International Strategy Formulation - PowerPoint PPT Presentation

About This Presentation
Title:

International Strategy Formulation

Description:

International Strategy Formulation Theme of this chapter: International Environment is characterized by turbulence Therefore there are no recipes – PowerPoint PPT presentation

Number of Views:159
Avg rating:3.0/5.0
Slides: 18
Provided by: Facultyof74
Category:

less

Transcript and Presenter's Notes

Title: International Strategy Formulation


1
International Strategy Formulation
Theme of this chapter International Environment
is characterized by turbulence Therefore there
are no recipes Weve looked at all the major
forms of engaging in international business - Q
When do I use which one? A It all depends..
2
I Environmental Turbulence 1. Russia/ Eastern
Europe- breakup of the Soviet Union Centralized
planning collapsed from its own internal
contradictions Some people in the USSR were
aware of that as early as 1970,
probably earlier Only a relatively
decentralize market economy can cope with the
complexity and multiplicity of decision
making The political consequences were quite
severe - independence of former constituent
republics - liberation of former Warsaw Pact
states from Russian hegemony - unification
of Germany - breakup of Czechoslovakia -
breakup of Yugoslavia
3
2. EEC - Growth of political centralization -
Growth by expansion to the East Q Can they
afford it? High cost of farm subsidies for
agricultural east. Q Can they manage it? They
were not able to manage 15 its still to be seen
what they will do with current 25 - Pressures
for fragmentation on western and northern
boundaries - Danes dont like the Euro -
Norway never joined - Sweden isnt so sure it
was a good thing - Opposition in the UK Q
Commitment to harmonization e.g. so-called
Stability Pact to limit fiscal deficits and
inflation seems to be breaking up in the face
of national priorities, esp. France and
Germany If and when Turkey joins, the EEC
enters Asia and the EEC enters the Islamic
world.
4
3. China - has evidently learned the lesson of
the Russian collapse - trying to introduce a
market economy while maintaining strong central
control - Have achieved enormous economic
growth - Have become a new economic powerhouse,
and therefore a new political force in the Far
East and the World. 4. S. E. Asia -
Extraordinary growth of the Asian Tigers -
collapse of dictatorships and cronyism,
especially military backed, e.g. Indonesia,
Cambodia, Philippines - but still Pakistan,
Burma, Viet Nam - many deep rooted ethnic and
religious conflicts 5. Japan - almost a decade
of recession, basically brought on by excessive
speculation and bad lending in real estate -
cronyism and the seeming inability to let go of
the old way of doing things has dragged the
recession on for far longer than what was
necessary. 6. India - market reforms
initiated under Narasima Rao (Congress Party)
are continuing under the the nationalist BJP
government
5
7. Central and South America - collapse of
traditional rule in most countries - military
dictatorships - perpetual rule of an oligarchy
e.g. Mexico and Brazil Emerging middle class
seeking an enlarged political voice. A common
characteristic of the old oligarchies (whether
military or civilian) was their narrow
nationalism. Their disappearance means a much
more fluid environment for building and/or
restructuring economic relationships - among
classes (which are closely correlated with
race) - among regions within the same country -
among countries
6
8. Africa - still the basket case North
dictatorship or personal rule from Morocco to
Egypt - ethnic warfare mixed in with
intra-Islamic ideological conflict (Sudan,
Algeria) Sub-Saharan Africa - only one or or two
true democracies Its been more than a
generation since de-colonization - whats the
problem? - venality and corruption (power,
diamonds, oil, copper, etc.) - failed ideologies
(esp. Tanzania and Mozambique - tribal conflicts
(sometimes intermixed with religion)
7
  • Terrorism since 9/11/01 Is it a New Issue?
  • Yes and No
  • Israel Irgun and Hagganah
  • RSA, Rhodesia/Zimbabwe assassinations,
    rebellions,
  • USSR Stalinist purges, Assassination of Trotsky
    in Mexico
  • Northern Ireland IRA and UDF
  • USA FBI at Waco
  • Kenya Mau Mau
  • i.e. Terrorism and guerilla tactics are common to
    virtually all liberation
  • movements.
  • There is also state terrorism
  • Haiti -China the Red Guards
  • Chile -Cambodia Killing Fields under Pol Pot
  • -Argentina

