MGMT3001 International Management

Topic 6: Chapter 6:
Formulating Strategy

Workshop 6 – Chapter 6
Formulating Strategy

In-class activity 1: Discussion questions

Discuss the following in class:

1. Explain the defensive and aggressive reasons for organisations going
international.
defensive reasons include:
Globalisation of competitors: competitors who already have overseas operations or
investments may get so entrenched in foreign markets that it becomes difficult for
other companies to enter later. the lower costs and market power, technology
available to these competitors operating globally may also give them an advantage
domestically.
Trade barriers: some countries’ restrictive trade barriers do provide some reactive
reason for companies often switching from exporting to overseas manufacturing.
Barriers such as tariffs, quotas, buy-local policies, and other restrictive trade
practices can make exports to foreign markets too expensive and too impractical to
be competitive
Regulations and Restrictions: a firm’s home government’s regulations and
restrictions can become so expensive that companies will seek out less restrictive
foreign operating environments
Customer demands: Operations in foreign countries frequently start to response to
customer demands or to solve logistical problems. Certain foreign customers may
demand their supplying company to operate in their local region so that they have
better control over their supplies, forcing the supplier to comply or lose the business
Aggressive reasons include:
Economies of scale: many large firms wanna expand overseas in order to seek
economies of scale, it means to achieve world-scale volume to make the fullest use
of modern capital-intensive manufacturing equipment and to amortize staggering
research and development costs when facing brief product life cycles.
Growth opportunities
Resource access and cost savings: Resource access and cost savings entice many
companies to operate from overseas bases. The availability of raw materials and
other resources offers both greater control over inputs and lower transportation
costs. For example, lower labour costs for production, service, and technical
personnel lead to lower unit costs and have proved a vital ingredient to
competitiveness for many companies. Sometimes just the prospect of shifting
production overseas improves competitiveness at home.
Incentives: Governments in countries are seeking new infusions of capital,
technology, and know-how willingly provide incentives— including tax exemptions,

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Topic 6: Chapter 6:
Formulating Strategy

tax holidays, subsidies, loans, and the use of property. Because they both decrease
risk and increase profits, these incentives are attractive to foreign companies.
2. Discuss the common entry strategy alternatives for organisations to go
international.
3. Why do the BRICs countries attract plenty of investment from multinational
firms?

In-class activity 2: Ongoing Semester Case Study – Businessville Hotel.

The Beijing Businessville Hotel has now been open for five years and has been very
successful. The hotel’s close proximity to Beijing has attracted business people from
all over the world, as well as sporting teams and tourists who come specifically to
visit the Great Wall of China. The success of Beijing Businessville Hotel has
encouraged the managers of the Around the World Hotel Chain to consider opening
up Businessville Hotels in other parts of the world. They are currently considering
Europe.

List three countries in Europe you would consider opening a Businessville Hotel and
justify your choices.
Would you open a new hotel or consider partnering with an established hotel? Why?

In-class activity 3: Video Case – Lands’ End & Yahoo

After viewing the video you will be asked to engage in a group discussion based on
the following questions:

1. Compare the different reasons why Lands’ End and Yahoo! decided to
expand internationally.
2. How did Lands’ End succeed in establishing itself in the United Kingdom
and Japan?
3. How did Yahoo! succeed in France and China?
4. What international issues have challenged the two companies?

In-class activity 4: Student Presentation Case Study.

Students to present solutions to Q 6-15 & 6-15 of case study titled ‘Foreign Business
Tread Carefully as Cuba Opens Up’ on page 274-276 of your textbook. Audience to
prepare discussion points for the questions.

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Topic 6: Chapter 6:
Formulating Strategy

In-class activity 5: In-class multi-choice quiz.

Print out the quiz for the students and administer in class. Students will be given 10
mns to attempt the quiz. Discuss the solutions in class. This quiz serves as a good
revision exercise.

In-class activity 5: Additional discussion questions (if time permits)

Discuss the merits of the following entry strategies – exporting, turnkey projects and wholly-
owned subsidiaries.
Exporting: Increased Sales and Profits, Enhance Domestic Competitiveness, Gain
Global Market Shares, Expand Life Cycle of Product, Gain New Knowledge and
Experience.
turnkey projects : One Company to Contact, One Company Sending Invoices, Design and
Manufacturing in Sync, Costs are Cut, Greater Quality.

