Learning Objectives
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Appreciate the major trends in global strategic
management and why internationalization is
important
Recognize the stage of global development of a
particular firm
Understand how to create a global mindset
Understand the roles of foreign subsidiaries
Select an appropriate international expansion
tactic
Analyze a foreign country to determine its
attractiveness for investment
Primary Reasons Firms
Make Foreign Investments
 New
Markets
 Better Resources
 Efficiency
 Risk Reduction
 Competitive Countermove
Global Orientation
 International
expansion is the process
of building an expanding operational
presence
 Global integration is the process
through which a multi-national
organization integrates its worldwide
activities into a single world strategy
Four Stages of International Development
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Domestic Stage
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International Stage
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Exporting important; international divisions to handle
marketing functions
Multinational Stage
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Focus on domestic operations
Some exporting
Marketing and production facilities throughout the world
More than a third of sales overseas
Access to world capital markets
Global Stage
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Organization no longer associated with any one country
Operate in as many as 40 or more countries
Cross-Cultural Human Resource Differences
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Percentage of people who agreed with this statement:
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High percentage countries
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It is important for a manager to have, at hand, precise
answers to most of the questions that his or her
subordinates may raise about their work
Japan 77%
Indonesia 67%
Italy and France 59%
Low percentage countries
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USA and Sweden 13%
Netherlands 18%
Denmark 27%
Great Britain 30%
Factors that Lead to Competitive
Advantages of Nations
Firm Strategy,
Structure and
Rivalry
Factor
Conditions
Demand
Conditions
Related and
Supporting
Industries
Source: Adapted with the permission
of the Free Press, an imprint of Simon &
Schuster Adult Publishing Group (see
text for complete reference)
Management of Foreign Subsidiaries
 Three
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levels of subsidiary responsibility
Local Implementation
• Very well defined roles to play
• Very little independence
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Specialized Contribution
• An interdependent network of subsidiaries, with each
subsidiary making a unique contribution
• Often in a production role
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Global Mandate
• Have responsibility for and entire global business
• Activities integrated by the subsidiary itself, not the
corporate office
Product/Market Approach
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Multidomestic Product/Market Strategy
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Global Product/Market Strategy
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Handle product design, assembly and marketing on a
country-by-country basis
Custom tailored products and services for particular
markets (local responsiveness)
One product design
Marketing in the same fashion throughout the world
Emphasis on efficiency
Transnational Product/Market Strategy
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Entails seeking both global efficiency and local
responsiveness
Integrated network that fosters shared vision and
resources while allowing for individual decisions
International Expansion Tactics
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Exporting
 Contractual Arrangements
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Foreign Direct Investment
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Licensing
Franchising
Joint Venture
Wholly Owned Subsidiary
Acquisition
In general, moving down the list (above) is
associated with greater cost, financial risk, profit
potential and control
Global Business-Level Strategy
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Improve Competitive Position Through Cost
Leadership
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Foreign assembly or manufacturing
Branding of finished products that are subcontracted to
foreign firms
Global sourcing
Expanding markets leading to economies of scale
Transfer of technological know-how through joint ventures
Improve Competitive Position Through Differentiation
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Distribution of elite foreign product in the U.S.
