Class 3 - Apuntes 3 PDF

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Carolina
Garcia Gomez...

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The need for an International Strategy https://www.salesforce.com/products/sales-cloud/resources/international-sales-strategy/ DAVID, Collis (2014). Introduction. Jhon Wiley and sons Ltd. International Strategy: Concept, Context and Implicatiosn (p4). London, UK Generic International Strategies ht tp s: // w w w .v a n s. c o m / https://www.gs1.org/1/strategy/ LOCAL It’s not an International Strategy. To stay domestic. Not all companies need/want to become international. Profitability – willingness to pay! It’s a viable strategy even if it restricts the size of the firm. Local products to meet local demand. Businesses with big differences in consumers

preferences, stay local. Ex: Sausages. Diseconomies: Costs of going international. Risk: Vulnerability. Constant need to upgrade FSA. https://www.karibik.com/, www.lineadirecta.com, www.hershey.com, https://www.canstockphoto.com/isolated-colombian-map-47551221.html EXPORT It’s not a Multinational Strategy in terms that it normally uses contracts to coordinate international activity, rather than internalizing foreign activity inside the firm hierarchy. To sell a product through distributors or other figures, which take on the complexity of operating in foreign markets. Restricted access to consumers so it’s not easy to adapt the product to the market needs. No direct access to the end consumer. We can´t control the global activity such delivery, sells, prices… www.ramo.com.co, www.myjacpack.com, www.kinkymascotas.co EXPORT It’s best adopted when we don’t require our own international adv, but to simply exploit our country’s comparative adv. Ex: Avocado hass. Arbitrage, exploit factor cost or CSA (commodities, labour). It better to sell the same product all around the world (homogeneous demand). Except for technical regulations! Opportunistic scope. Entering and exit markets when it’s profitable. Ex: sw industry. International Department to handle relationship with agents. It’s a good way to start. Many multinationals started with this strategy. www.wbrandf.com IMPORT

A Company that competes only in one country, accessing products through international sourcing. It takes advantage of international markets by arbitrage foreign CSA (factor costs) or augmenting products by offering a distinctive product in it local market. Gift shops, party shops, marketers… It applies when demand in the home market is similar to the countries where you’re sourcing from. Same product, no customized. https://www.losmolinos.com.co/tienda/importados-x/ Common features of first Multinationals: Augmenting the product set available in their home country. Arbitrage factor costs differences across countries. Challenges of the time: Trust. High Investment. Transport costs. NOW Informational Advantage: Supports intermediate markets. Facilitate contractual relationships. Reduce transport and communication costs. AGGLOMERATION:

Leverage benefits of a coordinated global network VERTICAL MULTINATIONAL – Internalizes a global supply chain within the corporate hierarchy Companies replicate their domestic activities in a foreign country, rather than simply source from them. Operations by subsidiaries (mini versions of their home-country parent). Autonomous and self-contained operations TODAY Augmenting FSA by replicating a set of products across countries. Aims to maximize benefits by meeting local markets needs through extensive customization. Local Adaptation. After transmitting the FSA, each foreign subsidiary is given autonomy to adapt all activities to meet local market requirements. Waterfall approach of product development. Distinctive set of capabilities to be transfered to subsidiaries, not only product but branding, marketing, etc. (core competences) MULTIDOMESTIC www.offcorss.com, www.Unilever.com MULTIDOMESTIC www.mtv.com

Low pressure for Global Integration. Autonomy in subsidiaries The subsidiary has to remain linked to the HQ or it would lose its competitive advantage over time. Scope: Each country stands on its own. Strategies for each country. Drawbacks: Replication of activities on each country is expensive In the search for local adaptability, it sacrifices global efficiency. High pressure for local responsiveness. Totally opposite trade-offs from Multidomestic strategy. Same product, sold the same way all around the world (standardized) Optimize production. Simplicity + standardization = Efficiency (focus) Exploits scale and learning. Highly centralized. Low pressure for local responsiveness High pressure for global integration. Global scope: World as a single market! GLOBAL https://blog.btrax.com/what-should-your-companys-international-expansion-strategy-be/ GLOBAL

https://co.pinterest.com/pin/371828512961035614/, www.rolex.com, www.Pfizer.com Aggregation (scope) - Conditions: 1. A global customer who will buy a standard product. Global segment Global demand. EX. Rolex in US, India and UK 2. Interdependency among countries. Coordination of activities around the world. Scale economies in supply and demand. Standardized not only product but marketing and brand positioning (packaging, distribution and aftersales support) Different activities can be located in different countries to exploit factor costs. REGIONAL Strategy for a progression from local to international. Only to compete in a single region. Expand from local market but choosing home region first. Limit geographic scope to simplify the challenge of competing internationally. Being Global within a region and Multidomestic between regions. Group countries, not by continent but by stage of development. Standardized products within a region, each region operates independently. https://www.natura.com.co/, https://us.pg.com/ TRANSNATIONAL

