SIXTH EDITION International Management Managing Across Borders and Cultures Text and Cases Helen Deresky Emerita, Sate Univers of New York Plassburgh "PEARSON EDUCKTION INTERNATIONALCyn epee on tert oti i mini nok a "ppt cine ae Cnr ee hen “apg 0) Sm 7 Pen Hn, pr Sn Ri New Ae See matrices Peed a Und Serer Antes Ti pans remo Copia ein ‘esis cabin por y tio repoanctan rage mera nem wanes a att 87 ae it at png tg wae Frio eee tan) Rp ra Begone sn re at andor Pa Bien mat eae en Li Le enon Eon Nt Aaa Fimo gerce owe Lit fas Bane an ‘iter eoceeea en Edun, Upper See ese aco aa PY. Lied ‘Nore 99765432 sen, 0140186CHAPTER Formulating Strategy Outline “Opening Prof Wal Mart Finds hat Is Using E-Busines for Global Foil Docent Fi Eery Culture Expansion Reasons for Going fnteratona Global or E-Locl Reactive Responses Eniry Strategy Alternatives Prouctive Reason Comparative Management i Fos: Manageman ove: Meco Comes ‘Stele Ponning forthe EU Marker ‘Contin Gleb Expansion n2007 ‘Strategie Choice. Sati Formulation Process ‘Timing Eniry and Scheduling ‘Stop im Developing ftereationl ‘Expansions “od Globl Strategies “Te fluence of Caltre on Statepe Mason ana Onjesties ‘Choices Environmental Asesment Cconeuson Source of Evironment Summary of Key Points Information Discusion Querions Internal Anais Application Eerses Competitive Arai EEperemtal Exrcie Statees Deebion Making Models InemerResourees Gobel and international Strategic Case Study There’ Detroitand There's ‘Alternates Tinea the SategieAtrction of Approaches to Word Markets Ewer Europe hal feertve Satis ‘Opening Profile: Wal-Mart Finds that Its Formula Doesn't Fit Every Culture |WIESBADEN, Germany, July 31,2006—Three day after Wal-Mart Stores Atnnoanced that t woul pul ot of Germany, Roland Kogel was wandering Through te aes ofa somewhat headbare Wal-Mart in stip alin his trestern German ct Sy ae they Bring up n0¥?"he asked. ~Tey have good pies anda pod varity of produce” ‘Yer Mr Kopel, contested that he never bought groceries at Wal-Mart Food ischeaper at German dicount chains He also doesnot visit thi store often, bechve it ison the edge of tows and he doesnot own aca. is one purchase for the dy wa tucked wader bis ara neck plow. ‘Shoppers ike Roland Kop hepexpain why Wal-Mart raised the white ag ln Genny the ste of te company’s fst foray into Europe. ‘Ate ely a dxade of tying, Wal Mat never cracked the country—faling to become the alone shop destination for Germans tha itis fr soy ‘lions of Americas Wal Marts problems ae ot ited to Germany. The etait {tha strggled in counties ike South Korea and Japan ait sovered ats mema PART HIE Formulating and Implementing Strategy fr Internation and Global Opentions formula for ueest—low prises resus inventory contol ands lage ary of ‘Rerchanise id not ranslaeto markets wi lr vn Sscount chains and ‘hoppers with diferent habits. "Svc al Wal Mart stl expanding outside the United States, partial in markets whetetenered by aeqifng song eter. Sil,aven WalMart’ formidable esord at home, the companys ecet setbocks have exposed arare ulneraity overseas "Some of Wal Mars problems stem fom hubris a uniquely powerful American cemterpris yng foumpoue vas around the world. At Wil Mars Fendguarer in Bentonville, Ark, Aomever, te mesg rom these mstepsis ‘ow reiterng loud and clea. in porculr Wal Mart experience in Germany where ios hundred of lon of dolls since 198 has become aso of template for how not to expand into a country. tina good, important sso, a uingpont"an eterntiona spokeswoman foc Wal Mart, Beth Keck si“Germany asa good example of that nave” She aed=We itera bought te wo chains and said Hey we aren Germany isn thispreat?™ Among other thing se sid, Wa: Mart now cares es wether its foreign storescaty the name derived rom sounder, Sam Waltons the German ‘Wat Marts do Seventy percent of Wal Ma's terrational ses come fom outlets With names ike Asda n Brita, Sei in apa ox Bompresoin Bra ‘Wat Mart sly ting fo integrate aequstios with mote ensiiviy—a proces that involves tus like deciding wheter to console multipefrign Fesdguarer and how aggressively (0 impose Wal-Mart's cororate culture on ‘oa-American employees in Germany, Wal Mart topped requiring sls clerks rosie at customers practice that some male hopper interpreted as iring—andserapped the ‘roning Wa Mar hast by staff memes. "People found these thing strane, Gexmans jst doa’ tehave ha way. sld Hana Movin Pochmann, the seestary of the Verdi uion Which represents 3:00 ‘Watart employes bee "Wat Mares chengs came too lt for Germany, but they could hep it rack cotter matkets ike China, where it aleady has 0 stores and 30.00 employees Far ‘fom being chastened by setbacks Wak Mar. forging ahead with an aggresive prope of foreign ausitions.CHAPTERS — Formulating tategy 205 Ina singe wek ast fal Wa Mart complete she prchase of te Sona chain in Bri hong controling taken Sly of lopan, and became a partner inthe {Cacho shan Central Ameria The deals added 54 stoves and 50000 “mployes to Wal Mart overseas empire ST had pred to mane a US-based general mechandie retailer that i oing better than WalMart International ssd Bl Dreher, who allows Wal-Mart for Deutsch Bangin New York ‘Sartigitom srt [eat ago, Wal Mart ntroatioal has rown ito 4 $6 blionbusnes the fastest growing part of Wal Mart ws neatly Sd percent sles growth inne, compared wih the same month as year. Even subtracting one-time guns rom seqsions zew at neatly 12 cen about double thereof WalMart’ American stores. Sustaining that pace frie for Wal-Mart because high bl prices have ped sap the buying power of Americans In June store aliens tome market ocined Wa Mart erated that sen the United States in stores open at feast one yea would increase ony I pereent 03 percent in Ju "Wal art Germany, with 8 stores and 825 lion n sales, alost a footnote {ora company focused on Asia and Latin America But the problems i ‘counteed bere hve ctboeschewnere For emample i beveresubisies ‘Somfortble relations with is German abr unions "hey dit understand that in German, companies and unions are closely ‘connected, Poshmann sid “Bentonile die" want tohave anything todo ‘rth unions They thought we mere communist a Kec sid Wal Mart id eltivate god relations with he lenders ofthe vers coun which presets the unionized work fore, and changed polices in Tespomte to smpoyee concer Wa Mar wil soon pet another chance to deal with organized bor. lei of tess indepenent sore In China, the stat-contoled All China Federation of Tiade ‘Union ionizing worker io Wal Marts stores “Germany ls provides lesson inthe pes of busing exsingchains Wal ‘Mart’ purein of Werthauf ad ntrspar sale it with stores mundesrable locations Te Wiesbaden oles worlds sway fom a squeaky len American ‘al Mare nearby are a eoupl fsx shops se wee some othe at ateetive ofthe big-box eter out her” said James Bacon ditetor ofthe retal and consumer goods practi at Mercer Managemect Consulting a Munich206 PARTIE Formulating andlmplrmenting Staten fr laternational and Global Operations ‘Compounding the problem, Wal-Mart shut down the headquarters of one of the chtsinfrnting employes who opted to gut ater than move. Sch = ‘dcion mould have Ben soutien te United Sates where Ms Keck sid, “Soviet ofthe Wal Mart eltare”Ia Germany she said prompted sexo of tented executives Tn South Kore, Wal Mart ad only 1 stores small presence that contrite tits decison in May sell ou fo «Korean dsount en. Many ovesns have aver head of Wal Mart a Seoul, sprawling ares of 10 milion, thereon single tore “Ts ack of seal causes another problem that has afflicted Wa. Martin several counties inability to compete with established discounters ike the Aldi ‘Shain a Germany and E-Martin Korea, "Te obvious lesson to ty to lk up In Bra, Wal-Mart opened only 25 store a ast decade there and srgled to compete agit Digger Toca rival, “Thonn 200 i bought Bomprego, rng preseooe nthe country’s poo, Dut {seg ores ‘Gar Mst di aot change the names ofthe stores which range fom. eightorhood provers olaie American-style hypermarket But with 295 stores Bras Wel Mart now ras third in he market, fer Carefourof France andthe market leader, Companhia Brasileira de DistrbaSo. ‘See hs piven Wal Mart neeased leverage with suppliers there, though nays say the company needs even more sores tobe a postion tundereut focal essounters onthe prices ofes customers "Ala Wal Mart store i auburban Rio de Jano the other iy, Ana Paula ‘Cunha de Aled 26,yearold housewife, had loaded her shopping cat wih Foe teas and flo Bu she was also carrying aba om ase grocery tore, theres had Bought meat cboese and cold cls. ‘Shut are always cheaper somewhere ese she sad ‘The procery buns has proven the moat fil for Wal-Mart crack. Ala swith 4109 stores in Germany sndercats WalMart on rc, while sil offing aka food. ‘en a Cansda, where Wal-Mart steamroled local departnent store chs when ensted the country asa nonfood tale in 1994, the grocery rade looms {E'S thllenge Wal-Mart recently announced plans to bud superceters that wll ‘So sil grocerien But analysts predicted WalMart would face stiff compation {tom Crna’ largest chain, Loblaw. ‘Demie Skea vaatone hopping as Wal Martin Huntsville, Ontario, ortht Toronto side Hed ering fo he tre when he hada varied shopping Tc Bat he aed, I'm ooking fr fod, goto Loblaw's” ‘Wat Mar ost suocnfl market ike Mexico ae those in which estate big. There the company ovpht the country’s larpest and best etal chain, ‘Chea snd has never looked ack, This yea, Wal Mart is spending more than 51 blo in Meszo to open 120 new sores. "Taking over Cita “gve them acral mas to build from,” sai Taf Sslem, am anlat ot Cred Suis Ft Boston in Mexico Cit.“The management stayed, tnd ey koe the market very well” Techps th mow srking example of Wak Mart sucess Asda, which was ‘tans Not cincount chain when Wal Mat squire tin 199, With sas of ‘Suebilion, Asda ao cents or 3 pecet of Wal-Mart's inerationa revenue. ‘Valsts German experience so tuht to se local manapement. The compan aly stalled American executives, who had ite fet fr what ‘German consumers waned. They tried to sll packaged meat whea Germans ike toby met from the butcher" Mr Poschmane saaCHAPTERS —Formalaingtategy 29 Map 61 Wal Nain Aner Some of WalMart miseps-sling gol cbs in Bra where the ame ‘afar ore states in Mioare so frequent) mentioned they have ‘become the stuff of urban lend: But even more sb ferences ia shopping ‘abs have ped up the company. Tn Kores, WalMart sors orginal had taller acs than thos floc val, forcing shoppers toe lade o stretch for tems on igh shelves Wal Mars uterine cols wih expoed pipesput of shoppers used tothe ‘ecoratd ering ia E-Mart stores ‘Beyond the ambience Wi Mats shoes sausage prdut ine dos not ut the shopping habits of many on-Arercan shopper Tey prefer dail cutis 1 variety of clones that peciaize n rose dogs or hotschol! poss, cr han shopping once a week at Wal-Mart "hey have tack of gods In bores” sald Le in Sook, 2 housewile siting ‘on subway in Seo "That maybe good for some American housewives Who five ot in their own cars” Bu Koreans she sl, preter smaller packages "Why Stoud you buy «bor of shapoo bots?” ‘St beard Wa Mar ater ie to change ther syle Ms Lee ad, “but uesit was too late” Spending ncensing arsunts of moaey and ime on global expansion in search ot profiable new markets acquisitions and alliances though pot always with sc ‘esl els Cleary, according to the foreign iret investment (FDI figures shown in Ei global investment expanding buoyed bya wave of mergers and aequstions in the 0 of the OECD (Ongaietion for Economie Cooperation and Development) ‘ions Top repent of FDI sie the United Kino (oy tar followed by the United Sates and Franetp investors were the Neerland France, ad the United Kingdom. "weve, hese figures do not ll te whole stry afar as lobal competitions oa ‘ered. Alter the Boston Consting Group in mi 200, inti 100 emerng-market ‘Sompanies that they fet have the potential to reach the top rank of lal corporationsin ‘hel industries Business Week dallenged that A sez te nt rn cou nn he ol Mutnaonals from Chi, Ind, Bras, Rusia and even Eypt are coming on rong Thay hungry and vant your cstomer Thay caning lal ame Busvess WEEK, uy 3, 200682 agri nmin und Yemeni Strategy for ration and bal Opens EXMIBITEA Yorsgn Dis met in OBCD Cousifo Te eta vers 208 Terai roar "ess isy ooytay wx stern ral | — conte) emo | onan sins] tae] | | Soo] spon | 1 10 0 ww 0 10010 Puc ron fm omc psec in ts, Managemest constant Ram Charan ave that we are now lyn a al wee Tee tans a cncamie change” to the compottine fandseape brought shut by {aati an the Internet This it wave of emerging-ation ply He Sys te Miarakantige tive tres sparse om by the Ineret mayo le my respon moby af knowledge he strategie orm sch us Ameria Movi SP MoE Chea Mobi Powubrss of Bari snd Mand and Murad 0 ta {wt pentating Desre's atk on isa US. (arta to ase thei Hes het crting aarkets