International Business

1

INTERNATIONAL BUSINESS

STRATEGY

2

Multidomestic

Transnational or

Global Strategy?

3

Multidomestic

“is an organisation with multicountry affiliates, each of which formulates its own business strategy based on perceived market differences”

(Source: International Business, The Challenge of Global Competition)

• Operates in different countries but – Products, Manufacturing Process and Business Strategy are adjusted to suit the local conditions.

• Polycentric Orientation – must adapt to succeed.

4

Multidomestic

• Differences in the various market places.

• Markets demand different strategies.

• Different Products• Different Marketing• Different Processes

• Also called Multinational

5

Transnational

• The term Transnational and Multinational are now used synonymously.

• 1970’s and 1980’s the U.N. when studying the impact of ‘TNC’s’ found:

“considerable complexity” in defining Transnational corporations.

• “Agreement on a specialised definition was never achieved”

(Source: United Nations Conference on Trade and Development, www.unctad.org)

6

Transnational

“corporation comprising parent enterprises and their foreign affiliates”

(Source: International Business, The Challenge of Global Competition)

• Combination of MDC and Global Company

Highly responsive to local Globalise Functions

Conditions

7

Transnational

• Merger of two firms from different countries

Example:

Unilever (Dutch – English Food)

Shell (Dutch – English Oil)

• Might also be called “Binational”

8

Transnational - Example

• Royal Dutch / Shell

• Binational Dutch – British Heritage• Headquarters – The Hague and London• “National operating company has significant autonomy”• “a distinctive global culture”

(Source: Managing the Multinational, Humes, Samuel, 1993)

9

Global

• An Overused and Misused term

• A Global organisation attempts to:

1. Have a Worldwide Presence

2. Standardise its operations Worldwide (1 function at least)

3. Integrate its operations Worldwide

10

Global

• Assumption:Customers around the world are similar.

• Geocentric Orientation – markets are similar and it is possible to have a global strategy that transcends local differences.

• Worldwide Standardisation in: - Marketing - Technical Functions - Production

• Production Plants located around the World

11

Global

• What is a Global Firm not?

1. Borderless

2. Stateless

“Each country has a home government and tax authority”

(Source: International Business, The Challenge of Global Competition)

Also most are owned by shareholders from one nation.

12

Factors to consider when deciding on

International Strategy(Source: Strategic Marketing Management, Lambin, Jean-Jacques, McGraw Hill, England, 1997)

13

SEGMENTATION

• Potential customers with similar buying behaviour.

• Approaches:

1. Identify Clusters of Countries

2. Identify Segments that exist in many/most countries

3. Different Segments/Different Countries/Same Product

• Segment

Group of Countries

Group of Customers

14

Competitive Advantage

FIRM STRATEGY,

STRUCTURE, RIVALRY

FACTOR DEMANDCONDITIONS CONDITIONS

RELATED AND SUPPORTING INDUSTRIES

15

Competitive AdvantageForces Driving Competition

Potential Entrants

Industry

Competitors rivalry amongst existing firms

Suppliers Customers

Substitutes

16

Communication - Advertising

2 Approaches

Standardised Localised

Consumers have Cultural Empathy

same needs/wants Required

Universal Individual

17

Communication – AdvertisingAlternative Strategies

1. Brand Globally and Advertise Globally - standardise both brand and advertising - global forces strong / local forces weak

2. Brand Globally but Advertise Locally - standardise brand but localise advertising - both global and local forces are strong

3. Brand Locally and Harmonise Advertising Locally - standardise advertising but localise brand - focus on brand value / name doesn’t matter

4. Brand Locally and Advertise Locally - local forces strong / global forces weak

18

EXAMPLES

1. Brand Globally and Advertise Globally?

2. Brand Globally but Advertise Locally?

3. Brand Locally and Harmonise Advertising Locally?

4. Brand Locally and Advertise Locally?

19

Going International FactorsSummary

• ‘Controllable’s’

• Cost • Price• Advertising• Distribution

• ‘Uncontrollable's’

• Political• Economic• Social• Technological• Demographics• Legal Factors• Competition• International Trade

Agreements

20

Multidomestic, Transnational or Global?

The Best Commercial Approach

21

Benefits of going International

• Reduced costs through moving production to lower cost countries

• Increase company size through Merger and Acquisition = economies of scale

• Increase sales by opening up new markets = economies for the manufacturing system

• Question is: Global or Multidomestic (Transnational)

22

The extent of Globalisation as a Strategy

• Seven Global Dimensions(Source: International Business, Ball et al.)* dimensions that can be standardised – from MDC to

Globalised or in between. 1. Product 2. Markets3. Promotion4. Where value is added to the product (F.A.B.)5. Competitive Strategy6. Use of non-home country personal7. Extent of Global ownership of the firm

23

To what extent can you Globalise (Standardise)?

‘Seven Dimensions’

Full Global Strategy

Scale

Transnational

Multidomestic

24

To what extent can you Globalise (Standardise)?

• Product• Segment Markets• Promotion• Where value is added• Competitive Strategy• Non-Home country

personal• Extent of Global

ownership

e.g. Coca Cola e.g. Teenagers

Advertising Limitations Features / Benefits

‘Uncontrollable’s’ Employ local people

Normally have at least an equity stake

25

Example – Limitations on Global Advertising

• Language – interpretation / use of foreign words• Media Availability – Regulation / Viewing Habits• Legal Considerations – Alcohol, Allowed in Sweden,

Limited in Ireland, Banned in Belgium• Symbols • Colours• Family Structure• Consumer Habits – Orange Juice for Breakfast?• Social Roles – Middle East, Shopping always done by

women(Source: Strategic Marketing Management, Lambin, Jean-Jacques)

26

Conclusion

Why fight over it?• A Global company meets these criteria:

- Worldwide Presence

- Standardised operations

- Integrated operations

- Culturally diverse

- Production worldwide

- Allows free flow of people – “multicultural multinational”

- Exploits its technologies worldwide• It still must – be responsive to its local customers if only for cultural

reasons• Does this mean it cannot be a Global company?

27

Example – Proctor & Gamble

Head & Shoulders - Oil of Ulay – Ariel - Pampers

• 1837 – Cincinnati, Ohio• 1933 – England• 1940 – Cuba, Philippines, Indonesia• 1963 – Brussels, European Technical Centre

R&D, Purchasing, Engineering, Manufacturing• 1983 – Japan• Since 1983 – Acquisitions• 25 person Board with 8 non-Americans

28

Example – Proctor & Gamble

• Edwin L. Artzt, CEO;

• “manage our brands locally”• “these are world brands, with appropriate regional

tailoring of product aesthetics and form”• “whatever it takes to best satisfy local consumer demand

for quality and value”(Source: Managing the Multinational, Humes, Samuel,

Prentice Hall, 1993)• Example: ‘Wash & Go’ – sold in 60 countries under 6

different brand names.

29

Sources

International Business, The Challenge of GlobalCompetition, Ball, Donald A., Mc Culloch, Wendell H.,Frantz, Paul L., Geringer, J. Michael, Minor, Michael S., McGraw Hill, New York, 2004

Strategic Marketing Management, Lambin, Jean-Jacques,Mc Graw Hill, London, 1997

Managing the Multinational, Confronting the Global – LocalDilemma, Humes, Samuel, Prentice Hall International,London, 1993

30

Sources

www.unctad.org, 09-12-2007

www.wto.org, 09-12-2007