
    - - features
        
        no product differentiation and low-cost structure
        
        e.g.
        
        Rolex
        
        Starbucks
      - benefits
        
        leveraging home-based core competencies
        
        economies of scale
      - risks
        
        no or limited local responsiveness
        
        highly affected by exchange rate fluctuations
        
        low
    - - benefits
        
        attempts to combine product differentiation and standardization of strategies by creating a global matrix organization
        
        e.g.
        
        Haier
        
        economies of scale
      - risks
        
        global matrix organization is costly and difficulty to implement, leading to high failure rate
        
        higher higher risk or IP expropriation
      - features
        
        product differentiation and low cost
  - - - grow market share if they tailor offerings to local customer preferences and host-country requirements
        
        e.g. McDonalds
        
        highly responsive to local tastes and local market conditions
        
        example: India
        
        accommodate local tastes and religious sensitivities
        
        offer many chicken based and vegetarian options instead of beef hamburgers
    - - reducing operating costs in international business
        
        using scale
        
        deploying common resources
        
        e.g. Telsa
        
        has relatively few local tastes or conditions that it needs to cater to
        
        lower costs significantly to scale economies
        
        has prompted the company to build a small number of so-called Giga factories
        
        1 more item...
        
        by standardizing internationally as much as possible
        
        not
        customizing to individual countries except to the minimum extent necessary
        
        significant pressures and opportunities to reduce costs
  - - - countries are different
        
        how to balance the need to customize to the needs of local markets
        
        just be patient
      - things brought to the table as a multinational company
      - How's it integrate inside the company?
        
        crack the geographical dependencies
        
        crack the production process dependencies
        
        it's really the product and the geography makes a very matrix to work