from which they have ha to eke out meager rota “pein TOR Suit pohat empire Add thse now ehalenzers to the alreiy ype (Saetve en of pol players and it cca hat mans mec to py ce hd ‘Sintant tenon te state panaing Beeaue intemtional opportunities se fa Store comylse than thos in dmestc matty manages must am cafall—thal bs AMaesily-tohenfit rr them, Many experienced managers ar way abt expand Fnginto ply Pky ses the counts wher they inl german patie: (SE pzakitye Tis wari ms none bythe OED sn ne 20 when they ware 6 {hc lint time tat avestment ad promt wre ecalened by kc ek eto gst tEkacwer ned on national sso concer a sense that otal coun sti Nir ‘Sompanis layed bythe sme rules "ih prcess hy which i's manages calute ths fur prospects the em and dst wm anpropte strate o shee longer ots lsd ep planing {feta mean hy wich the company sompeteras boce uf Pons Panes ih “Thich trope the ways wich lifters el fam is competion | ‘Mhtey, font all sunssfl companies ng im long-range rates planning. sts SENET Sacneton porn theese eal antag of worldwide ems sal apporanies Mulntinalsorpoatons (MNCS) in partis. rept st Wace Hann esc oct wih cressing lol competion and were We Toes operations Toca however. hat rational trate planning often trmere or change some pinch s move nrementa smetines mess. process of strate dscon making tae managers When anew CEO f hr, or example Re ors will tn ll To ‘da cg sate. That why te eer fe careulychomn.om ihe os what {hoy arecpected tod Salih he rational strate plnning races resented itCHAPTERS — FormulatngStrateey 209 thi text teense tis usually the ideal acusive method of determining longterm plans, ‘hanaacr mus femember that people are making decison, and thei own personal od ‘nent eperences and motivation will shape the ulumatestateic deen REASONS FOR GOING INTERNATIONAL. Companies ofl izes" international” diferent reasons, some reactive (ot defeesive) Sd some proactive (or aggresive). Te that of ther own derented compelivenes ‘ts overiing reason mary Ire soripanie adopt sh agresve lol sateg. To remain Compeitiv these companies wat to move fs fo bud tong pesitions in Key world mar ern products aored othe common nes o 650 ion cstomers in Europe, Latin ‘America and Jopan. Building on heir past sucess compnies such as IBM and Digital Equipment are plowing profits back nto operations overseas Europe i now atacting ‘nuek cw imeanent capa erase ofboth the European Union (EU) andthe opening [rextenve new markets in Eastern Europe Indeed, ADL Europe was launched 5 ou {Gapomt to AOL’ deciing busines nthe United States The company lobbied hard fo ‘Stas ues paranteeng AOL Europe equal acess eleconmunications networks “Global f Contin ‘ne fhe mon common env reson thst prom a company to go overseas is lal ‘ompetton I left unchallenged competitors who siready Rave overseas opestons ot Stentment may et so entrenched in foreign markets that it becomes dificult for ober ‘Companies tener aa ate time In ation. the lower oss and matte power availble {Sirdar compet operating Boba may aio gve them an advantage domestica Nor [Pans gal perspective limited Yo indusies with tangible products Following te ghbal xpansion of banking: insurance, credit cards, and other financial services, ancl ‘renanges ate now lo going bal by ying foing partnerships with xchange in ‘ther couires ter ststepes fetal by advances in technology Trulear “hutmaers from: overs fistbego dng manufacturing plant in thi curry in the 1970 largely defensive response protecionit hea But ‘enas General Motor and ord have ben announcing thowands of job cus he foreign automakers ouch ay Tayots Honda, Mercedes-Ben oe aggresive) fnuling new fcr and expanding plans they opened no longo. New Yore Tots, ute 22 205° Although rade barriers have Been lessened in recent yeas asa reslt of ade agree: ‘Rent, hich have led fo mreated exports some counties este trade bates do provigeancher reactive reason tat sompenies often switch rom exporting to overseas Fanofacturing, Bares suchas tails quotas, buy local policies and other restive {Tade practices can nae exports to foreign markets oo expensive and 0 smpracal to [eccompettive Many firm fr example, want to gai 2 foothold in Europe—to be ‘garda as insiders counteract rae baits aad estietons on non-Europe: {Union (EU) fms (dicesed further nthe Comparative Management in Focus Staegic Panning forthe EU Market inthis chapter). par this fear of "Fortress Europe” is {nused by action such asthe EU's Black exemption for the tranciseindusty. This ‘kempion prot french, say McDonal’ from contacting with 8 single com pany ny CoCo, to supply ali ranehitees eit oes inthe United States. ulations and eestitons by a firm's home government may become 80 ‘xpemsive tat companies wl seek out les recive foreign operating envionment.0 “PARTIE Formulating sod lnplementng Strategy for Inereatina nd lab Operas ‘Avodingsuchreultions prompted US pharmaceutical maker SnihKtine an Britis ‘echam to merge Both thereby guarantee tha hey would avodicensing and exo {ory hasty i thi largest mariets Western Europe and the United State The merged onmpny snow taser in oth Europe and Ameri, ‘Operations in foreign counts roqunly start sa response to cusomer demands {Sutin to logistical problems Certain foreign customer for example, may demand thatintrseplying company operate ott local eons that tey have Deter ent aan inte forcteg tc Supper a comply ore the bine MeDonai'sn oe eoepnay tha an ts domestic suppers to follow to foreign veures, Meat supplier ‘Ost industries does jst tha, with ia ventres in 17 countries ach ss Bavaria, that {tesa work mith oc companies makiag MeDonal'shamburgers* Proactive Reson ‘Many more companies are wing thir oes in the developing world as prin oat ul global empires such at Mean coment giant Come, rn dea ker Romer and Rassias Lk, whi as hundreds fs tations in New ‘ese and Pes Busnes Wen, “ul 3, 20008 ‘Caefllong term strategie planning encourages fms ogo international proactive FREE, Oak presing feson for many large Vrms to expand overseas i t0 seek mL eratnes nat nctive wrldscle volume to moke the ules we of mode ‘Se apal-mtensve manfactnngeouipment snd to amortize staggering esearch and “Enctopment cots when facing ret prot Me eyes!" Te hp cos of rsearch and \Jrctopment such in he phurmaceutealindsty (or example. Raby Laboratories Seton) along wth the cnt of keeping up wih new tecnolopes.ca often be recouped ‘nly through global sales. he ame (198) i was prescient ving Fe Ew enero ols, ts the puck a skate ward Mice. Ducxer, VP ternational. els Express Uni Ap, 206° Astle by te above comment. companies in mature mets in develped countries Sinica prom anprative to ok for new opportune in emerging markets I this ‘kispie Red founder and CEO Frederick W. Smith was farsi I predicting hat ‘Xn ald besome an économie juggemaut ad purchased Tiger Internationa efor {355 milion in 1989, igor ma stugling cargo hauler. However, chad the assets hat Srutn wartcefyngrigtsnto major Asan airports and managers with Weal Knowle “Tis brave move rewarded FedEx with 39 percent of the Chin-o-US ir express market ‘Comiing to sck agaresive growth opportunities in thereon, FedEx moving hub {Scuungthou, Ching ih S130 milan investment 208 When expansion oppor ‘Ses beame ited home fro sch ot MeDorls are often driven toseek expansion Tough ne international markets A matore product or service with ected growth [idomenie market often hse He" note oun, whet wl he at an caer age ol fe ole Avon Produts for example Ras seen decine in fs US. market since ‘ional sles and marketing ststepy ovo Calling” (hose to-house sles) 0% ‘Sate wit empty house doe the epraing mmber of women who work oti ome: To make p forts fos, Avon pushed overseas o 26 emerging markets such 08 Mexico Poland China, nia Suth fren and Vietnam ringing its ta to 10 countriesCHAPTERS — FormulatingStteey 240 in which operates oversea) In Bra for tancefsina Reis Basra cartes her amp [Eto the wooden shack inthe tiny vgs of Rego, jst out of So Plo In some Inatet, Avon adapted ocr nfences suchas in Chia, hese consmers ar i5p- Tu of door-to-door slespeope Thee Avon et op showrooms (beauty boutiques) its franh otis in mayor eis that women can consult coumetcans and sample products Sutnequenty he company’ patience pa off when was awarded a dec sling cen ‘China in Jane 200 and bepan recutng over 39.00 dct sas agents” Ta edition, new markets abroad provige apace 1 iavest apt pos a well 5 ‘employ underutlized resources in management, technology. and machinery. When ‘hurly new markets open up, such 2 in Eastern Europe, oth experienced fms and those new tointemationl competion usally rsh ote advastage of awaiting opp tunics Such waste cas wth the proscive sane hat Unisys Wok in peparing fr and jumping oa the newly opened market opportuni in Vietnam. ‘Comes, the Mencan coment gant one company agresiely aking advantage of| youth opportunites through soqisitonsasdetaed inthe accompanying Management Foam Alter leering is famly'sbasines ro the boom up freien years, Lorenz amino became CEO and seared hs gute expansion sto ward markets Histaesy ‘as been to suite foreign company allow te to tterat em into Cemex and psy ‘lf the deb ad then lok for tenet acquisition. Manica Comex Continves In October, 2006, the Mesican cement giant Cemex ‘ootnued is global expansion when t made an nso- listed bid of $128 billion forthe Rinker Group of ‘Australia, Te deal would create one of the world's iatgstconsracton materia compan the tansaction goes through, i Would also strengthen Comer’ leading potion i the American houing market, particary Un Sun Belt states lke Fora and Arison. Eighty percent of Rinker's sales ‘some fom the Unite Stats. "The acquisition would be the largest ever by a Mexican compan, Over st 1 years Ceres ha fran, Lorenao Zambrano ts ansformed his company {nto multinational company with operations on ve Continents Stes 2018 ached 153 lion “The global cement and consiruction materials ings hasbeen consobdating ove he last few years ‘pant ike Lafarge of ance, Hoke of Switerand Shi Cemerhave oop prow though auistions Daniel Altman, st analyst in New York for Bear Stearns sits “These companies make acquisitions through al parte ofthe eye They See something they Hike and they bay i” ‘But Mr, Altman and many other analysts ques- tioned whether Cemex had picked the right momen 0 take the bid. Several Yes of bisering growth in the pape A capita et§ ————————— SOURCE e Maines Comet Company Bir Aaa Coc’ Cepriht Ne a Ties Co Oster 2.206 ed ith es Riker Grp LA ale ed $1428 one fom ene 1 Glotal Fxpansion in 2007 United States housing marke have stopped short p= ‘aley in Flora which accounts for about percent ‘of Rinker overall sles. Mr Zambrana sought to alt investor concerns in ‘conference call with investors arguing that Cemex ‘wava long tem investor. “of coarse rtm worried about the US. howls slowdown andthe Fords residential marke” he sai Shut Tam confident tha those are manageable risks” ‘er Zambrano a grate of Stanford Business School bas confounded Wall Steet before with his pur ‘hates, taking on billions ia debt to expand firs Spain he in tats Ameria andthe United States. Last year, Cres became the word les prodicer cf ready-mix concrete when bought RMC of Bean for $58 bllon ging its rong presence in Earope. ‘Me, Zambrano’: pais have paid off as Cemex exoctives have cu costs and generated prot pay ‘down de “The company ha seo invested heavily in igh ech ology allowing managers a ts Moatertey headqat- ters northern Meso to rack plobal operations. {would give Came the benefit ofthe doubt based onthe enperenc ofthe pst eid Gonzalo Fernand, fh analyst with Santander Investment Securities in Mexico Cityan PARTIL Formulating and Implementing Strategy for Inteational and Gaba Operations esc sea ost savings ete many companies o operate from overseas hiss “The aalniy of raw materials and ober resources offer both greater control over Inputs and lower transportation costs Lower labor costs (or prdution, servic, and {eeamical personne!) another major consideration, lad tolomer unit costs and have ‘rowed vil ingredient fo compettivenes for many companies. “Sometimes fi the prospet of shifting prodton oveneas improves competitive neat home Whea Xerox Corporation started moving conir- rebuilding operations {Merion the unon agreed to nouded changes in Werk tle and productivity 1 Keep {he jobs at home. Lower operational cots mother areas~power, transportation, and Tinoncing frequently prove atractve Iacetves Governments in countries such a Poland seeking new infsions of capita, technoons Sau Enow-how willingly provide incentiver-tox exemptions, tax holidays subsidies, Ibana and he we of propery, Besse they both decrease rise and ineeas profits these Incenves are atractive to foreign companies One stdy surveyed 103 experienced manages concerning the elativeatracivenes of various incentives for expansion into the