International Management Slides

ESCP Business School
Bachelor in Management (BSc)

2021/2022 | Semester 6
International Management
Prof. Dr. Stefan Schmid

Chair of International Management and Strategic Management
International Management | Introduction
I. Who is the lecturer of this course?
II. What is the concept of this course?
III. What is the structure of this course?
IV. When does this course take place?
V. How is this course graded?
VI. What are the required readings for this course?
VII. What if there are further questions regarding this course?
Bachelor in Management (BSc) | International Management | 2021/2022 | Prof. Dr. Stefan Schmid 1
1988-1990 Studies in Business Administration, Augsburg University

1990-1993 Studies in Business Administration EAP Paris, Oxford, Berlin
1993-2002 Research Assistant and Assistant Professor, Catholic University Eichstätt-
Ingolstadt, Germany
1996 PhD in International Management
2002 Habilitation Degree in International Management
since 2002 Chair of International Management and Strategic Management, ESCP
2006-2010 Academic Dean for the MEB Programme, ESCP
2008-2010 Chairman of the International Management Division within the German
Academic Association for Business Research (VHB)
2012-2018 Academic Dean for Executive Education, ESCP Berlin Campus
2015-2018 Academic Dean Executive MBA, ESCP
since 2018 Academic Director Executive MBA, Berlin Campus
This course shall:
• provide you with the state-of-the-art knowledge in the field of International Management
• make you familiar with conceptual and theoretical approaches illustrated via practical
examples and cases
• be a mixture of lectures, short individual work, and group work
• have a clear structure presented in a comprehensible way
• have a practical focus
I am happy to respond to your questions and to consider your wishes as far as possible
I will expect active participation from you as well as the ability

to transfer and apply knowledge to specific problem settings!
The course is structured in five sections:
1 Introduction to International Management
2 The international firm and strategy
3 The international firm and structure
4 The international firm and culture
5 A network perspective on the international firm
Fri., February 4 Fri., February 11 Fri., February 18

Lecture 1 Lecture 2 Lecture 3
(9:00 am - 1:00 pm) (9:00 am - 1:00 pm) (9:00 am - 1:00 pm)
Mon., March 7 Fri., March 18 Tue., March 22

Tutorial Lecture 4 Lecture 5
(1:00 pm - 4:00 pm) (9:00 am - 1:00 pm) (9:00 am - 1:00 pm)
mid-term exam: Wednesday, March 9, 2022 (1:00 pm)

final exam: Monday, March 28, 2022 (2:00 pm)
All information about exams will be confirmed by the examination office;

the examination office is resposible for organzing your exams
Tutorial: Monday, March 7, 2022, 1:00 pm – 4:00 pm
For the tutorial, you will be split in three groups (A/B, C/D, E/F). The tutorial has three major
objectives:
1. To discuss the Amazon case.

2. To better prepare you for the exam and to give you advice on how to best pass the
exam.
3. To answer open questions that you may have.
With regard to the 3rd objective, please send us questions you want us to treat in the tutorial
by Wednesday, March 2, 2022, 11:00 am. We will set up a Google sheet where you can
enter the questions you may have. The link to the Google sheet will be made available to
you after the first lecture.
V. How is this course graded? (1)
This course is graded based on the mid-term exam (50%) and the final exam (50%).
Mid-term exam (50%)

• The mid-term exam will take place on March 9, 2022, 1:00 pm.
(more details will be given by the examination office)
• The exam will be scheduled for 20 minutes (there will be 20 multiple choice questions); the questions will be
related to the content covered in the first part of the International Management course (content covered up to
February 18, and the tutorials on March, 7), including parts of the readings (see next slides).
Final exam (50%)

• The final exam will take place on March 28, 2022, 2:00 pm.
(more details will be given by the examination office)
• The final exam will be scheduled for 20 minutes (20 multiple choice questions); the final exam will cover the
contents of the entire International Management course (including readings; see next slides).
This course is graded based on the mid-term exam (50%) and the final exam (50%).
• Rule 1: The marks for the mid-term quiz and the final quiz will each count for 50% in International Management.
• Rule 2: The final mark for the International Management part will be combined with the final mark for the
Strategy part (since Strategy and International Management are considered as one course). To get an overall
pass (10/20), please note that you need to achieve at least 8 out of 20 for the Strategy part and 8 out of 20 for
the International Management part. In other words, you cannot compensate a mark below 8 in one of the two
subjects with a higher mark in the other one. Thus, if you are below 8/20 in either International Management or
Strategy, you need to have a resit in both, i.e. in International Management and Strategy.
• Rule 3: You also need a resit if the average of International Management and Strategy is below 10.
Examples
• Student 1: • Student 2:
• Strategy mark: 14/20 • Strategy mark: 11/20
• International Management mark: 16/20 • International Management mark: 09/20
• Overall mark: 15/20 (pass) • Overall mark: 10/20 (pass)
• Student 3: • Student 4:
• Strategy mark: 07/20 • Strategy mark: 11/20
• International Management mark: 18/20 • International Management mark: 08/20
• Overall mark: 12.5/20 (fail) • Overall mark: 9.5/20 (fail)
Example of two multiple choice questions:
For each of the questions, you will find four alternatives for your answer. There will be only one correct answer for
each question. If you mark the correct answer, you will get one point (+1). If you mark the wrong answer, you will lose
half a point (-0.5). If you mark no answer at all, you will neither get nor lose one point (+/-0).
Here are two exemplary questions for a general strategy course (only one answer is correct for each of the
questions):
1. Which statement about strategic management is correct?
a. It is only relevant to large companies.

b. It is a continuously evolving process.
c. It only involves the CEO and CFO of a firm.
d. It applies mostly to companies that seek to internationalize their products/ services.
2. Porter’s value chain is crucial for:
a. Analyzing a firm’s external environment.

b. Assessing a firm’s internal situation.
c. Analyzing an industry.
d. Formulating the culture of the firm.
VI. What are the required readings for this course? (1)
The required readings for this course (relevant for both, mid-term exam and final
exam):
• Copies of the slides
• Case study “Aldi and Lidl”:

Schmid, Stefan/Dauth, Tobias/Kotulla, Thomas/Orban, Fabienne (2018): Aldi and Lidl: From Germany to the Rest of the World. In:
Schmid, Stefan (ed.), Internationalization of Business. Cases on Strategy Formulation and Implementation. Springer International
Publishing, Cham, pp. 81-98.
• Case study “McDonald’s”:

Schmid, Stefan/Gombert, Adrian (2018): McDonalds: Is the Fast Food Icon Reaching the Limits of Growth? In: Schmid, Stefan (ed.),
Internationalization of Business. Cases on Strategy Formulation and Implementation. Springer International Publishing, Cham, pp. 155-
171.
• Case study “KTM and Bajaj”:

Schmid, Stefan/Mitterreiter, Simon (2018): KTM and Bajaj: An Austrian-Indian Partnership in the Motorcycle Industry. In: Schmid,
Stefan (ed.), Internationalization of Business. Cases on Strategy Formulation and Implementation. Springer International Publishing,
Cham, pp. 99-124.
• Case study “Amazon”:

Schmid, Stefan/Baldermann, Sebastian (2021): Amazon: From Online Bookstore to International Technology Giant. In: Ghauri, P., &
Cateora, P. R. International Marketing (5th ed.), New York: McGraw-Hill Education, pp. 533-540.
VI. What are the required readings for this course? (2)
The required readings for this course:
Additional articles (only relevant for final exam):
Schmid, Stefan/Dzedek, Lars R./Lehrer, Mark (2014): From rocking the boat to wagging the dog: A
literature review of subsidiary initiative research and integrative framework. In: Journal of
International Management, Vol. 20, No. 2, pp. 201-218.
Schmid, Stefan/Grosche, Philipp/Mayrhofer, Ulrike (2016): Configuration and coordination of

international marketing activities. In: International Business Review, Vol. 25, No. 2, pp. 535-547.
For those of you interested in deepening your knowledge in the field of International Management
on a voluntary basis, we will suggest further readings at the end of this course (not compulsory).
VI. What is the required reading for this course?
VII. What if there are further questions regarding
this course?
• If you have further questions regarding this course in terms of contents or organizational
issues, you can contact me personally before, during, or after the lectures.
• In addition, you can contact my secretary Mrs. Bianca Voyé via e-mail at any time:
bvoye@escp.eu. She can also be reached via phone (+49 30 32007-137)
• For more information on the Chair of International Management and Strategic

Management at the Berlin campus of ESCP please visit:
www.escp.eu/imsm
I am looking forward to having a productive and interesting course

“International Management” with you. I hope you will enjoy!
International Management | Contents
1.1 What is International Management?
1.2 What is an international firm?
1.3 What are the objectives of an international firm?
• International Management deals with the management of an international firm in an
integrative way
• “Integrative” means that the focus is …

– not on the international dimension of a firm in its functional areas
(e.g. international procurement, international production/operations, international finance,
international marketing/sales)
– but on the international dimension of a firm and its management as such
• When managing an international firm in an integrative way, three main interdependent

areas have to be considered:
– strategy of the international firm → Chapter 2
– structure of the international firm → Chapter 3
– culture of the international firm → Chapter 4
• But let us first ask: what is an international firm? → Section 1.2 of this chapter
1.2.1 Introduction
1.2.2 Quantitative Approaches
1.2.3 Qualitative Approaches
1.2.1 Introduction
1.2.1 Introduction to the international firm
Please read the following example of an international firm with German origins: Siemens.
What measures/indicators are stated in the text for assessing the internationalization of
Siemens?
Siemens (1|2)
In 2019 (fiscal year), Siemens generated sales revenues of € 86.8 bn. Thereof, € 12.3 bn. (about 14%) were generated in
Germany and € 74.5 bn. (about 86%) were reached abroad. The foreign revenues consisted of € 32.0 bn. from Europe
(without Germany), the C.I.S. countries, Africa and the Middle East, € 23.7 bn. from America, and € 18.7 bn. from Asia /
Pacific. The orders received by Siemens amounted to € 97.9 bn. with a foreign ratio of about 88% (€ 85.9 bn.). This indicates
that doing business abroad will continue to be of great importance for Siemens over the next years. The essential role of
Siemens’s foreign business is also underlined by its 290 production subsidiaries abroad. Siemens operates in more than 200
countries all over the world.
In September 2019, Siemens had 385,000 employees. Thereof, 116,000 employees were working in Germany and 269,000
(almost 70%) were working abroad. 118,000 of the Siemens’s staff were employed in Europe (without Germany), the C.I.S.
countries, Africa and the Middle East, 76,000 in America, and 75,000 in Asia / Pacific. Only a few of the employees abroad are
expatriates, i.e., most of them do not have German nationality. Amongst others, the high number of employees abroad has
been caused by the consolidation of several foreign affiliated corporations, such as the Westinghouse Corporation in the U.S.
Siemens (2|2)
The investments in research and development by Siemens amounted to € 5.7 bn., including payments for the development of
new energy, industry and healthcare solutions. In fiscal year 2019, Siemens had about 45,000 people working on R&D.
Thereof about 14,100 (about 31%) are working in Germany and 30,900 (about 69%) are working 44 different countries. The
capital stock of Siemens is widespread as well. In 2020, about 71% of the shareholders were non-German – compared to
38% in 1993. About 9% of the shares are held in the UK, 26% in Continental Europe (without Germany), and 23% in the USA.
Around 13% of the shares are held in other foreign countries.
Siemens claims to contribute roughly € 250 bn. per annum to the global GDP. In some countries, Siemens’s subsidiaries are
one of the biggest companies in the country. In the U.S., Siemens is a strong competitor to national companies as the
company is present in all 50 states as well as Puerto Rico and employs approximately 50,000 people. For many years, the
U.S. have been the most important market for Siemens offering even higher sales volumes than the German market.
• An international firm is a firm that ...
– is involved in foreign activities on a substantial scale and
– regularly has transactions with foreign economic entities
• But since “substantial scale” and “regularly” are in some way ambiguous,
there is no clear agreement of when to refer to a firm as an international firm
• Instead, there are several approaches of looking at an international firm:

