Strategic Management and Business Policy:
Globalization, Innovation and Sustainability
Sixteenth Edition, Global Edition
Chapter 9
Strategy
Implementation: Global
Strategy
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Learning Objectives (1 of 2)
9.1 Describe the means of entry by which an organization
can do business in another country
9.2 Explain the elements of International Strategic
Alliances that lead to success
9.3 Discuss the stages of International Development
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Learning Objectives (2 of 2)
9.4 Explain how companies can improve their staffing
efforts as they expand beyond their home country
9.5 Discuss the unique issues related to Measuring
Organizational performance that are presented with the
administration of a truly international company
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Global Strategy
• Global strategy
– sum total of the activities that an organization takes in
order to compete in markets outside its home country
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International Entry (1 of 9)
• Exporting
– shipping goods produced in the company’s home
country to other countries for marketing
– exporting is popular for small businesses because of
the Internet and rapid advance of overnight express
services, which has reduced the once-formidable
costs of exporting
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International Entry (2 of 9)
• Licensing
– licensing firm grants rights to another firm in the host
country to produce and/or sell a product
– licensee pays compensation to the licensing firm in
return for technical and sometimes marketing expertise
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International Entry (3 of 9)
• Franchising
– the franchiser grants rights to another company to
open a retail store using the franchiser’s name and
operating system
– in exchange, the franchisee pays the franchiser a
percentage of its sales as a royalty
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International Entry (4 of 9)
• Joint venture
– association between a company and a firm in the host
country or a government agency in that country
– quick method of obtaining local management
– reduces the risks of expropriation and harassment by
host country officials
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International Entry (5 of 9)
• Acquisition
– purchasing another company already operating in that
area
• Green-field development
– company may build its own manufacturing plant and
distribution system
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International Entry (6 of 9)
• Production sharing
– process of combining the higher labor skills and
technology available in developed countries with the
lower-cost labor available in developing countries
– often called outsourcing
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International Entry (7 of 9)
• Turnkey operations
– typically contracts for the construction of operating
facilities in exchange for a fee
– facilities are transferred to the host country or firm
when they are complete
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International Entry (8 of 9)
• Build, operate, transfer (BOT) concept
– instead of turning facility over to host country when
completed, company operates facility for fixed time
during which it earns back its investment, plus a profit
– then turns the facility over to the government at little
or no cost to the host country
– variation of the turnkey operation
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International Entry (9 of 9)
• Management contracts
– means through which a corporation can use some of
its personnel to assist a firm in a host country for a
specified fee and time
– allows firm to continue to earn some income from its
investment and keep the operations going until local
management is trained
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International Coordination
• Multinational corporation (MNC)
– highly developed international company with deep
involvement throughout world, plus a worldwide
perspective in its management and decision making
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International Strategic Alliances (1 of 2)
• Key drivers for strategic fit between alliance partners
– Partners must agree on fundamental values and have
a shared vision about the potential for joint value
creation.
– Alliance strategy must be derived from business,
corporate, and functional strategy.
– The alliance must be important to both partners,
especially to top management.
– Partners must be mutually dependent for achieving
clear and realistic objectives.
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International Strategic Alliances (2 of 2)
• Key drivers for strategic fit between alliance partners
– Joint activities must have added value for customers
and the partners.
– The alliance must be accepted by key stakeholders.
– Partners contribute key strengths but protect core
competencies.
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Stages of International Development (1 of 5)
• Stage 1 (Domestic company)
– Primarily domestic company exports some of its
products through local dealers and distributors in the
foreign countries
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Stages of International Development (2 of 5)
• Stage 2 (Domestic company with export division)
– Success in Stage 1 leads company to establish own
sales company with offices in other countries to
eliminate the middlemen and better control marketing
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Stages of International Development (3 of 5)
• Stage 3 (Primarily domestic company with
international division)
– Success in earlier stages leads company to establish
manufacturing facilities in addition to sales and
service offices in key countries.
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Stages of International Development (4 of 5)
• Stage 4 (Multinational corporation with multidomestic
emphasis)
– company establishes local operating division or
company in host country, to better serve the market
– product line is expanded, and local manufacturing
capacity is established
– managerial functions organized locally
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Stages of International Development (5 of 5)
• Stage 5 (Multinational corporation with global
emphasis):
– has worldwide human resources, R&D, and financing
strategies
– denationalizes operations and plans product design,
manufacturing, and marketing around worldwide
considerations
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International Employment (1 of 3)
• Nearly 80% of midsize and larger companies send some
of their employees abroad.
• Between 20% and 45% of expatriate assignments are
failures with managers sent abroad returning early
because of job dissatisfaction or difficulties in adjusting to
a foreign country.
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International Employment (2 of 3)
• To improve organizational learning, many MNCs are
providing their managers with international assignments
lasting as long as five years.
• Upon their return to headquarters, these expatriates have
an in-depth understanding of the company’s operations in
another part of the world.
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International Employment (3 of 3)
Recommendations to improve the expat process are:
• Have a compelling reason for sending a current employee to a new
country.
• Choose individuals who are open to the assignment and committed
to adapt to the new environment.
• Assign sponsors/mentors in both the home country and the new
country.
• Develop a means of maintaining very open, frequent communication
throughout the assignment.
• Design a plan for repatriation.
• Craft an approach for sharing the experiences and lessons learned
within the company.
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Measurement of Performance (1 of 4)
• The three most widely used techniques for international
performance evaluation are ROI, budget analysis, and
historical comparisons.
• ROI can cause problems when it is applied to international
operations.
• Because of foreign currencies, different accounting
systems, different rates of inflation, different tax laws, and
the use of transfer pricing, both the net income figure and
the investment base may be seriously distorted.
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Measurement of Performance (2 of 4)
• To deal with different accounting systems throughout
the world, International Accounting Standards Board
developed International Financial Reporting Standards
(I F R S) to harmonize accounting practices.
• Enforcement and cultural interpretations of the
international rules can still vary by country.
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Measurement of Performance (3 of 4)
• Among the most important barriers to international trade
are the different standards for products and services.
• There are at least three categories of standards:
safety/environmental, energy efficiency, and testing
procedures.
• The European Union (E U) was the first to harmonize the
many different standards.
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Measurement of Performance (4 of 4)
• A global M N C needs tight controls over its many units.
• To reduce costs and gain competitive advantage, it is
trying to spread the manufacturing and marketing
operations of a few fairly uniform products around the
world.
• Its key operational decisions must be centralized.
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