Advantages of using wholly-owned subsidiaries include vertical integration of supply chains,

diversification, risk management, and favorable tax treatment abroad

1. What opportunities and threats will likely emerge when a firm decides to move
from purely domestic operations to global operations?
Opportunities: New markets, Diversification, Access to talent, Foreign investment
opportunities

2. As the Korean population is increasingly able to afford high priced items like cars,
this market represents a desirable growth opportunity for Japanese, German, and
American car makers. However, the Korean automobile market is dominated by
Korean car manufacturers (Hyundai, Ssanyong, and Daewoo). Oftentimes, such
domination by a domestic manufacturer is blamed on trade barriers, but Korea’s
tariffs are among the lowest in the world. Why then do most Koreans drive
Korean-made cars? What entry strategy would be most appropriate for accessing
this culturally-closed market?

Case study week 10:

What was done well?
 Decisions based on solid business rationale
 Once offer was made, employee paired up with International Assignment (IA)
Manager
 Workshop training before the employee embarked on international assignment: social
differences, 'dos and don'ts', language training.
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Topic 6: Chapter 6:
Formulating Strategy

 Connected with employees who had already served in the destination country
 Significant follow-up workshops
 Healthy work/life balance
What was done well?
Decisions based on solid business rationale
Once offer was made, employee paired up with IA Manager
Workshop training before the employee embarked on international assignment: social
differences, 'dos and don'ts', language training.
Connected with employees who had already served in the destination country
Significant follow-up workshops
Healthy work/life balance
Shortfalls:
Amid economic downturn (post-GFC), there was a shift towards more short-term
assignments which led to complications
Reductions in relocation packages may have led to reductions in productivity levels
Some suggest that the positive feedback from international assignees may be misleading
given they understand AZ's investment in them
Q2:
Prepare the expat for international assignments before they leave through workshops, training
and providing them with information about their new home country
Provide support both before and while the expat is on their international assignment
Allow adequate time to prepare and send their expat to their new location - dont rush them
Create expat packages to suit the individual - dependent on if they have spouses and/or
children.
Provide reasonable compensation for their move
Give the expat flexibility in order for them to achieve a better work/life balance
Show empathy for the difficulties the expat faces while being on an international assignment
Q3:
In order to cut costs, firms may choose to take advantage of "virtual" transnational teams.
This would large savings in regards to travel, accommodation, relocation costs that are
ordinarily associated with international assignees
However, the cost savings are often said to be offset/outweighed by the challenges faced:
technological, time differences, cultural, language

If the firm does decide to invest in an employee’s international assignment, it should do

everything it can to ensure retention. Send fewer employees with full remuneration packages,
as opposed to more employees with smaller remuneration packages
Overall, it appears that despite the large costs associated with sending employees on
international assignment, the investment is generally beneficial if managed effectively.

 •AZ has a very effective method for preparing expats for their assignments – they
select the candidates carefully and give them training and support – which are
essential to the process. In addition to working with the expats to brief them on
company policy, expats are given opportunities for language and cultural training
which is vital. Expats who are not prepared adequately for their assignments in
terms of training and acculturation are all too often doomed to failure – wasting the
company’s time and money. Experts laud AstraZeneca’s practices, which are in
contrast to those of many companies that rushed employees to foreign assignments
without adequate support. Experts too feel that the practices followed by

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Topic 6: Chapter 6:
Formulating Strategy

AstraZeneca, such as preparing the employees for international assignments,

providing them with support, and assigning IA managers, are effective.
 09:28
•Organizations can take a lesson from AZ: Once on assignment, expats stay in touch
with their IA manager in addition to the manager they report back to in the home
country. AstraZeneca sees to it that expats are given the necessary flexibility
required for them to achieve a work/life balance. “AstraZeneca is really good at
allowing people to manage their own time and being aware that we are working
across different time zones. It’s always something that we try to take into
consideration so we don’t have people [taking care of work matters] in the middle of
the night.” Continuing the process of training and support throughout the expat’s
assignment, working with them in matters of schooling and spouse assignments etc
will all help the expats to cope and succeed.
 09:28
•Organizations should learn from the experiences of AZ: first, there should be a
compelling business reason for sending the expat abroad and there should be
extensive support and training. The training must include the language and the
culture of the destination country but support should also include preparation for
the experience for any children or the spouse. The organization also needs to make
a decision concerning the type of person chosen for the assignment: the expat
needs to have the kind of personality that is open to new ideas and risks. By making
decisions concerning the type of assignment, the type of person chosen and the type
of training provided and the type of support given to not only the expat but to
his/her family, the chances for success are increased greatly.