need report based on 7 and 8 chapters only
Suresh-
CH7.pptxINTERNATIONAL STRATEGY: CREATING VALUE IN GLOBAL MARKET
CHAPTER 7
1
OBJECTIVES
Porter’s “diamond of national advantage” as a framework to explain the level of success for an industry in a given country.
Motivations as well as the risks (or pitfalls) associated with international expansion
The two opposing forces that firms face when entering international markets—cost reduction and local adaptation
2
3
FACTORS AFFECTING A NATION’S COMPETITIVENESS
Michael Porter’s “Diamond of national advantage” explains why some nations and their industries outperform others.
Factor endowments
Demand conditions
Related and supporting industries
Firm strategy, structure, & rivalry
4
FACTORS AFFECTING A NATION’S COMPETITIVENESS: FACTOR ENDOWMENTS
These include a skilled human resource pool, in addition to the supporting infrastructure of a country, e.g., communication and transportation systems
5
Factors Affecting a Nation’s Competitiveness: Demand Conditions
Demand conditions refer to the demands that consumers place on an industry.
Demanding consumers drive firms in that country to:
Meet high standards.
Upgrade existing products and services.
Create innovative products and services.
Better anticipate future global demand.
Proactively respond to product & service requirements.
6
FACTORS AFFECTING A NATION’S COMPETITIVENESS: DEMAND CONDITIONS
The growth of box office spending overseas is a result of a cinema boom in the emerging world, a concerted effort by the major studios to make films that might play well outside the United States and a global marketing push to make sure they do.
The imported films made more than five times as much as the home-grown products in Russia.
7
FACTORS AFFECTING A NATION’S COMPETITIVENESS: RELATED & SUPPORTING INDUSTRIES
Related and supporting industries enable firms to manage inputs more effectively.
A competitive supplier base
Reduces manufacturing costs
Italy has overtaken Germany and is currently no.1 in the European Union for value of pharmaceutical production (€ 31.2 billion, vs € 30.5 billion for Germany).
8
RELATED & SUPPORTING INDUSTRIES
In Denmark, everyone drinks directly from the tap, all restaurants serve tap water
9
RELATED & SUPPORTING INDUSTRIES
10
FACTORS AFFECTING A NATION’S COMPETITIVENESS: FIRM STRATEGY
Firms develop strategies and structures to compete with other firms in the same country that are trying to capture the same customer market.
11
FIRM STRATEGY
12
CONCLUDING COMMENT ON FACTORS AFFECTING A NATION’S COMPETITIVENESS
Porter’s conclusions were based on case histories from more than 100 industries. A common theme did emerge: Firms that succeeded in global markets had first succeeded in intense competition in home markets. Thus, successful global firms often result from determination, continuing improvement, innovation, and change.
13
POTENTIAL BENEFITS OF INTERNATIONAL EXPANSION INCLUDES
1. Increased market size (Boeing’s commercial aircraft; Microsoft; Hollywood films)
2. Enhance a product’s growth potential (soft drink producers PepsiCo and Coca-Cola; Procter & Gamble’s personal care products)
3. Optimize the location of every value chain activity (Microsoft)
14
MOTIVATIONS FOR INTERNATIONAL EXPANSION
A company pursues international expansion for many reasons. A company decides to become a multinational firm in order to:
Increase size of potential markets
Attain economies of scale
Applied to every stage of the value chain
Enhance a product’s growth potential
Reinvigorate the product life cycle
15
The firm spent $2.4 billion on investments outside of Japan. NTT is the fourth largest telecommunications company in the world.
16
EUROPEAN GROCERY RETAIL INDUSTRY
United Kingdom, Ireland, India, Malaysia, Thailand, Czech Republic, Hungary, Poland.
| Subsidiaries | Tesco Stores Ltd. Tesco Bank Tesco Mobile Tesco Ireland Tesco Family Dining Ltd. Dunnhumby Spenhill Booker Group Jack's |
17
Optimize the location
18
Performance Enhancement:
Microsoft’s decision to locate a corporate research facility in Cambridge, U.K. in order to draw upon superb technical and professional talent.
Cost Reduction:
Nike’s decision to source the manufacture of athletic shoes from Asian countries such as China, Vietnam, and Indonesia.
OPTIMIZE THE LOCATION
19
INTERNATIONAL EXPANSION: RISKS
Political risk due to social unrest, military turmoil, demonstrations, terrorism, absence of the rule of law can lead to
Destruction of property
Disruption of operations
Non-payment for goods and services
Arbitrary government decisions
Economic risk due to counterfeiting (COPYING)
Currency risk
Management risk due to culture, customs, language, income level, customer preferences, distribution systems
20
PROTOCOL ISSUES IN HONG KONG
Members of the same sex may hold hands to signify friendship, but members of the opposite sex may not.
Do not pat people on the shoulder or initiate any physical contact. It is not appreciated.
“Come here” is signified by turning the palm face down and waving the fingers.
