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SMMC_G2[CS-3]-Global Strategy, including complementarity, 108104041 范睿翔 …
SMMC_G2[CS-3]-Global Strategy
[1] Globalization
Definition
process of closer integration
exchange between countries and peoples worldwide
international trade and investment flows
economic dimension of globalization
movement of labor,and cross-border integration
advanced communication and transportation
reduce transportation cost
sea freight
air transport
the reduction in trade investment barriers
negotiations and treaties ex: GATT
Growth of MNEs and FDI
Foreign direct investment
investment, buying stocks or bonds, or putting
money in a fixed deposit or bank account.
investment in actual productive assets
[2] Foreign Market Entry
Why to entry foreign market?
access better or lower-cost factors
labor
human resource
natural resources
knowledge
technolog
reduce overall business risk
access a larger market
China
India
OECD countries
develop new capabilities
location-specific advantage
learning
Five market entry modes
1.exporting
direct exports
sale into foreign markets
export via an agent
2.licensing or franchising
contract with a local partner
transfer intangibles
IP
brands
patented technology
know-how
3.strategic alliance
active coordination
R&D
marketing
4.joint venture
contributed resources
capital
jointly-owned independent company
manage jointly, share in profits
5.wholly-owned subsidiary
100% owned unit in a foreign country
brownfield
acquire fixed assets and reuse
acquisition
buy a local company and integrate
greenfield
build the unit from scratch
Difficulties
solve
different legal systems
deal with new laws / regulations
new capabilities
Business cost
challenge
language
currency
culture
entry barriers
bilingual laws
currency
How to internationalize
liabilities of foreignness
affect
market entry mode
export
license
local presence
joint venture with local firm
help manage risks and knowledge gaps
reduce cost
manufacture locally
conquer liabilities of foreignness
form wholly owned subsidiaries
stages model of internationalization
expand to nearby / similar markets
entry mode
first lower risk only
after learn
key to success
globalization
improve in communication
the Internet
international flows
talent
entrepreneurs
local country specific advantages
supportive government policies
National competitive advantages
intangibles (human capital, technology) which is open access to worldwide :check:
software in the US, Israel and India Japan and South Korea for consumer electronics
fixed country-specific factors (location, raw materials) :green_cross:
Porter's Diamond mode
connected to five force mode
Demand conditions
do specific characteristics of demand in a firm's domestic market
Competitive intensity
do with the competitive environment that that firm faces
lead to stronger firm capabilities to that competition
explains national competitive advantages in particular industries
Factor conditions
national, human, supportive infrastructure, institution and other resources.
Related and Supporting Industries
companies in Switzerland
strong in chemicals
moved over into the pharmaceutical industry
healthcare industry developed in Switzerland
Implications for global strategy
identifying potential sources of competition
understanding your own competitive advantages relative to foreign competitor
tapping into foreign country advantages (location decisions
co-creating a supportive ecosystem (cluster
MNE Strategies
KEY TENSION
Cost reduction
Reduce operating costs by using scale and deploying resources
Local responsiveness
Grow market share if tailor offerings to local customer and host-country
pressure for cost reduction and local responsiveness
Four Types
Global strategy
Pursuing a global division of labor based on best-of-class capabilities reside at the lowest cos
Example: Lenovo's R & D in Beijing, Shanghai, and Raleigh; production center in Mexico, India, and China
Economies of scale and location economies
location economies, economies of scale
no local responsiveness, no product differentiation
International strategy
Leveraging home-based core competencies
EX : Selling Starbucks coffee internaionally
Selling same products/services in domestic/foreign market
risk
no or limited local responsiveness, highly affected by exchange rate
Benefit
leveraging core competence, low-cost implementation
Transnational strategy
Combination of localization strategy（responsiveness）with global strategy（low cost position）
German multimedia conglomerate
Bertelsmann; Haier in appliances
economies of sale, location, and learning
costly and difficulty to implement, leading to highly failure rate
Localization strategy
EX : Nestle customized product offering in international markets
Maximize local responsiveness via a multi-domestic strategy
Customers will perceive them to be domestic companies
strategyhighest-possible local responsiveness, reduced exchange-rate exposure
high cost of implementation, little or no scale economies of scale
Conclusion
foreign market entry mode choices
stages model of internationalization and born global
Global strategy is essential in an era of globalization
Porter‘s Diamond model of national competitive advantage
Four MNE strategic choices in the global market place
including complementarity
108104041 范睿翔
108103001 張博崴