1-1 copyright 2007 mcgraw-hill australia pty ltd ppts t/a strategic analysis: a guide to practice,...
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1-1Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
Chapter 16
Strategy in an international context
1-2Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
Traditional approach to internationalisation
Ricardo’s theory of internationalisation
Adapted from Vernon (1966)
Similar to the RBV, nations have natural advantages (e.g. oil)
This permits local firms to dominate in industries where there is advantage
With this advantage and dominance, foreign expansion is successful
1-3Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
Traditional theory of internationalisation and free trade
• For the traditional model to operate, free trade is required.
• Trade barriers negate the comparative advantage of other countries and allow nations to inefficiently produce where they have no comparative advantage.
1-4Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
16.2 Chiquita Bananas
• Chiquita came to dominate the banana industry (prior to WWI) using the US comparative advantages of transportation and disease control.
• Those advantages are now diluted and Central America now has the comparative advantage with labour costs, land and climate.
• Why does Chiquita still dominate the banana industry?
1-5Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
• Resources:
• Capabilities
16.2 Chiquita Bananas
1-6Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
International strategies follow two vectors:
need for local adaptation
need to reduce costs
highlow
high
low
global strategy transnational strategy
export strategy multi domestic strategy
1-7Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
Export strategy • Rationale: leverage home-based core competencies
in foreign markets.
Multi domestic strategy• Rationale: favour adaptation to local markets through
decentralization at country-level
Global strategy• Rationale: standardizing products and services to
maximize scale and location economies
Transnational strategy• Rationale: attempt to capture the ‘best of both worlds’
through scale and location economies and adaptation. Leveraging innovation and learning throughout the organization
1-8Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
Position WineRidge and justify answer
16.6 WineRidge’s international strategy
need for local adaptation
need to reduce costs
highlow
high
low
global strategy transnational strategy
export strategy multi domestic strategy
1-9Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
16.6 WineRidge’s international strategy
need for local adaptation
need to reduce costs
highlow
high
low
global strategy transnational strategy
export strategy multi domestic strategyUS JVAustralian
winemaking
Internationaldistribution
1-10Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
The rule of dinosaurs: mature industry structure and problems with the traditional model
Firm size
Large
Small
Firm number
Large
Small
Chiquita Bananas
1-11Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
Comparative advantage, internationalisation and free trade
Free trade provided great benefit for large firms.
The resources and capabilities that mattered were experience, scale, distribution and capital rather than capabilities based on domestic comparative advantage.
1-12Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
A theory for large firms, mature industries and developed economies.
Free trade + Size, experience, capital etc.
= Options of:
1. Export
2. Multi domestic
3. Global
4. Transnational
The traditional model does not explain the internationalisation of firms in small or developing economies.
1-13Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
The strategies of firms in smaller or developing nations
resources and capabilities
industry pressure to internationalise
transferable abroad
customised to home market
high
low
dodger strategy
contender strategy
defender strategy
extender strategy
1-14Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
Dodger strategy • Avoid competing directly with multinationals:
– collaborate through JVs, become a supplier, sell out
Contender strategy• Aims to accelerate growth and compete on equal
terms with foreign giants through:– cooperation with top suppliers and customers– foreign acquisitions
Defender strategy• identifies a niche market where it can serve the local
customer better than the multinationals.Extender strategy• Use a strong base in the home market to expand in
similar markets abroad (selective internationalization).
1-15Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
16.14 The Embraer case
need for local adaptation
need to reduce costs
highlow
high
low
global strategy
transnational strategy
export strategy
multi domestic strategy
resources and capabilities
industry pressure to inter-nationalise
transferable abroad
customised to home market
high
low
dodger strategy
contender strategy
defender strategy
extender strategy
Where does Embraer fit within each model
Where does Embraer fit within each model
1-16Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
16.14 The Embraer case
need for local adaptation
need to reduce costs
highlow
high
low
global strategy
transnational strategy
export strategy
multi domestic strategy
resources and capabilities
industry pressure to inter-nationalise
transferable abroad
customised to home market
high
low
dodger strategy
contender strategy
defender strategy
extender strategy
Where does Embraer fit within each model
Where does Embraer fit within each model
1-17Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
Smaller economy internationalisation
• Tendency to succeed in niche areas or new industries.
• Tendency to become global very quickly without dominating the domestic market.
• Known as “born global” firms.
1-18Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
16.16 Incat’s global strategy
Use industry maturity to explain why Incat is so successful whereas naval
contracts have led to very modest exports
Use industry maturity to explain why Incat is so successful whereas naval
contracts have led to very modest exports
1-19Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
16.16 Incat’s global strategy
Aluminium, wave piercing, high-speed large craft is effectively a new industry. There are no giants in this industry
Traditional ship-building is a consolidated, mature industry dominated by a few giants
1-20Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by WalderseeSlides prepared by Robert Waldersee and Stephane Tywoniak
Everything old is new again?Many of today’s giants in mature industries started as ‘born globals, for example:
• Microsoft• Nestle
Today’s ‘born globals’ may be tomorrow’s dinosaurs.