– Quantitative approaches → Section 1.2.2 of this chapter
– Qualitative approaches → Section 1.2.3 of this chapter
1.2.1 Introduction
1.2.2 Quantitative approaches to the international firm
Overview of important quantitative approaches of looking at an international firm:
Foreign Ratio Internationalization Profile
Graphical presentation of several foreign ratios, e.g.:

Foreign-to-Domestic-Operations ratio (FDO ratio), e.g.:
Assets
foreign sales
FDO ratio sales = Employees
domestic sales
Sales
Foreign-to-Total-Operations ratio (FTO ratio), e.g.:
Investments
foreign employees Taxes
FTO ratio employees =
total employees 0% 20% 40% 60% 80% 100%
Foreign Ratio (FTO)
Internationalization Index Internationalization Degree
Degree of internationalization
Arithmetic mean of several foreign ratios, e.g.:
(no consistent quantitative operationalization,
Transnationality Index (UNCTAD) =
often equated with a particular foreign ratio
mean average of the three FTO ratios
or a specific internationalization index)
for assets, employees, and sales
Foreign ratio – examples:
Sales Revenues
Firm
Total Domestic Foreign FDO Ratio FTO Ratio
BMW € 104.2 bn. € 13.4 bn. € 90.8 bn. 677.6% 87.1%
Daimler € 172.7 bn. € 26.3 bn. € 146.4 bn. 556,6% 84.7%
GM $ 122.7 bn. $ 106.4 bn. * $ 16.3 bn. 15.3% 13.3%
PSA Peugeot
€ 74.7 bn. € 58.7 bn.* € 16.0 bn. 27.2% 21.4%
Citroën
Tesla Motors $ 24.6 bn. $ 12.6 bn. $ 12.0 bn. 95.2% 48.8%
Toyota ¥ 30225.6 bn. ¥ 16625.4 bn. ¥ 13600.2 bn. 81.8% 44.9%
VW Group € 252.6 bn. € 153.3 bn.* € 99.3 bn. 64.7% 39.3%
The reference date for all data is end of fiscal year 2019. * Country-specific data not available, thus regional data were used for “domestic sales revenue” (Europe for
PSA and Volkswagen, North America for GM), which yields lower FDO and FTO ratios.
Internationalization profile – example:
Assets
Employees
Sales
Investments
Taxes
0% 20% 40% 60% 80% 100%
Foreign Ratio (FTO)
= Firm 1 (2020) = Firm 1 (2019) = Firm 2 (2020)
Top 10 international firms according to the UNCTAD Transnationality Index:
Number of
Assets ($ bn.) Sales ($ bn.)
TNI TNI Employees
Firm Industry
Rank %
Foreign Total Foreign Total Foreign Total
Mining, quarrying
1 99,6 Rio Tinto 87.2 87.4 41.2 41.5 45 817 46 007
and petroleum
Mining, quarrying
2 97,8 Barrick Gold 43.8 44.3 9.4 9.7 42 585 43 511
and petroleum
Instruments
3 97,7 Medtronic 86.7 89.6 30.4 30.5 87 065 90 071
and related products
John Swire & Sons
4 95,7 Transport and storage 48.7 51.3 13.1 14.1 131 670 133 000
Limited
Mining, quarrying
5 95,1 Anglo American 53.7 55.9 26.5 28.7 61 000 63 000
and petroleum
6 93,5 Altice Europe NV Telecommunications 48.2 53.0 16.2 16.5 41 343 45 409
Chemicals
7 92,1 Linde 82.2 86.6 26.5 28.2 69 624 79 886
and Allied Products
8 91,9 Nestlé SA Food & beverages 105.6 132.4 91.9 93.1 282 322 291 000
Takeda Pharmaceutical
9 91,3 Pharmaceuticals 113.4 118.1 24.8 30.2 45 595 47 495
Company Limited
Hon Hai Precision
10 90,9 Electronic components 96.8 110.8 169.2 172.8 863 183 987 613
Industries
The reference date for all data is the end of fiscal year 2019. Source: WTO/UNCTAD (2020)
The quantitative approaches – exercise:
What are in your opinion the problems and limits of quantitative approaches when
describing the internationality of a firm?
1.2.1 Introduction
1.2.3 Qualitative approaches to the international firm
Two very prominent qualitative approaches of looking at an international firm:
EPRG concept (Perlmutter) IMGT concept (Bartlett/Ghoshal)

Four archetypes of international firms, Four archetypes of international firms,
depending mainly on the mental orientation depending mainly on the strategy of the firm,
of the firm’s top managers: which is industry-driven:
Ethnocentric orientation International strategy

Polycentric orientation Multinational strategy
Regiocentric orientation Global strategy
Geocentric orientation Transnational strategy
The EPRG concept by Perlmutter (1|3):
Ethnocentric Polycentric Regiocentric Geocentric

Orientation Orientation Orientation Orientation
Geographical home country host country host region world

Identification identification identification identification identification
Perpetuation people of home people of host people of host

best people worldwide
(Recruiting, country developed for country developed for region developed
developed for key
Staffing, key positions key positions for key positions
positions worldwide
Development) worldwide in their own country in their own region
HQ: intervening in
Roles of HQ: deciding, regional HQ: deciding, HQ and S as an inter-
case of problems,
Headquarters and S: carrying out S: carrying out linked, worldwide-
S: deciding at a
Subsidiaries decisions decisions integrated unit
national level
high in regional HQ collaboration of

Authority and
high in HQ relatively low in HQ and/or high collabo- HQ and S around
Decision Making
ration among S the world
Ethnocentric Polycentric Regiocentric Geocentric

Orientation Orientation Orientation Orientation
highly inter- highly complex and

Complexity of complex in HQ, varied and
dependent on a interdependent on a
Organization simple in S independent
regional basis worldwide basis
Evaluation and determined determined standards which are

determined regionally
Control at HQ locally universal and local
Rewards, rewards for rewards for contri-

high in HQ,
Punishments wide variation contribution to bution to local and
low in S
and Incentives regional objectives worldwide objectives
to S: high to S: low to/from HQ: low to S: high

Communication and
from S: low from S: low to/from reg. HQ: high from S: high
Information Flow
between S: low between S: low between S: high between S: high
Ethnocentric Orientation Polycentric Orientation
Regiocentric Orientation Geocentric Orientation
Headquarters Subsidiary Management techniques, concepts, styles
The EPRG concept by Perlmutter – Quoting Jacques Maisonrouge with regard to the
geocentric orientation:
„The first step to a geocentric organization is when a corporation, faced with the choice
of whether to grow and expand or decline, realizes the need to mobilize its resources
on a world scale. It will sooner or later have to face the issue that the home country
does not have a monopoly of either men or ideas. … I strongly believe that the future
belongs to geocentric companies. … What is of fundamental importance is the attitude
of the company’s top management. If it is dedicated to ‘geocentricism’ good
international management will be possible. If not, the best men of different nations will
soon understand that they do not belong to the ‘race des seigneurs’ and will leave the
business.”
Jacques Maisonrouge
Former President of IBM World Trade
The EPRG concept by Perlmutter – exercise:
You have experienced the ESCP as a student for quite some time. Although you do
not know all internal details about the school, you have got some insights. Please argue,
a) in how far the ESCP is ethnocentric, polycentric, or geocentric, and
b) in how far you believe that the current orientation should change in the future.
Please give a detailed reasoning for your answers.
The IMGT concept by Bartlett/Ghoshal (1|3):
International Multinational Global Transnational

Strategy Strategy Strategy Strategy
need for continuous

need for need for localization
Industry Forces innovation and need for globalization
localization and globalization
knowledge transfer
innovation,
innovation and responsiveness to integration of
Key Skills responsiveness,
knowledge transfer local differences worldwide activities
and integration
transfer of
technologies and full adaptation of striving for a
adaptation,
strategies from HQ to technologies and low-cost,
Management standardization,
local markets, strategies to export-oriented
and transfer
including minor local markets competitive position
local adaptations
International Multinational Global Transnational

Strategy Strategy Strategy Strategy
adapting and making differentiated

identifying and
Role of use of the carrying out contribution of S
capitalizing local
Subsidiaries competencies strategies of HQ to integrated
market opportunities
of HQ worldwide activities
Generation knowledge knowledge gene- knowledge joint knowledge
and Diffusion generation in HQ and ration and retention generation and generation and mak-
of Knowledge transfer to S in every unit retention in HQ ing use in all units
core competencies
decentralized and centralized and widespread,
Configuration of centralized, other
independent at a world-market- interdependent,
Values and Skills competencies
national level oriented and specialized
decentralized
Configuration and
coordinated decentralized centralized hub
Coordination of integrated network
federation federation structure
Activities
International Strategy Multinational Strategy
S S S S
S HQ S S HQ S
S S S S
Global Strategy Transnational Strategy
S S S S
S HQ S S HQ S
S S S S
The IMGT concept by Bartlett/Ghoshal – example for a partially transnationally oriented firm:
Responsibilities: Responsibilities: Responsibilities: Responsibilities:

Strategy development; Market observation, interface with Services and solutions to operate Market observation, interface
Responsibility for product customers, looking for trends and efficiently (interface with external with customers, looking for
brands, focus on competitors; synergies, market research; experts/partners); trends and synergies;
Business Unit Structure: Regional Structure: Regional Structure: Functional Structure:

