A GENERAL FRAMEWORK: STRATEGY,
ENTREPRENEURSHIP AND
INTERNATIONAL BUSINESS
Chapter 9
Copyright ©2011 Taylor & Francis Group, an
informa business
Objectives…
 A Broad Value Proposition
 A Highly Generalizable Discipline
 Entrepreneurship
 Parallel Models
 New Complexities
 International Business
 International Strategies
 Implementation and Fit
A Broad Value Proposition
 How could a small firm like EAI serve such a
diverse clientele and still be successful?
A Broad Value Proposition
 Even firms that are very different share some basic
things in common.
 At a fundamental level firms are far more similar than
they are different.
 All firms survive by creating value for their customers,
over and above what those customers can find
elsewhere.
 This value leads to transactions, which translate into
revenues and profits.
A Broad Value Proposition
 All firms share the imperative to create value and
to translate that value into revenues and profits,
either in the present or at some point in the future.
 All firms gather resources and convert those
resources to produce outputs in the form of goods
and services.
 Firms that do not fit their environments do not
survive for long.
A Highly Generalizable Discipline
 The challenge of applying strategic management is
complicated by the breadth and variety of the
settings in which the discipline is practiced.
 It is important to recognize that strategic
management is a highly generalizable discipline,
with a fundamental logic and framework that can
be applied in some way to every firm, industry, and
setting.
A Highly Generalizable Discipline
 Some basic commonalities:
 Concept of competitive advantage
 Firms with a competitive advantage will perform better
than firms with no advantage and firms with no advantage
will not be successful.
 Concept of bargaining power
 All else being equal, firms with great bargaining power will
perform better than those without it.
A Highly Generalizable Discipline
 To realize the full benefit of strategic management
means understanding generalizability and
learning to think strategically in every setting and
across every type of firm.
 The challenge is to understand what is similar and
what is different, so as to take what works from the
strategic management framework and apply it to
the unique and particular setting of interest.
Entrepreneurship
 Parallel Models
 New Complexities
Entrepreneurship
 Entrepreneurship is the initiation, organization,
and operation of a business venture, for the
purpose of earning a profit.
 Entrepreneurship and strategic management are
closely related in that both are concerned with the
whole enterprise and with firm level performance.
Parallel Models
Opportunity
Recognition
Business Plan
Development
Feasibility
Analysis
Securing
Investment
Gathering
Key
Resources
A General Model of the Entrepreneurial Process
Launching
The Venture
New Complexities
 Liabilities of newness
 Newness, in any endeavor, carries with it some unique
problems related to unfamiliarity and the lack of example or
precedent.
 Entrepreneurs create new products and services or offer
existing products and services in new places or in different
ways.
 Therefore, they often face greater uncertainty and ambiguity
than others.
International Business
 The amount of international business transacted is
growing rapidly. Fifty years ago, international
trade was barely more than 1% of world GDP. By
2006, it represented nearly 30% and that number
continues to grow.
International Business
 The North American Free Trade Agreement (NAFTA)
created a free-trading block including Canada,
Mexico, and the United States.
 The Association of Southeast Asian Nations (ASEAN),
is designed to leverage bargaining power and to
facilitate trade and economic growth among ten
Southeast Asian countries.
 The World Trade Organization was created in 1995, for
the purpose of liberalizing world trade. The WTO now
has 153 members, 80% of the 192 nations recognized
by the United Nations.
International Business
 Two things are clear:
 First, the trend towards globalization of business is pervasive and
ongoing.
 The second implication is that international business will be an
increasingly important and increasingly common concern for
strategic managers.
 While international business is specialized, technical, and
complex, there are many issues that parallel the basic framework
and logic of strategy. Understanding these common themes and
leveraging the basic similarities can facilitate better
management, with better performance as a result.
International Strategies
 Competitive advantage derives from one of two basic
sources: low transaction costs and differentiation.
 This also applies in international settings; elasticity of
demand, along with issues like product substitutability
and bargaining power, still shapes strategy and
competitive advantage.
 In the international context, however, the scale and
complexity of the market is much greater.
International Strategies
 Thus, there are two distinct and generic strategies,
leveraging the same principles but doing so in a
way that is unique to the international context.
 These two generic strategies are the global and the
multi-domestic strategies. Both strategies reflect
some basic realities about the international market
and about how firms plans to compete in it.
International Strategies
 Consider the global strategy of Vodafone.
 It follows an economic logic that is very similar to the
low cost strategy, leveraging things like efficiency, scale
economy, and portability to offer products and services
that appeal to elastic customers.
 It does so by treating the world as a single, large, and
seamless market where one product or product
category can be adapted easily to suit all of the global
demand.
International Strategies
 Consider the multi-domestic strategy of Johnson &
Johnson.
 It follows an economic logic similar to a differentiation
strategy, leveraging things like customization and
customer responsiveness to offer products and services
that appeal to inelastic customers.
 It does so by treating the world as a series of different
markets, each with its own priorities and preferences
and each requiring local adaptations.
Implementation and Fit
 Recall the McKinsey 7-S
Model. How would the
implementation of these
two international strategies
necessitate different
organizational structures,
staffs, and styles?
Summary
 Entrepreneurship and International Business are
examples of specialized areas where the general
framework of strategic management can be
applied.
 In both cases, a better understanding of strategic
management can enable better action and better
performance.