Caribbean repon (primarily Mexica, Venezela, Colonia, Dominican Republi ha Guatemala). fhe raul ndeate the opinion of those managers about which nen {esare mnt portat however, the mort desable mx would depend onthe nature tthe parilar company snd te operations. The fist wo sues reflect managers’ on ‘Eins toout limiting foreign exchange sek, where restrictions offen change overnight Sumi te aby the frm to repatate roi Other cancers ar has of pital [Rxabty apd the possiblity of expropriation, and those of tax eoncesions™ Nor ace ‘hose incentive linited fo emerging economics The state of Alabama, i the US. Bas {pent hundreds of milion to ttrat the Honda, Hyundai and Toyota plants! Asof Jy [bor Europe's Airbus was lo considering opening plat n Alabama. ‘STRATEGIC FORMULATION PROCESS “ype he strategie formulation proces ncesary both atthe headquarters ofthe poration and at acho the subslares One stad reports, for example, that 70 per CErbof SOUS MNCubsiires ia Latin America and he Fr East operated on planing ‘Sls of ve or more years® “Toe global static formulation proces, es pat of overall corporate strategic management, pales the proces followed in domestic companies However, the “arables and therefore the proses sl ae far more complex Because ofthe greater “Mteuty in sining accurate and tnely information, he cvrsity of geographic lea ‘Tonzand the liferences in oll ga, caltural markt, and financial proceres These factor itoduce a preate level of kn tatepc decisions However, or ms that have ot ye engaged a international operations (aswel a for thos that do), an ongoing ‘Tuicse planting process witha bel orientation identifies potential opportunities for {Uh appropriate market expansion, (2) nereasedprottabity, and (3) new ventures by Aish the frm can exploit ts striegc advantages Even tthe absence of immediate ‘pportuniien monitoring the global enirnmeat for rends nd competion important ‘domestic planning “The strategie forulaion proves i part of the strategic management proces in eich mat fs engage ithe formal or nformal. The planing modes range fom 3 Jrontiv long fane format toa reactive, more set-ofthe pans method, whereby the Unyby oy decisions of ey ensoagers in partcalar ownermanages accumula to What ante dacemed retroactively othe new suatogie direction” The tages nthe steric ‘Sunsusment proses are shown in Exhibit 62. reality. thse stages seldom follow sh ‘Mint format Rater the proces cominvous spd intervie, wth data and rests irom earlier stages proving infomation forthe net sage "The fst pase ofthe stategie management processthe planing pheesarts withthe company establishing (or caring) its mission aad its overall objectives.CHAPTERS —FovmulingSategy 243 [EXHIBIT 62 The Sragic Manageme Pr Celt snd dn | tea ote 7 be I | oni aarti rams ‘seem “The next two steps comprise an assessment ofthe external environment that the firm {aces in he fate and an snalis ofthe fms relive capabilites to deal succestlly| sth tat eovronment Stratepe alternatives are ten considered, and plans are made ‘sed onthe strtep hoe. Tse five rep onsite the planing phase, which wil be further explained in this chapter. “Tne second part of he srtegic management aooes isthe implementation pare. Suectsfal implementation reques the establishment ofthe stuctre, stems and process stable to make te srategy work There variables, as wells funtion level $rateiesare explored in dtl in the remaining chapters on organizing, leading and Stating At thi point however, iis important o ate thatthe srategle planning proces by ie oes aot enange the posture ofthe frm unl the plans are imple- ented fn adton,fedbsck fom the intern and longterm results of such iple- ‘mentation, along with coninuous environmental montorig, flows drety back into the planning process, STEPS IN DEVELOPING INTERNATIONAL AND GLOBAL STRATEGIES Inthe planning phase of strategic management—srategicformlaton—managers need to ‘hreflly evaluate dynam factors described inthe stages that follow. However, di~ ‘Sheed carer manages seldom conceatiey move tough these phases ates, chang ing ovens and variables prom them to combine sd econsier thei evafuatios on an ongoing basisa4 PARTIE Formulating simplementing Strategy fr Internationa and Global Operations Mission and Objectives “Tae mii of an organization eis overal ron dre o the funtion it pecorms in ‘ety This mission chartsthe dietion of he company and provides ata fr Sate ‘Session making. “Sconpany’s overall objectives flow from its isin, and both uid the formalation cof atenstinal corporate aly. Beaune Weare focusing a ssbes of international ‘ategy, we wil ase that one ofthe overall obacives ofthe corporation some form ‘Sfintuaionl operation (or expansion). Te objectives ofthe firm's international “ter soald also be part he global corporate objectives A firm's pobal bjctives ws fy tal into the areas of marketing prodabity,fmanc, production and esearch and dexclopment snes other a shown lo Exhibit 63. Goals for market volume and or | ‘otusbity se wally et higher for international has for domestic operations Besse Erthesrower rk avlve. addition financial objectives onthe global eel must ake ato secant feng tax requaton in various countries and how to minimize overall Teses rm exchange rate Auctuations. Envirormental Assessment [After eifing the corporate mission and objectives the first major step in weighing iMternatisnalsratepe opto the environmental asesment. This asesent nies “vironmental seanning sad continsoue moaitring to keep abreast of variables around {he word hat are prune to them aad that have the potential to shapes ture by ‘ae nw opportunities (or threats), ems mist adap to ther environment to survive “Te focus of strategie planing how to adapt "The proces fathering information and forecasting relevant tends, competitive scsi tad circumstances tht wil fect operations in geographic aess of potential EXHIMET €5) Gish Carport Objectives Tare “conn mares tre—woréie anno ‘Arma peceag le roe oma pcg hr om ‘Conran oregon rari econo fe aur orgy ver domes roan vue coroner gel rosin tego ‘Qatiy cat concl Iron folie production rho coe rac of vrata ‘Tor gbul mang be Opn pal ercore Forages manages raanty Lenetern rte romh Aone roe romCHAPTERS Pring Snr a2) er cd eweomeatal ming This into e conducted on hee ete ce cba cup) Smeg so ee rad bo cone lonoy ant acme nal at one) atic say Thai repens aoe nd ucontalble iko the mations ees aad bythe open ihe Me Es nee eas MNCs > [2a Strikes bernie setins aol pty een owen ‘Carney ni. Thi variable oreans ater Fisk infation a Motto the ‘Shang sof renccs an Cama aie! polly when pesting oes For ‘Sone bot fori nia em ots sel emer of isk when Meio vane See iticand he sey colapcdin dona sna 202 Arena wat seg thetame protien «+ Nasrton This represen the howe goveramen’s osforindependese deco 2eC ape on nhc orgn cpus The bome orem! ay impooe ‘Siete tort cnr regurenens ol cone’ regret aes ‘Sih rp tbo ond soi apa frente me mas wth ‘seins aes px te fon of aan iy exer hog be ON (Ret) pres tom naonlgoncoents-sempte ty the United Sie puting esa (Speer ef conpsston 2) ie ptent nd trader proteston Inv ch a8 ‘Soca Chi n eet yn whch rode es propia xno thong afisk eed Gye bt of iraarctre eh on sd lemons Thermal eompetion Cnsacing gol compete ans prs be mostinprtat ‘Seton spsonent and suey formant Te ist step nang th compe ‘het sm he ev iy sce abe ene te competive me i ‘asa county (xen bing casera exam wi the tie por ‘his iy ete son oration competion? Wha it 7017 “23 Smad tthe pope prado ree? Tlie po pte ethan {felon wi te Strmine by Ose nds oon + Enno Scanning Magen must sl specie ases te caret compeons— ‘Ser bentor he rooms att They atk se port gosto Win oe ‘Sercomoeton! porns ce goa an stein nth engin a weaker rive ‘elton Whar te Hl emptor reacts carseat moves “Te fcmcan alo choose varying level of environmental scanning To eos ik and inverts any fi ake on the role he olowet" meaning that they init tele ‘Som vestigations stead hey sinply atch thee competitor moves and go where ‘hoy goramuming that te competitors have done tee homework. Other frm 6 0 con- ‘Siceabi ent to careful ater dna spd examine options nthe global arena eal the frm shuld conduct lol evionmentl analysis on thre ifeent vel ruitintonal regional, ad pation Analysis te multinational level provides abroad [Tesament of significant worldwide tende—thrugh dntfeation,frecsing and moni- {Seng sul These rede would ine the poll and economic developments of Site around the word st well egal technological progress From this sformaton, ‘anager can choose certin appropriate regions of the weld to conse ater. Nea atthe reponal evel. the analysts ocises in moe detail on cial environmen tahoe to Wen oppartnities (and rik) for marketing te company’s product se “Jats or technology. For evampl ne sch repona loaton ripe fr investigation by © Tem seeking new markets the EU Having zeroed non one ot mre regions he Fim mst a8its next step analy a the atonal level Soch an analse explores io depth specific countries win the desired feqion for economic, Iga, pola, and eatural factors significa tothe company. ‘ee Skample the analyses could oss on the se and nature of the market alongwith any ‘ose operasonal problems oconier how best to enter the market. In many volatile Eeunirs” continuous monitoring of such eavironmental factors 8 » wal part of ‘Sngingsstege planing. ln Per in 1988, lflation had soared fo 2,000 perent and ier icrorsts were Leinapping. or murdering business leaders. Although Key Tranages fled and many mtnationaleompanies pulled out of Per, Procter & Gamble ‘male fo take sdvamape of potentially lrpe marketshare when competitors let6 PART IT Formulating nd mpeg Sate fr laternatonal and Global Operations you couldn't goto beter busines shoo [tan what you learn by mansging ere ‘aid San Clspera de Frits the yar Peruvian manage of Procter & Gamble's ‘idiary. who was anked by armed bodyguards wherever she went Since then, Procter & Gamble consumer produts company, has expanded andis now a major fore in Peru, “Mis voces of environmental scaing rom the broad global eel down othe toca spo of etry planing stated in ExhiDL 64 The st broad scan of al potential Sond mers eaten te im ein ale to eliminate from ts ist those markets that “re etsed or nignicat oro not have seasonal entry contions The sesond ean of ‘Eoiningeeions ad then oventres done greater detai~perhaps eliminating some ‘Sunes based on polite instability, for example. Rematning countries are then [EXHIBIT 64a vane Sansing ad Sate Deco Making ‘Dex Ew lob ai Se pose ainsi linet: obo od ae Scan emonnnt x poiel ad comin) csp logs hse Ska ona Nore ke oe coin seme ane odo pl ae on Novo che a oie Ella nt alo elope cy endanger MN oa es) lt a tach nd amg pol Sel cer ey nie vt how mah i oe eis ook ry o/s Sins ineneton Nain wh li li, nt ods0en lave ey Coins entrant caning pensCHAPTERS — FoomuuingStrtery 21D assessed for competitor strengths stabi of products and soon This analysis ends 0 ‘Stour entry planning in seletted counties manapers tart to workon operational plans, ‘Sch as nepotaioneand legal rangement. Sources of Environmental Informations "The sores of envtnmental scanning depends onthe ability of mange take an inte ‘onal perspectveand ensure that thet zouree of formation and business ineligence [re global. A vanetyof public resources ae avaiable to provide information Inthe United State alone, more an 200 Busnes information services are aalable on computer Gataeses alred tapes indus snd regions Other ceoures inside coxporate “dipping” services ad fformaton packages Hower internal ous ofsormation are “aullyprerable-especly alert Geld personnel wha, wt stand observations, ah ‘tovde uptodate and ceva iefrmation fo the fm Extensive sing sown ternal Fedor tubs Meding Company ems worse more han 00 market a pets whe job its fo gabe, snayae, an feed market information tothe parent impor. Internal sources of information lp oeiminateuncelnbe information fom ‘eethdry sources particularly in developing countsies As Garsombke points ou, the ‘Steal data romcach countries canbe mseaing “Census datacan be tampered with by government offkns fr propoganda purposes o ic may be restted, tm South Roe for instanee en fil fires canbe coafcing depending on he souree”™ Tncermal Analysis [Ater th environmental asesament, the second major step in weighing international ‘trate options ste internal analysis This analysis determines which reso the firm's ‘heraions repre stengths or weakneses (currently or potentially) compared ‘hrpettors so thatthe flem may ase tha information fois strategie advantage "Te itemal mls ose on he company's resources ad eration and on lol synerpes Te stents and weakneser ofthe e's ancl and mnageial expertise and nctonal espabie are evant to determine what key sacs factors (SEB) the ‘npn har on he welhey an bp te frm exploit oe oppertnities Tose factors ‘Rarasnlyinvolvuperietechnoogalexpaity (5 wih Mire and Int), as ell ‘ther nestep adbentage sch a effective dtribution channels (as wth Wal-Mar?), ‘Soper promotion apabiies (Disney) low ost production and sourcing postion (a with ‘Tota-supetor per abd em prod pipeline (Merk) and 00. "Ung forh operational strenght advantage exemple by lapanese ca man atacurens Tir plduetion quality and eeiency have catapulted them into world (artes Asto her gobel trae theyhavereeogalzed hat tha sas and marketing uncions have proven a competitive weakness inthe European car wars, an the Japanere ate worhing on these shortcomings Japanese automakers—Toyota, Honda, Mazda, and so on-ae following Ford and GM in seeking fo become more sophist- ‘ited marketer troughout Europe. "Al compenieshavestengs snd weskreses Management challenge isto identi, both and take appropriate action. Many digo ols re available for condsting a Internal resouree anit Financial rag forename may eval aninefficint we of 588 that estcting pital acl fore anal may revel ta the sls fcc san ‘Snot datint cmpetence othe fr Ita company conducting this avait to determine “Ihether to stat ireational vestuero to mprove ongoing operations abron, ce {hmoperstioel sacs mst be taken into aenunt These sesh (1) the fist of ‘hating marti information n many countries 2) the often oory develope ian ‘Gal markescand () the complexe of exchange rates and govertment controls Competitive Analysis [At this plat, the firm's manages perform a compeitve analy to assess the iem's ‘Spabliies and key sucess actors compared to those of ts competitors. They must Judge the relative urrent and potential competitive postin of fms in that market an IGckton-wheter that a global position that for specie ccuntry oregon Like2a PART UL EXIIBIT6S lta Compo Anse Formulating nd mplememing Straten or neato nd Global Operations ches game the firm's managers also nee to consider the strategie intent of competing Firms and what might betel fire moves (satgies). This proces enables the Sate ‘Tplanncs to determine where the fem hos dstnetive competencies tha wl eve Lirdese advantage aswel ap what dection might lead the firm into a suxainable npattive avantage—that ne that wil ot be samedinely eroded by emation ‘Tue reso this proce wl also help to ‘dentfy potential problems tht esa be Comic oy that may be ignicat enough o eliminate further consideration of etain “Tht stage of state formulation is often called a SWOT analysis (Strengths, ‘eaknesea Opportunitin and Theat) wich a fs apie relative to those ofits npr ar sessed sprint othe opportune and threats in the evironment fOr ‘ows frm tn comparing tel company with plentia imernatonal competitors ia host Inari ts sf for manages to draw up a compedive postion max for eat potential Toeton For erample Exit anaiyaes 4 US specialty seaood fis competitive protic In Matysia The US rm has advanages i nancial capability, fre growth of resources, ‘lsutainaby but a dbadvatage in Ques Isso a a sadvantge compared © {he Korean MNC in important actors sch manufacturing capa an fey and ‘Miputy Beonse the ote fms seem to have te comparative advantage the major ompettr kel to eth Korean fm. At hs point then, te US fm can fous in more ‘Son asssing the Koran firm's rele strengths and weakness. ‘Most computes develop their statics around Ke suengts or intve compe ences Dative core" competences represent important corporate resources ‘ocr ts Prahalad and Hamel explain they ae the “collective learning nthe orgaiza- ‘on especialy how to cordinate ver production kil and integrate multiple streams crieSkbotogica™ Core compotenserlike Sony's capac to miniature and Philip's Shcskmedi experese—ore sully dilicut forcompetrs to imate and represen & Tajor focus fr srtepic development athe corporate level Canon fr example, hs the its core competency ia optics tot ompettive advantage throughout its diverse ‘esnese omer copiers and semiconductor thopaphe equipment ‘Mangers must also ases ther Gras weaknessen A company already on shaky round nme. for example wll ao be abet cose an acquston stato pet pe sny promt staeyy, Of cours the subjective pereptions motivations, capa, ‘nd polo the manager ivan sie agaoses fequety coud the decision-making TT Firm onpard wir nranonal apr Maan Mar eet eee | sora co gan oat mt ) ne) Malian em) UWE)” Fr cng ley eo au mare onccecss =e simi only ° : ° ° ° rao cory ° o ° ee ° 8% eatty ° ° ° ° ° Frcs paiey + = ° ° = rare oh of sores + ° = ° = Jouines = ° . S ° essay ° + . ° ° simi + ° e ° “i ey Soe eae Tens Compt Ani” Faun Rv 740. ae 12-7CHAPTERS — FoxmlaingSuatesy 219 process The reat tha beaut of por judgment by key players sometimes fms embark ‘satis that are couraingeated by objective information Strategie Decision-Making Medes ‘We can farther explain and summarize the hierarchy of the strategie decision-making procs desc hee ty means of te leg strategie models Thi les and interac [om areconcepuaizedm Eni At the broadest level are hse global, reponal and our actors and kt deus above and in Chapter I tha ae art of howe consiera- ‘onan instittion bed thery of exiting a potential sks ad nfvences in the host {rea For example is onidring operating ia Rusa ae rain the potential vlnes- “biliy tos changes poiea tite to the marke reforms and opeaaess (rom recent ogre since Preside: Patn’s ation to exert contol over Key industries Secondly, | ‘omcuteny he i's competitive postion nis industry canbe reviewed using Michael Porter’ indasty-ased model fe forces tht examines the dynamics within a dst. [he frcentetr othe te level of competion ready in the nds the elative ease sth wich new crpetrs ay or may no enter the fd ow much power the supplies {ndalo the buyers have within the ndiny, nd the extent of sou produto serves that preva These sree model can provide the decson makers witha pcre ofthe {Zuo opportunites sn threats thatthe frm wou fee a partcular region or county ‘iti ts industry, Tissues of cour tat the Hcations that are under consideration ave eleady been pinged a tractive and growing markets forthe indy. However, that ptre would Be te fo any rm within te pata industry Inter words al firms vith am duty face the hme envonmenal nd indus aor the diference among, rms perornance ava rent ofeach finns own revourescapabiiie and sate dec ‘Sos Te factors that determine ams unique niche or eompetv advantage within that Sree are a funcon oft ow capable strengths and weakness) rele to those ‘pportnites ad these which re pected fr tat locaton ths he rsource-bsed Earot the f—whensonidring te unig vale ofthe Gs competencies and tha [ts produc or services Wile these mods may indent varying choices hs sae {evionmaking proces shoud enable the manages to give an overall asessment ofthe State tte therm and the opportunites in that lation and so result in agfno f° decton for that pint nme. Tose managers may want to tart the proces agin ‘veto ferent eto nore to compare the restive level of state ft it Ueermined tat there a good state and a decison made to ener that markel Itcaon the new se sidan Eb 6610 consider aerate entry sateis 'S discussion of hese ety stategie follows ar we fist examine the broader picture of ‘heorealstatege approach that em might take towards work markets Global and International Strategic Alternatives “The nates planing proves involves considering the advantages (and disadvantages) Ot variousstategiallerativs i ight of the competitive seals While weighing aler- ‘Rance managers mut tke int acount the poalsof thee firms and the competitive ‘Matus of eter fires ithe industry Depending en the Size of the firm, managers mus ‘Snsier two evel of stati alternatives The fst level, elobal strategic aleratves {Gopteabie primary te MNCS), detcrmince what overall approach othe global maret- Place firm wines 0 ike The second level ny sare) erative, applies to firms of {ny se these alternatives determine what specie ety satay & appropriate or ech lure hich the fm las to operate Ene stategy altematives are dacused i 2 [ster secon The two nai lal strate approaches fo work markets—slobal strategy ‘hd eponal or lal tategy—arepreseatdin the folowing subsections Approaches to World Markets Cone Inthe ast decade icrening competitive pressures have forced businesses to consider gobs ‘Natepesto tea the worl wan undierentited worldwide maskeiplce Such satis {re aow lossy refered to as globaltatlon— term that eles fo the establishment ofCHAPTERS — Formulatog Satay 284 woridnide operation an the development of standardized prods and masking, Many rat ke Porter have argued that plbalzatn is comet imperative or fms ia ‘Jabali tna lol nda rm mn Some way inerate is avis on 8 ‘reidwide bso to cape the linkages among counties This nla bu rere more Than transerng intricate among councs The rationale behind lain i tbcnmpte by estabishing wordwide ecmomies of sale ofshore manufotrrg. and inte (Geel cask ows Te tarm globelicauon therefore ss appeabe to oranzationa Shrstr sis to siratey (Orpnintiona uct i iseused uteri Chapter) “Ine preaures to globalize include (1) inereasig competitive clout rcing fom ‘egionl tang Sos 2) desing ais, hich encourage rang aso borers and open ‘itnow markt and (2) the information ecology explosion which makes te coors Ton of farang operations csr and io inceases the commonality of consumer tastes Un of Web tes how allowed entrepreneurs as well 2s exaised companies ogo glob! ‘most instantaneously trough e-commerce—cither B2B or B2C." Examples are eBay, ‘Yao! Lands End tnd the iatedEToys which met ts demise in 20 tn aion the ‘cus of Japanese companies with global statepes his st the competitive standard ia ‘any indunics-most rely in the automobile industry. Other compari sich 35 ‘Caterpillar ICI and Sony, tae aed wel with lbal steps ‘One ol the quickest and cheapest ways o develop a global strategy s though state rcallances Many firms are trying tog global faster by forming alliances with rivals, pliers and eistomers The apy developing information technologies ae sping ‘Bbennioal busines aliance rom sort term vital corporations to longterm state ‘Se pares (Strtepc allanes ae cussed further in Chapter 7) TA bal strategy heenty more vulnerable fo enrtonmenta sk, however, than a regionlation or euli-locl”) strategy. Global organizations ae dificu to manage tezzuse ding vo request coordination of broadly diverge national eutures I ao ‘ean tay Merson: Ricks and Roth tat fs mst se some of terol det ‘hey man "nationalize operations and replace home county yas wih aysem of ommoa corporate values td loyalies"> In ater words, the global stratery necessary fret all counties sary egress oftheir diflerences in cles and stems Problems ‘Shen esl wh as lack foal exblty nd responsiveness anda neglect he ned for ‘Sterentite products Insome eat each nto how US companies compre, Morso0| al dnoncred tha many companies sr dng that elation no pace sin {act globe! mpertves ate tng esipned by an upsurge in cegional presares"™ These ‘esetchers cam tha any companies now el hat reponalzationoazaton a more ‘Banageabe and lex ak appronch one that allow them fo capitalize on al compete ‘Ter atlonget he parent orpnczation and each sui ean ible approach 1 each ‘ther Ar dacusedin he opening profile, Wal Mart one Bobal company th has earned the ard wey tht shuld have sted more “lea” in some eons ofthe werd cling ‘Germany and South Korea where thas hao abandon operations ilo ocatin ‘Nokia, Nese Google and Wal-Mart hae fled adjust 0 he ates of South orn consumers In contrat the Bish raaler Tesco sa remarkabe case of Succeeding loan Same Tesco 1 89 percent owned by the Bish ret ‘fae ut ha led heron local manager fom Saraung, Iris on of Tse Fieger overseas sucesso generating hind of ts Overseas sales Mr Na Hove Stox, Anan Sw South Koren March 38 For those firms in mltidomenendustes—those industries in which competitiveness t= {termined on county-y county bags rather than a iba basis —repnalsuaeaes are ‘fore approprate than globalization” The regionalization stategy(multdomestie (or ‘alSocay seats] one in which acl markets are linked together wihin a region. [Mowing more lea tesposivenes and specialization Top managers within each region ‘Scie on their gen invesnien oeatons product mixes and competitive positioning: ‘ter words they ran ther subarea qustindependet organizationsFd PARTI Forme plementing State fr ltemationa and Global Options Since there are pressures oglobalie—such as the need for economies of sale 10 compete on cost there are opposing pressures to regional cfcily for newly devel ‘ped economics (NDEs) and es developed counties (LDCS), These localization pres Shes include umgoe vonsumer preferences resuling {rw cultural or national ‘iernces(pethaps something a snple a ighthand-dive crs fr Japan, domestic Suiies ang new prodicton technologies that faciltate produ aration for les cost {hon before" By "ttn local” cn focus individually ineach eounty or region on the locl market need for prod! or sevice characteristic