• Baby & Family Care • North America • Americas (located in Costa Rica) • Finance & Accounting
• Beauty & Feminine Care • Asia/India/Australia • Asia (located in Manila) • Human Resources
• Fabric & Home Care • Northeast Asia • Europe, Middle East and Africa • Information Technology
• Snacks & Beverages • Greater China (located in England) • Legal Affairs
• Health Care • Central-Eastern Europe/Middle • R&D
East/Africa •…
• Western Europe
• Latin America
Source: Website of Procter & Gamble as of March 2010.
The strategy of the international firm not only depends upon its philosophy, but also upon its
internationalization objectives. Here are some results of an empirical study
(Kubíčková/Votoupalová/Toulováb 2014).
Food Industry – Motives for Internationalization %
Foreign demand for products 63
Increase in sales 56
Competitive pressure in the domestic market 47
Customer portfolio enlargement 47
Accession to the EU 41
Lack of demand in the domestic market 41
Better use of production capacity 41
Competitor’s success in foreign markets 34
Survey: 341 small and medium-sized enterprises from the Czech Republic (relative frequency)
Wood Processing Industry – Motives for Internationalization %
Lack of demand in the domestic market 53
Competitive pressure in the domestic market 45
Enlargement of market for company products 39
Better use of production capacity 36
Higher sale prices in foreign markets 33
Agriculture – Motives for Internationalization %
Higher sale prices in foreign markets 50
Significant position in the domestic market 29
Enhancement of image 25
Grants and subsidies 25
Previous manager’s experience 25
More analytically, John Dunning differentiates between four main objectives:
Resource-Seeking Objectives Market-Seeking Objectives
Seeking resources abroad which do not exist Seeking access to new markets abroad with
at home (e.g. natural resources) high volume and/or high growth
Seeking resources abroad which are available with other Seeking to establish markets of reference/
characteristics than at home (e.g. lower labour costs) bridgehead markets abroad
Efficiency-Seeking Objectives Strategic-Asset-Seeking Objectives
Seeking economies of scale Seeking to become participant in foreign networks

(reaching higher volumes) (local embeddedness)
Seeking economies of scope Seeking to be present in so-called lead markets abroad

(combining resources)
Seeking to make “follow-the-leader investments”
Seeking risk diversification or “cross investments” abroad
Please read the following example of the car manufacturer Audi and work on the
exercises:
1) Summarize the reasons which have led Audi to build a subsidiary in Györ and relate
these reasons to the four main objectives of international firms.
2) Which other reasons within the four main categories of objectives might have led Audi
to start producing abroad?
Audi (1|2)
The car manufacturer Audi, together with Czech Skoda and Spanish Seat, belongs to the German Volkswagen Group. At the
beginning of the 1990s, Audi was a car manufacturer which had recovered from difficult times in the 1980s. While there
existed extensive sales activities abroad, production was carried out in Germany. Until the beginning of the 1990s Audi had its
main production facilities in Ingolstadt (Bavaria) and Neckarsulm (Baden-Württemberg).
At the beginning of the 1990s, Audi reconsidered its strategy to produce exclusively in Germany. The relocation of parts of the
production process abroad was under serious consideration by top management. The main reason behind these ideas was
the intention to lower the cost of production. Moreover, at this time new production capacity for a new generation of engines
was needed. Therefore, Audi planned to investigate the construction of an engine factory and an assembly plant abroad. For
this purpose, approximately 180 potential sites were assessed. The majority of these 180 sites were located in Central and
Eastern Europe.
Audi (2|2)
In 1992, Audi decided on the Hungarian town Györ and established the Audi Hungaria Motor Kft. in 1993. As being the case in
many production relocation decisions, a combination of different arguments was crucial for top management. The Györ site
promised significant cost advantages, since the wage level in Hungary was (and still is) significantly below the German
average. Furthermore, Györ benefits from a favorable geographic situation. The proximity between Györ and headquarters in
Ingolstadt – approximately 600 km distance – was a decisive factor. The distance was important since the Györ site was
designed as an engine factory (and later as an assembly plant), which implied deliveries and services within the Audi
company. Hereby, just-in-time processes were easier to implement in contrast to more remote sites. Furthermore, Györ was
comparably well connected to the road- and rail-network at that time, which was of great relevance for Audi.
The qualifications of the employees were another important factor for Audi’s decision. During the era of the centrally planned
economy, Györ had been home to the Rába conglomerate of heavy industry, which had cooperation links with western
companies such as MAN and which already had gained experience in sectors related to the car industry. Many of the (former)
Rába employees were well trained; and some of them were looking for new challenges during the transformation process.
Time pressure was also in favor of Györ: in Györ, Audi could make use of a production plant which had been nearly completed
by Rába. The level of investment amounted to only one third of the sum necessary to build a comparable production facility in
Germany. Tax discounts made the decision even more attractive for Audi; relief from any income and business tax was
negotiated. Additionally, the Hungarian administration guaranteed Audi to waive any import tariffs and to minimize customs
controls.
The objectives of an international firm – some final reflections:
• In most international firms, several objectives exist at the same time.
• In many specific cases, it is difficult to say which objective is most important
(although journalists and governments often try to find out).
• The objectives of an international firm and their relevance can change in the course of
time.
• The objectives of an international firm influence the strategy, the structure, and the
culture of the firm.
2.1 Introduction
2.2 International market entry strategy
2.3 International target market strategy
2.4 International timing strategy
2.5 International allocation strategy
2.6 International coordination strategy
2.7 Summary
2.1 Introduction
2.7 Summary
2.1 Introduction to the internationalization strategy of firms
The internationalization strategy of a firm is multi-faceted; the five dimensions of strategy are
interdependent:
Market Entry
Strategy
(How do we go
Coordination and operate Target Market
Strategy abroad?) Strategy
(How do we coordi- (Where do we
nate our activities go and operate
abroad?) abroad?)
Allocation Timing
Strategy Strategy
(How do we carry (When do we go
out our activities and operate
abroad?) abroad?)
In order to answer these questions, international firms have to be aware of their objectives
and they have to analyze their strategic situation as regards …
• the internal situation (strengths, weaknesses)
• the external situation (opportunities, threats)
… for the present as well as for the future.
However, in the international context, strategic analysis is more complex, since it has to be
carried out at …
• the level of headquarters and the home country
• the level of each (existing and potential) foreign unit and host country
• the level of the world market and the firm as a whole
Concept of a strategic analysis for an international firm:
Host Country A Host Country B
Firm Environment Firm Environment
Strengths
Strengths Opportunities Strengths
Strengths Opportunities
Weaknesses Threats
Threats Weaknesses Threats
Threats
Firm Environment
Strengths
Weaknesses Threats
Threats
Home Country
Firm Environment Firm Environment

Strengths
Strengths Opportunities Strengths
Weaknesses Threats
Threats Weaknesses Threats
Threats
Host Country C Host Country D
When taking the internal perspective, an international firm should analyze all value-adding
activities in terms of strengths and weaknesses:
Firm Infrastructure
Human Resource Management

Secondary
Activities
Technology Development
Procurement
Primary Inbound Outbound Marketing Service

Activities
Operations
Logistics Logistics and Sales
When taking the external perspective, a firm should analyze the following categories in
order to identify opportunities and threats:
Macro Environment Micro Environment
• Natural environment • Competitors
• Political environment • Industry (five forces)
• Legal and tax environment • Markets
• Economic environment
• Technological environment
• Demographic environment
• Cultural environment
• Socio-psychological environment
• …
Analysis of the internal situation – example of a value chain analysis:
Foreign Unit A Foreign Unit B
X X
Headquarters
Foreign Unit C
= major weaknesses X = not existent Foreign Unit D
Analysis of the micro environment – example of the industry:
Host Country A Host Country B
Bargaining power Threat of Bargaining power Threat of
of suppliers new entrants of suppliers new entrants
Rivalry among Rivalry among

existing competitors existing competitors
Threat of Bargaining power Threat of Bargaining power

substitutes of buyers substitutes of buyers
Bargaining power Threat of

of suppliers new entrants
Rivalry among
existing competitors
Threat of Bargaining power
substitutes of buyers
Home Country
Bargaining power Threat of Bargaining power Threat of

of suppliers new entrants of suppliers new entrants
Rivalry among Rivalry among
existing competitors existing competitors
Threat of Bargaining power Threat of Bargaining power
substitutes of buyers substitutes of buyers
Host Country C Host Country D
Analysis of the micro environment – example of a competitor analysis:
USA Mexico China Taiwan
Strategic Intent Dominant Leader Maintain position Dominant Leader Move into the top five
Competitor 1 Generic Strategy Low cost Low cost Low cost Differentiation
Current Position Market leader Middle of the pack Number 2 New entry
Strategic Intent Overtake the leader Move up a notch Dominant Leader Survive
Competitor 2 Generic Strategy Differentiation Differentiation Differentiation Differentiation
Current Position Number 3 Market leader New entry Number 2
Gain/hold market Gain/hold market Gain/hold market Gain/hold market

Strategic Intent
share share share share
Competitor 3 Generic Strategy Differentiation Differentiation Differentiation Differentiation
Current Position Middle of the pack Middle of the pack Market leader Market leader
What can be concluded with regard to the international strategic analysis?
• Strengths/weaknesses and opportunities/threats of an international firm are not identical
all over the world
– e.g., because headquarters can differ from subsidiaries in terms of financial resources
– e.g., because competitors and their strategies can differ from country to country
• International firms have to take two different perspectives when performing a strategic
analysis:
– differentiated perspective (for each corporate unit and each country)
– integrated perspective (for the international firm as a whole)
• Based on a thorough strategic analysis and a clear definition of the internationalization

objectives, a firm can start to develop its internationalization strategy
2.1 Introduction
2.7 Summary
There are many ways of how to go and operate abroad; the most common are:
Foreign Trade
Cross-national trade with goods or services in the form of export or import
International Transfer of Resources
International Contract International Licensing: International Franchising: Internat. Management
Manufacturing: Transfer of intangible assets Transfer of a business format/ Contracting:
Agreement to have all or parts (e.g. know-how) to a foreign business package to a foreign Transfer of management
of the products/services firm for a licence fee firm for a franchise fee services to a foreign firm
provided by a contract for a management fee
manufacturer
International Cooperation
International Consortium: International Strategic Alliance: International Joint Venture:

Project-oriented cooperation between firms Strategy-oriented cooperation Cooperation between firms from different
from between firms from countries in the form of creating an
different countries different countries additional joint firm
Foreign Direct Investment
Foreign Branch: Foreign Minority Stake: Foreign Subsidiary: International Merger:

