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International strategies

International strategies
Learning objectives
1.

Define and discuss the concept of international strategy

2.

Explain traditional and emerging motives for firms to pursue

international strategies

Outline three common international business-level strategies:

multi-domestic, global and transnational

Identify typical international entry modes

Describe some of the environmental trends affecting

international strategy, especially liability of foreignness and
regionalisation

6.

Name and describe some typical entry modes into international

markets

7.

Outline some major risks in international environments

8.

Articulate some key limitations to international expansion.

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International strategies
Outline

Introduction

A further reminder: What is strategy?

Levels of strategy

Definition of international strategy

Some motives to use an international strategy
Three broad international business-level strategies
Multi-domestic strategy
Global strategy
Transnational strategy
Emerging global environment trends that may impact international strategies
Some typical international strategic entry modes
Risks in international environments
Limits to international expansion
Conclusion
Strategic choice: Summary
Strategic implementation: General perspective.

References

Hanson et al., (2014) Chapter 8

Readings in bold black are important.

A business strategy process: Rational or formal model

2.

Strategic analysis
3.

Analyse the
environment

Strategic
direction-setting

6.

Identify the
organisations
current vision,
mission and
strategic
objectives

Reassess the
organisations
vision, mission
and strategic
objectives

Analyse the
organisations
resources

Strategic
Strategic
implementation evaluation

Identify
opportunities
and threats

1.

4.

Strategic choice

7.
Formulate
strategies
to achieve
strategic
objectives

8.

9.

Implement
strategies

Evaluate
results

5.
Identify
strengths and
weaknesses

(Source: Robbins, S. P., Bergman, R., Stagg, I. and Coulter, M. 2009. Management, 5th edition, Pearson Education,
Australia: 276; and Robbins, S. P., Bergman, R., and Stagg, I. 1997. Prentice Hall, Australia: 248 ).

Introduction
An earlier topic examined strategy at the corporate level: that is, strategies
pursued by corporations with multiple businesses in different industries/
markets.

The previous topic examined typical business-level strategies pursued by

firms in a single industry or market.

This topic examines international strategies typically pursued

by a firm operating in a single international industry or
market.

Introduction
A further reminder: What is strategy?

A strategy is a comprehensive plan or blueprint that sets out coordinated commitments and activities that will be implemented
in order to achieve strategic objectives.
(Hanson et al., 2014: 4-6)

Levels of strategy

Strategy may be practised at different organisational levels

(Based on deWit and Meyer, 2010: 9)

NETWORK/ JOINT VENTURE LEVEL STRATEGIES

Multiple corporations working collaboratively

CORPORATE LEVEL STRATEGIES

Strategies for a corporation with multiple businesses

BUSINESS LEVEL STRATEGIES

Strategies for a business in a single industry or market
FUNCTIONAL LEVEL STRATEGIES
Strategies for each functional or discipline area in a business
that combine to implement business level strategies

Definition of international strategy

A strategy a firm creates to develop its business outside
its domestic market:
International strategies involve adapting core competencies
and SCA to chosen overseas markets.
International strategies focus on creating and exploiting
opportunities outside domestic markets.

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Some motives to use an international strategy

Traditional
Extend product life cycles
Secure access to key resources
Provide access to low-cost labour.

Emerging
Use of the Internet and telecommunications to facilitate
easy global transactions
High potential global demand for consumer products and
services.
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Some motives to use an international strategy

Five basic benefits
Increased market size
Firm expands into larger international markets.

Return on investment
Firm recovers investments in plant, capital equipment and R&D from the
larger international market

Economies of scale
Firm achieves optimal economies of scale and exploits core
competencies through resource use.

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Some motives to use an international strategy

Five basic benefits
Scope for internationalisation
Through knowledge sharing firms increase their capability for
internationalisation
Location advantages
Firm lowers basic costs of goods and services and gains access to
critical supplies and customers.

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Three broad international business-level strategies

Hanson et al., (2014) outline three broad international
strategies:
Multi-domestic
Global
Transnational.

While Hanson et al. describe them as corporate-level

strategies, they are equally applicable to the business level,
where a business operating in a single industry
(McDonalds restaurants) seeks to expand globally.

Three broad international business-level strategies

Each international strategy may be defined along two
competitive axes:
The need for global integration of operations, to achieve economies of
scale = the need for global cost leadership
The need for local responsiveness = the need for differentiation of
offering against competitors in each countrys market.

Together, these axes define an integrated cost leadership/ differentiation

strategy. Which of the two competitive strategies (cost leadership or
differentiation) different countries markets will allow to be dominant,
will determine which international strategy a firm pursues

Three broad international business-level strategies

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Multi-domestic strategy
Strategic and operating decisions are decentralised to the firms
business unit in each country
This strategy recognises that each countrys market may be very
different: therefore the need for local responsiveness is very high;
A multi-domestic strategy focuses on competition within each
country, supports product customisation and encourages competitive
response to local conditions. Hence the firms business in each
country behaves almost like an autonomous business in that country
(GMH)

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Global strategy
Firm offers standardised products across country markets, with
competitive strategy being dictated by the home office:
Emphasis is upon economies of scale and exploiting innovations in
many markets (Apple, Nokia)
Requires resource sharing and coordination across country
boundaries (Apple, Nokia))
McDonalds restaurants pursued a global strategy during the last
century.

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Transnational strategy
A transnational strategy seeks to achieve both global efficiency
and local responsiveness:
To achieve a competitive advantage in each country requires local
flexibility
Therefore, a transnational strategy involves conflicting goals of close
global coordination and local flexibility
Effective implementation of transnational strategy often produces
higher performance
McDonalds pursues a transnational strategy.

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Emerging global environment trends that may impact

international strategies
Several global environmental trends may increasingly impact
upon a firms decision to pursue an international strategy and
which strategy to pursue:
Liability of foreignness
In a world of tension between many nations, pursuing an international
strategy can be difficult
The complexity of managing local conditions across many markets can be
daunting (Disney theme park in France)

Regionalisation
One response to the liability of foreignness is to focus on regions where the
markets are more similar and some coordination and sharing of resources
would be possible.
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Some typical international strategy entry modes

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Risks in international environments

Political
risks

Economic
risks

Political risks include:

Instability in national governments
War, both civil and international
Potential nationalisation of a firms resources.

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Risks in international environments

Political
risks

Economic
risks

Economic risks are interdependent with political risks and

include:
Differences and fluctuations in value of currencies
Differences in prevailing wage rates
Difficulties in enforcing property rights.
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Limits to international expansion

Geographic dispersion increases coordination costs
Trade barriers, logistical costs, cultural diversity and other differences
by country complicate the implementation of an international strategy
Complexity of managing multinational firms
Highly competitive nature of global markets:
Multiple cultural environments
Rapid shifts in the value of different currencies
Instability of some national governments.

Management challenges:
Understanding local conditions in many different countries
Multiple risks involved when operating in many countries.
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Conclusion
Strategic decision-making is too complex for perfect
decisions to be made: they tend to be satisfactory rather
than optimal
A good choice today may be a poor choice tomorrow:
ongoing strategic decisions needed
strategy must be flexible enough to continue to change

Strategic decision-making involves much judgement

and intuition. Why?

Conclusion
Above all, strategic decision-making is a never ending
process of creation, trial and error, adaptation and
adjustment - at both business and functional strategic
levels - to ensure a firm remains competitive in this
era of rapid, volatile, discontinuous change!