dsbuton,clstomer sp por. and 50 on “Qrinth any management function, the static choice 2s fo where a company should potion lf along the lobaliantion-reponalzationcominuum contingent 00 the nature of the industry the typeof company the company’s goals and stengths oF \reakneses) and the nace of ie subsidaien among many fctors. In addition, each Company's sateie approach shouldbe unique in adapting tis own environment Many fms may tr to-Co Global, Act Local fo rade olf the best advantages af each ‘Metegy. Masta one frm with cosierable experts af being a “GLOCAL? fim {GLObat LoCAL) Matsuthia ae more than 10 production and research and develop trent (RAD) besesin 38 counties In Malaysia, fr example where Matsushita employs 52130) people in i 13 subsidiaries the company dligent fotos its pote of tng to iiep the expatriate headcount down and wa local managessonly 230 employees {ho ae Japanese. Other Matsushita lol poses are to develop local RAD tailor products o markets to et plant se their own rales and 0 be a good corporate citizen Ievery country Global Integrative Strategies ‘Many MNCs have developed thelr lobsl operations 10 the point of being ely invyrated-oiten both vertaly and norzotallytduding suppers productive facies, marketing and dtibution outlets and contractors round the Waid, Del for examples 1 sotllyitegrted company, with workwide sourcing and fly integrated production {snd marketing sytem It factors In rela, Bra, Chia, Malaysia, Teese, nd "Tuas and it hes an asembiy and delivery system fom 47 locations around the word At {he same tine it hs entree leibility Since Dell buds computers to each ores, ca tics ery litle inventory and therefore, cn change its operations at a moments nce "Thomas Friedman descibod the proces that his notebook computer went through When ‘The notebook was co-dsigned in Austin, Texas and in Tan... The ital supply chain for my computer including suppliers of spp involved about Jour hundred companies in North America, Europe and primary Asi, but with ‘hy key payers (war delivered by UPS 17 days ter ordering) “Twouas Fricouary PheWorld Fay 2005 Athough some companies move very quickly to the stage of global integration often ‘hrough merge or equistion many compares evolve into mitinatioal corporations by gong tvough the enty strategies In sages aking varying lng of time between ogee Typically a company tare with simple exporting, moves to lrgescae exporting ‘th sales branches sbvoad (or perhaps begins cening) then proceeds 1o assembly “brea either by tl or hough contract manufatring),andeventually eves fall ‘recon sod wth its own suid Finally, the MNC wl undertake the global Titration of ts foreign subsidiaries, sting up cooperative setivities among them 1 ithe economies of sae By this point, the MN has usualy adopted a geocentric Crienation, viewing opportunites and entry satgies in the contest of an interrelated ‘bel mart instead regioal or national markers In this way. alternative entry tate [esate viewed on a overall portfolio bas to take maximum advantage of potential Syerges and leverage sing rom operations in malieounty marketsCHAPTERS — FormulingStegy 23) Using E-Business for Global Expansion ‘Companies ofall sizes ar increasingly looking othe Internet as a meansof expending thet abal operations However, the Ltenet not just abou e-business: ‘The real ory sha te Ine i driving plobal marketplace rasormaton and paadig shift in how companies et ngs done, how they compte and how they serve ter customers ‘nie the benefits of e-business are many,ncuding rapid entrance into new geographic Ranks (ee Exhibit 67) les touted are the many challenges inherent ia pobal B2B UBBIC sttegy. These inciode cultural ferences and varying business modes and ‘overnmenta wrangling and border conflict in particular the question over which Seuatr has jrsition and responsibly over disputes regarding erosbordcr eee toni wamracions* Potential problem ates that managers mist aes their pobal ‘TSltonmental analy ioclade conflicting consumer protection, intlletal property Sho tar lw, increasing isolation even among democracies, language barsiers and [ick of ech savy legislators workwide se Sbatnasagers wil realae that e-business cannot be regarded justan exten sion of sunentbanneses tise whole new industry in tel complete with a diferent $5 Srcompettor and ately new str of environmental sues A reasessment of he PPeonmantal orc inthe new) configured indus, wing Michal Pore’ Sve frees ‘Suva model, shoul ake scout ofits in the relative Darganing power f buyers hu uppers te lve of treat of new eomapetitors exiting and potent subst as rll ats present and antlpated competitor analss** The lve of e-campetition wil, [Sliteenined by how wanoparent and imable the company’s business rode! fr rod or services observed on its Web Ttasler tat acompetive oat BB oe B2C strategy must offer a ehnology soi sion tha oes beyond Bae transaction or sting service capabltes To asus the poten- ta compeive postion of the company, manages rust ask hemseves he owing: + Does the crane provide tenolony slain tht eps indy tenig pres todo ‘snare ey? «Tne etcang owe oe among op het ie win etal ins? 1 Beer ie change fern peii ecosog od expec hat pea avant et gnc ncnge lee? “Tere no doubt thatthe gob e-business compete aren it a callengingon6, both teil ad technlogealy But many companies around the wo are plunging xine 67 eae a H a “sa om gegen a =| ee nit “Sotbac do chan ovre nm inetcg PARTI Forme 20 mplemersing Sate a nernationa and Global Opry in. fearing that hey il eet hind in his fastdevetping slob marketplace Tad ar Fu Xeton which hs ond pew eamaketpae with NEC an other kd ing.ecommerce payers icing Simtome, Hewlett Packard Japan. Li. Sumisho ‘Canpoter Systems ind US sttwave develope Ariba. Is ste. PLEOMART (plenty of fronts). B2B marketplace for companies Buy and el an the Internet oie upmett and spe pats and related aati Services seh sy consalation inane Sha Touts serous Ia Mtbovins, Asli the Broken Hill Proprietary Company {BHP} wbich specs mtr sours and regionatel for he lol market hs NMunchod fa om one-stop glabal eonaretplce The ste provides logit sample prts and supply prcarinens to e-business produer marketplaces Recnly, BAP Rin conducted aseies of Interat-bsed “reve” avetions where suppliers ape | Ning prices and then bd zoo each othe to ower price for ferrolloys BHP Franc gan. president or Gls Sopp epetsthat BP already spends about 10 Siton anualy om goods nd services oniae He says that “nline auctions allow us 0 ‘ove rely gureate r buying power and leverage geal savings they aw prove ‘Ramos sete and rom patric nthe suppl function ise rr compris ke cay etnies heir Pusinesy serves re provided ove the Inert frend wsers ad for sins Wal ungue snes model and a young many tay bar embark on global estates. Te company has pained el [Ro zobal and giant part infernstionl swap met prt earinghouse forthe worl man [ators and scars The introns esormeree markt evoling rapid. and ‘Rccutves a cay unnual nani conference ia May 2008 dieused how eBay fs ‘spon etetnly challenges “In Europe eBay in tack io bea igre than isin the United States wile As remainy eBay's fastest erowing region with tremendous ang term potential” Aer fr business we grr prams fr fre roth ae vcr ore Eo ras [MarkeplacesPryments nu Communica i Ih le eer sce and wel pond pura nw oppomnits ad ‘ected or charge me an Our lt ‘rand rte pening etc new nto opportu for Oe compans Mec Wuesin, (C0, Cauda News Wire Grp, Bey 42068 Global oe E-Lacal? [Although the ent ol mente company stl faced wth he ae st | ‘ext eyaing how mach ts pros or serves can hei” 0 How mash they must belied aio or repona makes Loa eutura expectations hit [ences in privy fas government regulates ake and pymentinfetrotre ne {far few othe copies encountered i tying took” ecommerce Further Shtcatons vse beso the al phys iantrutre must sopport e-usinewes| {at require the transportation factual gos For asiution tober business in he “appy shan ov to end were la thove instances adding e-commerce an exiting ol Economy" busines in those intemal markets key to bs more sca than Strung an ehasincs fom serach wthout the supply and isibution channel ley in pluc However many cchnlogycomuling fms, such s Next ine. provi software ‘Sans ad tools to penta gil mirkes extend tei soppy chains and enable ow buyer and sll elattnabips around the gate ‘Gong ehobel wih hanes Yahoo! hs done. necesita coordinate ft in ‘number of eons ound he world te same met ain 2 fold and to gab | “uric befor competion Certain cnatlons ate he ast of pings ‘The lob ewe strategy mikes ene when rade lal scope when ‘ne ramen eves nt mone dering order ad he esis moet cat Deicke reeves aly hy al competionCHAPTERS Formulating Saexy 228 “This strategy would work wel fr global B2B markets in see, plastics, and electronic composeats "Th elocal or regional strates approach sited to consumer retating and finan- cial services for example. Amazon and eBay have sted their eqional approach in ‘Western Euope Again. cetain conditions would make this strategy more advisable the elacalreionalepproch] is preferable unde ree conditions: when pro tutto nd constmpion ae reptona athe han lol Sope whe customer Ubhavio and marker structures differ aeons regions but are relatively smi wim areion and when supply-chain management very impor sucess “The selection of whish repon or regions o laraet depends onthe sme factors of local Imarket dymumice and industry variables as previously discussed in this chapter, Tlowever fre busineses additonal variables must aio be considered such asthe ate ‘ol tnornt penetration sd the level of development of he local elecommunications fntatrctre ‘One company which learned the hard way how to localize it e-business i Handango, ine, of Horn, Texas—a maker of smartphone and witelessnctwork Foftvare 4 the company vce president of marketing, Cla Paterson, sab fling fon thelr move into Avian markets several years ago:"We didnt understand what purchasing methods would be popular or even what Kinds of content, We dda havea {ocal taste, We realized me needed someone on the steet to hold our hand For trample, Handango found it needed local bank account todo business in Japan, Seeaue Japenese consumes ue a method called Konbin! o make online payments ‘Ths means thot when they place their order online, stead of paying with a cre {ard they toa Toal convenience store and pay cash to clerk, who then transfers the payment into the online vendor's account In order to adapt to this system Handango formed an alliance with @ieBitway a leal consumer-electonics Web powsl mich now acts Hlandangos agen inthe Koabii system, and also has taken Ever Hondhngo's focal marketing and translation” Handango ran ito a simi problem in Germany, ining out that Germans do ot lik debt and preter to pay fr Frei online purchases with wire transfers rom their bank accounts To get round hi the company founda local parinert eterZace with cal banks, and then adapted ‘Web ste tothe new payment method > Entry Strategy Alternatives Fora multinational corporation (ora company considering entry nt the international vena) a ore speci act of stntegic alternatives offen varying by targeted county, Tocnses on dflerent ways to entra forlgn market. Managers need to consider how potential now markets may est be served by ther company in iht of the risks and the [Ricalenrconmentl ators associated with her entry strategies The following vections ‘namin the various enty and ownership strates svalabe to Firms, including export ine license fanchsng contract manufacturing service-secor outsourcing, Unk, ‘operations management contrat joint ventures td uly owned subse se p by {he frm, These alfermatives are not mutually excuse: several may be employed athe Sve e They are addressed in ede of ascending sk Exporting _Exporng a relatively lwssk way to begin international expansion orto test ut an fovenens marl, Lite vestments nveved ab fas withcawal elativey eas Smal, Fre seldom go beyond ti stage, and are ms use this avenue fr many of the pro: tts Becaueof thle compaatve lack of opal reooros and masking clout exporting ‘Sthepramarenty strategy wed by smal basins to compete onan international evel Jorden Toothbrush for exatples small company eth one plant in Norway and with in ied esos dependent on good distributor Siac loedan exports round the wor, the company ecoges the importance of maitalaing good dstibutor lations recent25 arith Fouling and Ipeertng Strategy for International and Gaba Operations survey by Dunand Bradstreet showed that mor than lf of small o medium-sized bus tees antcipns promt ia tcc expr se nthe next ew years" “An expensed its may want handle is expvtg functions by appointing man ager or estbling a export department Ateraatively an export management company (EMC) may be etained fo takeover some oll exporting functions ncoding éalng ‘ith os coun epations tif