BSB119 L W 7

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Management and Human Resources
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BSB119 – GLOBAL BUSINESS LECTURE 7: GOING INTERNATIONAL Definitions  Transnational strategy: Sharing and integrating different capabilities and contributions from different country operations (a hybrid of global and multidomestic strategies)  Licensing: An agreement whereby one company gives rights to another for the use, in return for a fee, of assets such as trademarks, patents and copyrights  Greenfield: establishing a new operation in a foreign country  Internalisation: Control through self-handling of foreign operations by keeping them within the same corporation What is Internationalisation?  Outward expansion - A business strategy where a domestic firm expands its operations to a foreign country either via a Green field investment, merger/acquisition and/or expansion of an existing foreign facility.  This is a process of natural progression for business  Inward expansion – expansion of existing business activities within the home country  Calof and Beamish (1995: p.116) suggested that internationalisation is “the process of adapting firms’ operations (strategy, structure, resource, etc.) to international environments”. This definition incorporates de-investment or de-internationalisation ... International Business Expansion Strategies  In order to enter the market and compete effectively, there are two conflicting pressures: cost reduction (global integration) versus local responsiveness (adaptation)  Standardisation reduces costs but may lose revenue •Motives Objectivies •Global •Multidomestic •International Strategies •Transnational •Export •FDI •Licensing Means - How? •Other means Pressures for Global Integration and Local Responsiveness  Pressures and strategic choices o Jet engines  Economies of scale (standardised training, manuals, spare parts inventories; discounts); no adaptation required; centralised decision making o Food  Adaptation to tastes, competition, distribution channels; no need to integrate operations across countries; decentralised decision making o Pharmaceuticals  Needs scale to cover R&D costs; face same competitors worldwide; need to adapt to government regulations and distribution; standardise production but adapt marketing; centralises some (R&D, finance), decentralises other management tasks HRM, marketing); sharing learning experiences o Branded products  Extension of domestic operations; replicate operations in similar markets; firm specific advantage; no need to integrate or for scale; no need to adapt Four International Business Strategic Choices – balancing global efficiency and flexibility Analysing Global Strategies  Strategy: “the action managers take to attain the goals of a firm” o General purpose: maximize/make profit  Differentiate products, increase price: add value, features, quality, service  Achieve low cost o Key means: allocation of scarce resources to attain goals Global Expansion Benefits  Earn greater return from distinctive skills, core competences o inimitable or difficult to imitate skills in value chain  Realize location economies (choice of FDI location) o create multinational network of activities (global web)  Realize greater experience curve economies, which reduce the cost of value creation o learning effects, economies of scale International Strategy  The firm uses the core competency or firm-specific advantage it developed at home as main competitive weapon in the foreign market it enters.  The international strategy and the global strategy share an important similarity, a firm conducts business the same way anywhere in the world.  Main difference IS takes domestic way, GS tries to figure out best way to serve all of its customers in the global market. o Low pressures for local responsiveness and global integration. Eg Flight Centre - it uses the marketing, buying and distribution techniques used in Australia in foreign stores as well. Global Strategy  The firm views the world as a single marketplace and its primary goal is to create standardized goods and services that will address the need of customers worldwide.  Since the global corporation must coordinate its world wide production and marketing strategies, it usually concentrates power and decision-making responsibility at a central headquarters location. Multidomestic Strategy  The firm views itself as a collection of relatively independent operating subsidiaries, each of which focuses on a specific domestic market. o For example: Kraft, Unilever o (Think global – act regional eg Nestlé) Transnational Strategy  The firm attempts to combine the benefits of global scale efficiencies with the benefits of local responsiveness. o Eg Microsoft  product development in US  responsibility for marketing delegated to its foreign subsidiaries Enter which foreign markets?  Each one’s attractiveness to a particular firm as a particular market depends on: o The firm’s objectives o A balance of benefits, costs, and risks Timing of Entry  Fist-mover advantages o Preempt rivals; establish strong brand name; capture demand o Build sales volume; ride down experience curve ahead of competitors; cost advantage o Create switching costs for that tie customers to 1st mover’s products o Establish social ties ahead of following foreign competitors  important in high-context cultures  First-mover disadvantages; pioneering costs o Time spent to learn dos-don’ts; competitors can learn from 1st mover o If 1st mover introducing a new industry, it builds infrastructure o 1st mover “trains” customers for followers o Break through host country’s adjustment to “foreignness” issues  Regulations may change as a result of 1st mover’s entry Scale of Entry  What level of resources to commit?  What level of resources can firm afford to commit?  A strategic commitment is difficult to reverse o Has a long-term impact o Means that the resources cannot be used elsewhere  1st mover advantages and large scale linked  Small scale entry allows learning at low risk  Entry in small or large potential market may require the same level of initial
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