Sale of U.S. product in foreign markets
Superior quality through joint ventures
Licensing of product technology from abroad
Promoting an open, learning mindset
Global Corporate-Level Strategy
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Merger and acquisition wave is a global trend
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Many cross-country acquisitions
Much consolidation of global industries
Creates enormous, diversified global companies
Some companies are focusing on related acquisitions in
pursuit of economies of scope based on shared resources
Many global firms are downscoping
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Probably helpful to performance of firms with big
investments in industrialized nations
May be damaging to the economies of developing nations if
big firms withdraw their capital
• Big firms channel capital to promising businesses in nations with
poorly developed financial markets
International Markets
 Triad
regions include North America,
Europe and the Pacific Rim
 Difficult management challenges common
in other “developing” nations
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Unstable governments
Inadequately trained workers
Low levels of supporting technology
Shortages of supplies
Weak transportation systems
Unstable currencies
Japan After the Economic Bubble Burst
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Business Environment
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Consumers
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Remains a tough, highly competitive environment
Price destruction
Distribution becoming more concentrated
Increasing expectations of fast retailer response
Increased balance between work and family
Some convergence with “international values”
Heritage
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Luxury designer products hold strong, but consumers
are more price/value conscious,
Luxury products sold through discount outlets
Japan After the Economic Bubble Burst
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Consumer Interest
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Product Churning
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Reduction in product emulation activity
Insider Strategy
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More focus on home
More value-for-money-driven behavior
Increased emphasis on functional performance, less brand
devotion
May still be true, but foreign owned companies attempting
“insider” strategies are struggling
Marketing Skills
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Marketers in Japan still maintain dedicated dialogue with
consumers
Selecting a Foreign Market
 A foreign
market should be selected
only after thorough evaluation of:
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Social Forces
The Economy
Political / Legal Environment
The State of Technology
Industry Specific Factors
Institutional Differences Across Countries
Emerging
economies:
Russia,
China,India
Lessdeveloped
economic
and
transaction
environments
Group- Family-centered Bank-centered
Marketcentered
economies:
economies:
centered
economies:
Sweden,
Japan,
economies:
Korea
France, Italy
Germany
U.S., U.K.
Well
developed
economic and
transaction
environments
Source: R.E. Hoskisson, R.A. Johnson, D. Yiu and W.P. Wan, “Restructuring Strategies of Diversified Business Groups:
Difference Associated with Country Institutional Environments,” in M.A. Hitt, R.E. Freeman and J.S. Harrison, The
Blackwell Handbook of Strategic Management (Oxford: Blackwell Publishers LTD, 2001), p. 444, used with permission.
Strategic Management for the 21st Century
 Increasing
Levels of Global Trade and
Global Awareness
 Global and Domestic Social Turbulence
 Increased Terrorism and a World-Wide
Effort to Eliminate It
 Increased Sensitivity to Ethical Issues and
Environmental Concerns
 Rapidly Advancing Technology, Especially
in Communications
Strategic Management for the 21st Century
 Continued
Erosion of Buying Power in the
U.S. and Other Economies
 Continued Development of Third World
Economies
 Increases in U.S. and Global Strategic
Alliances
 Revolution in the U.S. Healthcare Industry
 Greater Emphasis on Security and Crisis
Management
Major Concepts in Chapter 10
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Firms make foreign investments for a variety of
reasons, including seeking new markets, better
resources, efficiency, risk reduction or as a
competitive countermove
 Global strategic management provides challenges
and opportunities not found in domestic markets
and strategies
 International expansion involves building an
expanding operational presence, while global
integration is the process through which a
multinational organization integrates its worldwide
activities into a single global strategy
Major Concepts in Chapter 10
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Organizations seem to evolve through four stages
of international development, which are domestic,
international, multinational and global
 The role of foreign subsidiaries is changing from
being simply branch locations to a full role in the
development of new competencies, capabilities,
resources and products
 A multidomestic product/market strategy entails
custom tailoring products and services by country,
whereas a global product/market strategy offers
one approach throughout the world. A
transnational product/market strategy is a
compromise between the two approaches
Major Concepts in Chapter 10
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Common international expansion tactics include
exporting, licensing, franchising, joint ventures,
wholly-owned subsidiaries and acquisitions
 A global merger and acquisition wave has created
enormous, diversified global companies; however,
refocusing is also evident as firms pursue related
acquisitions and discard unrelated businesses
 Foreign markets should be carefully evaluated
before investments are made. Factors that should
be evaluated include the social environment,
economy, political/legal environment, the state of
technology and other factors specific to each
industry