Chapter 16
Strategy in an international context
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-1
Traditional approach to internationalisation
Ricardo’s theory of internationalisation
Similar to the RBV,
nations have natural
advantages (e.g. oil)
Adapted from Vernon (1966)
With this advantage and
dominance, foreign
expansion is successful
This permits local firms to
dominate in industries
where there is advantage
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-2
Traditional theory of
internationalisation and free trade
• For the traditional model to operate, free trade is
required.
• Trade barriers negate the comparative advantage of
other countries and allow nations to inefficiently produce
where they have no comparative advantage.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-3
16.2 Chiquita Bananas
• Chiquita came to dominate the banana industry (prior
to WWI) using the US comparative advantages of
transportation and disease control.
• Those advantages are now diluted and Central
America now has the comparative advantage with
labour costs, land and climate.
• Why does Chiquita still dominate the banana
industry?
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-4
16.2 Chiquita Bananas
• Resources:
• Capabilities
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-5
International strategies follow two
vectors:
high
global strategy
transnational
strategy
export strategy
multi domestic
strategy
low
high
need to
reduce costs
low
need for local adaptation
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-6
Export strategy
• Rationale: leverage home-based core competencies
in foreign markets.
Multi domestic strategy
• Rationale: favour adaptation to local markets through
decentralization at country-level
Global strategy
• Rationale: standardizing products and services to
maximize scale and location economies
Transnational strategy
• Rationale: attempt to capture the ‘best of both worlds’
through scale and location economies and adaptation.
Leveraging innovation and learning throughout the
organization
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-7
16.6 WineRidge’s international
strategy
high
global strategy
transnational
strategy
export strategy
multi domestic
strategy
low
high
need to
reduce costs
low
need for local adaptation
Position WineRidge and justify answer
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-8
16.6 WineRidge’s international
strategy
high
need to
reduce costs
low
global strategy
International
distribution
export strategy
Australian
winemaking
low
transnational
strategy
multi domestic
strategy
US JV
high
need for local adaptation
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-9
The rule of dinosaurs:
mature industry structure and
problems with the traditional model
Large
Chiquita
Bananas
Firm
number
Small
Small
Firm size
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
Large
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Comparative advantage,
internationalisation and free trade
Free trade provided great benefit for large firms.
The resources and capabilities that mattered
were experience, scale, distribution and capital
rather than capabilities based on domestic
comparative advantage.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-11
A theory for large firms, mature industries
and developed economies.
Free trade
+
Size,
experience,
capital etc.
=
Options of:
1. Export
2. Multi domestic
3. Global
4. Transnational
The traditional model does not explain the
internationalisation of firms in small or developing
economies.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-12
The strategies of firms in smaller or
developing nations
high
industry
pressure to
internationalise
low
dodger
strategy
contender
strategy
defender
strategy
extender
strategy
customised to
home market
transferable
abroad
resources and capabilities
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-13
Dodger strategy
• Avoid competing directly with multinationals:
– collaborate through JVs, become a supplier, sell out
Contender strategy
• Aims to accelerate growth and compete on equal
terms with foreign giants through:
– cooperation with top suppliers and customers
– foreign acquisitions
Defender strategy
• identifies a niche market where it can serve the local
customer better than the multinationals.
Extender strategy
• Use a strong base in the home market to expand in
similar markets abroad (selective
internationalization).
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-14
16.14 The Embraer case
high
need to
reduce
costs
low
global
strategy
transnational
strategy
export
strategy
multi
domestic
strategy
high
low
need for local adaptation
high
dodger
strategy
contender
strategy
industry
pressure to
extender
interdefender
strategy
nationalise
strategy
low
transferable
customised to
abroad
home market
resources and capabilities
Where does Embraer fit
within each model
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-15
16.14 The Embraer case
high
need to
reduce
costs
low
global
strategy
transnational
strategy
export
strategy
multi
domestic
strategy
high
low
need for local adaptation
high
dodger
strategy
contender
strategy
industry
pressure to
extender
interdefender
strategy
nationalise
strategy
low
transferable
customised to
abroad
home market
resources and capabilities
Where does Embraer fit
within each model
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-16
Smaller economy internationalisation
• Tendency to succeed in niche areas or new
industries.
• Tendency to become global very quickly
without dominating the domestic market.
• Known as “born global” firms.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-17
16.16 Incat’s global strategy
Use industry maturity to explain why Incat is
so successful whereas naval contracts
have led to very modest exports
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-18
16.16 Incat’s global strategy
Aluminium, wave piercing,
high-speed large craft is
effectively a new industry.
There are no giants in this
industry
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
Traditional ship-building is
a consolidated, mature
industry dominated by a
few giants
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Everything old is new again?
Many of today’s giants in mature industries started as
‘born globals, for example:
• Microsoft
• Nestle
Today’s ‘born globals’ may be tomorrow’s dinosaurs.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak
1-20