dates, documentation, les of eet caren em ‘eon and sofort Frequent paso hie a specalst fr a given hs county. ‘Cetin decors need special cate when managers are sting UP an exporing tem, partly the choice of drbutor Many counses have regulations that make i ‘ory hard wo rove a dstebutor who prove aeiclent,Oterericl environmental Factors include xportinport ars aed quotas eight cos ad distance rom sapher ‘An international licensing agreement grants the rights to alm in the Rost county to ‘itner produc or sea producto both Thi spreement involves the transfer fright 0 pated traders or technology fora speci period tie in return for ae paid by {he ieense, Anheuser-Busch, for osance, has granted Bens o produce and market Budweiser bern England, pan Austral, and sel, among her countries Many 00d ‘manulaetring MNCs Hcense thet prodets oversea often under the names of ea ms {hd pres ke tov of Nike ad Disney an be sea around the work under various ceasing agresmets Like exporting. eensing also aeatively low tkstratey because itrequres il iverinien and it can be a seul oon in counties where market entry bye meee constrained by regulations or pottrepatiation restrictions Llcemings especially stable forthe mature pve of a produt’s ie cyl, when competition sintense margin deine, nd production i relatively standardized I iso wseful for Riss wit rapidly changing Lecologe, for those with any diverse product ine and for small rms it ew fancal and managerial esoures for direst Fvetnent road A clear advantage of licensing i that it avoids the tafe and quotas ‘Surly imposed on exports The moet common advantage the Hceasr' ak f con folover te feence's ett and performance Chticalenvionmental factor to consider a censing are whether sufient patent and aderar protections valable ia the hos county, the rack ecord and quality of| ‘he licensee, her that the Heense may develop is competence to become direct petri eenoe ket etry, dtp its om the royally rate structure in the ost coum Simi to Hcesng, amen involves relatively ite isk. The franchisor senses its ttademark pods and servis and operating princpes othe franchise for an ial {een ong royalties Franchies are wellknown athe domes fast-food industry, ‘MeDonad’ fr example, operates priariy on this basis Fra large upton fee and siderable oyalty payments the ranchise gets the benef of MeDona's reputation, ‘eating cliente areting clout and manegement expertise. The “Big M” is wel recog Tn, siel consideration forthe franchisors management quality eonio, which ‘becomes more df wih greater geoprapic dispersion. Franchising con be an ea strategy for sll business because ots equ ile ‘evestment inept or human fescue Troup ranching, an enteprencu anus he esouress of anchsees fo expand; os of today's large ranchiss Started outwith this Strategy An eitepreneur can kore franchises to enter anew business Higher cots in ‘nty esa soya are oferty he lower ko an extaished produ trademark, “Ind customer basa well athe bene ofthe fanchso experience nd tenis” Cte Mafctring ‘A common neant of ting cheaper Inbor overseas is contract manufacturing which involves contacting forthe production of finished goods or component parts TheseCHAPTERS — Formulating Statery 227 ‘ood or components ste then imported tothe Home county. Ff oer counties for ‘Ecombly or tle Alternately they maybe sold he ost country. f managers can roure the reliably and quay ofthe focal eomracor and workout adequate means of ‘ita eparatin, hi stop) cam be a desirable means t quick enty ito a country ‘wha tow eptl investment and none ofthe problems oflcal ownership Fem ke ‘Nike ue contact mansfsturiog around the wot fboring rtsoring when a company moves oneo lofts factors trom the ‘home’ counry to Snother county a theese with ome of Toyotas ators inte US Offshoring pro- ‘des the company with accesso foreign market while avoiding rae arias wel as, Iroquentiy, 27 oncrall lower cost of production. Accord to the US. Commerce Deparment epproxinately 9 prcet ofthe output om US-owned offshore factories Isso to foreign consumers" Save Satie Ontong ‘An ncreasing number of rms are outsourcing “white cola Jobs overseas in an attempt ‘Seduce ter ovrallcosts Often they enter overrest markt y setting up oa offices, ‘aeateh laboratories cll centers and so on inorder to utlize the highly skilled but Towervage “taman copii tat avaiable in counties sich at India, the Philippines, tnd Chin, aswell the ality to offer global, round-the cock sevice trom diferent time zane Some examples inlade the following Genera let 20000 Ini: ig Choa RAD cen R&D tor mes. ighting aera, [Accra 500 he Psion: scot tare tock Work ‘rece Dong india sta ose desig coon suport oun, once L700 ti hes moe sens planed scree aim rocesig™ vera. seems that India has benefited in IT jobs a note by Bll Gates of Microsoft aula the absolute leader in services offered onthe world market." However. a8 India _gett more sophisticated at taking over high-sked jobs outsourced (rom European and US multinational, thay re starting ofa away eallcenter work, fying tht i does’ pay wel any longer. Te adution, companies are finding tht SRE nia are increasing with the demand fr jot rom MINCS, and with the TRulun technology companies temselves growing a global lout, Outsourcing of low: {dtc obs tay then start fo migrate fo other coats sch as the Philippines or South Africa! Te turn, both Indlan and American service providers are opening tices n Hungary Poland, andthe Crech Republic ote advantage ofthe German Sd English-speaking werkfores for European cients. Whether the fm outsource (or ofleore) white-collar or blue-collar jobs they must somige strategic aspect ofthat decison befond nadine cst savings According qo Hewitt Associates a global human resources coasting fin, the “global sourcing ‘Mente ullacd bythe firms surveyed was often short-sighted: sevicesin fino, FT upper. Although cox reduction the primary diver less tha half of companies analee theta emronmen of coniderel counties oy re furs measre he ipa on ‘tps cha cot an ony 34 percent aes cost of plano ofc suadonn™ ‘Even wi tsncreasng outsourcing of jobs IBM has acknewledged the need to conser fect fer then cos as stared ada revamping of 200.00 people services| twrkfors in 2006, 08 “The idea iso peform work for cle where it can done mast competitive. ‘That means not nb nda and Chia but Taba, Oklahoma and Boulder, Coord Buuness Wen “ne 5208828 PARTIE Formulating sod tnplementng Sse for International nd Global Operations ‘Managers are infact broadening thelr srteic view of sending sled work abroad. now {ings term “Wansformationl ousouring” to refer to the growth opportunities provided by making better se of skled aft ip the home offce whch are brought Sout bythe gains in efceney and productinty through leveraging global talent Te US-based bank Wachovia Corp for example signed a 31.1 ttion dealin 2006 with Inc's Geapet ro outsource finance snd sezountng jobs But the sume ie the con pany ousoured adinistation of ie tuman-resourcesprograns to Hewitt Asocates Bosca in the US* However, the risk of backlash (rom etsiomers, community ad ‘Curent employees pecsiftes careful consideration a the eats fora company fo £0 “ttnore Managers also must conde the rik of fosiegcontel of propeetay techno fny aid proveses and decide whether to sct up te company'sown subir shore (captive operation) instead of contracting with outside spe Bank of Americ, {or example spit thr strategy by opening tele omn subir in Inia, but ao allied ‘wth Infosys technologies and Tata Coasultaney Series for 30 percent of is TT resources be outsourced Turnkey Operations {n.asolledearatey operation, a company designs and constr fact abroad (such {Sa dam or chemi plantains local personnel. and then tun the ey over toa ‘unagement-fora feof course The flan company Bat for example constricted an ‘Ttombt lant inthe former Soviet Union ander a turnkey agreement Cita lctors forsucces ae the avait of focal soppis and abo, retableintatuctre, anda ‘ceptable means of separating profits Thre ey als be 2 eieal rik exposure if the turnkey sontract with the host government, which ion the case. Thi tua {Gon expos the company fo sk sucha contract eveaton an the restison of bank frances Management Contracts [A manageen conta pve fotlgn company the ight tomanage the dally opera- tons of business bot o make Sesion epadlg ownership financing or strategic ‘hd poly changes Usual. management contracts ae enacted ncombiationwithother ereements such a ln ventures By ise a management extracts a relatively low {5k en suteey, bt tis kly tobe shor er a provide mtd income unless t lends to another more permanent postion im the market International Joint Ventures [Ava much higher level of svestméat ands (hough usually les risky than a wholly ‘ened plan) joint ventures present considerable opportunites unattainable through tne statis A oit venture volves an agreement by two cr more companis 0 pro- {cea pect o service tgetber Ina fternaional ait wate (UV) cenersh is Shred, typicaly by an MNC anda loa! partner, rough apieed-upon proportions of| ‘yuiy Ths stlegy factates an MIC rapid ete iat aew markers by means of an iva area somos strategy for corporate growth around te wor. They ao are & Incanto overome trade bairs to ahieve significant economies of sae for develop~ Inent ofa sro competitive postion, to secure aces to aditonal raw materials, to ‘Ture manegeral en technology a To spread the rk associated with operat {iain foreigh emitonment” Not srprngs lager companies are moc inclined 10 the high ety stake man Lo engage goal ndsies ano be es ulneable tothe rik condensin the hos county. The Joint venture educes thers of expro- priton aad harstment by the host country. Indeed, may bs the only means of entry Ito certain counts ike henco and apan at stipulate proportions of loeal ownership nd oc patipation econ years Vehave made up about 20 peroeat of diet investments by MNCs in other soutien including such deals that between Mital tel of tna and Arcelor fot rance in 2006cresting the work's biggest tel company” Many companis have et {ip joim ventures wth European compenis to gain the sus ofan “nsider™ in theCHAPTERS —FormatingSiategy 23 ‘European Common Market. Mos of thee alice reno jst ols of convenience but ‘Se important=perhap rtcal~mean o compete in the global arena. To compete pb Sy tems ave fo incur and defray, smmease fed osts—and they need pariners to belp feminthietfor™ ‘Sometimes counties themselves need such alianees to improve economic cond sionsThe Rusian Federation has recently opened ts doors fo jot ventures seeking an Infusion of exptel and management expertise Vs are one of te many forms of strategic (Boba lanes that ae further diced in the next chapter, ina joint nntue the level of relative ownership and spi conibutions must be worked ou bythe prtners‘The partners mst share management and decision making Tora succe aliance.The company seeking sch venture must maintain suient Control however, becuse without adequate control the company’s managers may be “Inble to implement their desired tatgie Il partner selection and te develop- ment ofa mutually beneficial working areement ate, therefore, crite othe success ‘St ajoiat venture, fa addition, managers mst ascertain that there wil be enough of i betmov the partner objectives strategies, an resources financial uma, and ‘echnolopal-to make the venture work. Unfortunatly to often the ned for prepare ‘ion sd cooperation given iauicient attention, esting i many such marriages oun in voce About €O percent of Vs fai usualy because of ineffective managerial ‘estonsreguding the ype of IV. Rs scope, duration, and administration, a well as ‘areless parner selection aly ad Sai In counties where a aly owned sbsiiry x permitted, an MNC wishing total contro! tls operations can stat he own product or sevice Business frm scratch, of i may ‘Sequzean exiting fem inthe host country. Philip Moris segue the Swiss fod fm, [nce Suchard to gain an eal ln teak nthe European Common Market and 0 ontnue ts dveraton away from it aging abucco busines Wh hs move, Philip ‘Mors became te second US company, afer Mas to ensure itself lace In Europe's food indstry. Sich acquisitions by MINCs allow rapid entry into a market with estab ished produts and distribution networks ad provide a level of acceptability not Hkly tobe gen toa “foreign firm Thez advantage somewhat fet the greater level of ak semming from largce capital investments compared with other entry strategies, Examglee of soqisionst gin farther growth and entry into pobal markets include thatof the Love Group of China ofthe 1BM Personal Computing Division, rating fslobal busines with worlwide reach: andthe Procter and Gamble acquisition of iteue which paved the way forthe craton of the world's largest consumer goods company* "A the highest evel of sik is the strategy of starting a busines frm scratch the os countythal i exablsing