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Hitt PPT 12e ch08
Hitt PPT 12e ch08
International Strategy
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Learning Objectives
Studying this chapter should provide you with
the strategic management knowledge needed to:
1. Explain incentives that can influence firms to use an international strategy.
2. Identify three basic benefits firms achieve by successfully implementing an
international strategy.
3. Explore the determinants of national advantage as the basis for
international business-level strategies.
4. Describe the three international corporate-level strategies.
5. Discuss environmental trends affecting the choice of international
strategies, particularly international corporate-level strategies.
6. Explain the five modes firms use to enter international markets.
7. Discuss the two major risks of using international strategies.
8. Discuss the strategic competitiveness outcomes associated with
international strategies particularly with an international diversification
strategy.
9. Explain two important issues firms should have knowledge about when
using international strategies.
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Opportunities and Outcomes of International
Strategy
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Identifying International Opportunities
• International Strategy
– A strategy through which the firm sells its goods or
services outside its domestic market.
• Incentives to use international strategy
– New market expansion extends product life cycle
– Gain access to materials and resources
– Integration of operations on a global scale
– Better use of rapidly developing technologies
– International markets yield potential new opportunities
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Classic Rationale for International Diversification:
Extend a Product’s Life Cycle
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International Strategy Benefits
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International Strategy Benefits (cont’d)
• Location Advantages
– Low cost markets aid in developing competitive
advantage by providing access to:
• raw materials
• transportation
• lower costs for labor
• key customers
• energy
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Incentives and Basic Benefits of International
Strategy
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Determinants of National Advantage
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Determinants of National Advantage
• Factors of production
– The inputs necessary to compete in any industry.
• Labor
• Land
• Capital
• Infrastructure
• Natural Resources
• Basic factors
– Natural and labor resources
• Advanced factors
– Digital communication systems
– Educated workforce
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Determinants of National Advantage
(cont’d)
• Demand Conditions
– Characterized by the nature and size of buyers’ needs
in the home market for the industry’s goods or
services.
• Size of the market segment can lead to scale-efficient facilities.
• Efficiency can lead to domination of the industry in other
countries.
• Specialized demand may create opportunities beyond national
boundaries.
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Determinants of National Advantage
(cont’d)
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Selecting an International
Corporate-Level Strategy
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International Corporate-Level Strategy
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International Corporate-Level Strategy
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Multidomestic Strategy
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Global Strategy
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Transnational Strategy
Transnational
Strategy
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Environmental Trends
• Liability of Foreignness
– Legitimate concerns about the relative attractiveness
of global strategies
– Global strategies not as prevalent as once thought
– Difficulty in implementing global strategies
• Regionalization
– Focusing on particular region(s) rather than on global
markets
– Better understanding of the cultures, legal and social
norms
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Environmental Trends
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Choice of International Mode of Entry
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Choice of International Mode of Entry
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Choice of International Mode of Entry
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Choice of International Mode of Entry
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Choice of International Mode of Entry
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 8–25
Choice of International Mode of Entry
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Risks in an International Environment
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International Diversification and Returns
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International Diversification
and Innovation
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Complexity of Managing Multinational Firms
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Limits to International Expansion
• Management Problems
– Cost of coordination across diverse geographical
business units
– Institutional and cultural barriers
– Understanding strategic intent of competitors
– The overall complexity of competition
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