STRATEGIC MANAGEMENT II

COMPETING IN INTERNATIONAL
MARKETS

Presented By
Aditi Anand 19P065
Archit Goel 19P074
Kanan Gupta 19P087
Prachi Singhal 19P099
Ruchika Badesra 19P107
Tanu Khare 19P118
 OVERVIEW

SAGAR RATNA: UK Vegan market risen by 360% in 10 years

HERO: Colombia one of the fastest growing in Lat Am. Bangladesh 3 rd largest in SEA
 WHY GO INTERNATIONAL

The use of international strategies is increasing. Multiple factors

and conditions are influencing the increasing use of these
strategies.

04 A company first tries to satisfy home demand

Then it shifts to catering international demand

03
through exports

When international demand gets too high to be

02 catered by home production

Expanding to international markets

01

Example
 INTERNATIONAL STRATEGIES

BUSINESS-LEVEL
INTERNATIONAL STRATEGY

TWO
BASIC At the business-level:
• Cost Leadership
TYPES • Differentiation
(one or both can
be chosen) • Focused
Cost Leadership
• Focused Differentiation
• Integrated
Cost / Differentiation

CORPORATE-LEVEL
INTERNATIONAL STRATEGY

At the corporate level:

• Multidomestic
• Global
• Transnational
 INTERNATIONAL BUSINESS LEVEL STRATEGY

● See domestic strategy as core competencies and capabilities

form foundation of international strategy

● Porter’s diamond model

a. Factors of production
b. Demand conditions
c. Related and supporting industries
d. Firm strategy, structure and rivalry

● Policies of individual governments and a country’s resources

● Leading companies should recognize that a firm based in a
country with a national competitive advantage is not
guaranteed success
SAGAR RATNA: Differentiation Leadership
HERO: Cost Leadership
Conditions or factors in a firm’s domestic
market—either hinders or supports the firm’s
efforts to use an international business-level
strategy for the purpose of establishing a
competitive advantage in international
markets.
 INTERNATIONAL CORPORATE LEVEL STRATEGY

International corporate-level strategy is required when the firm operates

in multiple industries that are located in multiple countries or regions and
in which it sells multiple products.

TYPES

CENTRALIZED DECENTRALIZED
(STANDARDIZATION) (LOCAL FOCUS)
HIGH

Global strategy Transnational strategy

● Centralized decisions ● Flexible Coordination

● High global integration, low local ● Global efficiency and local responsiveness.
responsiveness. ● Can produce higher performance than rest
● Standardization of products - economies of ● Difficult to use because of its conflicting goals
NEED FOR GLOBAL INTEGRATION

scale ● Necessary to compete - as need low costs and

● Innovation used everywhere differentiated products
● Differences between markets & customers are
insignificant.

Multidomestic Strategy

● Decentralized decisions
● Local responsiveness high, global integration
SAGAR RATNA: Global low
HERO: Transnational ● focuses on competition within each country
● Differences between the markets and the
customers are significant.
● Do not allow economies of scale

HIGH
W
LO NEED FOR LOCAL RESPONSIVENESS
 ENVIRONMENTAL TRENDS

Liability of foreignness Firm’s choice and use Regionalization

of international
A set of costs associated with various strategy can be It allows narrow focus to a particular
issues firms face when entering based on 2 factors region rather than where the
foreign markets. international markets differ greatly.
It can be due to: It helps as to:
● Unfamiliar operating environments
● Economic, Administrative and ● Better understand the cultures
cultural differences ● Coordination and sharing of
● Challenges of coordination over resources among similar markets
distances (4 types) ● Achieve some economies
○Cultural
○Administrative Trade agreements (NAFTA, OAS)
○Geographic
also help
○Economic
 ENTRY MODES

Exporting

Pros:
• Avoid the
expense of
Licensing
establishing
operations Pros:
Cons: • Attractive for Strategic Alliances
• High costs smaller/newer firms
• Low control • Least Costly Pros:
• Harder to earn • Low Risk • Shared Costs,
profits • A royalty on each resources
unit produced and • Less Risk
sold (Shared)
Cons: Cons:
• Little control • Conflict in
• Least return integration
• Incompatible
Partners
• Trust
 ACQUISITIONS NEW WHOLLY OWNED SUBSIDIARY

ADVANTAGES
● Rapid access to new market
● Quick growth
● Can leverage bought firm’s resources
DISADVANTAGES
● High cost involved
● Difficult integration
● Complex negotiations
● Difficult to capture potential synergy
ADVANTAGES
● Provides maximum control of the firm
● Speedy Strategic Decision Making
DISADVANTAGES
● Very costly
● Require knowledge and expertise acquisition
● Unfavourable in high country risk areas, instead
Joint Venture is preferred
Preferred in:
● Firms with proprietary technology
● Capital-intensive businesses
● Service Industries
DYNAMICS OF MODE OF ENTRY

Export, Licensing, and Acquisitions, greenfield

Strategic Alliance — ventures, and sometimes
joint ventures —
effective means of initially
entering new markets and when firms want to establish
for developing a presence a strong presence in an
in those markets international market

The decision regarding which entry mode to use depends on:

 Industry’s competitive conditions
 The country’s situation and government policies
 The firm’s unique set of resources, capabilities, and core competencies
SAGAR RATNA: Licensing. Low risk for initial presence
HERO: Wholly Owned Subsidiary – Low Risk (Colombia), Joint Venture – High Risk (Bangladesh)
POLITICAL RISKS ECONOMIC RISKS

 Government instability on their investments or  The availability of important infrastructure

assets  Perceived security risk
 Uncertainty created by government regulation  Terrorism
 The existence of conflicting legal authorities or  The differences and fluctuations in the value of
corruption currencies
 Potential nationalization of private assets

Political risks: HERO

1. Bangladesh - politically unstable, risk of corruption,
significant bureaucratic burden, weak judiciary system
2. Colombia - politically stable and resilient, corruption
risks, prudent laws

Economic risks:
1. Bangladesh - EODB index -179, good growth rate,
poor infrastructure
2. Colombia - stable economic growth, high cost of
trading across borders
 INTERNATIONAL DIVERSIFICATION OUTCOMES

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.

Greater Returns Enhanced Innovation

• Returns decrease initially • Appropriate additional
but then increase quickly returns from innovation
• Reduction in overall risk. • Exposure to new
• Positive stock returns products and
• Resources to sustain a technology
large-scale R&D
operation.

Initial performance needed to provide the resources the firm needs to diversify geographically
Geographic diversification provides incentives and resources to invest in R&D

Important role played by diverse top management

HERO: To become world’s best two-wheeler company in every sense:
Innovation, Technology, Customer Service, Modernisation, Digitisation
 CHALLENGES FOR INTERNATIONAL STRATEGIES

● Complexities
1. Size and complexity can cause the firm to become virtually
unmanageable
2. Cost of management > Value created using international
strategies
3. Different cultures and institutional practices of the countries

● Limitations
1. Greater geographic dispersion increases the costs of coordination
and distribution
2. Trade barriers, logistical costs, cultural diversity, and other
differences by country
3. Differences like access to raw materials and employee skill levels
4. Marketing programs need to be redesigned and new distribution
networks established MITIGATION

• Competing in countries that are friendly,

geographically close and have similar cultures
(central coordination)

• Using strategic alliances to rely on their partners for

dealing with local laws, regulations etc.