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Chapter 6
Chapter 6
Chapter 6 - Overview
Reasons for going international Strategic formulation process Steps in developing international and global strategies
Chapter 6
Chapter 6
Proactive Reasons Economies of scale Growth opportunities Resource access and cost savings Incentives
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Chapter 6
Implementation Process
Chapter 6
Environmental Scanning
It is the process of gathering information and forecasting relevant trends, competitive actions, and circumstances that will affect operations in geographic areas of potential interest.
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Major Variables Covered in Environmental Scanning Political instability Currency instability Nationalism International competition
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Internal Analysis
Internal analysis determines which areas of the firms operations represent strengths or weaknesses (currently or potentially) compared to competitors, so that the firm may use that information to its strategic advantage It focuses on the companys resources and operations, and global synergies
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Pressures to Globalize
Increasing competitive clout resulting from regional trading blocs Declining tariffs, which encourage trading across borders and open up new markets The information technology explosion, which makes the coordination of far-flung operations easier and also increases the commonality of consumer tastes.
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Pressures to Regionalize
Unique consumer preferences resulting from cultural or national differences Domestic subsidies New production technologies that facilitate product variation for less cost than before.
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Benefits of B2B
(Exhibit 6-6)
Better relationships with distributors/channels Improved customer loyalty Rapid entrance into new geographical markets Better customer service Lower operational costs Expanded sales channel
10
20
30
40
50
60
70
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Exporting Licensing Franchising Contract manufacturing Turnkey operations Management contracts International joint ventures (IJVs) Fully owned subsidiaries
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Licensing
Quality and trustworthiness of licensee Appropriability of intellectual property Host-country royalty limits Quality control of franchisee and franchise operations
Franchising
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Advantages
Limited cost and risk Short-term commitment
Turnkey operations
Management contracts
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Advantages
Insider access to markets Share costs and risk Leverage partners skill base, technology, local contacts
Realize all revenues and control Global economies of scale Strategic coordination Protect technology and skill base Acquisition provides rapid entry into established market
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Examples
International experience Core competencies Core capabilities National culture of home country Corporate culture Firm strategy, goals, and motivation
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Industry Factors
Industry globalization Industry growth rate Technical intensity of industry Extent of scale and location economies Country risk Cultural distance Knowledge of local market Potential of local market Competition in local market
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Location Factors
Venture-specific Factors
Value of firm assets risked in foreign location Extent to which know-how involved in venture is informal (tacit) Costs of making or enforcing contracts with local partners Size of planned foreign venture Intent to conduct research and development with local partners
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Strategic Choice
The strategic choice of one or more of the entry strategies will depend on
1) a critical evaluation of the advantages (and disadvantages of each in relation to the firms capabilities, the critical environmental factors, and the contribution that each choice would make to the overall mission and objectives of the company.
2) 3)
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