Legally dependent foreign Stake of < 50% in a legally Stake of ≥ 50% in a legally Amalgamation of firms from
corporate unit (plant, affi-liate, independent foreign corporate independent foreign corporate different countries
representative office) unit unit into a new firm
Please read the examples on the following slides and work on these exercises:
1) Please describe the major advantages of each market entry strategy
2) Please elaborate on the major disadvantages of each market entry strategy
Export – example 1:
Ozawa Shuzo
Although Japanese rice wine (sake) is still considered a niche product within the global alcohol industry, its recent rise in
popularity is remarkable: with export value up by 19% in 2017, the total volume has reached 20 million liters and has doubled
since 2007. The USA accounts for 25% of all shipments, followed by China, South Korea and Taiwan. One explanation for the
increase is the simultaneous global explosion of Japanese restaurants, which with a total of 120,000 establishments were up
by 30% from 2015-2017.
Ozawa is a typical example of a sake maker who, while still deeply rooted in tradition, tries to capture its share of these
developments. The brewer, founded in 1702, is considered one of Japan’s top 100 makers and has concentrated on the
domestic market for generations. With Japan’s changing drinking habits and shrunk thirst for sake, however, Ozawa is now
turning to new sources of income. Since the company with only 80 employees sees itself as a specialized maker of quality
goods with no prior capacity and knowledge for an international expansion, it was clear that export through middlemen would
be the only reasonable strategy to go global. Thus, Ozawa today exclusively depends on the expertise of wholesalers and
exporters/importers that specialize in Japanese alcoholic beverages. Given the general lack of foreign language skills at
Ozawa, Japanese language profession is a prerequisite for its partners. The results of this low commitment strategy are
impressive and Ozawa’s exports have jumped from near 0 a decade ago to 10,000 bottles in 2017. This accounts for around
10% of Ozawa’s volume, although it can be estimated that the share by value is higher, as it is mainly the exclusive
Tokusenshu range which is offered abroad.
Ozawa is slowly beginning to depart from its rather passive internationalization path, and while they have no intention of
changing their general export strategy, they slowly increase their engagement, e.g. by introducing English language brewery
tours. In this line, Mikio Ozawa, eldest son of the current CEO, is currently also learning business English to help explain the
sake’s refined quality to a new range of customers at fairs and tasting events.
Kavalan
While single malt from Scotland is still dominating the $5 bn global luxury whisky market, a number of new competitors have
entered the stage in recent years. Among them is Taiwan’s Kavalan, which appeared out of nowhere when it beat a range of
top graded Scottish whiskys in a prestigious blind tasting competition in 2010. Since then, Kavalan has won more than 200
prizes, including “Distiller of the Year” in 2017. Named after an indigenous tribe and its native homeland in north-western
Taiwan, the Kavalan distillery only opened in 2005. The entity behind the new whisky maker is the family owned King Car
Group, which made itself a name with ready to drink coffee in the 1980s, at a time when Taiwan was still dominated by tea
drinkers. Since then, the group has grown and expanded into a range of products, a line of detergents sold under the Dr White
brand being among the group’s classics.
When Taiwan joined the WTO in 2002, and the state monopoly on liquor production fell, King Car Group’s founder and whisky
enthusiast Tien-Tsai Lee fulfilled himself a dream by opening his own distillery. As Taiwan, despite a population of only 23
million people, is home to the world’s 4th largest market for single malt, it was clear for Mr Lee that Kavalan will concentrate
on premium products from its very beginning.
Due to the island’s hot and humid weather conditions, the maturation process is cut down by a third, resulting in high quality
whisky after only 5 years as opposed to Scotland’s 10-15 years. Within less than a decade, the distillery has made itself a
name in the scene and today exports around 40% of its annually produced 9 million bottles to 60 countries around the globe.
Miele
One of the many examples of German exporting companies is Miele from Gütersloh. The company, which was founded by
Carl Miele in 1899, offers kitchen and household goods and is considered most famous for its washing machines.
In terms of production sites and employees, Germany is still the core of the enterprise. In 2018, the majority of its production
sites and also 11,255 of the 20,098 employees were based in Germany.
In terms of Miele's business figures, however, the company appears far more international. In the business year 2017/2018,
only €1.23 bn of its global revenues of €4.1 bn were generated in the home country, which equals 30.0%. According to the
official website, Miele is represented in almost 100 countries, either through its own sales companies or local importers.
International contract manufacturing – examples:
Apple
One of the many examples of firms in the electronics business using contract manufacturing is Apple. In the year 2000 Apple
decided to order the production for the first iMacs from the Taiwanese contract manufacturer Foxconn. The two firms had
worked together on production before, but this was a major boost. It was the start of a strong partnership between Apple and
Foxconn which enhanced technological prowess on both sides. Seven years later, in 2007 Apple launched its first iPhone
which was also largely produced by Foxconn in Asia and sold by Apple worldwide. On the backside of most iPhones you can
find the sentences: “Designed by Apple in California. Assembled in China”.
Due to lower labor costs of Foxconn and their experience in electronic manufacturing for other company's like Asus, Sony etc.
it appeared beneficial and lucrative for Apple to work with Foxconn as a contract manufacturer. The final assembly of an
iPhone X by Foxconn is estimated to represent 3 to 6 percent of the manufacturing cost of 370.25 $ in 2017.
Over the years, the partnership grew stronger. Apple manages inventories of core parts at Foxconn's warehouses in real time,
and their employees are present at the supplier's factories at all times. In some ways, the companies have practically
integrated their operations. The success of the iPhone and Apple´s high profit margin therefore depend on Foxconn as a
contract manufacturer.
International licensing – example:
Coca-Cola
In 2019 the U.S. American Coca-Cola Company operates in almost 200 countries and sells about 100 bn. litres of beverages
per year. More than 82% of the sales revenues (US$ 24.8 bn.) stem from outside the U.S. Coca-Cola issues licenses to
foreign firms for producing Coca-Cola beverages, for bottling the beverages, and for selling them in selected areas.
In 2016 Coca-Cola distinguished three types of licensees: (1) licensees in which Coca-Cola has no stake (about 27% of
production), (2) licensees in which Coca-Cola has a minority stake (about 58% of production) and (3) licensees in which Coca-
Cola has a majority stake (about 15% of production). The licensees vary widely in their size. In the future, Coca-Cola wants to
focus more on small and independent bottlers, because the firm wishes to pursue a stronger localization strategy.
International franchising – example:
McDonald’s
From the beginning of McDonald’s on, franchising has always played a crucial role in the company’s expansion. But as
longtime chairman Ray Kroc valued the impression of uniformity, any franchisee had and still has to adhere to a strict set of
guidelines and rules.
Today, McDonald’s is often considered as the biggest international fast food chain in the world. In 2015, there were more than
36,000 restaurants around the globe, of which about 81% were franchised. McDonald’s restaurants can be found in 118
countries. The revenues of the fast food chain exceed the ones of direct competitors like Subway or Burger King by far. The
brand and its logo rank among the most famous worldwide.
Franchisees can benefit from being part of a well-established business model. However, this lucrative offer comes at a cost.
McDonald's demands a fee of $45,000 from any franchisee in the beginning, followed by a monthly fee of 4% of sales.
Additionally, McDonald's often buys the estate and lets it to the franchisee for a sum of about 8.5% of sales. This is not to
mention the training of two years, which every potential franchisee has to succeed in, and the costs of actually setting up the
restaurant, which lie between 1 and 2 million dollars, depending on the location.
While the conditions of Burger King are similar to those of McDonald’s (except for the strategy of buying and renting out
estates which is unique to McDonald’s), the ones of Subway differ substantially. The franchising fee is $15,000 and the total
costs to open up a store only add up to approximately €250,000. Yet, with 8% of the sales, the monthly franchising fee is
higher.
However, as all of these franchise companies manage to maintain their successful positions worldwide, working with them is
still attractive to many potential franchisees.
International management contracting – examples:
The aviation and hotel industry

One of the most important assets a company may have as its disposal is management talent. Management contracts are
means by which a company may transfer such talent – by using part of its management personnel to assist a foreign company
for a specified period for a fee. The company may gain income with little capital outlay. Contracts usually cover three to five
years, and fixed fees or fees based on volume rather than profits are most common.
An organization usually pursues international management contracts when it believes that a foreign company can manage its
existing or new operation more efficiently than it can. For example, the British Airport Authority (BAA) has contracts to manage
airports in Indianapolis, USA, Naples, Italy, and Melbourne, Australia, because it had developed successful airport
management skills, and the Dutch Schipol Group operates airport facilities in Aruba, Caribbean, Stockholm, Sweden, and
Brisbane, Australia. Similarly, major airlines such as Air France and British Airways often sell their management expertise to
small state-owned airlines headquartered in developing countries. Another example is a subsidiary of Hilton Hotels that offers
hotel management and reservation services to hotels that bear the Hilton logo but that are not company-owned.
With management contracts, the host country gets the assistance it wants without foreign companies’ control of the operations.
In turn, the management company receives income without having to make a capital outlay. This pattern has been especially
important in Middle East hotel operations where governments have highly restricted foreign ownership.
International consortium – example:
Research consortia
A new drug can cost US$ 500 million to develop and bring to market; a mainframe computer or a telecommuni-cations switch
can require US$ 1 billion. Some US$ 7 billion go into creating a new generation of computer chips. To combat the high costs
and risks of research and development, research consortia have emerged in the U.S., Japan, and Europe. For example,
Ericsson, Panasonic, Samsung, Siemens, Sony, Motorola, Nokia, and Psion work together in a research consortium called
“Symbian” in order to develop technologies for wireless communication.
Since the passage of the “Joint Research and Development Act” of 1984 (which allows both domestic and foreign firms to
participate in joint basic research efforts without the fear of antitrust action), well over 100 consortia have been registered in
the U.S. The consortia pool their resources for research into technologies ranging from artificial intelligence to semiconductor
manufacturing. The European Union has five megaprojects to develop new technologies registered under the name EUREKA,
ESPRIT, BRITE, RACE, and COMET. Japanese consortia have worked on producing the world’s highest-capacity memory
chip and advanced computer technologies.
EUREKA = European network for market-oriented industrial R&D and innovation

ESPRIT = Integrated European program of industrial R&D projects and technology take-up measures
BRITE = Business Register Interoperability Throughout Europe
RACE = Raising Awareness and Competitiveness on RFID in Europe
COMET = Converged Messaging Technology
International strategic alliance – example:
The airline industry

The international airline industry is dominated by competition. Three mega-alliances together account for about 59% of the
world’s air passengers. Star Alliance, established in 1997, was the first of the mega-alliances to form and is the industry’s
largest. Its 27 members include for instance Air Canada, Air China, Lufthansa, Singapore Airlines, Turkish Airlines, and United
Airlines. Star Alliance provides service to 1,330 airports in 193 countries. The 19-member SkyTeam alliance entails for
instance Aeroflot, Air France-KLM, Alitalia, China Eastern Airlines, and Delta Air Lines. This alliance serves 1,074 destinations
in 177 countries. The oneworld alliance, whose 13 members comprise for instance American Airlines, British Airways, Finnair,
Iberia, and Qantas Airways, is the third largest alliance. This alliance flies to 1,012 destinations in 158 countries.
By being part of an alliance, airlines can make use of other airlines’ hubs abroad. For example, by joining the SkyTeam
alliance, Delta Air Lines can make use of Air France’s hub in Paris, Aeroflot’s hub in Moscow, and Korean Air’s hub in Seoul.
Thus, Delta Air Lines and any other member of the SkyTeam alliance can advertise and offer services on nearly 17,000 flights
a day to 1,074 destinations in 177 countries even though it operates only a small percentage of these flights itself. Besides
offering customers more flights and more destinations, these strategic alliances make it easier for customers to transfer
between alliance members’ flights and allow customers to use frequent flyer miles earned on one carrier to fly free on the
flights of other members of the alliance. The alliances also strive to maintain uniformly high standards of service and to
promote consistent customer service policies.
International joint venture – example:
General Mills & Nestlé

