Strategic Management

1. International Strategy Chapter Nine © 2006 by Nelson, a division of Thomson Canada Limited.

2. The Strategic Management Process Chapter 8: Acquisition & Restructuring Chapter 9: International Strategy Chapter 10: Cooperative Strategy Strategy Formulation Strategic  Actions  Chapter 3: The External Environment Strategic Competitiveness Strategic Mission & Strategic Intent Strategic Objectives & Inputs Chapter 1: Strategic Management Ch. 2: Strat. Mgmt . & Performance Chapter 3: The External Environment Chapter 3: The External Environment Chapter 4: The Internal Environment Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics Chapter 7: Corp.-Level Strategy Chapter 9: International Strategy Chapter 11: Corporate Governance Ch. 12: Org. Structure & Controls Chapter 13: Strategic Leadership Chapter 14: Org. Renewal & Innovation Strategy Implementation Strategic Competitiveness

4. International Strategy Opportunities & Outcomes Identify International Opportunities Strategic Competitiveness Outcomes Higher Performance Returns Innovation Use Core Competence Modes of Entry Exporting Establishment of New Sub. Licensing Strategic Alliances Acquisition Explore Resources & Capabilities International Strategies International Bus.-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Identify International Opportunities Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage Management Problems, Risk, and First Steps Management Problems, Risk, and First Steps Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage

6. International Strategy Opportunities & Outcomes Identify International Opportunities Strategic Competitiveness Outcomes Higher Performance Returns Innovation Use Core Competence Modes of Entry Exporting Establishment of New Sub. Licensing Strategic Alliances Acquisition Explore Resources & Capabilities International Strategies International Bus.-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Identify International Opportunities Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage Management Problems, Risk, and First Steps Management Problems, Risk, and First Steps Explore Resources & Capabilities International Bus.-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage

9. Corp.-Level International Strategies Type of Corp. Strategy selected will have an impact on the selection & implementation of business-level strategies Some Corp. strategies provide individual country units with flexibility to choose their own strategies Others dictate bus.-level strategies from the home office & coordinate resource sharing across units Three Corporate Strategies Global Strategy Transnational Strategy Multi-Domestic Strategy

10. Multi-Domestic Strategy Focus on competition in each market Prominent strategy among European firms due to broad variety of cultures & markets in Europe Assumes markets differ by country or regions Business units in each country are independent of each other Products & services are tailored to local markets Corp.-Level International Strategies Strategy & operating decisions are decentralized to strategic business units (SBU) in each country

11. Global Strategy Firm often lacks responsiveness to local markets Requires resource sharing & coordination across borders (which also makes it difficult to manage) Corp.-Level International Strategies Emphasizes economies of scale Strategic business units (SBUs) are assumed to be interdependent Decisions regarding business-level strategies are centralized in the home office Products are standardized across national markets

13. International Corporate Strategy When is each strategy appropriate? Need for Global Integration Low High Need for Local Market Responsiveness Low High

15. International Strategy Opportunities & Outcomes Identify International Opportunities International Strategies Strategic Competitiveness Outcomes Higher Performance Returns Innovation Use Core Competence Modes of Entry Exporting Establishment of New Sub. Licensing Strategic Alliances Acquisition Explore Resources & Capabilities International Bus.-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Management Problems, Risk, and First Steps Management Problems, Risk, and First Steps Explore Resources & Capabilities International Bus.-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Explore Resources & Capabilities International Bus.-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage Use Core Competence Exporting Establishment of New Sub. Licensing Strategic Alliances Acquisition

21. Strategic Competitiveness Outcomes International diversification facilitates innovation in the firm. May generate resources necessary to sustain a large-scale R&D program. Generally related to above-average returns, assuming effective implementation and management of international operations. Provides larger market to gain more and faster returns form investments in innovation. International diversification provides greater economies of scope and learning.