“Think Global. Act Local” Glocal. To build and manage a coordinated, but dispersed, worldwide network of markets and activities. Product- Platform: With variations to drive willingness to pay and generate local innovation. Platform: Designed around a standard core that supports a locally variable appearance. TRANSNATIONAL Scope: Leading countries in terms of demand, leading in innovations and where my key international competitors are located. Location: Disperse activities in order to exploit dynamic arbitrage opportunities in a balanced way! Production in specific countries but R&D in dispersed countries. Has a full set of activities in key countries to respond to new local ideas and developed its own innovative products and processes. Horizontal structure. Socialization of people and purposes. It’s difficult in terms of motivation for managers. Subsidiaries develop their own capabilities to become active contributors to, and implementers of innovations. www.Starbucks.com, www.google.com, www.cocacola.com, www.Ford.com Evolution of International Strategy Export/ Vertical Import Multinational Global Horizontal

Local Multinational Multidomestic Regional Transnational https://www.youtube.com/watch?v=z7M1vQTvkx4 Generic International Strategies DAVID, Collis (2014). Generic International strategies. Jhon Wiley and sons Ltd. International Strategy: Concept, Context and Implicatiosn (p121). London, UK International Strategy Statement https://www.downtownkingston.ca/business/starbucks-0 There is no “one right strategy” to pursue International competition. Many firms have succeed using different strategies: Global: Mc Donald's, Mars, Whirlpool Multidomestic: Electrolux, Cadbury, KFV Local: GE, Hershey, Taco Bell BUT not every strategy will work in any industry! So, how to choose the best for my Company? Choice of Generic Int Strategy www.vivaair .com https://www.semantia.com.au/articles/performance-based-decision-making/ Understand the strength of the factors that support or limit the ability of a firm to exploit each of the 4 sources of International Competitive Advantage: Augment – Differences in the business system among countries that allows me

to fill a gap in those markets with locally adapted product. Aggregate – Degree of interdependence between markets that generates efficiencies across countries (scale and experience). Arbitrage -Extent of factor cost differences that generates static arbitrage advantages. Agglomerate - Volatility and unpredictability of differences between countries that generate dynamic arbitrage and innovation opportunities. Choice of Generic Int Strategy DAVID, Collis (2014). Choice of generic international strategy. Jhon Wiley and sons Ltd. International Strategy: Concept, Context and Implicatiosn (p164). London, UK Extent of differences in the business system around the world. Companies cannot just replicate their domestic strategies globally, because countries differ! 2. Business System Similarity DAVID, Collis (2014). Choice of generic international strategy. Jhon Wiley and sons Ltd. International Strategy: Concept, Context and Implicatiosn (p165). London, UK Do I have to adapt my product? Do I have to adapt my marketing strategy? Extent of local responsiveness Similar: Export and Global Adapted: Multidomestic and Transnational Porter: “Am I better off in country A by virtue of my position in country B? If competitive position in one country improves because of a firm’s presence in another country, then there are economic interdependencies that require treating the globe as a single entity rather than as a separate set of markets. INTERDEPENDANCE GLOBAL STRATEGY

Balance of the scope economies to determine if it’s better to aggregate or agglomerate in order to exploit those interdependencies! 3. Interdependencies among countries INTERDEPENDENCY IN THE SUPPLY SIDE AND DEMAND SIDE 3. Interdependencies among countries DAVID, Collis (2014). Choice of generic international strategy. Jhon Wiley and sons Ltd. International Strategy: Concept, Context and Implicatiosn (p167). London, UK Extent to which differences between countries create static arbitrage opportunities. It happens when: Factor costs in the business differs between countries (supply). Product market differences are on an intermediate level so when you introduce a product from another country, augments domestic product space (demand). FACTOR COSTS: Magnitude of costs differences. Ex: Taxes, tariffs Size of the cost element. % in my cost structure. 4. Current differences in CSAs Dynamic Arbitrage Ability to continually re optimize production among locations and take learnings form anywhere to quickly deploy them everywhere around the globe. It requires ongoing coordination and it’s more valuable when there are unpredictable variations between countries. Agglomeration. Economic conditions. Rate of innovation – Technological dynamism. Barriers to trade. 5. Extent of volatility

The choice of an International strategy is not Black and White. Companies have the freedom to choose the strategy that suits them the best. The International strategy can vary across segments within the industry and through time. A firm should choose an International strategy based on skills, capabilities and the economic factors of their industry, but the basis of any International strategy is its original competitive advantage or FSA. A firm should make a choice they are comfortable with, but then it needs to ensure that every tough choice of Product, Scope, Location and Organization is aligned with that strategy!...