BSB119 – GLOBAL BUSINESS
LECTURE 7: GOING INTERNATIONAL
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
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
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
Adaptation to tastes, competition, distribution channels; no need to integrate operations
across countries; decentralised decision making
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
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
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.
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.
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)
The firm attempts to combine the benefits of global scale efficiencies with the benefits of local
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
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