6
国际企业管理
Multinational and
Participation Strategies:
Content and Formulation
跨国参与战略：内容与制定
国际企业管理6
朱吉庆
博士 讲师
harveyzjq@126.com
Learning Objectives
• Appreciate the complexities of the global-local
dilemma
• Understand the content of the multinational
strategies
• Formulate a multinational strategy
• Understand the content of the participation
strategies
• Formulate a participation strategy
• Understand political risk and ways companies can
manage such risks
Multinational and Participation Strategies: Content and Formulation
5–2
Multinational Strategies: Dealing with the
Global-Local Dilemma
• Local-responsiveness solution: customize to
country or regional differences
• Global integration solution: conduct business
similarly throughout the world
• Global-local dilemma: choice between a localresponsiveness or global approach to a
multinational’s strategies
Multinational and Participation Strategies: Content and Formulation
5–3
Multinational Strategies: Dealing with the
Global-Local Dilemma
• Four broad multinational strategies
- Multidomestic
- Transnational
- International
- Regional
Multinational and Participation Strategies: Content and Formulation
5–4
Multidomestic Strategy
• The company attempts to offer products or
services that attract customers by closely
satisfying their cultural needs and expectations
• Emphasizing local-responsiveness issues
- Ex.: different packages, colors
- Costs more to produce, need to charge higher prices
to recoup
- A form of the differentiation strategy
- Not limited to large multinationals
Multinational and Participation Strategies: Content and Formulation
5–5
Transnational Strategy
• Two goals get top priority
- Seeking location advantages
- Gaining economic efficiencies from operating
worldwide
Multinational and Participation Strategies: Content and Formulation
5–6
Transnational Strategy (cont.)
• Location advantages: dispersing value-chain
activities anywhere in the world where they can
be done best or cheapest
• Global platform: country location where a firm
can better perform some of its value-chain
activities
Multinational and Participation Strategies: Content and Formulation
5–7
Transnational strategy (cont.)
• With upstream location advantages, the
transnational can:
-
Locate subunits near cheap sources of high-quality raw material
Locate subunits near centers of research and innovation
Locate subunits near sources of high-quality or low-cost labor
Seek low-cost financing anywhere in the world
Share discoveries and innovations made in one part of the world
with operations in other parts of the world
Multinational and Participation Strategies: Content and Formulation
5–8
Transnational Strategy (cont.)
• Comparative advantage: advantages of nations
over other nations
- No longer only available to domestic firms
• Location advantages can exist for all activities of
the value chain
Multinational and Participation Strategies: Content and Formulation
5–9
International Strategy
• International strategy: selling global products
and using similar marketing techniques
worldwide
- A compromise approach
- Limited adjustment in product offerings and marketing
strategies
- Upstream and support activities remain concentrated
at home country
Multinational and Participation Strategies: Content and Formulation
5–10
Regional Strategy
• Regional strategy: managing raw-material
sourcing, production, marketing, and support
activities within a particular region
- Another compromise strategy
- Attempts to gain economic advantages from regional
network
- Attempts to gain local adaptation advantages from
regional adaptation
Multinational and Participation Strategies: Content and Formulation
5–11
Exhibit 6.1: Content of the Four Basic
Multinational Strategies
Multinational and Participation Strategies: Content and Formulation
5–12
Resolving the Global-Local Dilemma:
Formulating a Multinational Strategy
• Selection of strategy depends on degree of
globalization in an industry
• Globalization drivers: conditions in a industry
that favor transnational or international
strategies
• Four categories of global drivers: markets, costs,
governments, and competition
Multinational and Participation Strategies: Content and Formulation
5–13
Global Markets
• Are there common customer needs?
• Are there global customers?
• Can you transfer marketing?
Multinational and Participation Strategies: Content and Formulation
5–14
Costs
• Are there global economies of scale?
• Are there global sources of low-cost raw
materials?
• Are there cheaper sources of highly skilled labor?
• Are product-development costs high?
Multinational and Participation Strategies: Content and Formulation
5–15
Governments
• Do the targeted countries have favorable trade
policies?
• Do the target countries have regulations that
restrict operations?
Multinational and Participation Strategies: Content and Formulation
5–16
The Competition
• What strategies do your competitors use?
• What is the volume of imports and exports in the
industry?
