INTERNATIONAL BUSINESS STRATEGIES
Andrey G. Medvedev,
Professor
CEMS MIM Programme
September 15, 2009
3. GLOBAL – LOCAL DILEMMA
1. COMPETITION IN MULTI-DOMESTIC AND GLOBAL INDUSTRIES
2. MIXED INDUSTRIES
3. “LOCAL RESPONSIVENESS – GLOBAL INTEGRATION”
FRAMEWORK
4. STRATEGIC ALTERNATIVES FOR FOREIGN EXPANSION
© Andrey Medvedev
FOREIGN EXPANSION STRATEGY

FOREIGN EXPANSION STRATEGY IS A FIRM’S PLAN
TO EXTEND ITS VALUE CREATION ACTIVITIES
INTO FOREIGN COUNTRIES
© Andrey Medvedev
GLOBAL INTEGRATION –
NATIONAL RESPONSIVENESS FRAMEWORK

FOREIGN EXPANSION STRATEGY IS A FIRM’S PLAN
TO EXTEND ITS VALUE CREATION ACTIVITIES
INTO FOREIGN COUNTRIES

GLOBAL INTEGRATION – NATIONAL RESPONSINESS
FRAMEWORK HAS BEEN PROPOSED
BY PROFESSORS C. K. PRAHALAD AND Y. DOZ

TWO FACTORS (DIMENSIONS) ARE TAKEN INTO ACCOUNT
– NATIONAL (LOCAL) RESPONSIVENESS
WHICH BRINGS DIFFERENTIATION BENEFITS
– GLOBAL INTEGRATION
WHICH BRINGS BENEFITS EFFICIENCY
© Andrey Medvedev
PRESSURES FOR RESPONSIVENESS
(PRAHALAD AND DOZ, 1987)

DIFFERENCES IN CUSTOMER NEEDS

DIFFERENCES IN DISTRIBUTION

NEED FOR SUBSTITUTES AND PRODUCT ADAPTATION

DIFFERENT MARKET STRUCTURE

GOVERNMENT REGULATION
© Andrey Medvedev
MULTI-DOMESTIC AND GLOBAL INDUSTRIES

MULTI-DOMESTIC INDUSTRIES

GLOBAL INDUSTRY

ARE PRESENT IN MANY
COUNTRIES BUT ARE SPECIFIC
TO EACH COUNTRY OR A
SMALL GROUP OF COUNTRIES.
THE INTERNATIONAL INDUSTRY
BECOMES A COLLECTION OF
ESSENTIALLY DOMESTIC
INDUSTRIES

OPERATES WORLD-WIDE WITH
ONLY SMALL ADJUSTMENTS
MADE BY MNCs FOR COUNTRY
SPECIFIC CIRCUMSTANCES.
THE INTERNATIONAL INDUSTRY
IS NOT MERELY A COLLECTION
OF, BUT A SERIES OF LINKED
DOMESTIC INDUSTRIES

COMPETITION IN EACH
COUNTRY IS ESSENTIALLY
INDEPENDENT OF THAT IN
OTHER COUNTRIES. THE
COMPETITIVE ADVANTAGES OF
THE FIRM ARE SPECIFIC TO
EACH COUNTRY

A FIRM’S COMPETITIVE
POSITION IN ONE COUNTRY IS
INFLUENCED BY ITS POSITION
IN OTHER COUNTRIES. THE
RIVALS COMPETE ON A TRULY
WORLD-WIDE BASIS
© Andrey Medvedev
MIXED INDUSTRY

IS LOCATED BETWEEN TWO EXTREMES,
GLOBAL AND MULTI-DOMESTIC INDUSTRIES

IS NOT PURELY GLOBAL AND NOT PURELY MULTI-DOMESTIC

WITHIN A MIXED INDUSTRY SOME SEGMENTS HAVE A GLOBAL
GEOGRAPHIC SCOPE, SOME HAVE A LOCAL GEOGRAPHIC
SCOPE, AND SOME ARE IN BETWEEN (MIXED SEGMENTS)

THE CO-EXISTENCE OF GLOBAL, MULTI-DOMESTIC AND MIXED
SEGMENTS APPEARS TO BE A FUNDAMENTAL
CHARACTERISTIC OF MIXED INDUSTRIES
© Andrey Medvedev
PRESSURES FOR INTEGRATION
(PRAHALAD AND DOZ, 1987)

PRESSURES FOR GLOBAL STRATEGIC CO-ORDINATION
– IMPORTANCE OF MULTINATIONAL CUSTOMERS
– MULTINATIONAL COMPETITORS
– INVESTMENT INTENSITY