When the CEO of General Mills decided to enter the European market, where a very tough rival, Kellogg, was entrenched, he
knew it would be very expensive to set up manufacturing facilities and a huge marketing force. However, he knew that another
food giant, Nestlé, the world’s largest food company, has a famous name in Europe, a number of manufacturing plants, and a
strong distribution system. On the other hand, Nestlé lacked strong cereal brand names, something that General Mills, the
number two American cereal company, had. Just two weeks after the initial discussions in 1991, General Mills and Nestlé
formed a joint venture: Cereal Partners Worldwide.
General Mills provided the cereal technology, brand names, and cereal marketing expertise. Nestlé supplied its name,
distribution channels, and production capacity. Cereal Partners Worldwide distributes cereals everywhere in the world except
the U.S. Within two years, the new company had already passed Quaker Oats, the long-time number two in Europe after
Kellogg. According to General Mills’s vice chairman, building factories and distribution channels from scratch would have
taken years.
International joint venture – example:
Alstom & Ubumbano Rail

Gibela was established in 2013 as a joint venture between the French company Alstom, a world leader in integrated transport
systems, and the South African Ubumbano Rail Company. Gibela was awarded a USD 3 billion contract to replace South
Africa´s aging metro fleet with a modern service and build 600 commuter passenger trains for the South African rail network
over the next 10 years.
The manufacturing facilities consist of 60 000m2 at the custom-built Gibela Rail factory and will generate 1,500 direct jobs and
thousands of indirect jobs through the supply chain over a 10-year period. The first 20 trains were built at Alstom’s Lapa plant
in Brazil. Gibelas engineers were among the manufacturing team in Lapa as part of an ambitious skills transfer program, and
South African raw materials were shipped to Brazil, confirming Gibela’s commitment using more than 65% local content for the
Gibela/South Africa Rail Agency contract.
Foreign branch – examples:
The banking sector and the manufacturing industry

A bank that wants to initiate business with clients in other countries but does not want to open a full-scale banking operation in
that country can do so through foreign branches. For example, a foreign representative office of a bank is basically a legally
dependent unit that provides information regarding the financial services of the bank, but cannot deliver the services itself. For
instance, it cannot accept deposits or make loans. The foreign representative office of a U.S. bank will typically cater to local
firms that are interested in services for trade or other transactions in the U.S.
In many other industries, firms establish branches. These can provide information about the products and services of firms,
similar to the representative office of banks. In manufacturing industries, such as the chemical industry, it is also common to
maintain sales offices in countries where no other value chain activities of the firms are located. Another example is the
fashion retail industry where many firms also sell their apparel abroad at the stores of legally dependent foreign sales outlets.
Foreign minority stake – example:
DaimlerChrysler, Mitsubishi Motors & Hyundai

In March 2000, DaimlerChrysler took a stake of 34% in the Japanese car manufacturer Mitsubishi for more than
€ 2 billion. A few months later, DaimlerChrysler also took a stake of 10% in the Korean car manufacturer Hyundai for € 460
million. In both cases, operations continued to be managed by Mitsubishi and Hyundai.
By taking these stakes in the two Asian companies, DaimlerChrysler wanted to break into the promising Asian car market. In
the medium term, Jürgen Schrempp, CEO at that time, pursued the goal to generate one fourth of DaimlerChrysler’s sales
revenues in Asia. In addition, DaimlerChrysler hoped to grow stronger in the segment for small cars by taking the minority
stakes in Mitsubishi and Hyundai.
In 2000, Mitsubishi produced 1.1 million passenger cars (including SUVs and pick-ups) as well as 380,000 commercial
vehicles. Hyundai produced 1.6 million passenger cars (including SUVs) and 425,000 commercial vehicles. While the
cooperation with Mitsubishi was focussing on passenger cars, it was the commercial vehicles that were playing a major role in
the cooperation with Hyundai. In the case of Mitsubishi, DaimlerChrysler had a later buying option for the remaining 66%, and
in the case of Hyundai, DaimlerChrysler had a buying option for another 5% of the shares.
However, DaimlerChrysler decided to cease its cooperation with Mitsubishi and Hyundai in 2004. The company sold its stocks
in the two firms due to bad economic performance of Mitsubishi and Hyundai.
Foreign minority stake – example:
Ant Group
Ant Group is a is an affiliate company of the Chinese Alibaba Group and the world's highest-valued FinTech company with an
estimated valuation of around 200bn USD in 2020. Ant Group provides many financial services and products like private
online banking, insurances and cloud services for financial institutions. Furthermore, Ant Group operates China’s leading
digital payment service, Alipay, with more than 900 million users worldwide, and a market share of about 55% in China’s
mobile payment market.
In 2015, Ant Group bought a 25% stake for USD 575 million of Paytm, an Indian mobile payment company with around 100
million users and 75 million transactions a month (2015). At the end of 2015, Alibaba group itself invested about USD 680
million to buy another 20% of Paytm. With this, Alibaba became the largest shareholder in the company with 45% of the
shares and entered the Indian market successfully. In 2019 Ant Financial completed the acquisition of WorldFirst, a UK
payment company (with roughly USD 700 million in value). These investments allow Ant Financial to continue their growth
and tap new business opportunities outside its saturated home market.
Foreign subsidiary (greenfield investment) – example:
Lidl
With annual sales revenues of over €81 bn in 2018, Germany-based Lidl is one of the leading food discounters in the world.
Lidl operates in 30 countries and has more than 10,500 stores worldwide. When entering new foreign markets, Lidl usually
establishes wholly-owned foreign subsidiaries in the form of greenfield investments. Afterwards, Lidl builds logistics centres
within the country for distributing the products to the discount stores. In a next step, Lidl buys or rents property for building its
stores – usually 40 to 80 stores within the first three years.
In Finland, for instance, Lidl established a wholly-owned foreign subsidiary in 2002, built several logistics centres and opened
ten stores in the country. Shortly after, Finland was the basis for further expansion to the Scandinavian countries: Lidl opened
its first stores in Sweden in 2003, it entered the Norwegian market in 2004, and it broke into the Danish market in 2005.
In 2007, Lidl’s sales revenues in Denmark, Norway, Sweden, and Finland already amounted to more than €1 bn. However,
Lidl had to withdraw from the Norwegian market in 2008 due to bad economic performance.
In 2017, Lidl also entered the US market. Within a timespan of less than a year, 50 stores were opened and experts expect a
rapid expansion, accompanied by a rather aggressive marketing policy. The discounter plans to expand its US footprint and
double the number of stores to more than 100 by the end of 2020.
Foreign subsidiary (acquisition) – examples:
Examples of large cross-border acquisitions

Acquiring firm Acquired firm Industry Year Acquisition price*
Vodafone (UK) Mannesmann (D) Telecommunications 2000 183.0 bn.
Communication,
AT&T (USA) Time Warner (USA) 2016 108.7 bn.
Media
Anheuser-Busch InBev (BRA,
SAB Miller (UK) Beverages / brewing 2015 107.0 bn.
BEL)
Linde AG (D) Praxair (USA) Chemical industry 2017 80.0 bn.
Chemical industry,
Bayer (D) Monsanto 2016 63.5 bn.
Agrochemical
Pfizer (USA) Wyeth (USA) Pharmaceuticals 2009 48.8 bn.
Pharmaceuticals,
Merck (D) Sigma-Aldrich (USA) 2014 16.4 bn.
Chemical industry
* Acquisition price in USD including debt of acquired firm
International merger – example:
Hoechst & Rhône-Poulenc

In December 1998, one of the most spectacular mergers ever was announced: two companies with a long tradition, the
German Hoechst and the French Rhône-Poulenc, revealed their plans to merge into a new “life science corporation” called
Aventis. In early summer 1999, the plans to merge were finalized at the shareholders’ meetings of both firms. For a
considerable time, it had been uncertain whether sheikdom Kuwait – with the state-owned Kuwait Petroleum Corporation
(KPC) being a major shareholder at Hoechst – would approve the merger. But finally, sheikdom Kuwait could be convinced of
the merger’s advantages.
The motives for the merger were diverse: the two companies wanted to reduce cost, increase sales, and avoid a possible
hostile takeover by a third party. The new binational firm Aventis was located in Strasbourg, France, for five years. In 2004,
Aventis merged with the French Sanofi-Synthelabo into a new company called Sanofi-Aventis headquartered in Paris.
With annual sales revenues of € 27.6 bn. in 2008, Sanofi-Aventis has become the largest pharmaceutical company in Europe
and the third largest worldwide.
The choice of market entry strategy depends on a variety of factors:
In accordance with:
Overall firm philosophy Internationalization objectives General strategy of the firm
Best situation-specific trade-off between the following criteria:
• Sales potential of the strategy • Reversibility of the strategy • Acceptance of the strategy by
(short-term, long-term) • Flexibility of the strategy the local government/
• Cost potential of the strategy authorities/population
• Risks of the strategy
(short-term, long-term) • Legal restrictions
• Speed of the strategy
• Potential for economies of scale • Competitive rivalry
• Control over the activities abroad
• Potential for economies of scope • Need for long-time experience
• Dependency on other firms
• Appropriateness of the strategy concerning with foreign markets
the activities/resources to be transferred
You have read the three case studies on Aldi/Lidl, McDonald's and KTM. We will now work
on the following questions:
1. Why do Aldi and Lidl usually prefer greenfield investments when entering foreign countries (and not
acquisitions)?
2. Why does McDonald's opt for franchising as its main market entry strategy?
3. Why did KTM use a joint venture to expand to India (and not a greenfield or an acquisition)?
You have read the case study on Amazon. On March 7, 2022, we will have a tutorial. Please
prepare the following questions before this tutorial:
1. During the burst of the “dotcom bubble” in the late 1990s and early new millennium, many Internet
companies proved to be unprofitable and eventually failed. In your opinion, why did Amazon survive
the era of the dotcom bubble and become even more successful in the years to follow?
2. In many countries, Amazon operates both a website and an Amazon marketplace. In addition, the
company strives to build physical distribution facilities. Why do you think Amazon is eager to quickly
establish a comprehensive non-physical and physical infrastructure? In how far can a website or a
marketplace established in a country compensate for a lack of distribution facilities in that country?
Further questions concerning the case study on Amazon to prepare before the tutorial on
March 7, 2022:
3. Acquisitions of other firms have been an important strategy for Amazon when entering new
geographical markets. Please discuss the advantages and disadvantages of acquisitions as a way of
entering new markets, also compared to other market entry forms. How do Amazon’s greenfield
investments complement the company’s acquisitions?
4. Imagine you are a marketing consultant to Amazon in the United Arab Emirates (UAE). Amazon has
recently acquired Souq.com and Wing.ae. Which B2C marketing practices and activities would you
recommend to Amazon for the UAE, and why? Should Amazon copy its US marketing mix, i.e. what
would you recommend with regard to standardisation and adaptation?
More information on the tutorial will follow!
According to John Dunning’s “OLI paradigm”, the choice of market entry strategy should
depend on the extent to which a firm can realize the following advantages:
• Ownership advantages:
Advantages resulting from a firm’s long existence, its internationality, or its resources
(e.g., economies of scale, economies of scope, better access to resources, geographic risk
diversification, patents)
• Location advantages:
Advantages resulting from operating at a particular location (e.g., lower factor cost, lower
transport cost, or better infrastructure in a particular country)
• Internalization advantages:
Advantages resulting from not carrying out particular activities on the market, but within the
firm (e.g., internalizing R&D to avoid plagiarism, or internalizing production to reduce
transaction cost)
Based on these three advantages, John Dunning presents the following decision model for
choosing the appropriate market entry strategy:
Ownership
advantages?
no yes
no foreign Internalization
market entry advantages?
no yes
international Location
transfer of advantages?
resources no yes
foreign foreign direct

