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MM 5012 BUSINESS STRATEGY AND ENTERPRISE MODELLING

SUMMARY ASSIGNMENT CHAPTER 8 & RM 10

R48A

Henny Zahrany 29112551

MASTER OF BUSINESS ADMINISTRATION SCHOOL OF BUSINESS AND MANAGEMENT INSTITUT TEKNOLOGI BANDUNG 2014

INTERNATIONAL STRATEGY International strategy is a strategy through which the firm sells its goods or services outside its domestic market. There are some reasons for a company to implement an international strategy: International markets yield potential new opportunities To secure needed resources Pressure has increased for a global integration of operations Technology drives globalization because the economies of scale necessary to reduce costs to the lowest level often require an investment greater Pressure for cost reductions, achieved by purchasing from the lowest-cost global suppliers. Because of currency fluctuations, firms may also choose to distribute their operations across many countries There are four basic benefits: 1. Increased market size 2. Greater returns on major capital investments or on investments in new products and processes 3. Greater economies of scale, scope, or learning 4. A competitive advantage through location International Business-Level Strategy Michael Porters model describe the factors contributing to the advantage of firms in a dominant global industry and associated with a specific home country or regional environment: 1. 2. 3. 4. Factors of Production (inputs necessary to compete in any industry) Demand Conditions (nature and size of buyers needs) Related and Supporting Industries Firm Strategy, Structure, and Rivalry

International Corporate-Level Strategy International corporate level strategy focuses on the scope of a firms operations through both product and geographic diversification. There are three international corporate-level strategies: 1. Multidomestic It is decentralized to the strategic business unit in each country so as to allow that unit to tailor products to the local market. 2. Global It is centralized and controlled by the home office, it is an international strategy through which the firm offers standardized products across country markets, with competitive strategy being dictated by the home office. 3. Transnational It is an international strategy through which the firm seeks to achieve both global efficiency and local responsiveness. It requires close global coordination while the other requires local flexibility. Environmental trends Liability of foreignness Research shows that global strategies are very difficult to implement. As such, firms may focus less on truly global markets and more on regional adaptation, even the implementation of Web-based strategies also requires local adaptation. Regionalization Because a firms location can affect its strategic competitiveness, it must decide whether to compete in all or many global markets or to focus on a particular region or regions. Choice of International Entry Mode After the firm selects its international strategies and decides whether to employ them in regional or world markets, it must choose a market entry mode.

Type of Entry Exporting Licensing Strategic alliances Acquisition

Characteristics High cost, low control Low cost, low risk, little control, low returns Shared costs, shared resources, share risks, problems of integration Quick access to new market, high cost, complex negotiations, problems of merging with domestic operations

New wholly owned Complex, often costly, time consuming, high risk, max control, subsidiary potential above average returns

New Wholly Owned Subsidiary: Greenfield venture, it affords maximum control to the firm, require high levels of professional skills, specialized know how, and customization, preferred in service industries where close contacts with end customers. International Diversification and Returns: its a strategy through which a firm expands the sales of its goods or services across the borders of global regions and countries into different geographic locations or markets. International diversification provides the potential for firms to achieve greater returns on their innovations and lowers the often substantial risks of R&D investments. Risk in an International Environment: Political and Economic risks THE INTERNATIONAL COMPETITIVENESS OF ASIAN FIRMS What are the main ideas of the reading materials? To analyze the international competitiveness of a large countries we can use the single diamond framework (Porter) and use the double diamond framework for smaller countries as advanced by Rugman and DCruz. Its analyzed with consideration of four determinants and through the use of FSA/CSA and the regional matrix, from there we can define the best strategy for each firm by strengthening their FSA and CSA.

What are the requirements for implementing the ideas in your own context? First I have to understand the four determinants of international competitiveness, such as factor costs, domestic demand, related and supported industries in the home country, and the amount of rivalry in the home country between leading firms by sector. And then by using the FSA/CSA and the regional matrix, I have to know and understand their position in the matrix and why theyre in them, last step, is knowing the best strategy to enhance the FSA and CSA of a international firm. What are practical implications for you? From the paper, it showed that international competitiveness should not be confused with globalization, so before going internationally, a firm must consider factors related to their FSA and CSA through the four determinants to be able to know a firm position in the foreign country. What are the lessons learned? As most Asian firms operate regionally, they should focus on developing regional competitiveness. Cross border activities of an MNE (multinational enterprise) have two goals: first, an MNE can reach economies of scale and scope by integrating across homogeneous countries, and Second, an MNE may leverage diversification benefits by expanding into heterogeneous markets, however an MNE may develop some FSAs and CSAs in a foreign region only when those FSAs and CSAs are unavailable in its home region.