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INTERNATIONAL STRATEGIES 305

Exhibit 8.4 Four international strategies

Source: Adapted from M.E. Porter, ‘Changing patterns of international competition’. Copyright © 1986, by The Regents of the University
of California. Reprinted from the California Management Review, vol. 28, no. 2. By permission of The Regents.

arso ned.co. u internationally (see Exhibit 8.4). More precisely, configuration refers to the
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KEY
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geographical dispersion or concentration of activities such as manufacturing and

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CONCEPT
R&D, while coordination refers to the extent to which operations in different
countries are managed in a decentralised way or a centrally coordinated way.
Four
international The four basic international strategies are:8
strategies
● Simple export. This strategy involves a concentration of activities (particularly
manufacturing) in one country, typically the country of the organisation’s
origin. At the same time, marketing of the exported product is very loosely
coordinated overseas, perhaps handled by independent sales agents in dif-
ferent markets. Pricing, packaging, distribution and even branding policies
may be determined locally. This strategy is typically chosen by organisations
with a strong locational advantage – as determined by the Porter Diamond,
for example – but where either the organisation has insufficient managerial
capabilities to coordinate marketing internationally or where coordinated
marketing would add little value, for example in agricultural or raw material
commodities.
● Multidomestic. This strategy is similarly loosely coordinated internationally, but
involves a dispersion overseas of various activities, including manufacturing
and sometimes product development. Instead of export, therefore, goods
and services are produced locally in each national market. Each market is
treated independently, with the needs of each local domestic market given
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306 CHAPTER 8 INTERNATIONAL STRATEGY

priority – hence ‘multidomestic’. Local adaptations can make the overall cor-
porate portfolio increasingly diversified. This strategy is appropriate where
there are few economies of scale and strong benefits to adapting to local
needs. This multidomestic strategy is particularly attractive in professional
services, where local relationships are critical, but it carries risks towards
brand and reputation if national practices become too diverse.
● Complex export. This strategy still involves the location of most activities in
a single country, but builds on more coordinated marketing. Economies of
scale can still be reaped in manufacturing and R&D, but branding and pricing
opportunities are more systematically managed. The coordination demands
are, of course, considerably more complex than in the simple export strategy.
This is a common stage for companies from emerging economies, as they
retain some locational advantages from their home country, but seek to build
a stronger brand and network overseas with growing organisational maturity.
● Global strategy. This strategy describes the most mature international strategy,
with highly coordinated activities dispersed geographically around the world.
Using international value networks to the full, geographical location is chosen
according to the specific locational advantage for each activity, so that product
development, manufacturing, marketing and headquarters functions might all
be located in different countries. For example, Detroit-based General Motors
designed its Pontiac Le Mans at the firm’s German subsidiary Opel, with its
high engineering skills; developed its advertising via a British agency with the
creativity strengths of London; produced many of the more complex com-
ponents in Japan, exploiting its sophisticated manufacturing and technological
capabilities; and assembled the car in South Korea, a location where a lower-
cost, yet skilled, labour force was available. All this, of course, required high
investments and skill in coordination (see also the discussion of the trans-
national structure in Chapter 12).

In practice, these four international strategies are not absolutely distinct. Man-
agerial coordination and geographical concentration are matters of degree rather
than sharp distinctions. Companies may often oscillate within and between
the four strategies. Their choices, moreover, will be influenced by changes in the
internationalisation drivers introduced earlier. Where, for example, tastes are
highly standardised, companies will tend to favour complex export or global
strategies. Where economies of scale are few, the logic is more in favour of
multidomestic strategies.

8.5 MARKET SELECTION AND ENTRY

Having decided on an international strategy built on significant sources of
competitive advantage and supported by strong internationalisation drivers,
managers need next to decide which countries to enter. Not all countries are
equally attractive. To an extent, however, countries can initially be compared
using the standard environmental analysis techniques, for example along the
dimensions identified in the PESTEL framework (see section 2.2.1) or according
to the industry five forces (section 2.3). However, there are specific determinants