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Challenges of Implementing IB Strategy

Mangers Foreign orientation

Decisions often based on compatibility with existing operations - geographic,


language, market similarities, and familiarity of technology.
Company can seldom, if ever, gain all information its managers would like - upto-date, accurate, and comparable.
Managers Foreign Orientation influences how collect & evaluates data

Foreign Market Orientation

Subjective Managerial Character


Psychic Objective Managerial Character
Attitude towards export
Distance

Risk Preference

Rigidity

Willingness to change Future perspective

Influence of National Culture & Corporate Culture

Adjusting Functions Marketing

Marketing most affected by international operations. Excellence in international


marketing strategy is necessary to MNC viability. Company sensitivity is key.
Theory & best practice for IB marketing broadly same as domestic marketplace
but difficulty gathering data
PRODUCT - focus on customer requirements
- Adjustment due to cultural reason
PRICING - quick to adjust, but perceptions of quality?
- Surplus production from Home, or producing in market
PROMO

- Adjust message & medium? brands vs Virgin, Nova

DISTRIBUTION - efficiency of intermediaries & effective/close to customer


service operations
OTHER ELEMENTS OF EXTENDED MARKETING MIX (7Ps) (price, product,
place, promotion, process, physical layout, provision of customer
service)
Internet -opportunity & threat (purchasing vs promote

Marketing - Altering Product & Price

Product
Legal reasons: to protect customers, environment (packaging laws and
product standards]
Cultural reasons: religious beliefs may offer clear guidelines regarding
product acceptability, other factors (colour, design, etc)
Economic reasons: levels of income, differences in income distribution,
extent & condition of available infrastructure.

Pricing
Government Intervention
Maximum or minimum prices for designated products.
Restrictions against imports dumped at low price
Different prices regionally - differing competition & demand
Price Escalation in Exporting tariffs, greater distance to market
In many cultures prices are simply starting point in bargaining process

Advertising/Branding, & Distribution

Standardised Advertising
Advantages - cost savings; improved quality (effectiveness) at local level; rapid
entry into new country markets.
Challenges - translation [content, meaning, images]; legality [consumer
protection, competitive protection, standards of morality, nationalism]; message
[national differences in perceptions & product demand]
Regional and global brands - language [translation & pronunciation of names;
sensitivity of shapes, symbols, colours]; brand acquisitions [local brands known,
expensive to maintain]; country of origin

Distribution systems - historical, cultural, economic, & legal


Citizens attitudes towards own retailers
Legislation affecting chain & individually-owned stores
Restrictions on size of stores & their hours of operation
Financial ability of retailers to carry large inventories
Poor infrastructure (transport, storage, national postal system, etc)
Levels within distribution system & retail inefficiencies [insistence upon counter
service]
Need for service centres = sources of revenues/profits

Human Resource Management

Human resource management (HRM or simply HR) is the management process of


an organization's workforce, or human resources. It is responsible for the
attraction, selection, training, assessment, and rewarding of employees, while
also overseeing organizational leadership and culture and ensuring compliance
with employment and labour laws.

Most important for successful implementation of I.B. strategy is attention to


HRM.
All IB modes require some adaptation to organisations HRM:1- EXPORT:- to product, promotion, distribution, & price; negotiations, after
sales
2- For more INTENSIVE I.B. MODES + cultural dimension labour relations
3- Willingness to adapt - firms attitude to risk & control
Preferred relationship between HQ & subsidiaries (ethno vs geo?)
Foreign location - language, need for adaptation, acceptability of expatriate staff
Mobility Home-Country Nationals, availability local personnel, suitability 3rdCNs
Cost & merits of options vs transfer of corporate culture
Objective = corporate culture for control of IB & management
development
Pool of managers should encompass Home CN, Third CN & local.

Organising & Control

Planning, implementation, evaluation & correction to ensure


objectives achieved
Views of distance, diversity, un-controllable/uncertainty: - sufficient data,
location of decision making
Single reporting system logical - problems (info comparability/collection)
Centralised approach

Decentralising

- Corporate efficiency

- close to customer, environment

- Standardisation of approach

- Important decisions still centralised?

Organisational structures is not problem. Need to concentrate on H. Resource


development to create managers with correct attitude

Accounting, Tax & Finance

Modes require different balance of funds - inward flow of funds, funds


raised in local money markets, funded from cash-flow
Legislation may restrict foreign firm ownership in HOST market, or set higher
tax rates for wholly-owned operations (but beware unexpected outcomes
encourage collaboration with local companies vs. forces exit to protect OLI)
Concern that MNEs use unrealistic transfer prices to reduce local profit
(Tension with host government)
International business managers cannot make good decisions without
adequate & timely information about accounting & taxation

The global value chain revisited

Logistics transportation, storage of materials & goods


Supply chain - co-ordination of materials, information, & funds from initial raw
material supplier to ultimate customer
Global Value Chain focuses on integration (home & host) & satisfying
different stakeholders goals

More than Sourcing to secure inputs - reduce costs, access materials &
technology only available abroad, improve quality, improve logistics process,
strengthen reliability of supply, react to competitors practices

Make or buy decision- internal or external?