Multinational and Participation Strategies: Content and Formulation
5–17
Competitive Advantage in the
Value Chain
• Location of competitive advantage in value chain
determines choice of generic strategy
• Upstream advantages: low-cost or high-quality
design
- Favor transnational strategy or an international
strategy
• Downstream advantages: marketing, sales,
service
- Favor multidomestic strategy
Multinational and Participation Strategies: Content and Formulation
5–18
Competitive Advantage in the Value
Chain (cont.)
• Mixed conditions
- Competitive strength downstream in industry with
strong globalization drivers
- Competitive strength upstream in industries with local
adaptation pressures
 Both favor regional strategies
Multinational and Participation Strategies: Content and Formulation
5–19
Exhibit 6.2: Pressures for Globalization vs.
Localization
Multinational and Participation Strategies: Content and Formulation
5–20
Transnational or International: Which
Way for the Global Company?
• Select a transnational over an international strategy
when:
 - Benefits of dispersing activities worldwide offset the costs of
coordinating a more complex organization
• Select an international strategy over a transnational
when:
 - Cost savings of centralization offset the lower costs of higher
quality raw materials/labor from worldwide locations
Multinational and Participation Strategies: Content and Formulation
5–21
Participation Strategies:
The Content Options
• Participation strategies: the choice of how to
enter each international market
-
Exporting
Licensing
Strategic alliances
Foreign direct investment
Multinational and Participation Strategies: Content and Formulation
5–22
Exporting
• Easiest way to sell a product in international
market
• Passive exporter: company that treats and fills
overseas orders like domestic orders
• Alternatively, a company can put extensive
resources into exporting with dedicated export
department
Multinational and Participation Strategies: Content and Formulation
5–23
Export Strategies
• Indirect exporting: uses intermediaries or gobetween firms
• The most common intermediaries
 - Export Management Company (EMC) and Export
Trading Company (ETC)
 Specialize in products, countries, or regions
 Provide ready-made access to markets
 Have networks of foreign distributors
Multinational and Participation Strategies: Content and Formulation
5–24
Export Strategies
• Direct exporting: direct contact with customers in
the foreign market
 - More aggressive exporting strategy
 - Requires more contact with foreign companies
 - Uses foreign sales representatives, distributors, or
retailers
 - May require branch offices in foreign countries
Multinational and Participation Strategies: Content and Formulation
5–25
Export Strategies (cont.)
• Channels in direct exporting
- Sales representatives use the company’s promotional
literature and samples
- Foreign distributors resell the products
- Sell directly to foreign retailers or end users
Multinational and Participation Strategies: Content and Formulation
5–26
Licensing
• Licensing: contractual agreement between a
domestic licensor and a foreign licensee
• Licenser has valuable patent, know-how, or
trademark
• Foreign licensee pays royalties for use
Multinational and Participation Strategies: Content and Formulation
5–27
Exhibit 6.3: Contents of a Licensing Agreement
Multinational and Participation Strategies: Content and Formulation
5–28
Special Licensing Agreements
• International franchising: the franchisor grants
the use of a whole business operation
• Contract manufacturing: production following the
foreign companies’ specifications
• Turnkey operation: multinational company
makes a project fully operational before the
foreign owner takes control
Multinational and Participation Strategies: Content and Formulation
5–29
International Strategic Alliances
• Cooperative agreements between firms from
different countries to participate in business
activities
• May include any value-chain activity
Multinational and Participation Strategies: Content and Formulation
5–30
Types of International Strategic Alliances
• Equity International Joint Ventures (IJV): two or
more firms from different countries have an
equity position in a separate company
• International Cooperative Alliance (ICA): two or
more firms from different countries agree to
cooperate in any value-chain activity
Multinational and Participation Strategies: Content and Formulation
5–31
Foreign Direct Investment (FDI)
• Companies own and control directly a foreign
operation
- Symbolizes the highest stage of internationalization
• Greenfield investments: starting foreign
operations from scratch
Multinational and Participation Strategies: Content and Formulation
5–32
Exhibit 6.5: World’s Top Companies Ranked by
Foreign Assets
Multinational and Participation Strategies: Content and Formulation
5–33
Exhibit 6.5: World’s Top Companies Ranked by
Foreign Assets
Multinational and Participation Strategies: Content and Formulation
5–34
Formulating Participation Strategy
• Must take into account several issues:
- Basic functions of each participation strategy
- Strategic considerations and intent of company
- How best to support company’s multinational strategy
Multinational and Participation Strategies: Content and Formulation
5–35
Export Strategy
• Exporting is the easiest and cheapest
participation strategy, although it may not always
be the most profitable
• It is a way to begin to internationalize or t test
new markets
• Which form of exporting should it choose?