trade investment
Often, international firms choose a combination of several market entry strategies:
Export partner
: Intra-Organizational
Export
Network of Firm A
Firm
HQ: Headquarters J
Firm
FS: Foreign Subsidiary B
FS
Firm FS FS Firm
I C
HQ
Strategic Firm
FS FS
Alliance D
FS
Firm
Licensing
H
Firm
Firm Firm E
G F
2.1 Introduction
2.7 Summary
Target market strategies are relevant at three different sub-levels:
Market Presence Strategy Market Selection Strategy Market Segmentation Strategy
In which regions of the world Which specific markets should we How should we segment the selected
and in how many markets select with regard to attractiveness, markets in order to find promising
should we be present? risks and entry barriers? market segments?
Market presence strategy – options:
Market Presence Strategy
In which regions of the world and in how many markets should we be present?
Fundamental Market Presence Strategy: Geographic Market Presence Strategy:

concentration strategy (few markets): concentric (neighbouring markets):
diversification strategy (many markets): insular (non-neighbouring markets):
Market selection strategy – criteria:
Market Selection Strategy

Which specific markets should we select in regard to attractiveness, risks, and entry barriers?
Market Attractiveness: Market Risks: Market Entry Barriers:
market volume exchange rate risks tariffs
market growth payment risks legal restrictions
industry and market structure inflation risks fierce competition
price level transport and warehousing risks closed distribution systems
cost level risks of being nationalized differing consumer behavior
sourcing possibilities risks of security (life, health, freedom) cultural differences
infrastructure risks of faking information barriers
… … …
Market selection strategy – checklist technique:
Argentina Brazil Bolivia Indonesia Mexico Thailand Taiwan …
I. Macro environment
1. Political environment
- Domestic political stability
- Foreign political stability
-…
2. Legal environment
- Contract certainty
- Regimentation as regards market entry
strategies
-…
3. Economic environment
- Gross national product
- Inflation rate
- Organization of capital markets
-…
4. Socio-cultural environment
- Attitude towards work
- Attitude towards change
- Attitude towards technology
-…
II. Micro Environment
1. Market volume
2. Market growth
3. Market structure
4. Competitive rivalry
5. Procurement safety
6. Cost situation
…
++ = great opportunity/very good; + = opportunity/good; o = neutral; – = threat/bad; –– = strong threat/very bad
Market selection strategy – score evaluation technique:
Argentina Brazil Bolivia Indonesia Mexico Thailand Taiwan …
I. Macro environment 45%
1. Political environment 5%
- Domestic political stability
- Foreign political stability
-…
2. Legal environment 10%
- Contract certainty
- Regimentation as regards market entry
strategies
-…
3. Economic environment 20%
- Gross national product
- Inflation rate
- Organization of capital markets
-…
4. Socio-cultural environment 10%
- Attitude towards work
- Attitude towards change
- Attitude towards technology
-…
II. Micro Environment 55%
1. Market volume 20%
2. Market growth 10%
3. Market structure 5%
4. Competitive rivalry 5%
5. Procurement safety 5%
6. Cost situation 5%
… 5%
TOTAL 100%
10 = great opportunity/very good; 0 = strong threat/very bad
Market selection strategy – portfolio technique (external/external):
Country D
Country D
high
Country G
Country E
Country E
Market Attractiveness
medium
Country B
Country B
Country C
Country
CountryAA
low
Country
CountryFF
low medium high

Market Risks
Market selection strategy – portfolio technique (external/internal):
Country
Country D
D
high
Country G
Market Attractiveness
Country E
medium Country E
Country B
Country CC
Country
CountryAA
Country
low
Country
CountryFF
weak medium strong

(Potential) Own Competitive Position
Market selection strategy – exercise:
Please discuss the advantages and disadvantages of

a) the checklist technique,
b) the score evaluation technique, and
c) the portfolio technique.
Market segmentation strategy – options:
Market Segmentation Strategy

Which market segments should we select to be successful?
Intra-National Market Segmentation: Integral Market Segmentation:
Looking for promising within-country market segments Looking for promising cross-country market segments
promising promising promising

market market market
segment segment segment identical promising market
in country 1 in country 2 in country 3 segments across countries
Market segmentation strategy – segmentation criteria:
Socio-demographic Buying, behavioral and

Psychological criteria Criteria of media use
criteria communication criteria
Personality- Product-oriented - Television habits

Buying and Communication
oriented psycho- psychological - Preferred print
behavioral criteria criteria
logical criteria criteria media
- Frequency of
- Intelligence - Product - Functions in the media use
- Independency involvement decision process - Interest in
- Spirit of innovation - Attitude towards a - Influencer in the advertising
- Hobbies product communication
- Values - Opinions process
- Lifestyle - Memorization
- Leadership style - Knowledge
- Motivations - Brand preference
Demographic Sociographic Geographic Short-life Long-life

criteria criteria criteria General criteria
consumer goods consumer goods
- Age - Income - Place of - Buyer vs. - Buying frequency - Owning a good
- Gender - Job residence non-buyer - Brand loyalty from the same
- Family status - Education - Residential area - User vs. - Owning a product class
- Stage in the - Social class - Purchasing non-user corresponding - Duration of
family life cycle - Household power area - Usage frequency long-life owning a good
- Household size income - Urban/Rural - Price/Brand consumer good from the same
- Industry - Size of the awareness product class
city/town - First-time/Repeat
buyer
Target market strategy – exercise:
Imagine you were asked by the School’s management to develop a target market strategy
for the Bachelor program for the next ten years. Which recommendations would you give?
Please back up your answer by appropriate arguments.
Target market strategies – a summarizing overview:
Market Presence Strategy Three countries in Western Europe
Market Selection Strategy UK E I
Intra-National
Market Segmentation
Market Segmen-
tation Strategy
Integral identical promising market

Market Segmentation segments across countries
2.1 Introduction
2.7 Summary
Timing strategies are relevant at two different sub-levels:
Timing Strategy for One Country

Pioneer/First Mover/Early Mover Strategy: Follower/Late Mover Strategy:
A foreign market is entered earlier than A foreign market is entered later than
by all or most of the relevant competitors by all or most of the relevant competitors
Competitor
Competitor222
Competitor Competitor
Competitor333
Competitor222
Competitor My
My Firm
Myfirm
Firm
My firm
My Firm
Firm Competitor
Competitor111
Competitor444
Competitor111
Competitor333
Competitor444
Competitor
Years Years
0 1 2 3 4 5 0 1 2 3 4 5
Timing Strategy for Several Countries

Sequential Strategy: Parallel Strategy:
Different foreign markets are entered with Different foreign markets are entered without
relatively great time lags between each other mentionable time lags between each other
Entry
Entry Entry
Entry
Country A
Country
CountryBB
Country
CountryCC
Country
CountryDD
Country
CountryEE Country
CountryAA Country
CountryBB Country
CountryCC Country
CountryDD
Country D Country
CountryEE
Years Years
0 1 2 3 4 5 0 1
Timing strategy for several countries – exercise:
On the next slide, you find a timeline with all foreign market entries by the world’s largest
food discounters, Aldi and Lidl. Please answer the following questions:
What are the differences between the timing strategies of Aldi and Lidl?
28
27
26
25
24
23
22
21
20
19
18
17
16
15
14
13
12
11
10
9
8
7 L
6 S
USA CZ
DK GR
5 B H
FIN H
L
4 DK AUS PL N P PL CYP
NL E B IRL SK SLO
3 BGR
I UK P
2 A F F UK NL A GR HR M CH
IRL E CH SLO GR ROU CN USA I SRB
\ N
1
0 \ \
\
Number of new market entries from Aldi Number of new market entries from Aldi accumulated Number of market exits from Aldi
Number of new market entries from Lidl Number of new market entries from Lidl accumulated Number of market exits from Lidl
Timing strategies for one country – major advantages:
Timing Strategy for One Country

Pioneer/First Mover/Early Mover Strategy: Follower/Late Mover Strategy:
A foreign market is entered earlier than A foreign market is entered later than
all or most of the relevant competitors all or most of the relevant competitors
Competitor 2 Competitor 33
Competitor
Competitor222 My
My
Myfirm
Firm
Firm
My
My Firm
My firm
Firm Competitor 1 Competitor 4 Competitor
Competitor111
Competitor
Competitor333 Competitor
Competitor
Competitor444
Years Years
0 1 2 3 4 5 0 1 2 3 4 5
Major Advantages: Major Advantages:

image lead learning from the pioneer’s mistakes
high customer loyalty often more stable situation (e.g. political)
recruitment of motivated staff better information (e.g. about customers)
building up networks benefiting from standards set by pioneers
establishing standards
contacts with governments → lower risks due to free-rider effects,
creating market entry barriers for followers but sometimes also lower profit potential
Timing strategies for several countries – major advantages:
Timing Strategy for Several Countries

Sequential Strategy: Parallel Strategy:
Different foreign markets are entered with Different foreign markets are entered without
relatively great time lags between each other mentionable time lags between each other
Entry
Entry Entry
Entry
Country A
Country B
Country C
Country D
Country
CountryEE Country A Country B Country C Country D Country E
Years Years
0 1 2 3 4 5 0 1

lower need of resources per time unit getting a strong international presence quickly
lower risk of failure due to focussing high probability of first mover advantages
successive learning from each market entry quicker amortization of fixed cost
gradually expanding in foreign markets → higher profit potential, but often also higher risks
2.1 Introduction
2.7 Summary
In order to allocate its activities abroad, an international firm has to choose from different
allocation strategies:
Configuration Strategy Customization Strategy