8
Three issues for the MNE 1. Which regions or
countries to penetrate? 2. Which industries or
markets to enter? 3. How to co-ordinate
activities across such a vast expanse? The book
says that Business Unit Managers have become the
primary driving forces in shaping international
strategies. I beg to differ. They play a
powerful role, no doubt, (and there are reasons
for this which we will examine later) But they
can only be the primary force if top management
have abdicated or otherwise failed in their
responsibility to manage the corporation as a
whole.
9
II Industry Pressures There is always the
in-built tension between being Globally
Integrated Locally Responsive - centralized
prodn - decentralized prodn mktg - uniform
product - Market specific products - uniform
marketing structure - market specific mktg
structure - uniform promotion - market specific
promotion -uniform reporting control - market
specific reporting systems control systems
10
HIGH
Transnational strategy
Global strategy
Pressures towards global integration
Multidomestic strategy
International strategy
LOW
LOW
HIGH
Pressures toward localization
11
Factors facilitating globalization 1. Freer
trade - globally and regionally - less emphasis
on economic sovereignty 2. Global financial
services and capital markets- forn x/c market is
never closed! 3. Improved communications -
information - phones, faxes, email, internet -
people - air services - goods -
containerization - ports - trucks - air
freight Costs have decreased enormously in real
terms in last 20 - 50 years.
12
Industry factors (some, but not all
industries) - universal customer needs - TVs,
cameras, electronics - fast foods - leisure -
global customers - customer is everywhere - high
investment intensity - capital intensive
technology, scale - pressure for cost reduction
- seek lowest cost source of supply
13
Pressures toward localization - trade barriers
remain - tariffs -non-tariff barriers (health,
safety, quotas, interpretation of the
law) -cultural differences - differences in
consumer tastes - furniture styles - clothing
styles - differences in patterns of expenditure
e.g. share of household budget for food,
entertainment, clothing, varies - nationalism -
western commodity culture subverting indigenous
culture e.g. India, Middle East, China,
Japan cf. Canada - for decades weve been trying
to protect Canadian culture from onslaught of
US radio, TV, magazines Real problems arise when
tribalism - i.e. a sub-national ethno/religious
group - inhibit the growth of national
consciousness and national consensus
14
Corporate Specific Issues 1.Management
resistance to change - inertia - destructive of
power base - under globalization branches lose
power to the centre 2.Incompetent managers -
there is a shortage of truly skilled
international managers 3. Transportation
issues value/weight ratio - if high, then
tendency to globalization, - if low, then
tendency toward localization 4. Impact of
technology - if making short runs more economic,
favours localization - if industry is capital
intensive, long runs of standard product,
favours globalization In summary different
industries in different places and at different
times face different sets of pressures - thats
why theres no recipe.
15
Interaction with Government 1. Governments
compete for location - subsidies - tax breaks
(e.g. Ireland) 2.Companies make use of transfer
pricing to minimize tax liabilities 3. Companies
use carrot stick techniques to influence
government -e.g. use carrots of benefits (and
bribes?? and campaign contributions??) to
influence government in their favour - use
stick of threatened plant closure, or relocation
to another jurisdiction, to pressure
government into giving a better
deal 4.Governments can place demands on
investing companies for - level of technology
and degree of technology transfer - quantity of
training and employment of local staff - level
of investment and/or re-investment -
restrictions on ownership - restrictions on
capital flows - restriction on payment of
dividends or management fees
16
Questions to Ask Yourself 1. Ask the questions
product -by product - different products will
have different answers 2. Where do the cost
advantages lie? - scale - input costs -
operating efficiencies (inc. labour
productivity) 3. What are the possible sources
of inputs? 4. Where is the location of product
development activities? 5. In deciding global
vs. local, what marketing strategy are we going
to use? What promotion strategy? What
advertising?
17
Things we can do 1. Have a specific plan to
develop international management expertise
e.g. rotate managers But note this will create
problems - salary scales - benefits, family
issues of health, education, vacation -
problems of managing a multinational work
force (cultural diversity) - differences
between expat and local salaries and
conditions 2. Make the performance measurement
and reward system match your strategy 000 Global
- emphasis is on cost control, productivity -
little control over profitability as
such Localized -emphasis on product mix,
production, marketing, profitability Remember
that it is more varied and complex than a
national, one-country, company!
Write a Comment
User Comments (0)
About PowerShow.com