Template 502sm A.1 Assignment Ppt Final

International Strategy

Viplav Gupta, PG08-121 Assignment # A.1: PPT in Learning 7 December 2009

OBJECTIVES # 1 





2

Explain traditional and emerging motives for firms to pursue international diversification. Explore the four factors that lead to a basis for international business-level strategies. Define the three international corporate-level strategies: multidomestic, global, and transnational.

Viplav Gupta, PG08-121

12/10/09

OBJECTIVES # 2 







3

Name and describe the five alternative modes for entering international markets. Explain the effects of international diversification on firm returns and innovation. Name and describe two major risks of international diversification. Explain why the positive outcomes from international expansion are limited.

Viplav Gupta, PG08-121

12/10/09

Opportunities and Outcomes of International Strategy

4

Viplav Gupta, PG08-121

12/10/09

Identifying International Opportunities 

International Strategy A

strategy through which the firm sells its goods or services outside its domestic market.



Reasons to having an international strategy  International  New

markets yield potential new opportunities.

market expansion extends product life cycle.

 Needed

resources can be secured.

 Greater

potential product demand.

5

Viplav Gupta, PG08-121

12/10/09

Benefit of International Strategy Increased Market Share  Return on Investment  Economies of scale and learning  Location Advantage 

6

Viplav Gupta, PG08-121

12/10/09

Four Benefits of lS 1. Increased Market Size  Domestic

market may lack the size to support efficient scale manufacturing facilities.

7

Viplav Gupta, PG08-121

12/10/09

Media Report (1) Increased market share # 1 Presence of Ben Q (Japanese Company ) in India  Increase in Ben Q spots from 30 to 75 by 2009.  Increase in product line i.e. LED monitor LCD, TVS etc. 

8

Viplav Gupta, PG08-121

12/10/09

Media Report (1) Increased market share # 2 Working constantly on innovating and consumer friendly features.  Concentrating move to take its India portfolio beyond the projector ,as in the last 6 years BenQ is known for the projector only. 

9

Viplav Gupta, PG08-121

12/10/09

Four Benefits of lS 2. Return on Investment  Large

investment projects may require global markets to justify the capital outlays.

 Weak

patent protection in some countries implies that firms should expand overseas rapidly in order to preempt imitators.

10

Viplav Gupta, PG08-121

12/10/09

Four Benefits of lS # 2 3. Economies of Scale (or Learning)  Expanding

size or scope of markets helps to achieve economies of scale in manufacturing as well as marketing, R&D or distribution.

 Can

spread costs over a larger sales base.

 Can

increase profit per unit.

11

Viplav Gupta, PG08-121

12/10/09

Four Benefits of IS # 3 4. Location Advantages  Low

cost markets aid in developing competitive advantage by providing access to: • Raw materials • Transportation • Lower costs for labor • Key customers • Energy 12

Viplav Gupta, PG08-121

12/10/09

Determinants of National Advantage # 1

13

Viplav Gupta, PG08-121

12/10/09



Determinants of National Advantage # 2

Factors of production  The

inputs necessary to compete in any industry

Natural resources • Labor Land • CapitalInfrastructure 

Basic factors  Natural



and labor resources

Advanced factors  Digital

communication systems and an educated workforce

14

Viplav Gupta, PG08-121

12/10/09

Determinants of National Advantage # 2 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.

15

Viplav Gupta, PG08-121

12/10/09

Determinants of National Advantage # 3  Related ◦

and Supporting Industries

Supporting services, facilities, suppliers and so on.  Support in design Support in distribution Related industries as suppliers and buyers

16

Viplav Gupta, PG08-121

12/10/09

Determinants of National Advantage # 4  Firm ◦

Strategy, Structure and Rivalry

The pattern of strategy, structure, and rivalry among firms. Common technical training Methodological product and process improvement Cooperative and competitive systems

17

Viplav Gupta, PG08-121

12/10/09

International Corporate-Level Strategy 

Focuses on the scope of operations:  Product 



diversification

Geographic diversification

Required when the firm operates in:  Multiple 

18

industries, and

Multiple countries or regions

Viplav Gupta, PG08-121

12/10/09

International Corporate-Level Strategies

19

Viplav Gupta, PG08-121

12/10/09

Multidomestic Strategy 

Strategy and operating decisions are decentralized to strategic business units (SBU) in each country.



Products and services are tailored to local markets.



Assumes markets differ by country or regions.



Focus on competition in each market.



Prominent strategy among European firms due to broad variety of cultures and markets in Europe.

20

Viplav Gupta, PG08-121

12/10/09

Global Strategy  



  

Products are standardized across national markets. Business-level strategic decisions are centralized in the home office. Strategic business units (SBU) are assumed to be interdependent. Emphasizes economies of scale. Often lacks responsiveness to local markets. Requires resource sharing and coordination across borders (hard to manage).

21

Viplav Gupta, PG08-121

12/10/09

Transnational Strategy 

Seeks to achieve both global efficiency and local responsiveness.



