Chapter 14 Hill Chapter 11 Daniels Entry Strategy

Chapter 14 (Hill) & Chapter 11 (Daniels) Entry Strategy and Strategic Alliances

Pressure for Global Integration Different Strategies for Operating International Market High Global Transnational View the world as a single market. Tightly controls global operation from headquarter to preserve focus on standardization Prefers a flexible value chain to facilitate local demand. Adopts complex coordination mechanism to facilitate global integration International Low Uses existing core competencies to exploit opportunities in foreign markets Multidomestic Relies on foreign subsidiaries operating as autonomous units to customize products and processes for local market High Low Pressure for National Responsiveness 15 -2

International Strategy Ø R&D or branding being developed centrally Ø Try to create value by transferring core competencies and unique product where rivals are unable to develop, match and sustain Ø Does not push local responsiveness Ø Limitation: ØCentral role of headquarter often hinder identifying and responding local condition ØThis become costly when the local company emphasize customization based on local demand 15 -3

Multidomestic Strategy Ø Meet need of individual country and region basis Ø Respond to local culture, legal policy and economic environment Ø Can add value if local government give incentive for local plant Ø Local company can build sales force if there is unfavorable environment Ø Managers follow polycentric view Ø Limitation: Ø Can lead to duplication of management, design, production and marketing Ø Subsidiary is a virtual stand-alone operation, so headquarter must resort persuasion for any change 15 -4

Global Strategy Ø Create product or service for a world market, manufacture them on a global scale in a few highly efficient plants, and market them with few focused distribution channel Ø Aim to become low cost player in the market Ø Place R&D, production and marketing in most favorable location Ø Firms that follow global strategy face strong pressure for cost reduction but weak pressure for local responsiveness Ø Large operation helps to give standard product in a low price 15 -5

Transnational Strategy Ø Exploit location economies, leverage core competencies and pay attention to local responsiveness Ø Differentiate capability and contributions from country to country Ø Learn various knowledge (operation, finance, technology, creative idea), integrate and defuse them in global operation Ø Combine the market sensitivity of local responsiveness with the competitive efficiency of global integration Ø Limitation: Ø Difficult to build and prone to shortfall 15 -6