7/14/20151 Business Strategy & Policy PSU MGMT #562 Dave
Garten [email protected] International Strategy
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7/14/2015Dave Garten Business Strategy2 DeBeers Case Objective:
look at how monopoly power affects organizations & global
industry -- how govt. policy & competitive forces seek to
change it. X Learnings: Antitrust policy is ultimately tied to
consumers Even the most powerful organizations have to react to a
changing environment It takes many years to bring down or build a
powerful position. Changing business models is frightening and
risky it is generally accompanied by resistance.
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7/14/2015Dave Garten Business Strategy3 Session Objectives To
Gain an Initial Understanding of: 1. Economic Value of
International Strategies (Why?) 2. Options, Barriers and Approaches
(What?) 3. Execution Considerations (How?) 4. Organizational
Responsibilities (Who?)
7/14/2015Dave Garten Business Strategy5 Why go International?
Source: Intel Annual Report, 2004 P&G: Steady intl growth Intel
Revenue
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7/14/2015Dave Garten Business Strategy6 Intl Strategy Drivers
(Why?) International Economies of Scope Gain access to new
customers Gain access to low-cost factors of production Develop new
core competencies Leverage current core competencies in a new way
Manage corporate risk Derived from: Gaining and Sustaining
Competitive Advantage, Second Edition, Jay B. Barney, 2002 p.
518
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7/14/2015Dave Garten Business Strategy7 Access to New Customers
Customer that are willing to buy Customer that are able to buy
Target Market Segmentation Targeting Market Growth $ Product Price
Place Promotion
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7/14/2015Dave Garten Business Strategy8 Access to New Customers
- Barriers TariffsQuotasNontariff Barriers Taxes levied on Imported
Goods or Services Quantity Limits on the Number of Products or
Services that can be imported Rules, Regulations, and Policies That
Increase the Cost of Importing Products or Services Import Duties
Supplemental Duties Variable levies Border levies Countervailing
duties Voluntary quotas Involuntary quotas Restricted import
licenses Minimum Import limits Embargoes Govt. Policies Govt.
procurement procedures Govt. sponsored export subsidies Custom
policies Quality standards
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7/14/2015Dave Garten Business Strategy9 Access to Supply Chain
Raw Materials Labor Manual Labor Knowledge Workers R&D
Technology
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7/14/201510 Options, Barriers, and Approaches (What?) What key
issues must be addressed with your strategy?
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7/14/2015Dave Garten Business Strategy11 Challenges &
Opportunities 1. Heterogeneity across markets 2. Scale and
Complexity of Global Operations 3. Unpredictability of economic
conditions between countries (volatility)
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7/14/2015Dave Garten Business Strategy12 International Risk
Factors Financial Complexity, Variability Currency Credit Inflation
Political Risks Macro scale Micro scale Relationship Risks
Communication/Culture Objectives
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7/14/201513 Execution Considerations (How?) VRIO?
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7/14/2015Dave Garten Business Strategy14 Imitators Direct
Duplication of International Strategy Will competing firms try?
Profits/market share motivate Are they able? Substitutes Strategic
alliances, diversification, M&A
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7/14/2015Dave Garten Business Strategy15 Growth Strategies New
Business or Competency New Markets Current Business or Competency
Current Markets High Risk High or Low Risk Moderate Risk Access new
customers Do nothing Access new customers with new competencies
Develop new competencies or leverage current competencies in new
way
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7/14/2015Dave Garten Business Strategy16 Market entry options
Source: Berkowitz
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7/14/201517 Organizational Considerations
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7/14/2015Dave Garten Business Strategy18 Intl Strategy:
Organization Cost Efficiency Local Responsiveness Global
Multinational X
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7/14/2015Dave Garten Business Strategy19 Appropriate
Organizational Structure HighLow High Importance of local
responsiveness Importance of global integration Decentralized
federation Coordinated federation Centralized hub Transnational
federation Source: Gaining and Sustaining Competitive Advantage,
Second Edition, Jay B. Barney, 2002 p. 546
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7/14/2015Dave Garten Business Strategy20 Organizational
Structures Decentralized federation Centralized Hub Coordinated
federation Transnational Full P&L High Autonomy Duplication
Full P&L High Autonomy Some Centralized Strategy Less
Duplication P&L Low Autonomy Execution Focus Centralized
Strategy Less Duplication Full P&L Autonomy Some Centralized
Strategy Regional specialization Global leverage of
competencies
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7/14/2015Dave Garten Business Strategy21 Strategies for
Emerging Markets Then vs. Now Then: low cost production,
opportunistic export/marketing. Now: revenue opportunities.
Disposable income, reach of media/internet High risks: political,
economic & infrastructure Distribution, market data,
communications, instability/lack of regulatory discipline, product
diversion, counterfeiting, complex networks. Yetopportunitieseach
situation is unique General classification mask the complexities
(ex: China GDP) Political and social systems, openness, product
markets, labor markets, capital markets Corporate control very
problematic basis of business/competition so different (Local norms
vs. MNC)
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7/14/2015Dave Garten Business Strategy22 Strategies for
Emerging Markets Convertibility of profit Long Term Market
Potential LowHigh Low High Leading Markets China, India, Brazil
Aggressive Investments Chile, Czech, South Africa Platform
Investments Russia Trailing Markets Sub-Saharan Africa Source: New
Strategies in Emerging Markets by David J Arnold and John A Quelch,
SMR, 1998.
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7/14/2015Dave Garten Business Strategy23 Implications for
International Strategy Global expectations change the game
Standards set at the global level -> launch globally Global
sourcing Clusters of competitive advantage are dispersed Suppliers,
consumers, R&D, marketing, production Productivity a key
criteria for placement Managed tension of global vs. local
Commonality (efficiency) w/ local requirements Overseas
assignments, frequent communication A desk is a very dangerous
place from which to view the world