International Strategy & Management

1. International Strategy & Management “Home and away games”

2. International Strategy • What is a global business? • What determines global business success? • How do firms enter global markets? • How does a firm manage a global operation?

3. What is a Global Business? What are the unique challenges?

4. Unique Issues • Complex Pricing • exchange rates • Political Risk • threats to ownership, and profit

5. Unique Issues • Cultural Differences • tastes, values, language • Conflicting political demand • government policies, and economic systems

6. Advantages of Globalization • Scale economies • Growth potential • Factor costs • Vertical integration demands • Opportunities • Homogenization of global culture • Competitive dynamics

7. What determines global business success? Do competitive advantages transfer?

8. Transferring Competitive Advantage Advantages vary across value chain • Downstream advantages • price, product design • Midstream advantages • assets, skills, relations with other firms • Upstream advantages • ability and willingness to learn, • adaptability

9. Transferring Competitive Advantage Advantages vary across domains • International Contexts • public good issues • regulatory climate, economy, trade policy, etc. • infrastructure • transportation, education, communication, etc. • Industry Contexts • structure • competitive rivalry, entry barriers, etc.

10. Limitations on Transferability • Geographic advantages • labor, monopoly positions, distribution network, reputation, customer or supplier relations • Tacit knowledge • difficult to enact in different context, unknown interaction with context • Cost of transfer • loss of effectiveness or efficiency • Mode of transfer • joint venture, partnership, direct investment

11. Limitations on Transferability • Domestic advantages may not transfer across national boundaries • The advantage in the home market may not be that important in foreign markets. • International advantages may not hold in domestic markets • A successful international competitor may not be the strongest firm at home.

12. Walmart Enters Germany Does Small Town America Sell in Europe?

13. How do firms enter global markets? Balancing opportunity against opportunism

14. Modes of Entry • Exportation • accessing markets at low risk • Licensing • retaining some rights to product design • Joint Venture • looking for complementary knowledge • Foreign Direct Investment • going it alone

15. Balancing opportunity with opportunism • Opportunity • the potential returns from taking products into new geographic regions • Opportunism: contracting • Moral hazard • Learning opportunities. • knowledge transfer • knowledge development

16. Matching Advantage to Mode of Entry • Downstream advantages • export or license • Midstream advantages • joint venture or direct investment • Upstream advantages • direct investment

17. How do firms manage global operations? Balancing Economics and Politics

18. Economic demands • Remain competitive within one’s industry • Improve efficiency by streamlining operations • Achieve economies of scale • Coordinate R&D efforts • Share assets and knowledge as much as possible • Transfer people and knowledge

19. Political Demands • Be responsible to local government demands • jobs and taxes • Adjust to different regulatory setting • restrictions on competitive practices • Recognize cultural differences • product design and placement • human resource practices

20. Efficiency Strategic Options: Global Strategy • Regional or global approach • Cost advantage • scale economies, rationalize and integrate activities , allows side-payments (good citizen), simplifies management practices • Lowers expropriation risk • Bargaining power • larger firms have more power

21. Locally Responsive Strategic Options: Multinational • Nationally Responsive Approach • Differentiation advantages • respond to local tastes and preferences • Image advantages • subsidiaries have latitude to respond to local political needs, used where government plays a key role

22. Efficiency Responsive Strategic Options: Transnational • Balances cost with differentiation benefits • business manager • country manager • functional manager • corporate manager • Balance global efficiency and competitiveness with national-level responsiveness and flexibility • cross market capacity to leverage learning

23. Global Strategy Textbooks • Bartlett, Christopher A. & Ghoshal Sumantra • “Transnational Management,” McGraw-Hill • Text, Cases and readings • Bartlett, Christopher, and Ghoshal, Sumantra • “Managing across borders,” Harvard B-school Press • Transnational view of global firms • Yip, George S. • “Total Global Strategy II,” Prentice-Hall • Strategic focus

24. Global Strategy Texts and Readings • De la Torre, Jose, Doz, Yves and Devinney, Timothy • “Managing the Global Corporation,” McGraw-Hill • Case studies • Cullen, John B. • “Multinational Management: A strategic approach,” Southwestern Publ. (Thompson Learning) • Management focus • Tallman, Stephan (2002), “Global Strategic Management (pp. 464-490).” In The Blackwell Handbook of Strategic Management, M. Hitt, E.R. Freeman, & J.S. Harrison (eds.). Blackwell Publ: Oxford, U.K.

25. Global Strategy Videos • Coca Cola enters Russia • Wall Street Journal Series: Management: • The Commanding Heights • 3-part PBS series • Proctor & Gamble in Europe • Harvard Business School video