Internationalization Strategies

(a) International Strategies

Harley Davidson sells motorcycles abroad, they do not need to lower their prices or adapt
the bike to local motorcycle standards. People in other countries buy a Harley particularly
because it is different from the local motorcycles. Buyers want the American look and the
sound and power of a Harley, and will pay for that differentiation.
Belgium chocolate exporters do not lower their price when exporting to the American
market to compete with Hershey’s, nor do they adapt their product to American tastes. They
use an international strategy.
Starbucks and Rolex watches are other examples of firms pursuing the international
strategy.
(b) Multi-Domestic Strategy
Rather than trying to force all of its American-made shows on viewers around the globe,
Netflix customizes the programming that is shown on its channels within dozens of countries,
including New Zealand, Portugal, Pakistan, and India.
Similarly, food company H. J. Heinz adapts its products to match local preferences. Because
some Indians will not eat garlic and onion, for example, Heinz offers them a version of its
signature ketchup that does not include these two ingredients.
(c) Global Strategy
Consumer goods maker Procter & Gamble attempts to gain efficiency by creating global
brands whenever possible.
Global strategies also can be very effective for firms whose product or service is largely
hidden from the customer’s view, such as silicon chip maker Intel.
Lenovo also uses this strategy. For such firms, variance in local preferences is not very
important, but pricing is.
(d) Transnational Strategy
For example, large fast-food chains such as McDonald’s and Kentucky Fried Chicken
(KFC) rely on the same brand names and the same core menu items around the world. These
firms make some concessions to local tastes too. In France, for example, wine can be
purchased at McDonald’s. This approach makes sense for McDonald’s because wine is a
central element of French diets. In Saudi Arabia, McDonalds serves a McArabia Chicken
sandwich, and its breakfast menu features no pork products like ham, bacon, or sausage.
International modes of entry
1. Export entry Modes- produce in home country, markets overseas
A) Direct export- Without intermediaries in home country
B) Indirect export- Intermediaries who are responsible for exporting

2. Contractual Entry Modes- Non-equity associations between international company,

and a legal entity in the overseas market
A) Licensing- Transfer knowledge, tech, patent etc. in return for payment
Ex. Marvel licensed x-men to Fox and Spiderman to Sony

Ex. In May 2018, Nestle and Starbucks entered into a $7.15 billion coffee
licensing deal. Nestle (the licensee) agreed to pay $7.15 billion in cash to
Starbucks (the licensor) for exclusive rights to sell Starbucks' products (single-
serve coffee, teas, bagged beans, etc.)

Remakes of shows

B) Franchising- Right to use business format, usually a brand name, in the overseas
market, in return of payment
McDonald’s, KFC, Burger King, H & M, Lenskart, Hyatt, Marriot

C) Other forms of agreement

Technical agreements, service contracts, contract manufacturing, production
sharing

3. Investment Entry Modes

Ownership of production units in the overseas market, based on some form of equity
investment
a) Joint venture and strategic alliances- cooperative partnerships between firms
b) Independent ventures of wholly owned subsidiaries- parent international company
hold 100 per cent equity

Advantages of Internationalization
1. Economies of scale- expand sales volume, cost economies
2. Economies of scope- business models are replicated
3. Realising location economies- natural resources are present in some location,
expanding to them would provide location economies
Disadvantages of Internationalization
◦ Higher bureaucratic costs- cooperation between home office and overseas office
 (a) Mergers and Acquisitions
1. Zee Entertainment – Sony India Merger
2. Vodafone Idea Merger
3. Tata and Corus Steel (acquisition)
4. Walmart and Flipkart (acquisition)
-merger or acquisition?
-when?
-status of companies before and after M or A. (stock price, profits etc.)
-implications of M or A
-why do you think they went for M or A.

(b) Joint Ventures

Example:
A great example of Indian Joint Venture with a foreign company is the airline, Vistara, a
Full-Service Carrier.
Vistara is the brand name of Tata SIA Airlines Ltd, a JV between India’s corporate giant Tata
Sons and Singapore Airlines (SIA).
Mahindra-Renault
Why?
1. Activity is uneconomical for an organization to do alone.
2. Risk of business has to be shared and, therefore, is reduced for participating firms.
3. Distinctive competence of two or more organizations can be brought together.
4. When setting up an organization requires surmounting hurdles such as import quotas,
tarrifs, nationalistic political interests and cultural roadblocks.

Example of failed joint ventures

1. Ford – Mahindra
The recent example of JVs not even seeing single daylight is the Ford and Mahindra. It was
1st October 2019 when Mahindra and Ford signed an agreement to sustain business in the
country.
In the agreement, Mahindra had a 51% controlling stake, and the other 49% was owned by
Ford. But then things took a negative dive. One of the prime season for the JV to end was the
global economic conditions due to the pandemic. Hence the JV broke before even starting an
operation.
 2. Mahindra- Renault
It was 2005 when Mahindra and Mahindra went into collaboration with the French
carmaker Renault. In the JV 51% share was owned by M&M and Renault settled with
49% share.
In 2007 they launched their first vehicle after collaboration, the Logan. Because of really
low sales of the vehicle, the JV dissolved in April 2010. Both the companies are on their
own since.

3. Hero- BMW
Around the year 2003, it was proposed that BMW could enter in a joint venture with the
renowned two-wheeler manufacturer Hero Moto Corp. (Hero-Honda back then). Also, let
me get the facts right. The collaboration was for luxury cars and not two-wheelers. But as
the years passed, due to the recession in the automobile industry the proposal of
collaboration between the two companies was shelved.

(c) Strategic Alliance

Example-
Uber and Spotify
Uber’s partnership with Spotify lets Uber riders easily stream their Spotify playlists whenever
they take a ride. This makes the Uber experience feel more personalized, and encourages
Uber riders to subscribe to Spotify Premium (for more control of their tunes both inside and
outside Uber).
Coco-cola case study (coke at an arm’s reach) Uber/ola and coke
Starbucks and Barnes & Noble
Starbucks formed another successful in-store partnership with Barnes & Noble. While many
larger brick-and-mortar bookstores haven’t survived the tough competition from Amazon,
Barnes & Noble has seen continued success.
One reason is the co-branded Starbucks “B&N Cafes” inside most Barnes & Noble locations.
A hot beverage and a good read have always paired well, which gives book enthusiasts have
another reason to visit a physical Barnes & Noble store instead of buying online or from a
competitor.
Red Bull and GoPro
In 2012, Red Bull partnered with GoPro to support a record-breaking skydive from a balloon.
Red Bull sponsored the dive, and the skydiver wore a GoPro camera to capture it.
The two brands later formed a long-term strategic alliance for Red Bull extreme sports
events, such as the Red Bull Rampage. Only GoPro cameras are used to capture an athlete’s
point-of-view shots at these events.

Merger, Acquisition, JV or Strategic Alliance?

Flipkart and Phone Pay- Acquisition, Conglomerate

Flipkart and Ninjacart (Fresh produce supply chain firm) for flipkart quick- Acquisition
(vertical)
Nykka and Dot & Key- Acquisition, Vertical
Zomato and Runnr- Acquisition, Horizontal
Zomato and TechEagle Innovations- Acquisition, Vertical
Tata Starbucks- Joint venture
Sony and Ericson- joint Venture
NBC Universal Television Group (Comcast) and Disney ABC Television Group (The Walt
Disney Company)- HULU- Joint Venture
Uber and Volvo- Joint Venture