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Reasons to “Go Global”

Proactive Reasons Exploit factor-cost differences across countries Unique product Technological advantage Economies of scale Growing foreign markets Exclusive information Attack rivals on home turf. Reactive Reasons Competitive pressure Overcapacity Declining domestic sales

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Reasons to “Go Global”

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  1. Proactive Reasons Exploit factor-cost differences across countries Unique product Technological advantage Economies of scale Growing foreign markets Exclusive information Attack rivals on home turf Reactive Reasons Competitive pressure Overcapacity Declining domestic sales Saturated home market Under attack from foreign rivals Reasons to “Go Global”

  2. Foreign Market Entry Modes • Export • Licensing • Joint Venture • WOS • Acquisition • Greenfield

  3. Entry Mode Framework • Mindset • Country-market opportunity/cost analysis • Stand-alone Attractiveness • Strategic Importance • Resources-Control-Risk tradeoff

  4. Mindset and International Activity International • Overseas activities support / subordinate to domestic activities Multinational • Flexibly adapting value-creating activities on country-by-country basis; nationally-responsive Global • The world is the market; standardization Transnational • “Glocalization” – Some value-creating activities standardized/globalized, others localized

  5. Entry Mode Decision Matrix Hi Strategic Importance of Country Lo Hi Resources, Control, Risk Lo Lo Hi Stand-alone Attractiveness of Country

  6. Country-Market Analysis • Stand-alone attractiveness: • Size • Growth • Product acceptance / segmentation • Cultural similarity • Risk • Policy incentives • Other factors? ….MNC “power”?

  7. Country-Market Analysis Strategic importance: • Home market of global customer • Home market of global rivals • Significant market of global rivals • Major source of innovation • Demanding/sophisticated customers • Factor-cost advantages

  8. Resources-Control-Risks Resources • $$, time, technology, machinery, people, organizational, strategy Control • Operational and strategic discretion over value-creating activities Risks • Political, F/X, economic, cultural, dissemination

  9. Control • Extent of involvement: Ship Product Distribution After-sales Support Marketing • Channel control / ownership: Retail Local Whsle. Regional Whsle. Import Agent Export Agent Mfg.

  10. Entry Mode Decision Framework ControlResourcesRiskDissem. Low Low Low High Licensing Exporting Intermediaries Direct Joint Venture Wholly-owned Subsidiary High High High Low

  11. Entry Mode Decision Matrix Hi Strategic Importance of Country Lo Hi Resources, Control, Risk Lo Lo Hi Stand-alone Attractiveness of Country

  12. General Electric and International Involvement • GE Product Divisions: • Light bulbs • Aircraft engines • Appliances • Power-generation • GE Market Opportunity: • North America • Europe • Pacific rim / Asia • Emerging markets

  13. GE’s Markets, Entry and Strategy Choices 4 3 Product Lines 2  1  International Strategy A B C D Country-Markets

  14. Entry Mode Decision Matrix Hi Strategic Importance of Country Lo Hi Resources, Control, Risk Lo Lo Hi Stand-alone Attractiveness of Country

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