You are on page 1of 3

Name : Amalia Winie Prasetya

NIM : 29113027/YP49-B
GLOBAL STRATEGY
An international strategy is a strategy through which the firm sells its goods or services
outside its domestic market. In some instance, firms using an international strategy become
quite diversified geographically as they compete in numerous countries or regions outside
their domestic market.
The use of international strategies is increasing. Multiple factors and conditions are
influencing the increasing use of these strategies, including opportunities (incentives) to :
 Extend a product’s life cycle
 Gain access to critical raw materials, sometimes including relatively inexpensive labor
 Integrate a firm’s operations on a global scale to better serve customers in different
countries
 Better serve customers whose needs appear to be more alike today as a result of global
communications’ media and the internet’s capabilities to inform
 Meet increasing demand for goods and services that is surfacing in emerging markets.
When used effectively, international strategies yield three basic benefirs, among them :
 Increased market size
 Ecoonomic of scale and learning
 Location advantages.
International business-level strategies are usually grounded in one or more home-country
advantages. Research suggests that are four determinants of national advantages :
 Factors of production
 Demand conditions
 Relatedd and supporting industries
 Patterns of firms strategiy, structure, and rivalry
There are three types of international corporate-level strategies :
1. A multidomestic strategy focuseses on competition within each country in which the
firm competes. Firm using a multidomestic strategy decentralize strategic and operating
decisions to the business units operating in each country, so that each unit can tailor its
products to local conditions.
Name : Amalia Winie Prasetya
NIM : 29113027/YP49-B
2. A global strategy assumes more standardization of products across country
boundaries; therefore, a competitive strategy is centralized and controlled by the home
office. Commonly, large multinational firms, particularly those with multiple diverse
product being sold in many different markets, use a multidomestic strategy with some
product lines and a global strategy with others.
3. A transnational strategy seeks to integrate characteristics of both multidomestic and
global strategies for the purpose of being able to simultaneously emphasize local
responsiveness and global intergration.
Two global environmental trends – liability of foreignness and regionalization – are
influencing firms’ choices of international strategies as well as their implementation. Liability
of foreignness challanges firms to recognize that four types of distance between their
domestic market and international markets affect how they compete. Some firms choose to
concentrate their international strategies on regions (e.g. the EU and NAFTA) rather than on
individual country markets.
Firms can use one or more of five entry modes to enter international markets :
1. Exporting  is an entry mode through which the firm sends products it produces in its
domestic market to international market. The characteristics are high cost, and low
control.
2. Licensing  is an entry mode in which an agreement is formed that allows a foreign
company to purchase the right to manufacture and sell a firm’s products within a host
country’s market or a set of host countries’ market. The characteristics are low cost,
low risk, little control, and low returns.
3. Strategic Alliances  find a firm collaborating with another company in a different
setting in order to enter one or more international markets. The characteristics are
shared costs, shared resources, shared risks, and problems of integration (e.g. two
corporate cultures).
4. Acquisitions  is an entry mode through which a firm from one country acquires a
stake in or purchases all of a firm located in another country. The characteristics are
quick access to new markets, high costs, complex negotiations, problem of merging
with domestic operations.
5. New wholly owned subsidiary  a greenfield venture is an entry mode through which
a firm invests directly in another country or market by establishing a new wholly
Name : Amalia Winie Prasetya
NIM : 29113027/YP49-B
owned subsidiary. The characteristics are complex, often costly, time consuming, high
risks, maximum control, potential above-average returns.
Most firms begins with exporting or licensing, because of their lower costs and risks, but later
they might use strategic alliances and acquisitions as well. The most expensive and risky
means of entering a new international market is establishing a new wholly owned subsidiary.
The two major categories of risks firms need to understand and address when diversifying
geographically through international strategies are :
 Political risks : risks concerned with the probability a firm’s operations will be
disrupted by political forces or events, whether they occur in the firm’s domestic
market or in the markets the firm has entered to implement its international strategies.
 Economic risks : risks resulting from fundamental weakness in a country’s or a
region’s economy with the potential to adversely affect a firm’s international strategies.
Overall, the degree to which firms achieve strategic competitiveness through international
strategies is expanded or increased when they successfully implement an international
diversification strategy. As an extention or elaboration of international strategy, an
international diversification strategy is a strategy through which a firm expands the sales
of its goods or services across the borders of global regions and countries into a potentially
large number of geographic locations or markets.
Successful use of international strategies (especially an international diversification strategy)
contributes to a firm’s strategic competitiveness in the form of improved performance and
enhanced innovation.
International diversification facilitates innovation in a firm because it provides a larger
market to gain greater and faster returns from investments in innovations. In addition,
international diversification may generate the resources necessary to sustain a large-scale
R&D program.
From the Reading Material “The international competitiveness of Asian Firms” we can
conclude that most Asian Firms do not operate globally, but focus on their home region.
Thus, Asian firms exploit and develop their FSAs regionally. Only a few large Japanese and
Korean firms have significant sales outside of Asia. Large Asian firms vie with their regional
competitors in their home region market.