anew wally owned foreign manufacturing of sevice ‘Company ov subailry with prodat aimed a the lca market or aged or export. SSpincse automobile manufacturers sich ae Honda, Nisa, and Toyota, have sucestly tea is ategy inthe United Sates to get round US. import quotas “This strategy exposes the company othe fl range of st the extent fs invest ment in the host country. As evidenced by evens in South Africa and China, political {tsluny can be devastating co = holy owed fureipy Subsidiary. Add to th ‘umber of the cecal environmental factoreoclatitudes toward foreign onnership Cirenc stblity and reputation, te threat of expropeltion and nationalis—and you faves lask enty stay that mst be nelly evaluated and monitored. There are ‘hdvantages to this sategy, however such afl conrl over decision making an ef ‘enc. os wel atthe abt to ntepate operations wih overall companywide strategy. "Behioa 68 summaries the advantages and eral succes factors of these ery strategies which must be lake ato account when selecting one oF a combination of “Srtcpes depending onthe location, the environmental factors and competitive analysis nthe overall strategy wth which the company approathes work markets. ‘Complt situational factors face the international manager as she or he considers strategie approaches fo word markets along with which entry strategies might be230 PARTI Forming snd implementing Sirateny for Internationa and Global Operations EXHIBIT €8 Inertial Entry Sian: Abate an Cee Sic Far Parana cours eevee ety medebire ana Nolo se any ura ce ot emt omar ie ‘ro epson ad it Lome empleo ons ‘econ hgh ad aras =r Soar con a ie Lap arr ee Sra onan ‘Acciona a mace Saye sabes mare Qa zenro ease ‘eprops f wtlc rpee Hose cour cs at com tance at tncie laity ad uy ofc coer ‘Spero corl an hoa geet gay eon Sc pt air eperaie ot lay tay grerma prer COpporanny gn ergertem postion Seredova ee ie to promt acy Congreve stanage ‘bie to Pa cena Cara say of paves ‘Ai eo ae ad coer aconome, atc arene ae scp exe of ok pproprte, a ustrated in Comparative Management in Pocus: Sraepc lasing Co SHEE Market ‘Tae strategic choice of one or more ofthe etry strategies will depend on (1) a ei Cal evaditon ofthe advantages (and disadvantages) of etch eatin tote fers ‘ipablties, (2) the ential eavsoamentalfctors and (3) the contribution that each ‘hoice would make tothe overall mission and objectives ofthe company. Exhibit 68 Smmarzed the advantages andthe citial ace actors foreach etry strategy di ‘usted. However when i comes down toa choice of entry strateny or statics for» particu ar company, more specific factors relating to that (rm situation must be {ake ito account, Tese nce factors relating tothe frm felt te industry inCHAPTERS — FormuatingStategy 284 ‘Comparative Management in Focus ‘Strategic Planning forthe EU Market lag R07 Toe coer ed Cnt Siirer gone od Seeger "pee ap 2A New trope Uso SBb ct so Tn, Bath 8,26 pat nth perminon apt The New Yr Tie Ca Multinationals are wel placed to benef from enlargement (inclsion of the ‘communis states) Bees hey have he retest aces 10 capital, technology and tile Local enepreneirs have tr ut often ack the funds “To grom Only handfi of tcally owned groupssuch as Mol the ‘Hungarian ol group, or CEZ, the Coro elcreycompan)arebig enough tines abroad. Froancrat toes, “April 27, 2097 youre investing in Hangoyor Poland, ou ge aces 0 the lower cos they ‘oer compared oy sy, Germany wr France or Bria At the sane tne f ‘you're producing in Poland, you hae an ability fo move your goods and "ecesorun within the European Union, Man AN@LER,| Price aerhouseCoopers London® uinee wns in Europ] sl nl focus om individual courries and ‘managerial practice tl follow lng sanding national pater. Francesoo Cu0, (CEO Merlo Elewrodomesi, Fbriana alya PARTI Formulating and implementing Srey or lntenationa and Glabal Operations “The ation of the eight Central and Easter Europe (CE) counties (the Cech Republe, Eston Hungary, Latvia, Lithuania, Poland, the Slovak Republi, and Sven) aswell a Matas Cyprus, to the EU in May 200, nd then Bulgaria {nd Romanian 2007 makes 227-ationuned market of more than 00 milion people This expended EU provides great busines opportunities in particu for [fall and medium-sized enerpries (SMES) to gin oces othe EU market by taking advantage of the lower cost inthe CEE compared tothe rest ofthe EU, ‘heaper wager iowercorpurite tate and edented worforcen Those counter fave utenghened ter comomies inorder fo meet EU accession requirement, [aching pivatig state-run busines improving the iaastracare. and revamp Ig their ance and banking syoems Mane and Pearce researched the statepes ‘SPMNES in Centrl and Easter Europe (CEE) and fond that, because of wee Uhiny about investing a CEE, “inaly market-secking operations dominated in (CEE, wth ite integration of CEE subse into gobal MINE networks" The ‘thors found that European MNEs ended to pursue county centered strategies, “ihe Asin MNES invested more in exporting They recommended that “produc “Sefrentiation wing CEE creative capabilites (technology and engineering “apertn) rate than cor sompettneness may utimatly secure a more sstia- ‘Ble anu embeded entry into MINES wider European (or global networks" For firms within Europe the euro eliminates curreny rsh, aad 0 “Pan. ‘European thinking becomer not only practicable but essental™® The success of Companies wiia Europe then depends on thei efficiency in steaining and co Sottdang thie procsesand'in Integrating product and marketing pans across rope the challenges to blanc the national and the continental view because & ‘omuoncatene dos not ring about cultural or inguisti union ®™ ‘Cleatly both European and non-European companies must reconsider thei. ‘European ad indeed global statics now ha the enlarged EU has become a reali, complete with a comaion cerrency, the euro. Foreign” managers ‘earpl,nced to Sevelop aa action program to ensoe that their products have ‘Sonuinued acces to the EU and to adapt their marketing efforts to encompass the whole EU. The late tas is dficl, if po imposible, however, because the “Siuren of Europe” amyths national cltores ad wastes cannot be homogs- ized With many different languages and distinctive national customs and Ctutes companies ying to sellin Europe must thread thelr way through 8 ‘haze of vying atonal preferences These and other challenges ic ahead long With numerous opportunities. "UPS bs one of many fms experiencing his double-edged sword ts managers cealze that Europe i sil vga trtory for save companies and they expect ‘even to giow by 15 percent a year there However, UPS has un into many oa ‘its bsh prose! and cultural Some ofthe surprises Big Brown” experienced as {tput ts brown snforms on 25,000 Europeans and sprayed brown pint 00 0000, ‘every tucks around Europe inelue the folowing Indignaton os trance, when diver wer wld they wut’ have wine nth anc; proves in Britain, when driver dogs were banned from deli ry ck damay in Spain, when was found thatthe brown UPS tacks Veuembled the local heart; and shook in Germany, when brown shirts Vere reuied forte frat ime since 19853 Meanutile, venturous European businesses ae spreading their wings aer38 reighboring counties they reale tht open markets ca fer as mich growth nd pottablity as does protectionsen~probably more. The Dutch willingness 9 ‘Mteender KLM tos holding company based in Parisi ven not oly bythe Tose ‘ot European iteration, bt als by the promise of long-verdve deregulation of the rane Adan marketCHAPTERS —FormutingStategy 28 {none of Europe's biggest mergers, the Zeneca Group PLC. of Britain scqute Asta AB of Sweden The resting pharmaceutial int was deemed nec ‘Ssurytofand new drug reseaich ad a compete amare dominated by US co povtions Early European mergers were dominated by Bish companies But now that Coninestat Esopean companies wil have thei shares denominated in cuos there wl ikely be more cross border deals among those untses because they will be frewofcurency.exchange problems®™ ‘Companies win the EU are guining grest advatages by competing ina continetasale market and thereby avoiding dupltion of administrative proce ‘lures production, marketing, and dstrbuton. The Tullan company Benetton ‘Group SPA is one such companycompeting by being technologically efficient. or mide single EU internal market means grate efficiencies and greater ‘comomicpowth through economies of scale an the removal of bari, with he ‘Somsequent lowering of unit cos ‘Companies based outside the EU enjoy the same advantages ifthey have asub- sitar ina least ne member sate, but they sometimes el csrimiaation simpy because they ate outside what forthe member tats sa domestic market. In oer ‘rode the EU has a protectionist walla aiff quotas loa content awe, ad Competitive tactics-to keep out the United Sates and pa. However, the BU has ‘bo seated oppovtuniis for nonmembers Masy companies, especialy MNCS, Stat rom a better pouiton than some Gms based sie he community because of (0) thee sperior competitiveness and teeatch and development, 2) an exiting foothold in the market and (3) reduced operating expemses (one sbsiry forthe whole EU instead of several). But European harmonize standards whe seeking to eliminate ade bases within Europ seve to limit aces to EU markets by tute companies throuph the standadied speceatins of product allowed t0 esol in Europe Te harmonization lavs set manimum standards for export and imports that are EUwide. However, tho standard also fequenty hinder ‘European companies (rm efficent sourcing ofa atria or component parts from'foreign” companies "Opinions dfer about the longterm inpacton US. rms: The EU could uni its markets adversely affecting some US. industries; markel acess could be reduced and demands for reciprocal market acu inthe United States might ‘Casue In Noverber 203, or example, when Presiden Bush imposed tars on ‘Soe nor the WTO roid tht the ars were egal and authorized European tnd Aslan aon to impoe retaistory tats agains tf United States Not long ‘Mts President Bosh was forced to feverse ise andthe tits ‘thers fel that he ne singe market provides tethteat to and considerable opportenity for America Many US. ims (a aatiputon of protections) have Itvested in Europe sine the beginning ofthe Common Market in 195, and they ‘ow fel sted with thee current potions. Indeed US. companies (GE, Dow, 5M, HewletePackard) that already have wellestabshed European presences enjoy the same fe low of good service capital and people as Europeans Is ‘Sear thoug, ha the BU Competition CommisslaneLeping a Keen eye on any “Inicompetitive tastes from abroad. far. im Marc 2004, the EU Commision ‘Srdered Microsoft to "iscontinue abuses of ts dominent market postion, "(The EU: Microsoft atl was consuig In 2007) Indeed, orsign companies wishing to merge with or aque companies in Europe, or even with companies outside of Europe rho pan tod busier inthe EU,ne0do be avare of the EU competition polises aod merger contol In reviewing the faled GE Honeywell merge, which tasknocked down bythe EU Commision eve though he proposed mariage was tne of to US companies Anwar noted: Under the European Merger Control Regulation 'MCR) $0640, the Commision can review and invest any basins concentration (mere™ Formulating and Implementing Strategy fo ltercatina and Global Operations takeover cqiitons) ta exer a woldwide move (reve) of 566 itn S250 milion sales he Europea ion ‘whereas in the US those acquisitions that may ceate a mosopoly will not be Uhowed. win the EU the potion cnteron "a buses concentration that ‘tengthens matt postion an impedes competion ® ‘Nevertheless many firs are oping for just venares wth European patter, sacri ther onal peerene of 100 percent owners (or majonty conto) to ‘Send operations rd Europe Ths sete ako opens ors to markets domioated ‘ple precarment as with he ATAT-Phiip venture to produce elecommani ous equipment But fora mmr Brms-oth oegn and European—operating ‘Wester Europea east as become cot pbb The average Western European ‘ms more, works fewe hur takes longer vacation and reeves more sei nile ‘Tens ajo preeton than worker a Asi and North Ame. Ebropean MNCS [vet higher and texan cons ong the TRIAD nations" Siemens AG of ‘Germany, for example shied alow all semiconductor asemby work fom i ‘ants in Germanywhore its ot erie operate around the clack or on week {Ends nf Sgnpore here operates trent Bours a ay 368 days Senrand paye $4 a our for worker! "Saki Toyota, Nisan, and other Japanese compaies re alo experiencing the emma of peratig in Europe Toe ae reluctant to fey pour yen into Esrope, ‘ut thcy wan to keep a footheld inthe market Suz, for example, found hat ‘Spans plant ook ive time the amber of workers and cost 4 pereet more produce «Suzuki Samural than in its apanese plants. wien i operates, location factors, and venture-specifi factors as sommarized in Eee "Aller consideration