Export Strategy Exporting domestically produced products to selected countries The organisation is domestically focused, with a centralised

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1 Lecture 10 - Managing in a Glbal Envirnment: Internatinal Management and Strategy Invlves managing peratins in mre than ne cuntry, as rganisatins develp and implement strategies in mre than ne cuntry Reasns fr Expanding Internatinally Increase Market size Build n a cmpetitive advantage in the dmestic market by transferring cmpetencies t internatinal markets where lcal cmpetitrs lack such skills (e.g. Yellwtail wines - largest selling imprted wines in the USA) Imprvement n Return Particularly in R&D intensive industries e.g. bitechnlgy and pharmaceuticals Cchlear spent $4.3M in 2001 t acquire a German firm fr its technlgy Prtect innvatin as a patent prtectin requires a glbal perspective Ecnmies f Scale and Learning Increase in efficiency f prductin as the number f gds being prduced increases Ecnmies f scale result frm expanding the size/scpe f markets Develp learning and experience Realise Lcatin Advantage Ecnmies that arise frm perfrming a value creatin activity in the ptimal lcatin fr that activity (e.g. Beefeater BBQs in China) Lwer cst effects: raw materials and labur Differentiatin effects: Access t key suppliers, cheaper labur Strategies fr Internatinal Operatins Chse a Strategy fr Internatinal Operatins

2 Exprt Strategy Exprting dmestically prduced prducts t selected cuntries The rganisatin is dmestically fcused, with a centralised management & prduct develpment (& design) at hme Strng hme cuntry, head ffice cntrl ver freign peratin (hence lw glbal integratin) Very limited lcal custmisatin f prduct, if any (lw n natinal respnsiveness) E.g. Yellwtail Wines Glbalisatin Strategy Decisins regarding prduct design and advertising are centralised in the hme ffice (hence high n glbal integratin) Requires resurce sharing and crdinatin acrss brders Prduct design and advertising strategies are standardised acrss natinal markets (lw n natinal respnsiveness) Assumptin is that a single wrld market exists fr the prduct and therefre fcus n the need fr glbal efficiency Standardising prducts leads t glbal efficiency thrugh ecnmies f scale E.g. iphnes, Starbucks Liability f Freignness Organisatin ding business abrad can be disadvantages vis-a-vis lcal firms due t (1) cultural, plitical and ecnmic differences and (2) unfamiliarity with the business cnditins f the freign market Multidmestic Strategies Strategy and perating decisins are decentralised t strategic business units (SBUs) in each cuntry Business units in each cuntry are independent f each ther (hence lw n crdinatin and glbal integratin) Prducts and services tailred t lcal markets (high n natinal respnsiveness) Fcus n cmpetitin in each market (need fr advertising mdificatin) Assumed markets differ by cuntry r regins Prminent strategy amng Eurpean firm s due t brad variety f cultures and markets in Eurpe

3 E.g. Nestle (Mil tastes different in different cuntries, and is prnunced differently) Transnatinal Strategy Seeks t achieve bth glbal integratin and natinal respnsiveness Wrld-rientated view fcusing n using the best appraches and peple frm arund the wrld Attain efficiency with flexibility t meet specific needs in varius cuntries Difficult t achieve because f simultaneus requirement fr strng central cntrl and crdinatin t achieve efficiency and lcal flexibility and decentralisatin t achieve lcal market respnsiveness E.g. McDnalds (e.g. n beef burgers in India + Chicken Maharajah Bic Mac) Entry Mdes Exprting Organisatin maintains its prductin facilities within its hme cuntry and transfers its prducts fr sale in freign markets Cmmn way t enter new internatinal markets N need t establish peratins in ther cuntries Establish distributin channels thrugh cntractual relatinships May have high transprtatin csts and encunter high imprt tariffs and ther trade barriers Less cntrl ver marketing and distributin Difficult t custmize prducts Cuntertrade may be used in less develped cuntries E.g. Yellwtail wines, Vegemite Licensing Cmpany (licensr) in ne cuntry makes certain resurces available t cmpanies in anther cuntry (licensee) e.g. technlgy, managerial skills, patent Licensing firm is paid a ryalty n each unit prduced and sld Relatively lw-cst way t enter a freign market Relatively lw prfit ptential Licensing firm lses cntrl ver prduct quality and distributin A significant risk if the licensee learns technlgy and cmpetes when license expires Franchising: A frm f licensing in which an rganisatin prvides its freign franchisees with a cmplete assrtment f materials and services e.g. equipment, standardised perating system, managerial advice

4 E.g. QB huse Jint Ventures Mst jint ventures (JVs) invlve a freign cmpany with a new prduct r technlgy and a hst cmpany with access t distributin r knwledge f lcal custms, nrms r plitics Enable firms t share csts, risks and resurces t expand int internatinal ventures May be the fastest, cheapest and least risky way t g glbal if chse right partner May nt understand the strategic intent f partners r may experience divergent gals E.g. Land rver, Jaguar and Chery E.g. Kellgg's use Wilmar infrastructure t selling Asia Acquisitins Purchase f ne crpratin by anther, thrugh either the purchase f its shares, r the purchase f its assets Enable firms t make mst rapid internatinal expansin Can gain quick increase in market share r access t prmising new technlgies Can be very cstly Legal and regulatry requirements may present barriers t freign wnership Ptential t gain synergies in prductin but may als have t cmbine ptentially disparate crprate cultures E.g. Micrsft buying Skype, Facebk buying WhatsApp Greenfield Ventures The riskiest type f direct investment in which a cmpany builds a subsidiary frm scratch in a freign cuntry Mst cstly and cmplex f entry alternatives Ptentially mst prfitable, if successful Maintain greatest degree f cntrl ver prductin, technlgy, marketing and distributin May need t acquire expertise and knwledge that is relevant t hst cuntry e.g. lcal managers have heightened awareness f ecnmic, plitical & cultural cnditins Culd require hiring hst cuntry natinals r cnsultants at high cst E.g. Ikea and Aldi Assess Management Issues and Risks

5 Scicultural Envirnment: Differences in Natinal Cultures Natinal culture includes the shared knwledge, beliefs & values, as well as the cmmn mdes f behaviur and ways f thinking, amng members f a sciety. When chsing a cuntry in which t perate cnsider the culture s scial values and similarity / difference t hme culture Scial Values GLOBE prject based n Hfstede s mdel

6 Glbe Prject Value Dimensins Assertiveness Future rientatin Uncertainty Avidance Gender Differentiatin Pwer Distance Scietal cllectivism Individual cllectivism Perfrmance rientatin Humane rientatin Management theries are nt universal - mst theries in this curse are framed frm a Nrth American and Western Eurpe perspective Crss-cultural differences mean management practices cannt always be transferred successfully frm ne culture t anther Ecnmic Envirnment Ecnmic cnditins in the cuntry where the rganisatin perates internatinally When chsing a cuntry in which t perate evaluate Ecnmic develpment Infrastructure - physical facilities that supprt ecnmic activities Exchange rates Inflatin, interest rates and ecnmic grwth Legal plitical envirnment Plitical systems and gvernment supervisin and regulatins in the cuntry were the rganisatin perates internatinally When chsing a cuntry in which t perate, evaluate: Plitical risk A lss f assets, earning pwer r managerial cntrl due t plitically based actins r events by hst gvernments Plitical instability Rits, revlutins, civil disrders, frequent changes f gvernment Laws and regulatins E.g. cnsumer prtectin, infrmatin and labelling, intellectual prperty rights, emplyment and safety