Description
International Strategic Management (ISM) is an ongoing management planning process aimed at developing strategies to allow an organization to expand abroad and compete internationally. Strategic planning is used in the process of developing a particular international strategy.
International Strategy
Chapter 8
What is an International Strategy ?
• It is a strategy through which the firm sells its goods or services outside its domestic market • Another motive could be to secure needed resources or reduce production/operation costs
Raymond Vernon and the PLC
• Vernon believed that a firm does an innovation in its home country especially in an advanced economy then when demand of the product increases in foreign markets exports are done and finally to cater to the increasing demand operations are done at foreign locations. This is done to deal with foreign competition and also to get cheap factors of production • Vernon believed that going international happens to extend the PLC
Identifying International Opportunities
• • • • Increased Market size Return on Investment Economies of Scale Location Advantages
Increased Market Size
• Firms can expand the size of their potential market by moving into international markets
Return on Investment
• In sectors where which are R&D intensive/plan and capital intensive, large markets are required to earn significant return on investment and so firms like these go international
Economies of Scale
• By expanding into international markets, firms may be able to enjoy economies of scale • Firms may also be able to exploit core competencies in international markets through resource and knowledge sharing between units and network partners
Location Advantages
• Firms may locate facilities in other countries to lower basic costs of the goods or services they provide • It means easier access to lower cost labour, low cost energy and other natural resources
International Strategies
• Business level a. Cost leadership b. Differentiation c. Focus cost leadership d. Focused Differentiation • Corporate level a. Multidomestic b. Global c. Transnational
International Business Level Strategy
• In international business level strategy, the home country of operation is often the most important source of competitive advantage • The resource and capabilities established in the home country frequently allow the firm to pursue the strategy into international markets • But with time as the firm grows in multiple international markets, the country of origin is less important
Determinants of National Advantage – Diamond Model
Factors of Production
Firm strategy, Structure and Rivalry
Demand conditions
Related and supporting industries This model discussed the factors contributing to the advantage of firms in a dominant global industry and associated with a specific home country or regional environment
Determinants of National Advantage
• Factors of production – inputs – land, labour, capital and infrastructure • Basic factors – natural and labour resources • Advanced factors – digital communication systems and highly educated workforce • Generalised production factors – highway systems and supply of debt capital • Specialised production factors – skilled personnel
International Corporate Level Strategy
• Multidomestic Strategy – an international strategy in which strategic and operating decisions are decentralised to the strategic business unit of each country so as to allow that unit to tailor products to the local market • An multidomestic strategy focuses on competition within each country using decentralised approach • This strategy bring growth in local markets due to customisation to local markets
Global Strategy
• This strategy assumes more standardisation of products across different country markets • The strategy is centralised and controlled by the home office • This strategy is not responsive to local requirements and may inhibit growth of local markets
Transnational Strategy
• It is an international strategy through which the firm seeks to achieve both global efficiency and local responsiveness • Both the goals are contradictory and so this strategy is tough to implement • Thus ‘Flexible coordination’ is used which is building a shared vision and individual commitment through an integrated network which helps the firm manage its connections with customers, suppliers, partners and other parties more efficiently • If implemented successfully this strategy give more returns than multidomestic and global strategy
doc_941470871.ppt
International Strategic Management (ISM) is an ongoing management planning process aimed at developing strategies to allow an organization to expand abroad and compete internationally. Strategic planning is used in the process of developing a particular international strategy.
International Strategy
Chapter 8
What is an International Strategy ?
• It is a strategy through which the firm sells its goods or services outside its domestic market • Another motive could be to secure needed resources or reduce production/operation costs
Raymond Vernon and the PLC
• Vernon believed that a firm does an innovation in its home country especially in an advanced economy then when demand of the product increases in foreign markets exports are done and finally to cater to the increasing demand operations are done at foreign locations. This is done to deal with foreign competition and also to get cheap factors of production • Vernon believed that going international happens to extend the PLC
Identifying International Opportunities
• • • • Increased Market size Return on Investment Economies of Scale Location Advantages
Increased Market Size
• Firms can expand the size of their potential market by moving into international markets
Return on Investment
• In sectors where which are R&D intensive/plan and capital intensive, large markets are required to earn significant return on investment and so firms like these go international
Economies of Scale
• By expanding into international markets, firms may be able to enjoy economies of scale • Firms may also be able to exploit core competencies in international markets through resource and knowledge sharing between units and network partners
Location Advantages
• Firms may locate facilities in other countries to lower basic costs of the goods or services they provide • It means easier access to lower cost labour, low cost energy and other natural resources
International Strategies
• Business level a. Cost leadership b. Differentiation c. Focus cost leadership d. Focused Differentiation • Corporate level a. Multidomestic b. Global c. Transnational
International Business Level Strategy
• In international business level strategy, the home country of operation is often the most important source of competitive advantage • The resource and capabilities established in the home country frequently allow the firm to pursue the strategy into international markets • But with time as the firm grows in multiple international markets, the country of origin is less important
Determinants of National Advantage – Diamond Model
Factors of Production
Firm strategy, Structure and Rivalry
Demand conditions
Related and supporting industries This model discussed the factors contributing to the advantage of firms in a dominant global industry and associated with a specific home country or regional environment
Determinants of National Advantage
• Factors of production – inputs – land, labour, capital and infrastructure • Basic factors – natural and labour resources • Advanced factors – digital communication systems and highly educated workforce • Generalised production factors – highway systems and supply of debt capital • Specialised production factors – skilled personnel
International Corporate Level Strategy
• Multidomestic Strategy – an international strategy in which strategic and operating decisions are decentralised to the strategic business unit of each country so as to allow that unit to tailor products to the local market • An multidomestic strategy focuses on competition within each country using decentralised approach • This strategy bring growth in local markets due to customisation to local markets
Global Strategy
• This strategy assumes more standardisation of products across different country markets • The strategy is centralised and controlled by the home office • This strategy is not responsive to local requirements and may inhibit growth of local markets
Transnational Strategy
• It is an international strategy through which the firm seeks to achieve both global efficiency and local responsiveness • Both the goals are contradictory and so this strategy is tough to implement • Thus ‘Flexible coordination’ is used which is building a shared vision and individual commitment through an integrated network which helps the firm manage its connections with customers, suppliers, partners and other parties more efficiently • If implemented successfully this strategy give more returns than multidomestic and global strategy
doc_941470871.ppt