Strategic Intent and International Business: An In-depth Review

1. Activities for Today • Attendance Goals for Today • Exam 2 Review Sheet • Chapter 7 • Understanding Strategic Intent** • Break • CEP • Strategic Alliance • Strategies the Fit Emerging Markets** • Homework • Wednesday-Simulation – Round # 5 (before 11.59 p.m.) MQM485/Sp08/Class12

2. Importance of Foreign Sales for US Firms 2006 Figures

3. Chapter Overview • Strategic advantages of international expansion • Global and multidomestic industries • Competitive pressures for international expansion • Global, multidomestic, and transnationalstrategies • International market entry modes

4. Advantages in Internationalization • Growth opportunity • Cheaper resources • Full capacity production • Pre-empt or match competitors’ similar intentions • Learning opportunity

5. Disadvantages in Internationalization • Complex • Impact on strategic decision-making • Potential hostility by foreign countries • Market failure, political unrest, and prolonged governmental instability

6. Two Sides of a Spectrum Customization Massification Global Multi-Domestic

7. A Global Industry: Footwear Source: Adapted from P. Lasserre, Global Strategic Management (New York: Palgrave Macmillan, 2003), 1.

8. A Multidomestic Industry: Personal Care Products Source: Adapted from P. Lasserre, Global Strategic Management (New York: Palgrave Macmillan, 2003), 1.

9. Competitive Pressures in the International Business Environment (II)

10. Strategies to Compete in the International Business Environment • Global strategy • Multi-domestic strategy • Transnational strategy

11. Global Strategy • Standard product for worldwide consumption • Competitive advantages • Location advantages • Coordination advantages

12. Multidomestic Strategy • Compete according to local needs • Competitive advantage • Customized product/service

13. Transnational Strategy • Combination type • Mixes multinational and global • Competitive advantage • Transfer information and experience

14. Entry Modes • Exporting • Licensing/franchising • Joint ventures/strategic alliances • Sole venture or wholly owned subsidiary

15. Exporting

16. Licensing/Franchising

17. Joint Ventures/Strategic Alliances

18. Sole Venture/Wholly Owned Subsidiary

19. Porter’s diamond

20. Strategic Intent – Hitt, Tyler, Hardee, & Park • Why is it important to understand Strategic Intent in the Global Marketplace? • What are various approaches offered by the authors’ to improve one’s understanding of global competitors?

21. MOST IMPORTANT PERFORMANCE CRITERIA

22. U.S. AND JAPANESE FINANCIAL AND STRATEGIC OBJECTIVES Least Important Most Important

23. MARKET SHARE STRATEGIES

24. Perceptual Maps • Understand Competitors • GO beyond static analysis • National History • Managerial Values, Goals and Strategy • Understand Partners • How the specific alliance fits the partner’s strategy • Top Management Team -- What is their StrategicOrientation?

25. Perceptual Maps Understand Your Management Team - Country of Origin - Types and Amount of Experience - Analyze Past Strategic Decisions USE THE ABOVE TO GAIN SOME IDEA ABOUT STRATEGIC INTENT

26. Collaborate with Competitors-Hamel, Doz, Prahalad • What reasons are offered by Hamel, Doz and Prahalad to collaborate with competitors? • How can company build defenses so that its secrets may be expropriated by competitors?

27. Global Logic of Strategic Alliances • Uncertain world with dangerous opponents • Risk Reduction • Best not to go alone -- N0 Shame in that • Alliance means sharing control • Time, luck and money is always in short supply • Need not be permanent • Customer’s will not wait for you – to built in one market and move to other (cascade strategy) • Quality, Price, Design, Value

28. Why? • Fixed Costs Environment Vs. Variable Cost Environment • FCE: Focus towards maximizing contribution to fixed costs • VCE: Focus towards reducing variable cost like raw materials, wages, labor, etc. • The Dispersion of Technology • No one can master everything • Faster life cycle (nothing is proprietary for ever)

29. Collaborate with Competitors-Hamel, Doz, Prahalad • Cooperation becomes a low cost route for new competitors to gain technology and market access -- Yet the case for collaboration is higher than ever. • Collaboration should be looked at how long it lasted but at shifts in competitive strengths over time.

30. Collaborate with Competitors-Hamel, Doz, Prahalad Principles • Collaboration is competition in different form. • Harmony is not the most important measure of success. • Cooperation has limits. • Learning from partners is paramount.

31. Collaborate with Competitors-Hamel, Doz, Prahalad Competition for Competence • Competitive product not the same competitive organization. • Rethink the make or buy decision. • Watch out for deepening dependence. • Replenish core competencies.

32. Collaborate with Competitors-Hamel, Doz, Prahalad How to Build Defenses • Select the technology you want to share with competitors - type of skill company contributes. • Safeguard against unintended technologies. • Distinguish between technology and competence. • Limit the scope of formal agreement. • Employee Loyalty and self-discipline. • “Wall off” critical technologies. • Control the contact employees (e.g. engineers) • Don’t allow host firm to become the “Home Base”

33. Collaborate with Competitors-Hamel, Doz, Prahalad Enhance the Capacity to Learn • To learn-- “one must want to learn” • Senior management should convey the alliance is not just to share financial risk but also learn. • Once knowledge is acquired -- this should be diffused with the company. • Ability to Learn is Critical • Obsession from legal agreements to be better learners.

34. Collaborate with Competitors-Hamel, Doz, Prahalad Mutual Gain is Possible • Strategic Goals Converge while Competitive Goals Diverge. • Size and Market Power are modest. • They Believe They can Learn from One Another but Limit Access to Proprietary Skills.

35. Collaborate with Competitors-Hamel, Doz, Prahalad Why Collaborate? • Learning new technologies or skills are not devious. • “Strategic Intent” should direct commitment to learning. • Alliances should not become outsourcing arrangements. • Too much distrust and conflict will also kill any alliance.

36. Strategies that Fit Emerging Markets - Khanna, Palepu & Sinha • Briefly explain the various institutional differences in emerging markets that multinational companies need to recognize and work around

37. Strategies that Fit Emerging Markets - Khanna, Palepu & Sinha • Openness • Political and Social System • Capital Markets • Labor Markets • Product Markets