International Strategy &
Management
“Home and away
games”
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?
What is a Global Business?
What are the
unique
challenges?
Unique Issues
 Complex Pricing
 exchange rates
 Political Risk
 threats to ownership, and profit
Unique Issues
 Cultural Differences
–
tastes, values, language
 Conflicting political demand
–
government policies, and economic systems
Advantages of Globalization





Scale economies
Growth potential
Factor costs
Vertical integration demands
Opportunities
 Homogenization of global culture
 Competitive dynamics
What determines global business
success?
Do competitive
advantages
transfer?
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
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.
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
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.
Walmart Enters Germany
Does Small Town
America Sell
in Europe?
How do firms enter global markets?
Balancing
opportunity against
opportunism
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
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
Matching Advantage to Mode of Entry
 Downstream advantages
–
export or license
 Midstream advantages
–
joint venture or direct investment
 Upstream advantages
–
direct investment
How do firms manage global
operations?
Balancing Economics
and Politics
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
–
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
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
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
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
Global Strategy Textbooks

Bartlett, Christopher A. & Ghoshal Sumantra
–
–

Bartlett, Christopher, and Ghoshal, Sumantra
–
–

“Transnational Management,” McGraw-Hill
Text, Cases and readings
“Managing across borders,” Harvard B-school Press
Transnational view of global firms
Yip, George S.
–
–
“Total Global Strategy II,” Prentice-Hall
Strategic focus
Global Strategy Texts and Readings

De la Torre, Jose, Doz, Yves and Devinney, Timothy
–
–

Cullen, John B.
–
–

“Managing the Global Corporation,” McGraw-Hill
Case studies
“Multinational Management: A strategic approach,” Southwestern
Publ. (Thompson Learning)
Management focus
Tallman, Stephan (2002), “Global Strategic Management (pp. 464490).” In The Blackwell Handbook of Strategic Management, M.
Hitt, E.R. Freeman, & J.S. Harrison (eds.). Blackwell Publ: Oxford,
U.K.
Global Strategy Videos

Coca Cola enters Russia
–

The Commanding Heights
–

Wall Street Journal Series: Management:
3-part PBS series
Proctor & Gamble in Europe
–
Harvard Business School video