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Henry: Understanding Strategic

Management
Chapter 9: International Strategy
and Globalization

International Strategy and


Globalization
Globalization
Globalization refers to the linkages between markets
that exist across national borders.
These linkages may be economic, financial, social,
political, in effect, anything that leads to increased
interdependence among nations.
This implies that what happens in one county has an
impact on occurrences in other countries.

International Strategy and


Globalization
International Strategy
Motives for international diversification:
Organizational Factors
- Role of senior management team
- Firm specific-factors
Environmental Factors
- Unsolicited proposals
- The bandwagon effect
- Attractiveness of the host country

International Strategy and


Globalization
A Globalization Framework - Ghoshal (1987)
The Goals of a Multinational Corporation:
1. Achieving Efficiency
2. Managing Risks
3. Innovation, Learning and Adaptation

International Strategy and


Globalization
A Globalization Framework - Ghoshal (1987)

International Strategy and


Globalization
A Globalization Framework - Ghoshal (1987)
The Sources of Competitive Advantage:
1. National Differences
2. Economies of Scale
3. Economies of Scope

International Strategy and


Globalization
Types of International Strategy
When competing in international markets organizations must
decide:
To what extent should they produce standardised products for
sale in different countries utilising the locational advantages of
low cost countries?
To what extent should they produce differentiated products that
embody variations in local tastes and preferences but incur
greater costs?
This is the debate between globalization and localization

International Strategy and


Globalization
Types of International Strategy
The issue of globalization versus responsiveness to local needs
highlights four basic strategies open to the organization:
Multidomestic
Global
International
Transnational.

International Strategy and


Globalization
Types of International
Strategy

Figure 9.2
Characteristics of
Multidomestic, Global
and International
Companies

International Strategy and


Globalization
Transnational Strategy - Bartlett & Ghoshal (1989)

Figure 9.1
Industry Requirements and Company Capabilities

International Strategy and


Globalization
Entry Mode Strategies
Exporting
Licensing
Franchising
Joint Ventures and Strategic Alliances
Wholly owned subsidiaries

International Strategy and


Globalization
Entry Mode Strategies

Figure 9.3 Entry


Mode Strategies

International Strategy and


Globalization
The Diamond of National Advantage Porter (1990)
Four attributes:
1. Factor Conditions
2. Demand Conditions
3. Related and Supporting Industries
4. Firm Strategy, Structure, and Rivalry

International Strategy and


Globalization
Porters Diamond of Competitive Advantage

Figure 9.4 Determinants


of National Competitive
Advantage

International Strategy and


Globalization
The Myths of Global Strategy
Rangan (2000) argues that there are seven common myths about
companies considering a global strategy:
1. Any Company With Money Can Go Global
2. Internationalization In Services Is Different
3. Distance And National Borders Dont Matter Anymore
4. Developing Countries Are Where The Action Is
5. Manufacture Where Labour Costs Are Cheapest
6. Globalization Is Here To Stay
7. Governments Dont Matter Any More