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Globalization and Strategic Considerations for Multinational Firms

Explore the concept of globalization and its impact on multinational firms, including strategic orientation, factors affecting strategic management, and international strategy options.

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Globalization and Strategic Considerations for Multinational Firms

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  1. Topic 5 The Global Environment: Strategic Considerations for Multinational Firms

  2. What is Globalization? The strategy of approaching worldwide markets with standardized products

  3. Additional resources Lowered costs Taxes / Incentives Economies of scale Power and prestige Protect home market via offense in competitor’s home Some Reasons for Going Global –Proactive Approach

  4. Some Reasons for Going Global –Reactive Approach • Trade barriers • International competition • Regulations

  5. Strategic Orientation of Global Firms • Ethnocentric • Values and priorities of parent organization should guide strategic decision making of all operations • Polycentric • Culture of country in which strategy is implemented dominates decision making • Regiocentric • Parent firm attempts to blend its own predispositions with those of region under consideration • Geocentric • Parent firm adopts global systems approach to decision making, emphasizing global integration

  6. Beginning to Globalize:Key Steps • External assessment • Careful examination of critical features of the global environment, particularly to host nation’s status in • Economic progress • Political control • Nationalism • Internal assessment • Identification of resources in … technical and managerial skills, capital, labor, raw materials • Identification of capabilities in … product delivery, financial management systems

  7. Obvious … but important …differences in Factors that Affect Strategic Management in the U.S. and Internationally

  8. Differences (contd.)

  9. Stakeholder Activism Refers to demands placed on the global firm by the foreign environments in which it operates, principally by foreign governments

  10. Multidomestic vs. GlobalIndustries A multidomestic industry is one in which competition is essentially segmented from country to country A global industry is one in which competition crosses national borders

  11. Factors Increasing Degree to Whichan Industry is Multidomestic • Need for customized products to meet tastes or preferences of local customers • Fragmentation of industry, with many competitors in each national market • Lack of economies of scale in functional activities • Distribution channels unique to each country

  12. The Global Challenge • Few “pure” cases of either global or multidomestic industries exist • The challenge – global firms must • Decide what activities should be performed where • Determine what degree of coordination should exist among them

  13. International Strategy Options High Wholly owned foreign subsidiary Joint venture Foreign branch Licensing, contract manufacturing, franchising Foreign branch Joint venture Product diversity Licensing, contract manufacturing, franchising Export Joint venture Low High Market complexity

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