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STRATEGIC
ACTIONS:
STRATEGY
FORMULATION
Strategy Abroad
Management
of Strategy
Concepts and Cases
Michael A. Hitt Robert E. Hoskisson R. Duane
Ireland
KNOWLEDGE OBJECTIVES
Studying this chapter should provide you with the strategic
management knowledge needed to:
1. Explain traditional and emerging motives for firms to
pursue international diversification.
2. Explore the four factors that lead to a basis for
international business-level strategies.
3. Define the three international corporate-level strategies:
multidomestic, global, and transnational.
4. Discuss the environmental trends affecting international
strategy, especially liability of foreignness and
regionalization.
82
83
FIGURE
8.1
84
Foreign
Competition
Begins Production
Firm Introduces
Innovation in
Domestic Market
Firm Begins
Production Abroad
86
Return on Investment
Large investment projects may require global markets
to justify the capital outlays.
Weak patent protection in some countries implies that
firms should expand overseas rapidly in order to
preempt imitators.
87
88
89
FIGURE
8.2
Source: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group,
from Competitive Advantage of Nations, by Michael E. Porter, p. 72. Copyright 1990, 1998 by Michael E. Porter.
810
Land
Natural resources
Capital Infrastructure
Basic factors
Natural and labor resources
Advanced factors
Digital communication systems and an educated
workforce
811
812
813
814
FIGURE
8.3
816
Multidomestic Strategy
Multidomestic
strategy
Global Strategy
Global
strategy
Transnational Strategy
Transnational
strategy
819
Environmental Trends
Liability of Foreignness
Legitimate concerns about the relative attractiveness
of global strategies
Global strategies not as prevalent as once thought
Difficulty in implementing global strategies
Regionalization
Focusing on particular region(s) rather than on global
markets
Better understanding of the cultures, legal and social
norms
820
TABLE
8.1
Type of Entry
Characteristics
Exporting
Licensing
Strategic alliances
Acquisition
821
Optimal Solution
The
Thefirm
firm has
hasno
noforeign
foreign
manufacturing
manufacturingexpertise
expertise
and
andrequires
requiresinvestment
investment
only
onlyin
indistribution.
distribution.
Export
Export
822
Optimal Solution
The
Thefirm
firmneeds
needsto
to
facilitate
facilitatethe
theproduct
product
improvements
improvements
necessary
necessaryto
toenter
enter
foreign
foreignmarkets.
markets.
Licensing
Licensing
823
Optimal Solution
The
Thefirm
firmneeds
needsto
to
connect
connect with
withan
an
experienced
experiencedpartner
partner
already
alreadyin
inthe
thetargeted
targeted
market.
market.
Strategic
StrategicAlliance
Alliance
824
Optimal Solution
The
Thefirm
firmneeds
needsto
to
reduce
reduceits
itsrisk
riskthrough
through
the
thesharing
sharingof
ofcosts.
costs.
Strategic
StrategicAlliance
Alliance
825
Optimal Solution
The
Thefirm
firmis
isfacing
facing
uncertain
uncertainsituations
situations
such
suchas
asan
anemerging
emerging
economy
economyin
inits
its
targeted
targetedmarket.
market.
Strategic
StrategicAlliance
Alliance
826
Optimal Solution
The
Thefirms
firmsintellectual
intellectual
property
propertyrights
rightsin
inan
an
emerging
emergingeconomy
economyare
are
not
notwell
well protected,
protected,the
the
number
numberof
offirms
firms in
inthe
the
industry
industryis
isgrowing
growing fast,
fast,
and
andthe
theneed
needfor
for global
global
integration
integrationis
ishigh.
high.
Wholly-owned
Wholly-owned
Subsidiary
Subsidiary
827
828
829
Economic Risks
Instability in national
governments
War, both civil and
international
Potential nationalization of
a firms resources
?
?
Differences and
fluctuations in the value of
different currencies
Differences in prevailing
wage rates
Difficulties in enforcing
property rights
Unemployment
831
FIGURE
8.4
832
833