of the factors forthe rm asshown in Exhibit 9.8 wells what nave epithe ind location come ary strategie wil nah all oa of the Tealay zone th hoe tons remaining then strategic planers need to decide shith factor ate more important tothe frm than others One method ist develop 8 phd sessment to compare the overall ampact of actors such as thos it Exhibit 68 TERNe‘to me industry the location, andthe specie veature—on each entry sale. ‘Specie evalution ratings, of couse, woul! depen onthe country conditions a a given nt in nee naire of the indus and the focal company. ‘Beedon study of moe than 10,00 foreign entry activites into China between iy and 1998 Pan aT concded that managers end to follow » hierarchy of dec ‘Sietquene i chooiag an entry mode, Ax depicted in Exhibit 10, manages Gat ‘ede Between equity bused nd non-equity Based. Then equity modes ae spi ito ‘totly owned operations and equity joint ventures (EIV)non-eqity modes are divided {io contractual agreements and expo, Pap and Tse found thatthe location ehoie— {pectclly the love of country rik—vas the primary influence factor atthe level of| Beatseedencen equity and non-equity mods Hostcouatry government incentives abo ‘Sicourged the cole of equity mode. ‘Gupta am Govindarjen suo propose a herrehy of decision factors but conser two nial choice Ievels The fst the extent o which the im wil export o produce [daly th second the estat of ownership control oer ative that wil be performed [all lathe tart mastet™ Axshown a Eat 6-11. thereis an aay ofehoigs comb ‘ators within howe wo dimensions Gupta and Govindarajan pont ou that among the ‘Biny factors to take ito account aliance-bredenty modes are more stable under ‘he following conditions + Pisa ington cata dance betwee he ome ani host countess 1 nUaidary wou av low operation interatin withthe est ofthe multinational pentonCHAPTERS FormalatingStateey 235 EXHIRET 69. FastreAMlesing Chic of Inman Eat Nee Foor Canny anal Firm core ease egerece ae ore cabs indy tr base neon Iai om Teel ey otndy cour oo foc markt Conpeionin ie maka ere spe tore ie oat aed nore con cnt eich ow om ad verte ioral (3c) on ting or ering coment pares Sheol poed rsp venare et to eee enh id depen wh el pre ‘SOURCE Eudes Wang Cone nl io AW P| bp tis Capp ot Souter ag Pong Cuca, Os ace eo ator rancon es 10 Herc Model of Csr Bary Ma ‘SURGE Vn ond i ise Hara oe of ane Ey be ral mero Rar St aie duane OSE29 PARTIE Formultng sn Inplementng Staten fr Internationa and Global Operations EXHINET 611 Aeruine Moe En 4 How an manages asst potential relive compete poston ot fm inorder oie on em rater 5, Dic he late advantages of potion vert reat, i tae he reuanement ofthe ny sate cee Os chaper? Wha hel ona integrate la sistegy! 1 ee comidertonsin sate choke. cig the yp stage the MNC andthe ee fo anger loa perpen Application Exercises 1. Choo company inthe microcomperndu or achain in the fas-od nds nal roupecondue ame ‘Reseacanl anys devin te major vbr veved, te reiaive pat fei tent an opposites Saya cancel fates ote somes The roping cn tha be pete 10 he a lowing URS SELASiTor cen groups ha compare ent deste ot lees group perspectives cn flow. Be repaed ‘Pitt whet repansor sper hres you ar teed aa pve Your aol 2. leon ropa aon you tte Je whe te rap the eave mer othe raat ery Teetase tthe company and count ou cota eacbe You shout abe to make aap che ad defend dein 1 Forncuercae esearch Givi orn smal gous) company wih international operations ad find out he Knds Tous cuenta sed etn the flat ou fd wt vera fhe a dserBing te wr cRapunynerntont operation, motions sey steps kids of mplemetiaton oben, {Seton ran mand Howton probes hove Benet wh Experiential Exerc tego ar dco tee isp cnn at sein ty ita Ri WR ty Internet Resources Visite Dery Companion Website sw pretallvovDerey fr thi cape tert soreCase Study There's Detroit and Theres Trnava: The Strategic Attraction of Eastern Europe For Slovakia, the recent inauguration ofan $890 milion futombil acter war a major event The prime minis- ter and other government offical attended. French ‘hevutve from Peugeot Citroen which bil the fae tony le ito the ing tow of Trnava, where the pra ing istry expected to employ up to 3,50 people and ‘churn out many 8 300,00 compact cars yea. Aer the collapse of Cosma in 198, may frelgn car Inaker athe to aque local carmakers or build their ‘Own, factories in countries Ike Slovakia, Poland, Flangary Romani and the Caceh Repub "Tatra isle though. now a Hood The money has been paring nad he pace and frenzy i prompting talk of Europe's to indy iting om west east ‘By 2010 the Ceceh Repub could early doublets production over let year, to more than a milion ear. Indeed or woke Ester Europe ha become Europe’ ‘card manufcturng center andi could be producing 34 milion ers saul by 2010, 933 percent jmp over 20s asoring to forza by PcewaterhouseCoopers Even Rusa prodction expected os 101.6 milion ‘ea yeat from L2 millon om ‘That kind of growth can only be envied by more esablshed carmaking countries: the United States ul be making some [26 milion cars a9 percent juny over last yest and Tapan about 10. aon, a mere percent increase fom ls yea. By contrast ita expected to drop to 15 milion {oom 1 lon in 208 France expected to agate at ‘milion conpated with 35 mio st yea-Belgm es Strack How ent when Volsagen iit was stoping production in plat near Buses eliminating 400) Een before Pept opened is Tava plant maounced that eting 1.00 jobs many West Earope “The move ld cong plant» Ryton, England ‘Ta yea, car production in Cental and Eastern ‘Europe ettoing Run, son wack toeceed 24 milon States pour billions of dalla of fresh fvestmeat into foal ators "Tht ay be rction ofthe 7. millon cars made as year inthe 20 fp automobile producing nations 208, Butte exloniv ron contrasts stro plas by many !utonakersto wale back employmeat and ths production in Western Europe andthe United State Wat he ast Year ors, General Motors Toot, Valksmagen, Peugeot, Frat, Suk, Hyunda and Kia have anaounced plas tril or expand asembly plans inthe eon, “Making a ‘aris oot lie making plat bugs Sig de Ves the Spokemomaa forthe Asoeitien of European Automobile ‘Manufactures in Brssels "You have tobe cose tthe Ey rake and fel you have obese tthe estore, Ed this rere cera erganztion” "The reason for Cental Europe's new ave of zowih ae complex For one thing the eon together trith Russa aad China, sone of the Worlds great Untapped auto markets ‘Sogish ato indore under the old Communist spines ft many fries wuts Local goerents ‘Smpione lca automakers, like Skoda in the Czech Repub and Deca a Romani Ty were evento neat ruin under Communism, but some of those automakers sree then Bought by Wester armakers after 183, when ‘olaagen cq Skods snd Renault bought Dacia. "High ga pices inthe West ave aso encouraged con- sumere to start shig frm big crs and SUV (0 the Kind of compact crs that ae s specialty in Eastern [Enrpe Above allabor ere isthe cheapest in therein ‘Eogincers in Slovakia ara half of what Westera ngincers make, and assembly ne workers one-third 12 ‘ne-fifth,aezoring to Alain Baleyrou, Peupeo’s plant ‘hanager in Trans that doesnt sweeten the eon {or foreign carmakers, East European governments ‘ler incentives from francing seme of the tvestment Toolering Tow fo spa-sinple ux on employee wages tnd corporat profits ssa Slovai, where all aes are {simple 19 percent By 2010, new nvestnent wil ifthe Tepions production to ust below hat of France which s ‘apected tobe making 39 milo crs that same yea nd more than bie that of Bit, where proton tldrop to 49 in, rom Lilo n 20 Chia Europe in the European Uri it has the svaniage of sable economy, a they wast Ie eur Si! Matt Pot, etal European stomaive decor or PremateconeCooper He aed that hs was ely © ‘ean fa slower ron some Wester counties that now ‘ecilize in salar roduc, ke France od Span Temilabo reste move manftarng jobs in the four aor Catal European countries here the aber has. ‘Trendy sien t.286 072008 sar For Which ie tres ae avaliable from 235426 de yeas earlier, ding, the same time, soc ob ol sgh to 378,98, fom {9918 in Western Europe Tei lanpst challenge may be potential shortages qualified labor” Mi. Pot said wating hat “prices of Tabor are ring quit api” "within recent months European carmakers have node a warity of new modes that hey wll ase ble in their Eastern European sembly pants. At the fecent Paris Ato Shon, Renault featured the Logan. fourdoor ca assembled in Romania, starting a 5.700 ‘ro (about $7200) in Eastern Esrope.20 PART uh “Today, Europe i pie market.” said Stéphane Lemponcr a Renault exeative where consumers Buy hase on tow prices When Ford itruces an update of He soccsful subcompact the Ka which ow asm ‘ed in Valencia, Spi. thenew model willbe bul at a ‘etry Ford wl stare withthe Kalan atoraker atin Teh. in southern Poland. where Fat wil assemble 2 now vrsom ost popular Gnquecent. Bur Eastern Euope isnot raking ist cheap sal care Wtlowagenasembens Towne SUV. and the Bi (GP ofits Au afifotein Svan Porsche asterbles the foay of fs expensive Cayenne in a factory near [rata and then ship tem to German for ashing. the seion ws wel Peugeot ea that steel cl for theta plant now come om asia France Germany Asta But he plan oes sng Slovak steel mex oa alter US Stel Brings online a 169 mition hod atoning mil alto ake 34500 tonsa automobie- Sade steel shots yarn Rosie i easter Stove ‘Scat fr the Tnavs plant are manufactured by Fours Peugeotcontrled company. at supplier parka the main factory Slovakia, the Carch Republic Sid Poland have heen vying to atten suppers for the big ew seem plat Hyundai bung t Novice ine castor corner of fhe Czech Republic short thie trom Slovak and Plan "With many ofthe custes of Eater Europe now ln the European Union, care fom the region eter ‘ister Europe without duis ementialy easing he tore fo the sutomosie indus. Cours non the Shon hat are protection ike Rusia are abo att Inguventment ofthe owe. ‘Git may be lung money ctewhere,but it expects to lmost double ts sales in Ceneal and Eustern Europ, including Resin witin the next three year, fd toexpund its dealer network inte eon by 8.0 “Shout according o Automoive News Europe “samme GM, opened plat ner S. Potesburg to osemble the Cheviot Capa midsize SUN=by Dts, GM: hopes to bring otine $127 mon plant ety sae sbou 2 eis a year. "The decisions to mone sembly plats east cise awkward questions among workers nd thelr lbor Formebsting nd implementing Strategy or International and labs) Operations ion repesentaties nthe Wes. Labor uion faders {Germany ith the backing of leader nother coun tics have been prsting the Europese Usion to limit the Kind of incentives hat Easter Europe countries ‘ler tomers to settle there ‘Union leaders ane orate hey ae pes. “Is 1 deliberate act of tandaism by the company” sid James O'Boyle, a union leader atthe Ryton plat jst ‘orth of Coveniy hats schedule ckse Peugeot. he {hid would ny of sbout 2A00 workers Ryton Sind hough unerployment inthe region is wot about ‘Tpereent the auto workers would have Stile for inferior obs ‘rsdn people can nd jobs if hey tke mens cutsinwageranutsn belts: MO Boys Some people wl goon to tr hinge bey ae ine "can Martin Foz Pougcots chet exetive denied thatthe soung in Ryton andthe expansion in Trnava eet epoeioning ofthe sty estar." What You sre obeerving the economic grewih of the Eoopean Union he sith growth of manutetring heres Ryton wa closed he said onthe ede of the na traion ceremony. *becase i wa the leas profitable of ‘The new plant hasbeen a boon to loca ke Stefan ‘Bosak Trnaa'smayor who attended the eemony He Said that unemployment had dropped to about 8 pecent From 13 poset thee year ago forthe eon of TO peopl, which hada reserve of sill engineers lft ‘ver rom the Commun ams industy ‘Mee Boldeyrou the plant manage, sid wages were ot the ita ator “The share of ies the price ‘racer abou IS percent Resa “Matera Form the renter part ot wages” And ia the forme” Communit cunts unions poe few teats or fore gn investors. Fewer than half «milion of Slovakia’ wor force of "BSmilion ae ansonzed andthe ume ling People ace dong a god jo there ae good socal benefited an Stefan a marber of Pam art thevegin "So there rome need er won URTE stn "Tete' Der an ees TnWa “unyeaan Ree Sm Copa TN {EAS QUESTIONS. 1, What etry stratepes are being used bythe ut companies dacused io ths chapter? 2, Describe and dscuss the reasons the companies fave lrestblishing manufacturing in eastern European countic Why do those companies fet that they need to pes plain those countries? Doyou ogre with hi eons? Planning of tone companies tat supply nd ‘Src thous companies? 4 Whats the impacto these developments on the ‘5. What the ky impact on he overal EU ‘Ssonomy an promi prospect? 6, Discuss the environment fr the auto ndustry at the ime of your reading ofthis eae Ist ue that ‘heres a reposisoning of he global ato industry? Way that?