International business is becoming a necessity, rather than an option, for many businesses - especially larger ones. Some of the reasons that companies subject themselves to the complexities of international business:

• To enter more favorable markets, e.g., faster growing, more profitable, better government climate...
• To reach new customers
• To gain access to lower-cost labor markets and/or key/lower-cost raw materials
• To spread its business risk across a wider market base
• To gain other advantages inherent in location

THERE IS A RANGE OF INTERNATIONAL STRATEGIES

• Multidomestic or multinational - operating in several countries, each with rather independent strategies and processes
• Global or international - operating in multiple countries, in which there is considerable interdependence and linkage among the countries, resulting in global strategies
• Transnational - seeks to achieve both global efficiency and local responsiveness (difficult to achieve because of the conflicting goals of global coordination and local flexibility)

SOME TRENDS IN INTERNATIONAL BUSINESS

• The "developing nations" distinction is fading
• Watch growth in Asia and Latin America in 21st century, especially in China, whose economy is expected to grow at over 7% annually for the foreseeable future
• Regionalization is becoming more common; regional trading blocs are becoming more important

APPLICATION OF STRATEGIC MANAGEMENT PROCESS

• Diagnosis
• Use same general 3-phase process and considerations that we have already studied
• External environment makes the difference between countries - so is even more important in international organizations
• Therefore, external scanning & analysis is especially important
• Can use same 5-force model (by country or region) and same four aspects of general environment
• Still need SWOT and Critical Issues (may be specific to country or region - in addition to for the total corporation)


• Formulation - Process
• Still need to work on three levels: corporate-level, competitive, & other strategies necessary to manage the critical issues
• Still need to generate and evaluate a rich range of alternatives
• Likely to need different strategies in each nation or region
• Can use extended GE Business Screen to consider country attractiveness (can do 3D matrix with country attractiveness, industry attractiveness, competitive strength to help make decisions re portfolio strategy)
• Note that vertical integration has more disadvantages for international corporations
• A vital consideration is that partners are needed
• May have suppliers in other countries, even if not in that market
• Need to decentralize more, but this creates problems


• Formulation - Major Corporate-Level Strategy Alternatives
• Global strategies
• Transnational strategies
• Multidomestic strategies


• Formulation - Major Business-Level or Entry Strategy Alternatives (listed in approximate increasing order of involvement, commitment, and risk):
• Licensing
• Exporting
• Franchising
• Management contracts
• Turnkey and BOT contracts
• Production sharing
• Joint ventures
• Strategic alliances and joint ventures
• Acquisitions or mergers
• New wholly owned subsidiary (green-field development)


• Implementation
  • The usual implementation considerations to generate an effective set of action steps are still appropriate
  • Resources (financial, human, physical, technological) - what is necessary to get those we need and don't have?
  • Support (obtaining and sustaining sufficient support to allow successful implementation) ...consider key "stakeholders" and what matters to them.
  • Reward systems (don't be surprised when you "get what you reward"). When you want different behaviors, changing the reward system is often a key point of leverage, and an important part of implementation
  • Timing (especially sequencing of action steps and constraints on when things have to happen)
  • How to monitor and control the implementation to produce the desired results (how will we know how successful we are?)
  • Organization structure (often given too much attention, but sometimes needs changes)
  • Leadership (do we have what is needed?)
  • Need to deal with the need for partners again (choice and relationships are critical)
  • Organizing (decentralization vs. centralization is a key issue)
  • Staffing
  • Some key cultural differences that have to be managed:
  1. Power distance
  2. Uncertainty avoidance
  3. Individualism-collectivism
  4. Masculinity-femininity
  5. Time orientation
  • Increased need for information & good financial measures to maintain control
  • Importance and often difficulty of maintaining good host country relationships

SPECIAL CONSIDERATIONS

• Political risks: e.g., related to government changes, instability, conflicts and war within and between countries, nationalization of assets
• Economic risks: interdependent with political risks, primary are differences and fluctuations in exchange rates, inflation