Difficult to achieve because of simultaneous requirements:  Strong

central control and coordination to achieve efficiency

 Decentralization 

to achieve local market responsiveness

Firm must pursue organizational learning to achieve competitive advantage.

22

Viplav Gupta, PG08-121

12/10/09

Global Market Entry Type of Entry

Characteristics

Exporting

High cost, low control

Licensing

Low cost, low risk, little control, low returns

Strategic alliances

Shared costs, shared resources, shared risks, problems of integration (e.g., two corporate cultures)

Acquisition

Quick access to new market, high cost, complex negotiations, problems of merging with domestic operations

New wholly owned subsidiary Complex, often costly, time consuming, high risk, maximum control, potential above-average returns

23

Viplav Gupta, PG08-121

12/10/09

Media Report (2) Exports # 1 

Decreasing demand of Seafood



Exporting firms develop contractual arrangement with host country firms : (sector is capable of exporting at a large scale after the recession) the changing consumption pattern are expected to bring some cheer to Indian exporters Government has also facilitated application for export license.



24

Viplav Gupta, PG08-121

12/10/09

Exports #2 





Among Marine products shrimp is the main exporting item accounting for 44% of total seafood earning. India became the second largest supplier to France in 2008 with 10 % market share of total imports Decision of the US customs and border protection to do away with the enhanced bonding requirement (EBR) on import of Indian shrimp

25

Viplav Gupta, PG08-121

12/10/09

Media Report ( 3) Strategic Alliance # 1 GKB Ophthalmic is on the major expansion drive to become a multinational company : 





Joint venture of Rs. 919.3 cr.with spanish ophthalmic company ,Indo 50:50 jv will see GKB marketing Indo’s range of ophthalmic equipment in India. By doing so Indo will gain a foothold in the Asian markets. Indo will increase their product range by using the core competencies of GKB in Frames & Lens

26

Viplav Gupta, PG08-121

12/10/09

Strategic Alliance # 2 





27

This alliance ( synergy )will increases GKB’s sales by 10 % Due to sophisticated equipment & ease of operation , GKB’s has set a target of 10 machinery a year. As market grows 50 – 60 % annually ,the company expects to double its sales by 2011 – 2012. Viplav Gupta, PG08-121

12/10/09

Media Report ( 4) Acquisition # 1 

It will help Xerox to gain profit because Xerox shares fell 14 % to 7.74%



Xerox plans to aquire affiliated computer service in a $6.4 bullion cash. This acquisition will benefit the company for gaining market power and competative advantage as well as above average return. International negotiation for acquisition is little bit complex





28

Viplav Gupta, PG08-121

12/10/09

Acquisition # 2 



29

Revenue from services will triple to an estimated $10 billion next year from $3.5 billion in 2008. Deal expands the copier co. into outsourcing and data centre management , and its shares jumped 27% to $55.24 on the Newyork stock exchange. Viplav Gupta, PG08-121

12/10/09

Media Report (5) Wholly owned subsidiary # 1 

Noble group exits Indian edible oil market.



This wholly own subsidiaries will provide mere control to the firm. The mansingka family ,along with millionaire kirit shah owned GP group , already owns 49 % in noble grain. Geepe Agri pvt ltd. will be the new name of wholly owned subsidiaries



30

Viplav Gupta, PG08-121

12/10/09

Wholly owned subsidiary #2 



31

They have planned physical capital intensive plants. Oil seeds capacity of 3 million tonnes in china & a new plant coming up in Argentina Noble GP has enough first hand experience to directly enter the business India now.

Viplav Gupta, PG08-121

12/10/09

International Diversification and Returns # 1 

International diversification is a strategy through which a firm expands the sales of its goods or services across the border of global regions and countries into different geographic location and market.  May

increase a firm’s returns (such firms usually achieve the most positive stock returns).

 May

achieve economies of scale and experience, location advantages, increased market size and opportunity to stabilize returns.

32

Viplav Gupta, PG08-121

12/10/09

International Diversification and Returns # 2  Makes

implementing international strategy increasingly complex.

 Can

produce greater uncertainty and risk.

 May

result in the firm becoming unmanageable

 May

cause the cost of managing the firm to exceed the benefits of expansion.

 Exposes

the firm to possible instability of some national governments 33

Viplav Gupta, PG08-121

12/10/09

Risks in an International Environment # 1 

Political Risks  Instability in national governments  War, both civil and international  Potential nationalization of a firm’s resources

34

Viplav Gupta, PG08-121

12/10/09

Risks in an International Environment # 2 

35

Economic Risks  Differences and fluctuations in the value of different currencies  Differences in prevailing wage rates  Difficulties in enforcing property rights  Unemployment

Viplav Gupta, PG08-121

12/10/09

Risks in an International Environment # 3

36

Viplav Gupta, PG08-121

12/10/09

Thank you

Viplav Gupta, PG08-121 Assignment # A.1: PPT in Learning 7 December 2009