International Issues in Strategy. Porter’s Determinants of National Advantage Home country of...

International Issues in Strategy

Porter’s Determinants of National AdvantagePorter’s Determinants of National Advantage

Home country Home country of origin is crucial to of origin is crucial to International successInternational success

Factor ConditionsFactor ConditionsFactor ConditionsFactor Conditions

Basic FactorsBasic Factors- Land, labor- Land, labor

Advanced FactorsAdvanced Factors- Highly educated workers- Highly educated workers- Digital communications- Digital communications

Generalized FactorsGeneralized Factors- Capital, infrastructure- Capital, infrastructure

Specialized FactorsSpecialized Factors- Skilled personnel- Skilled personnel

Porter’s Determinants of National AdvantagePorter’s Determinants of National AdvantageHome country Home country of origin is crucial to International successof origin is crucial to International success

Factor ConditionsFactor Conditions

Advanced FactorsAdvanced Factors- Highly educated workers- Digital communications- Highly educated workers- Digital communications

Demand Demand ConditionCondition

ssHome country Home country may support may support scale efficient scale efficient operations by operations by

itselfitself

Porter’s Determinants of National AdvantagePorter’s Determinants of National AdvantageHome country Home country of origin is crucial to International successof origin is crucial to International success

Demand ConditionsDemand

ConditionsHome country may support scale efficient operations by itself

Home country may support scale efficient operations by itself

Related & Supporting Related & Supporting IndustriesIndustries

- Japanese cameras & copiers- Japanese cameras & copiers- Italian shoes & leather- Italian shoes & leather

Home country Home country of origin is crucial to International successof origin is crucial to International success

Demand ConditionsDemand

ConditionsHome country may support scale efficient operations by itself

Home country may support scale efficient operations by itself

Firm Strategy, Structure Firm Strategy, Structure & Rivalry& Rivalry

Intense rivalry fosters Intense rivalry fosters industry competitionindustry competition

Related & Supporting Industries

- Japanese cameras & copiers- Italian shoes & leather- Japanese cameras & copiers- Italian shoes & leather

Home country Home country of origin is crucial to International successof origin is crucial to International success

International Corporate StrategyCorporate-LevelCorporate-Level International Strategies International Strategies

Three Three Corporate Corporate StrategiesStrategies Global Strategy

Transnational Strategy

Multi-Domestic Strategy

Strategy and operating decisions are Strategy and operating decisions are decentralizeddecentralized to strategic business units (SBU) in each countryto strategic business units (SBU) in each country

Strategy and operating decisions are decentralized Strategy and operating decisions are decentralized to strategic business units (SBU) in each countryto strategic business units (SBU) in each country

Products and services are Products and services are tailoredtailored to local markets to local markets

Products and services are tailored to local marketsProducts and services are tailored to local markets

Business units in each country are Business units in each country are independentindependent of of each other each other

Business units in each country are independent of Business units in each country are independent of each other each other Assumes Assumes markets differ markets differ by country or regionsby country or regions

Business units in each country are independent of Business units in each country are independent of each other each other Assumes markets differ by country or regionsAssumes markets differ by country or regions

Focus on competition in Focus on competition in each marketeach market

Global Strategy

Products are Products are standardizedstandardized across national markets across national markets

Global Strategy

Products are standardized across national marketsProducts are standardized across national markets

Decisions regarding business-level strategies are Decisions regarding business-level strategies are centralizedcentralized in the home office in the home office

Global Strategy

Decisions regarding business-level strategies are Decisions regarding business-level strategies are centralized in the home officecentralized in the home office

Strategic business units (SBU) are assumed to be Strategic business units (SBU) are assumed to be interdependentinterdependent

Global Strategy

Strategic business units (SBU) are assumed to be Strategic business units (SBU) are assumed to be interdependentinterdependentEmphasizes Emphasizes economies of scaleeconomies of scale