Concentration/ Dispersion/ Standardization: Adaptation:
Centralization: Decentralization: The products and The products and
All value-adding activities are All value-adding activities are services are offered services are offered
carried out carried out identically in all differently in the various
at one corporate unit at all corporate units foreign markets foreign markets
Configuration strategy – example:
Activities USA CDN UK F D J

Inbound Logistics X X X X
Operations:
- Components X X
- Assembly X X X
- Testing X X X
Outbound Logistics:
- Order Processing X
- Physical Distribution X X X X X X
Marketing and Sales:
- Advertising X X X X X X
- Sales Force X X X X X X
- Promotional Materials X
Service X X X X X X
Procurement X X
Technology Development X X
Human Resource
X X X X X X
Management
Firm Infrastructure X
Configuration strategy – options:
Configuration
Configuration Strategy
Strategy
Strategy
Strategy of
of Strategy
Strategy of
of
Combined
Combined Strategy
Strategy
Concentration/Centralization
Concentration/Centralization Dispersion/Decentralization
Dispersion/Decentralization
Home Country
Host Country 1
Host Country 2
Host Country 3
Research & Development Procurement
Production Sales
Configuration strategies in the automotive industry (1)
Volkswagen Group (1/2)
The R&D activities carried out by the Volkswagen Group have always been largely centralized, with the corporate
research division at the company’s Wolfsburg headquarters providing support for all of the Volkswagen brands. The
individual brands also maintain smaller research departments which together form a research network, with
headquarters in Wolfsburg as its hub. In addition, the Electronic Research Lab (ERL) in Palo Alto, California, the Fuel
Cell Development Unit in Vancouver, Canada and the Battery Research Joint-Venture with Varta in Ellwangen carry
out research in the fields of electronic systems, alternative power units and battery technology and make the results
available to all of the corporate brands. Three Group Future Centers (Beijing, Palo Alto and Potsdam) serve as
development offices for digitalization and design for the entire VW Group.
The R&D activities of the various brands concentrate mainly on development efforts. Each brand has its own
development departments – VW in Wolfsburg, with a design branch in Potsdam; Audi in Ingolstadt (the electronics
centre) and Neckarsulm (the lightweight vehicle construction centre); Skoda in Mladá Boleslav, Czech Republic; and
SEAT in Martorell, near Barcelona, Spain. The SVW Technical & Design Center in Shanghai, China, has been
developing models for the Chinese market for several years. The Shanghai site, the Technological Center in Tokyo
(VTT), Japan, and the Electronic Research Lab (ERL) in Palo Alto also serve as outposts and pass on information to
the corporate research division in Wolfsburg.
The figure on the next slide shows the elements that make up the international R&D network of the Volkswagen
Group. While Volkswagen has several international R&D sites, most of its activities in the core areas of research and
development continue to take place in Germany or Europe. The bottom line, then, is that Volkswagen does not have a
global R&D organization that is active in all of the world’s important markets.
Volkswagen Group (2|2)
Ellwangen (DE)
R
Neckarsulm (DE)
R D
Wolfsburg (DE)
R D
Potsdam (DE)
D
Ingolstadt (DE)
R D Beijing (CN)
Vancouver (CN) Crewe (UK) Mladá Boleslav (CZ) D
R R D R D
Shanghai (CN)
Molsheim (FR) D M
Györ (HU)
R D D
Palo Alto (USA) Martorell (ES) Sant'Agata Bolognese (IT) Tokyo (JP)
R D R D M
R M D
R Research
D Development
M
M Monitoring
Quelle: Schmid/Grosche (2008): Management internationaler Wertschöpfung in der Automobilindustrie. Strategie, Struktur, Kultur. Bertelsmann Stiftung, Gütersloh, 2008, hier S. 40. Die gesamte Studie steht auf der
Lehrstuhl-Homepage zum Download bereit: http://www.escp-eap.eu/uploads/media/Management_internationaler_Wertschoepfung_in_der_Automobilindustrie.pdf.
Toyota (1/2)
Toyota’s research activities are even more centralized than those of the Volkswagen Group. The Japanese company’s
corporate research division at the Toyota Central Research & Development Laboratories is located in Nagakute,
Japan, near headquarters in Toyota City. Research is conducted in Nagakute for the entire Toyota Group, which is
active not only in the automotive industry, but for example in the construction industry and in biotechnology as well.
Some basic research (and development) is undertaken in Jiangsu in China. Located in Japan are the Tokyo Technical
Center, which conducts research on electronic systems, and the Higashi-Fuji Technical Center in Susono, which
focuses on research and development in the areas of innovative vehicle concepts and drive technologies.
The Head Office Technical Center in Toyota City is the headquarters for vehicle development and design, and it joins
together with seven other international development units to form a worldwide development network. Toyota Motor
Europe has three development divisions, located in Zaventem, Belgium, Cologne, Germany and Burnaston, Great
Britain. The American subsidiary Toyota Engineering & Manufacturing North America carries out development work at
its headquarters in Ann Arbor, Michigan, and at three affiliated sites. Also active in development are the following
Toyota’s subsidiaries: FAW Toyota R&D in Tianjin, GAC Toyota Motor R&D Center in Guangdong, both in China, Asia
Pacific Engineering & Manufacturing in Samutprakarn, Thailand, and the Toyota Technical Center Asia Pacific in
Melbourne, Australia. Completing this global network are two development centres that specialize in vehicle design:
The Toyota Europe Design Development Center (ED2) in Nice, France, and the subsidiary Calty Design Research in
Newport Beach, California, handle internal, external, and colour design. Most of these sites also serve as outposts.
The figure on the next slide shows how R&D activities are configured at Toyota.
Toyota (2|2)
Derby (GB)
D M
Susono (JP)
Brussels (BE) R D
Ann Arbor (USA) D M
Toyota (JP)
Torrance (USA) D M Cologne (DE) D
D M D
D Nagakute (JP)
Tianjin (CN) R
D
Nice (FR)
Newport Washington D.C. (USA) D Tokyo (JP)
Guangdong (CN)
Beach (USA) D M D
D
D
Wittmann (USA) Jiangsu (CN)
D M Samutprakarn (THA)
R D
D M
Melbourne (AUS)
D M
R Research
D Development
M
M Monitoring
Quelle: Schmid/Grosche (2008): Management internationaler Wertschöpfung in der Automobilindustrie. Strategie, Struktur, Kultur. Bertelsmann Stiftung, Gütersloh, 2008, hier S. 41. Die gesamte Studie steht auf der
Lehrstuhl-Homepage zum Download bereit: http://www.escp-eap.eu/uploads/media/Management_internationaler_Wertschoepfung_in_der_Automobilindustrie.pdf.
Configuration strategy – the Boeing case:
Boeing Finance
decentralized
Research/Development
Marketing/Sales
decentralized
decentralized
c
decentralized
Procurement/Production
Configuration strategy – the Unilever case:
Unilever Finance
decentralized
Marketing/Sales
decentralized
decentralized
c
decentralized
Configuration strategy – the MAN case:
MAN Finance
decentralized
Marketing/Sales
decentralized
decentralized
c
decentralized
Configuration strategy – major advantages (in the case of R&D):
Concentration/Centralization: Dispersion/Decentralization:
All value-adding activities are carried out All value-adding activities are carried out
at one corporate unit at all corporate units

achieving a critical mass accessing scarce resources
greater learning effects exploiting cost differences of resources
higher economies of scale overcoming logistic barriers
higher economies of scope distributing risk and increasing flexibility
coordination of activities easier and quicker making use of complementary resources
simpler organizational structures higher diversity of different approaches and ideas
HR management easier (e.g. face-to-face) reaching higher acceptance in each host country
information and communication easier benefiting from government subsidies
completing projects more quickly avoiding legal restrictions (e.g. genetic engineering)
easier to maintain confidentiality building up networks abroad
establishment of a consistent R&D culture easier building up listening posts abroad
Customization strategy – example:
Activities USA CDN UK F D J

Product:
- Design (S) S A A A A
- Quality (S) S S S S A
- Features (S) S S A A A
- Packaging (S) S S A A A
Price:
- Basic Price (S) S A A A A
- Mark-Up (S) S A A A A
- Discounts (S) S S A A A
Place:
- Distribution Channels (S) S S S S A
- Middlemen (S) S S S A A
Promotion:
- Advertising Channels (S) S S S S A
- Advertising Message (S) S S A A A
- Sales Promotion (S) S S A A A
- Public Relations (S) S A A A A
S = standardization; A = adaptation.
Toyota Corolla (1|2)

With over a million vehicles sold per year and more than 30 million sold since it was introduced to the market in 1966, the
Toyota Corolla is not only the Japanese equivalent of the VW Beetle, but the best-selling car in the world. Most of its buyers
live in Japan, the United States, and Europe (where, with the exception of the MPV called the Corolla Verso, it has been
known as the Auris since 2007). It is sold in a total of 140 countries.
The success of the Corolla is astonishing, given that customer preferences greatly vary in different markets. The Japanese,
for example, focus on fuel efficiency, modern design, and practical details, such as enough cup holders. The brand of the car
is less important to them than the model. Americans view their cars as an expression of their lifestyle: They want them to
project a youthful image and have soft seats and soft steering for relaxed cruising on the highway. German customers, for
their part, attach great importance to safety, which means that they appreciate features such as more solid doors. They want
their cars to be stable on the road and accelerate quickly in the low gears. Consumers in all three countries find the Toyota
Corolla attractive, despite their different priorities.
The key to the Corolla’s success lies in its region-specific versions, which have been built on a single platform since 1997.
“The VW Golf looks just the same everywhere in the world. We try to appeal to a wide variety of tastes in different markets,”
explains Soichiro Okudaira, chief developer of the current Toyota Corolla. The basic platform for the current model was
developed by the European design center in Nice, France, which also designed the European version. Toyota’s sites in Ann
Arbor, Michigan, and Toyota City, Japan, designed the other two versions.
Toyota Corolla (2|2)

Ninety-five percent of the vehicle’s parts are identical; the remaining five percent vary according to the regional preferences of
the relevant customer base. In Europe, this means adding such things as more solid bumpers, headlights that are integrated
into the car body and a large Toyota logo in the front grille – primarily to accommodate the preferences of German customers.
In the United States the vehicle has a more streamlined appearance and softer seats. In Japan the Toyota logo is replaced by
a Corolla logo, and several cup holders are added.
In addition, production of region-specific models takes place in the respective markets. The European Corolla (or Auris) is
manufactured in Burnaston, England, and Adapazan, Turkey. The North American version is produced in Fremont, California,
and in the Canadian city of Cambridge, Ontario. In Japan, the Corolla is manufactured in Takaoka, Kanegasaki, and
Sagamihara. All told, this model is produced in 16 different countries.
Customization strategy – exercise:
Please read the following text about the customization strategy of Coca-Cola.
What are the advantages and disadvantages of Coca-Cola’s strategy?
Coca-Cola
Although the Coca-Cola Company had conducted some international business before 1940, it gained true global recognition
during World War II, as Coke bottling plants followed the march of U.S. troops around the world. Management in Atlanta made
all strategic decisions then – and still does now, as Coca-Cola applies global marketing principles, for example, to the
worldwide introduction of Diet Coke. The brand name, concentrate formula, positioning, and advertising theme are virtually
standard worldwide, but the artificial sweetener and packaging differ across countries. Local managers are responsible for
sales and distribution programs, which they run in conjunction with local bottlers. The following table summarizes Coca-Cola’s
customization strategy:
Product Brand Product Advertising Advertising Distri- Sales Customer