Multinational and Participation Strategies: Content and Formulation
5–36
Deciding on Export Strategy
• Does management need to control sales,
customer credit, and sale of the product?
 - If yes, choose direct exporting
• Does company have resources to manage
export operations?
 - If not, use indirect exporting
Multinational and Participation Strategies: Content and Formulation
5–37
Deciding on Export Strategy
• Does company have resources to
design/execute international promotional
activities?
 - If not, use foreign intermediaries and indirect
exporting
• Does company have resources to support
extensive international travel or possibly an
expatriate sales
force?
•
- If so, choose direct exporting.
Multinational and Participation Strategies: Content and Formulation
5–38
Deciding on Export Strategy
• Does company have time and expertise to
develop overseas contacts and networks?
- If not, rely on foreign intermediaries or indirect
exporting.
• Will time and resources affect domestic
operations?
- If not, choose direct exporting.
Multinational and Participation Strategies: Content and Formulation
5–39
Licensing Decision
• Based on three factors
- Characteristics of the products
 Best products are older or soon-to-be replaced
- Characteristics of the target country
 Situation in target country
- Nature of the licensing company
 Company may lack resources to go international
Multinational and Participation Strategies: Content and Formulation
5–40
Licensing: Disadvantages
• Gives up control
• May create new competitors
• Often generates only low revenues
• Opportunity costs (barriers to other participation
strategies)
Multinational and Participation Strategies: Content and Formulation
5–41
Motivations for Strategic Alliances
• Partner’s knowledge of the market
• Government requirements
• To share risks
• To share technology
• Economies of scale
• Low cost raw materials or labor
Multinational and Participation Strategies: Content and Formulation
5–42
Key Considerations for Alliances
• Could other participation strategies better satisfy
strategic objectives?
• Does firm have management and capital
resources to contribute?
• Can partner benefit the company’s objectives?
• What is expected payoffs?
Multinational and Participation Strategies: Content and Formulation
5–43
Foreign Direct Investment (FDI)
• Most experienced international firms choose FDI
• Advantages
-
Greater control
Lower costs of supplying host country
Avoid import quotas
Greater opportunity to adapt product to local markets
Better local image of the product
Multinational and Participation Strategies: Content and Formulation
5–44
Disadvantages of FDI
• Increased capital investment
• Increased investment of managerial and other
resources
• Greater exposure of the investment to political
and financial risks
Multinational and Participation Strategies: Content and Formulation
5–45
Exhibit 6.6: Advantages and
Disadvantages of FDI
Multinational and Participation Strategies: Content and Formulation
5–46
Choosing Participation Strategy:
Strategic Considerations
1.Company’s strategic intent regarding profits vs.
learning
2.Company capabilities
3.Local government regulations
4.Characteristics of the target product and market
Multinational and Participation Strategies: Content and Formulation
5–47
Choosing Participation Strategy: Strategic
Considerations (cont.)
5.Geographic and cultural distance
6.Financial risk of the investments
7.Need for control
Multinational and Participation Strategies: Content and Formulation
5–48
Exhibit 6.7: The Risk versus Control Tradeoff
Multinational and Participation Strategies: Content and Formulation
5–49
Exhibit 6.8: Decision Matrix for Formulating
Participation Strategies
Multinational and Participation Strategies: Content and Formulation
5–50
Participation Strategies and the
Multinational Strategies
• What is the strategic reason to be in the market?
- Location advantages vs. market penetration
 E.g., source of raw materials, R&D, production, etc.
• A mix of participation strategies often support
the basic multinational strategy
Multinational and Participation Strategies: Content and Formulation
5–51
Exhibit 6.9: Participation Strategies and the
Multinational Strategies
Multinational and Participation Strategies: Content and Formulation
5–52
Participation Strategies: Synopsis
• The selection of a participation strategy depends
on a complex array of factors, including the
company’s multinational strategy, its strategic
intent, and its need for control of its products
• Most multinational companies will choose a
mixture of participation strategies to fit different
products or different businesses
Multinational and Participation Strategies: Content and Formulation
5–53
Conclusion
• Multinational manager faces array of complex
strategic issues
• All companies must deal with global-local
dilemma
• Multinationals also face the challenges of
choosing participation strategies
• Political risk is also becoming an important
factor
Multinational and Participation Strategies: Content and Formulation
5–54