Off-sourcing: sourcing offshore, either internally or externally
Out-sourcing: sourcing from supplier home country or overseas (based upon
own competitive strategy, nature of products & competitive environment, level of
experience of suppliers & capabilities)

4Cs of GVC

Success - f (Compatibility, Configuration, Coordination, Control)


Compatibility: consistency between firms GVC & competitive strategy
Configuration: facilities beyond borders of home country, for serving firms
domestic market or international markets?
Cost-minimization - efficiency/cost, dependability, quality, flexibility,
innovation
Coordination: linking/integrating participants/activities GVC as unified system
Control: structure & performance measurement to ensure implementation,
monitoring, & revision

The Future of I.B. S.M.E.s, Services (the role of ICT)

Historically, large manufacturing firms pursued global markets before


service organisations
Trend changing:- Pressures & opportunities of globalisation
- Application of new technologies of manufacturing & communication

->IB for SMEs & Service sector operations worldwide


SME behaviour influenced by Resource Poverty in their domestic markets, but
particularly their Global business (resources/expertise for info collection)

IB Opportunities & Smaller Firms

SMEs not merely small versions of larger organisations - operate in same


IB environment but fewer resources to analyse
Characteristics:SMEs generally suffer resource poverty
BUT small size may allow flexibility & innovativeness
Company ownership & control closely held - experience, skills, & attitude of
individual owner/managers more important than in MNEs
SMEs generally considered being risk averse
Planning methods for IB evaluation often viewed as inappropriate by
most SMEs

Smaller Firms & Progress Model

Small firm behaviour typified by Progress Model:External stimulus

- opportunistic base

Minimum commitment

Even active firms:-

Rarely have major presence in a single market


Operate through, & becoming dependent on, third party agents
Evaluate only merits of a specific proposed transaction

Exporting - relatively low risk/commitment, well-defined process, wholly-owned


direct investment (FDI) beyond means of most SMEs.
Collaborative means feasible, BUT time intensive
learning about process

- info about potential partners

Instant Internationalists

Strategic reality facing small high-technology firms (SHTFs) in Canada:- Limited window of opportunities. Patent protection, alternative solutions.
- International dimension of product life cycle
- Problems of small home market size
- Relative resource poverty facing SMEs
- Progress Model of SME participation in IB
- Potential of transaction means other than exporting
- Range of Collaborative poss. (function, partner size & origin)

Seek rapid access to other geographies - sell direct or engaging in co-operation


(eg. licensing)
- become instant internationalists

Globalisation of services

Change in economic structure (commodity-> manuf.->service)


Political change - public/command to private/market mechanisms
International PLC - transfer of production overseas (physical goods)
-> Change in Balance of Payments between countries
Developed (?) economies neg. BoP in goods reduced by pos. BoP in services
Consider production of services - Intl Service Life Cycle?

Trading services Internationally

Intangible, inseparable, perishable, variable characteristics of services


limited transfer internationally:- Customer in service factory?

- Control for variability?

- Face-to-face nature requires provision in-country


Initially, services traded internationally related to IB of physical goods
- eg. communications, financial services, management, advertising, transport,
professional & technical services = intermediary (support) activities
connecting parts of production system (Value Chain)
Role of ICT in internationalisation of services:US insurance companies process data overnight in Ireland
India ranked by World Bank (1991) as preferred offshore location for software
development - investment in education (created factor) by government

National competitive advantage in services

Historical pattern:First improve exports of manufactured goods


-> Increased export of services eg. Transportation
- Build national comp. advantage in services. From advantage in
manufacturing

How to develop national competitive advantage in services:-

Porters Diamond - services part of related & support infrastructure for


manufacturing activities. Government may insist use domestic banking, shipping,
insurance, etc
Dunning - preference for internalisation even greater for service
activities due to intangible, un-codified nature

Future Trends In I.B.

- Future of multinational & survival of nation state?


- Both parties will continue to have different bargaining powers
- Relative power will continue to ebb & flow over time
- Governments challenged by new tool of MNEs/other governments ICT moves
information across borders without consent
- Tension will persist
- MNEs continue to favour establishment of wholly-owned subsidiaries
- Governments likely maintain emphasis on joint exploitation
- Use of ICT changing balance of power in favour of consumer!
- International co-operation expected to grow (co:co, govt:govt, govt:co)

Managers will continue to need skills of monitoring market/non-market


environments, & to make decisions under conditions of uncertainty