Global Strategy

Strategic business units (SBU) are assumed to be Strategic business units (SBU) are assumed to be interdependentinterdependentEmphasizes economies of scaleEmphasizes economies of scale

Often Often lacks responsiveness lacks responsiveness to local marketsto local markets

Global Strategy

Strategic business units (SBU) are assumed to be Strategic business units (SBU) are assumed to be interdependentinterdependentEmphasizes economies of scaleEmphasizes economies of scale

Often lacks responsiveness to local marketsOften lacks responsiveness to local markets

Requires resource sharing and Requires resource sharing and coordinationcoordination across across borders (which also makes it difficult to manage)borders (which also makes it difficult to manage)

Global Strategy

Seeks to achieve both Seeks to achieve both global efficiency global efficiency and and local local responsivenessresponsiveness

Seeks to achieve both global efficiency and local Seeks to achieve both global efficiency and local responsivenessresponsiveness

Difficult to achieve because of simultaneous Difficult to achieve because of simultaneous requirements for strong central requirements for strong central controlcontrol and and coordinationcoordination to achieve efficiency and local to achieve efficiency and local flexibilityflexibility and decentralization to achieve local and decentralization to achieve local market responsivenessmarket responsiveness

International Corporate StrategyInternational Corporate Strategy

When is each strategy appropriate?When is each strategy appropriate?

Need for Need for Global Global

IntegrationIntegration

Need for Local Market ResponsivenessNeed for Local Market Responsiveness

Low High

National government instability may create potential National government instability may create potential problems for internationally diversified firmsproblems for internationally diversified firms

Major Risks of International DiversificationMajor Risks of International Diversification

Political Risk

Potential changes in attitudes or regulations Potential changes in attitudes or regulations regarding foreign ownershipregarding foreign ownership

Political Risk

Legal authority obtained from previous administra-Legal authority obtained from previous administra-tion may become invalid tion may become invalid

Political Risk

Legal authority obtained from previous administra-Legal authority obtained from previous administra-tion may become invalid tion may become invalid

Potential for nationalization of private firms’ assetsPotential for nationalization of private firms’ assets

Political Risk

Economic Risk

Economic risks are interdependent with political risksEconomic risks are interdependent with political risks

Economic Risk

Differences and fluctuations in international Differences and fluctuations in international currencies may affect value of assets and liabilities currencies may affect value of assets and liabilities and affect prices and ultimately the ability to compete and affect prices and ultimately the ability to compete

Economic Risk

Differences in inflation rates may affect internationally Differences in inflation rates may affect internationally diversified firms’ ability to competediversified firms’ ability to compete

Differences and fluctuations in international Differences and fluctuations in international currencies may affect value of assets and liabilities currencies may affect value of assets and liabilities and affect prices and ultimately the ability to compete and affect prices and ultimately the ability to compete

Economic Risk

Stages of International Development

• Domestic company—some exporting

• Domestic company—export division

• Domestic company—international division

• Multinational corporation—multidomestic emphasis

• Multinational corporation—global emphasis

Geographic Area Structure for a Multinational Corporation

Board of Directors

President

Corporate StaffR & D

Operating Companies

Europe*

Operating Companies

Africa

Operating Companies

Product Group

Operating Companies

Latin America

Product Group

*Note: Because of space limitations, product groups for only Europe and Asia are shown here.

Strategy Implementation

Hofstede’s Dimensions of

NationalCulture

Power distance (PD)

Uncertainty avoidance (UA)

Individualism-collectivism (I-C)

Masculinity-femininity (M-F)

Long-term orientation (LT)

International issues in staffing:– Considerable planning– Can be very costly– Cultural differences must be considered– Experience through international

assignments

International issues in staffing:– Effective management of foreign

assignments:• Focus on transferring knowledge and

developing global leadership• Foreign assignments to people with technical

skills matched or exceeded by cross-cultural abilities

• Deliberate repatriation at end of assignment with career guidance and jobs

International Issues in Strategy. Porter’s Determinants of National Advantage Home country of...

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