PRESSURES FOR GLOBAL OPERATIONAL INTEGRATION
–
–
–
–
TECHNOLOGICAL INTENSITY
PRESSURE FOR COST REDUCTION
UNIVERSAL NEEDS
ACCESS TO RAW MATERIALS AND ENERGY
© Andrey Medvedev
DISINTEGRATED ORGANISATION
Centralised or Decentralised Model
HQ
Subsidiary
© Andrey Medvedev
INTEGRATED ORGANISATION
Integrated (networked) Global Model
HQ
Subsidiary
© Andrey Medvedev
MANUFACTURING FORD FIESTA
IN EUROPE
© Andrey Medvedev
FOUR FOREIGN STRATEGIC ALTERNATIVES
High
Differentiation
benefits
from national
responsiveness
Low
Low
Efficiency benefits from global integration
High
© Andrey Medvedev
FOUR FOREIGN STRATEGIC ALTERNATIVES
High
Multi-domestic
Local differentiation
Pressure for
local
responsiveness
International
(Home replication)
Global differentiation
Transnational
(Multi-focal)
Differentiation
and low cost
Global
Low cost
Low
Low
Pressure for global integration
High
© Andrey Medvedev
MULTI-DOMESTIC STRATEGY



A COMPANY CUSTOMISES ITS PRODUCTS
TO SUIT THE NEEDS OF CUSTOMERS
IN EACH COUNTRY IT COMPETES IN
THE COMPANY TRANSFERS
VALUE CREATION FUNCTIONS ABROAD
THE COMPANY SETS UP MANUFACTURING OPERATIONS
IN COUNTRIES IN WHICH IT OPERATES
© Andrey Medvedev
INTERNATIONAL (HOME-REPLICATION)
STRATEGY



A COMPANY OFFERS CUSTOMERS IN ALL COUNTRIES
A STANDARDISED PRODUCT ALLOWING FOREIGN DIVISIONS
TO ADAPT PRODUCTS TO LOCAL PREFERENCES
ONLY SLIGHTLY
MANY CORE COMPETENCIES ARE LOCATED AT HOME
THE COMPANY TRANSFERS THESE COMPETENCIES
FROM THE PARENT TO ITS FOREIGN DIVISIONS
IN ORDER TO IMPROVE DOMESTIC CORE COMPETENCIES
© Andrey Medvedev
GLOBAL STRATEGY




A COMPANY TRIES TO EXPLORE LOCATION ADVANTAGES
CORE COMPETENCIES ARE LOCATED
IN SEPARATE LOCATIONS
THE COMPANY MANUFACTURES INPUT ACTIVITIES
IN THE COUNTRIES WHERE COSTS ARE LOWEST
IT HELPS REDUCE PRODUCTION COSTS SO
THAT THE COMPANY
CAN OFFER FOREIGN CUSTOMERS CHEAPER PRODUCTS
© Andrey Medvedev
TRANSNATIONAL STRATEGY




A COMPANY SIMULTANEOUSLY FACES BOTH
STRONG PRESSURE FOR LOCAL RESPONSIVENESS
AND STRONG PRESSURE FOR COST REDUCTION
AND INTEGRATION
THE COMPANY TRIES TO SIMULTANEOUSLY
ACHIEVE LOW COST (THROUGH LOCATION ECONOMY,
ECONOMY OF SCALE AND LEARNING EFFECTS)
AND DIFFERENTIATE ITS PRODUCTS
TO ACCOUNT FOR NATIONAL DIFFERENCES
TRANSNATIONAL STRATEGY AIMS TO REACH ADVANTAGES
OF BOTH A GLOBAL AND A MULTI-DOMESTIC STRATEGY
THIS STRATEGY IS NOT AN EASY ONE TO PURSUE
© Andrey Medvedev
FOUR FOREIGN STRATEGIC ALTERNATIVES
High
Multi-domestic
Local differentiation
Pressure for
local
responsiveness
International
(Home replication)
Global differentiation
Transnational
(Multi-focal)
Differentiation
and low cost
Global
Low cost
Low
Low
Pressure for global integration
High
© Andrey Medvedev
LEVELS OF INTERNATIONAL STRATEGY:
FUNCTIONAL STRATEGIES

INTERNATIONAL PRODUCTION STRATEGY

INTERNATIONAL MARKETING STRATEGY

INTERNATIONAL HUMAN RESOURCES STRATEGY

INTERNATIONAL FINANCIAL STRATEGY

INTERNATIONAL RESEARCH AND DEVELOPMENT STRATEGY
© Andrey Medvedev
INTERNATIONAL STRATEGY
IMPLEMENTATION

DESIGNING A SUITABLE ORGANISATIONAL STRUCTURE

SELECTING AN ENTRY MODE

DESIGNING A PRODUCTION AND TECHNOLOGY POLICY

SELECTING THE MOST SUITABLE MARKETING STRATEGY

ASSESSING THE EXISTING HUMAN RESOURCES CAPABILITY

MAKING DECISIONS CONCERNING WHICH INTERNATIONAL
FINANCIAL RESOURCES SHOULD BE USED
© Andrey Medvedev