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Flashcards in Foreign Entry Strategies Deck (36)
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1

What is strategy?

Planned set of actions that managers take to make best use of the firms resources and core competencies to gain a competitive advantage

2

Why enter? Objectives of establishing foreign subsidiaries

Nature resource seeking

Market seeking

Efficiency seeking

Innovation seeking

3

Nature resource seeking advantages

Quality and costs of nature resources

4

Market seeking advantages

Strong market demand and customers willing to pay

5

Efficiency seeking advantages

Economies of scale

Abundance of low-cost labour force and suppliers

Transport and communication infrastructure

6

Innovation seeking advantages

Innovative individuals, firms and unis

Industry agglomeration (collection of things)

7

First mover advantages

Experience curve benefits

Scale benefits

Reputation

Pre-emotion of scale resources

Buyer switching costs

8

Late mover advantages

Free riding

Learning

9

Foreign market entry strategies

Exporting

Contractual agreements, strategic alliances, licensing and franchising

Joint ventures and mergers and acquisition

Wholly owned subsidiary- FDI

10

How to enter non-equity modes

Exporting

Licensing

Strategic alliances
- technological
- marketing

11

How to enter- equity modes

Mergers and acquisitions

Joint venture
- scale
- link

Wholly owned subsidiaries

12

Purpose of mergers and acquisition

Acquiring another business can fulfil several of a company’s needs

65/70% fail to deliver anticipated results

Finding an appropriate acquisition candidate

13

The integration responsiveness framework

Global integration

Local responsiveness

14

Global integration STANDARDISATION refers to

Coordination of firms activities across countries to achieve worldwide efficiency and synergy in order to take maximum advantage of similarities across countries

Emphasises efficiency/economies of scale

15

Local responsiveness/adaptation refers to

Meeting specific needs of buyers in individual countries

Learning/differentiation

16

How to organise your operation?

Standardisation/global strategy

Adaptation/multidomestic strategy

Glo-Cal/transnational strategy

Home replication strategy

17

Standardisation (global) strategy

Take a product and transfer it

Start from a single case e.g flagship store and scale up

Standardise best practices and maximise efficiency

Why not make same product same way everywhere

Management emphasises central control and coordination to achieve max synergy, efficiency and integration

View world as one large market


18

Advantages of standardisation strategy

Allows companies to liberate low cost advantage and achieve economies of scale

E.g McDonald’s

19

Disadvantage of standardisation strategy

Low level of local responsiveness

Only works for very simple or complicated products

20

Adaptation (Multidomestic) strategy

Need to understand customers need

Make them understand why product is important for them

Approach to internationalisation where high culture ensure autonomy towards each area allowing them to operate independently to pursue local responsiveness

E.g Nestle, often considered a local firm in each of its markets, varies the taste of coffee in different areas

21

Advantage of adaptation/multi-domestic strategy

Maximum local responsiveness

22

Disadvantage of adaptation/multi-domestic strategy

Cost of duplicating companies efforts to pursue local responsiveness

23

Glocal (transnational) strategy

Think globally act locally

Identify best practices and transfer them

Centralise core functions and decentralise others

Strives to be responsive to local needs while retaining sufficient control to ensure efficiency

E.g Starbucks chai latte
Lenovo locate HQ China US, manufacturing low cost countries for economies of scale, basic computers are the same but software and keyboard adapted to accommodate differences in language

24

Advantages of Glocal strategy

Has the benefits of global and multi-domestic strategy

Both global integration and local responsiveness

25

Disadvantages of Glocal strategy

Difficulty to balance integration and local responsiveness

Only works when the company does local exploration and creates local knowledge transfer mechanisms to capture learning

Local unions have to be listened to

Most find it difficult to implement

26

Home replication strategy

Views international business as separate/secondary to its domestic business

Emphasises international replication of home country based core competencies

Opportunity to generate additional sales for domestic product lines

Design with domestic market in mind but pursue international business to extend product life cycle and replicate home market success

E.g Walmart American footballs in Brazil

27

Advantages of home replication strategy

Relatively easy to use and implement

Allows companies to leverage home country based advantage

28

Disadvantages of home replication strategy

Little local responsiveness

Failing to be mindful of local customers need and wants

Foreign customers alienation

29

Global indusry

Industry in which competition is on a regional or worldwide scale

30

Multi-domestic industry

An industry in which competition takes place on a country by country basis