22. International Strategy Opportunities & Outcomes Higher Performance Returns Innovation Identify International Opportunities Explore Resources & Capabilities Use Core Competence Competitiveness Outcomes International Strategies Modes of Entry Increased Market Size Return on Investment Economies of Scale and Learning Location Advantage International Bus.-Level Strategy Multidomestic Strategy Global Strategy Transnational Strategy Higher Performance Returns Innovation Competitiveness Outcomes Management Problems, Risk, and First Steps Management Problems, Risk, and First Steps Use Core Competence Exporting Establishment of New Sub. Licensing Strategic Alliances Acquisition Exporting Establishment of New Sub. Licensing Strategic Alliances Acquisition Management Problems, Risk, and First Steps Management Problems, Risk, and First Steps

23. Risks in the International Diversification Political Risk National government instability may create problems for internationally diversified firms. Legal authority obtained from previous administration may become invalid. Potential changes in attitudes or regulations regarding foreign ownership. Potential for nationalization of firms’ assets.

24. Economic Risk Econ. risks are interdependent with political risks. Differences in inflation rates may affect inter-nationally diversified firms’ ability to compete. Differences and fluctuations in international currencies may affect value of assets & liabilities. This affects prices & thus ability to compete. Enforcing intellectual property rights on copyrights; CDs, software, etc. Risks in the International Diversification

25. Risks in the International Environment Economic Risks Political Risks Political instability in Indonesia brought about by continuing ethnic strife Uncertain future of peace in the Middle East because of changes of national leaders Failure of the European Community’s quest for economic superpower status because of inter-country disagreements China’s difficulty in enforcing intellectual property rights on CDs, software, etc. Russia’s struggle with low productivity, currency problems & high unemployment. Exchange rate exposure due to the U.S. - Canadian dollar fluctuations.

26. Taking the 1 st International Step: Pitfalls of going to the U.S. Failure to: E.D. Smith ’s product goals required a corp. culture of company dedication that was lacking in its U.S. facilities U.S. retailers customers put more importance great front-line sales staff ( Canadian Tire ’s U.S. experience) Expectations for better service: The Paper-thin margins in the U.S. Electronics Retailing Industry that hurt Future Shop Recognize Different Customer Expectations  Take into account differing worker attitudes  Take into account firmly established competitors 

27. Taking the 1 st International Step: Basic Advice about going to the U.S. “ If you think it necessary to have a sales rep in Montreal, you should find it just as necessary to have one in Chicago.” Winpak’s President, Bob Lavery Keg Restaurants give larger portions in the U.S. because customers want to be sure they get value Open Text acquired U.S. operations and is listed on the NASDAQ to give the firm a U.S. appearance Jean Coutu U.S. stores are called “ MaxiDrug ” Know you may need to change basic business attributes Subtle cultural differences need attention Set up as a North American company Acquire U.S. attributes

28. Taking the 1 st International Step: Final Advice about going to the U.S. what local competitors are doing. and what does not work. What customers expect, and Jean Coutu hands-on what works, Open Text CEO Tom Jenkins “ If Canadians make any mistake in the U.S., it would be the same mistake they might make in Vancouver or Calgary, [And,] you have to provide a good product at a fair price and keep your customers happy. ” & discover which is not locating salespeople close to your customers… Get very involved quickly in day-to-day details Be close to your customers: what local competitors are doing. and what does not work. What customers expect, and Jean Coutu hands-on what works, & discover Get very involved quickly in day-to-day details

29. The Strategic Management Process Chapter 8: Acquisition & Restructuring Chapter 9: International Strategy Chapter 10: Cooperative Strategy Strategy Formulation Strategic  Actions  Chapter 3: The External Environment Strategic Competitiveness Strategic Mission & Strategic Intent Strategic Objectives & Inputs Chapter 1: Strategic Management Ch. 2: Strat. Mgmt . & Performance Chapter 3: The External Environment Chapter 3: The External Environment Chapter 4: The Internal Environment Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics Chapter 7: Corp.-Level Strategy Chapter 9: International Strategy Chapter 11: Corporate Governance Ch. 12: Org. Structure & Controls Chapter 13: Strategic Leadership Chapter 14: Org. Renewal & Innovation Strategy Implementation Strategic Competitiveness