Clocks (they imply death)
Books (they represent a “Curse to Lose” for gamblers)
Blankets (they choke the recipient’s prosperity)
Unwrapped gifts (this is rude)
Gifts wrapped in blue (the color of mourning)
21
INTERNATIONAL EXPANSION: MANAGING RISKS
Various activities of the firm’s value chain can be spread across several countries & continents via
Outsourcing
Offshoring
BT (formerly British Telecom), the UK telecom giant, outsourced its human resources operation to Accenture
Net revenues of $39.6 billion, with more than 459,000 employees.
150,000 employees in India, about 48,000 in the US, and about 50,000 in the Philippines. Strategy, consulting, digital, technology and operations.
22
Difference
Outsourcing is when a company negotiates a contract with a third party to perform a specific function. However, offshoring is when a company sends in-house jobs to be performed in another country. An example of offshoring is for a United States based company to produce their goods in Mexico.
23
International Corporate-Level Strategy
24
INTERNATIONAL STRATEGIES: OPPOSING PRESSURES (MULTIDOMESTIC STRATEGY)
Managers of multinational firms often experience dilemmas when it comes to adjusting to the norms of foreign countries in which they operate. One especially difficult choice is whether or not to participate in bribery to get projects moving forward or to get approvals needed.
25
Transnational Strategy
The Need for Contextual Intelligence which is defined :
as the ability to understand the limits of one’s knowledge and to adapt that knowledge to an environment different from the one in which it was developed.
Ways in which products are marketed and buying decisions are made, and how individual customers and employees interact.
26
TRANSNATIONAL STRATEGY
Johnson & Johnson today operates in 57 countries with 250 operating companies. How does one manage a company with so many different products and operations in so many different countries?
They standardize processes in staff and support areas like procurement, human resources, and IT, but not in operations. The managing directors of operating companies have enormous freedom to run their businesses.
27
CHOICE OF INTERNATIONAL ENTRY MODE
28
29
ENTRY MODES OF INTERNATIONAL EXPANSION
Exporting
Exporting consists of producing goods in one country and selling them in another.
LIMITATIONS
Firms have little ability to tailor their products to match the local market demands.
Furthermore, the exporting firm has little control over how their products are marketed or sold in the foreign market.
30
31
32
33
WHAT DO YOU THINK? Ethical Or Unethical
Medtronic plc is the world's largest medical device company that generates the majority of its sales and profits from the U.S. healthcare system but is headquartered on the island of Ireland for tax purposes.
Medtronic operates in 140 countries and employs over 86,000 people.
34
WHAT DO YOU THINK?
For your career, what conditions in your home country might cause you to seek careers abroad
35
REFERENCES
Anonymous. 2011. Hollywood goes global; Bigger abroad. The Economist. February 19: 69.
Negishi, M. 2014. NTT makes renewed overseas push. wsj.com. August 30: np.
"The Japanese Government Asset System and Current Conditions" (PDF). Ministry of Finance Japan. March 2019. Retrieved May 27, 2019.
"The World's Largest Public Companies". Forbes. Retrieved 2018-09-26.
36
REFERENCES
David Gelles (11 July 2019). "Julie Sweet to Run Accenture, Adding a Woman to the Ranks of Corporate C.E.O.s". Retrieved 11 July 2019.
Johnson, O'Ryan (20 December 2018). "Accenture Has $1.5B To Spend On More Acquisitions This Fiscal Year". CRN.com. Retrieved 17 July 2019.
"Fact sheet". Accenture. Retrieved 21 July 2019.
"Fortune Global 500 – The World's Biggest Companies - Accenture Profile 2011". CNN. Retrieved 24 March 2014.
37
REFERENCES
"Johnson & Johnson 2015 Annual Report" (PDF). www.jnj.com. February 24, 2016. Archived from the original (PDF) on April 18, 2016. Retrieved September 28, 2016.
"A Sign of the Times: The Story Behind Johnson & Johnson's Iconic Logo - Johnson & Johnson". www.jnj.com.
38
REFERENCES
Anonymous, 2012. You get what you pay for. The Economist. June 2: 89.
Khanna, T. 2014. Contextual Intelligence. Harvard Business Review. September: 59–89.
Kathy Hwang. "The New Corporate Migration: Tax Diversion Through Diversion"(PDF). Brooklyn Law Review. 80 (3): 807–856. Retrieved 22 April 2019.
39
REFERENCES
"English translation of the "Law Concerning Nippon Telegraph and Telephone Corporation, Etc."" (PDF).
Jump up to Duckett, Chris. "Dimension Data, NTT Communication, and NTT Security bundled into NTT Ltd". ZDNet. Retrieved 2019-07-10.
Vartan, Vartanig G. (November 9, 1987). "Market Place; Big Stock Sale By Japanese". The New York Times.
"U.S. set to make $8 billion from bailing out Citi". 27 March 2010.
40
THANK YOU
41