Packaging Pricing
design name positioning theme copy bution promotion service
Fully standardized X X X X X
Mainly standard. X X
Mainly adapted X X X
Fully adapted
Customization strategy – major advantages:
Customization Strategy
Standardization: Adaptation:
Products and services are offered Products and services are offered
identically in all foreign markets differently in the various foreign markets

lower cost due to economies of scale in all marketing better response to local needs in all marketing
dimensions (product, price, place, promotion) dimensions (product, price, place, promotion)
possibility of lower prices resulting in higher sales higher willingness to pay allowing for higher prices
possibility of creating a brand with global appeal possibility of creating a brand with a local appeal
Customization strategy – some considerations:
• In most cases, the standardization/adaptation decision is not an “either … or” decision:
• Standardization/adaptation of products and services is done…

– according to certain countries/markets
– most often in some marketing dimensions only (e.g. adaptation of price and distribution)
• Commonly, customization strategies are put on a level with generic strategies of Porter:
– cost leadership is associated with standardization
– differentiation strategies are associated with adaptation
However, this association is not necessarily true
Customization strategy – some considerations:
e.g. dish liquids

e.g.
(Fairy/Dawn),
Standardization watches (Seiko),
Product Features
shampoos (Silkience/
cameras (Canon)
Soyance/Sientel)
e.g. beverages
e.g. food
Adaptation (Coca-Cola,
(Unilever)
Pepsi-Cola)
Adaptation Standardization
Brand Name
There are several options to link the configuration strategy and the customization strategy of
an international firm:
Concentration/ Dispersion/
Customization Strategy
Centralization Decentralization
Adaptation
+ +
Adaptation Adaptation
Standardization
+ +
Standardization Standardization
2.1 Introduction
2.7 Summary
In order to coordinate its activities abroad, an international firm can choose from a variety of
coordination strategies:
Structural Coordination Strategy Technocratic Coordination Strategy Personal Coordination Strategy

Coordination based on Coordination based on Coordination based on
organizational structure, e.g.: organizational arrangements, e.g.: personal arrangements, e.g.:
divisions rules personal commands
departments plans visits
project groups budgets expatriation
staff function reporting systems cultural coordination
Coordination strategy – exercise:
1) Please recall the EPRG concept by Perlmutter introduced in section 1.2 of our course.
How might ethnocentric, polycentric, regiocentric, and geocentric firms differ in terms of
coordination (extent, type)?
2) Please read the article by Schmid/Grosche/Mayrhofer on configuration and
coordination of international marketing activities. Please summarize the main findings.
2.1 Introduction
2.7 Summary
2.7 Summary of the internationalization strategy of firms
The internationalization strategy of a firm is multi-faceted; the five dimensions of strategy are
interdependent:
Market Entry
Strategy
(How do we go
Coordination and operate Target Market
Strategy abroad?) Strategy
(How do we coordi- (Where do we
nate our activities go and operate
abroad?) abroad?)
Allocation Timing
Strategy Strategy
(How do we carry (When do we go
out our activities and operate
abroad?) abroad?)
2.7 Summary of the internationalization strategy of firms
Overview of the internationalization strategies of firms:
Market Entry Strategy Target Market Strategy Timing Strategy Allocation Strategy Coordination Strategy
Foreign Trade Market Presence Timing Strategy for Configuration Structural
(Export/Import) Strategy: One Country: Strategy: Coordination Strategy
- Geographical - Pioneer/First Mover/ - Concentration/
International Transfer Technocratic
- Fundamental Early Mover Centralization
of Resources: Coordination Strategy
- Follower/Late Mover - Dispersion/
- Contract Market Selection
Decentralization Personal Coordination
Manufacturing Strategy: Timing Strategy for
Strategy
- Licensing - Market Attractiveness Several Countries Customization
- Franchising - Market Risks - Sequential Strategy:
- Management - Market Entry Barriers - Parallel - Standardization
Contracting - Adaptation
Market Segmentation
International Strategy:
Cooperation: - Intra-National
- Consortium - Integral
- Strategic Alliance
- Joint Venture
Foreign Direct
Investment:
- Branch
- Minority Stake
- Subsidiary
- Merger
Case study on Aldi/Lidl, McDonalds’ and KTM:
In the case study, you find some information on Aldi/Lidl, McDonald's and KTM.
1. Imagine you were a member of Aldis’ or Lidls’ management board. Please

develop an internationalization strategy until 2025 taking all relevant
dimensions of internationalization strategy into consideration.
2. Imagine you were a member of McDonalds’ management board. Please

develop an internationalization strategy for McDonalds until 2025 taking all
relevant dimensions of internationalization strategy into consideration
3. Imagine you were a member of KTMs’ management board. Please

develop an internationalization strategy for KTM until 2025 taking all
relevant dimensions of internationalization strategy into consideration
3.1 Overview
3.2 Unspecific international structure
3.3 Segregated international structure
3.4 Integrated international structure
3.5 International network structure
3.1.1 Static perspective on international structure
There are four main organizational structures for an international firm:
Unspecific International Structure Segregated International Structure

The international activities of a firm are separated
The international activities of a firm are not explicitly
from its functional or divisional structure
incorporated within its organizational structure:
in the form of an “international division”:
International
Top Management Activities Top Management
Domestic Domestic Domestic Domestic Domestic Domestic International

Function/Division 1 Function/Division 2 Function/Division 3 Funct./Div. 1 Funct./Div. 2 Funct./Div. 3 Division
Integrated International Structure (one-dimensional) Integrated International Structure (multi-dimensional)

The international activities of a firm are The international activities of a firm are
integrated in its functional or divisional structure: integrated in its matrix or tensor structure, e.g.:
Top Management Top Regions

Management Region 1 Region 2 Region 3
Dom. & Internat. Dom. & Internat. Dom. & Internat.

Products
Product 1 Product 1/Region 1 Product 1/Region 2 Product 1/Region 3
Function/Division 1 Function/Division 2 Function/Division 3 Product 2 Product 2/Region 1 Product 2/Region 2 Product 2/Region 3
3.1 Overview
3.1.2 Unspecific international structure
The unspecific international structure is common in early stages of a firm’s internationalization,
especially in the following forms:
„Direct reporting Embeddedness of the international activities

structure“
Sales Procurement Finance Staff Function
• Linking international • Linking the • Linking the • Coordinating the • Coordinating the
activities to top international international international international
management activities to the activities to the activities by the activities by a staff
domestic sales domestic domestic function
• e.g. through executive
department procurement administration and
managers of the • Reduces workload
department finance department
foreign subsidiary • Mainly sales of the top
outlets abroad • Mainly procurement • Subsidiaries are management
subsidiaries abroad economically
that import independent to a
commodities and large extent
(semi-)finished
goods
Some international firms even have an unspecific international structure in more advanced
stages of their internationalization.
3.1.2 Unspecific international structure
The unspecific international structure – exercise:
Please read the following example of a direct reporting structure.
What are in your opinion the advantages and disadvantages of such a structure?
The Direct Reporting Structure of International Firms – An Illustration

Formerly, foreign affiliates were managed by entrepreneurially minded individuals, and in a very informal way. The CEO sent
his friends out to a foreign country with a pat on their shoulder and a chequebook, and after that they were supposed to take
care of the business abroad. Contacts between headquarters and subsidiaries were managed in a very personal way, and
there was little or no standardization of relationships. One subsidiary could be left almost completely alone for years; another
attracted the interest of headquarters, perhaps only because the president of the company liked to go and visit the general
manager of the subsidiary. So, the management style was informal, variable, and built on historical personal relationships, and
subsidiaries were generally given a lot of autonomy. To a large extent, this still holds true. Many international corporations
have a “mother-daughter-structure”, with the subsidiary managing directors reporting directly to the group president, or even
to the chairman of the parent company board.
3.1 Overview
3.1.3 Segregated international structure
The segregated international structure – options:
International Division Combined with a Functional Organization at the Domestic Level
Top-Management
National National National International

Procurement Production Sales Division
International Division Combined with a Business Unit/Product-Oriented Organization at the Domestic Level
Top-Management
BU 1/ BU 2/ BU 3/ International
Product A Product B Product C Division
International Division Combined with a Regional Organization at the Domestic Level
Top-Management
National National National International

Region 1 Region 2 Region 3 Division
3.1.3 Segregated international structure
The segregated international structure – advantages and disadvantages:
Advantages/Motives Disadvantages/Problems
• clear allocation of competencies due to explicit distinction • risk of isolation of the international division
between domestic and international activities from the rest of the firm
• international division as counterbalance • risk of doing work twice

to domestic activities
• difficult allocation of resources, e.g., when a domestic profit
• staff of the international division acting as advocates centre renders services to the international division
for the international activities
• risk of rivalry and conflicts between
• staff of the international division building a good team of domestic and international divisions
people who perceive situations similarly
• no/little transfer of knowledge and experience between
• decisions concerning international activities can be made domestic and international divisions
by the international division without long coordination
processes • no/little exchangeability of human resources
between domestic and international divisions
• knowledge and experience which are important
for the international activities are integrated • high likelihood of organizing headquarters only with
in the international division regard to the needs of the domestic divisions
• possibility of quicker response to the demands • an increasing heterogeneity of the international

of the several foreign markets activities leads to a decreasing manageability of
the international division
3.1 Overview
3.1.4 Integrated international structure
The integrated international structure – options:
Functional (One-Dimensional) Business Unit/Product-Oriented (One-Dimensional)
Top Management Top Management
Dom. & Internat. Dom. & Internat. Dom. & Internat. Dom. & Internat. Dom. & Internat. Dom. & Internat.
Procurement Operations Sales BU/Product 1 BU/Product 2 BU/Product 3
Regional (One-Dimensional) Matrix (Multi-Dimensional)
Top Regions
Top Management
Management Region 1 Region 2 Region 3
Products Product 1 Product 1/Region 1 Product 1/Region 2 Product 1/Region 3

Region 1 Region 2 Region 3
The integrated international structure – examples (1):
British Airways
Top Management
National & international National & international National & international National & international
...
Finance Marketing and Production Human Resources Engineering
Samsung
Top Management
National & international National & international National & international National & international
Consumer Electronics IT & Mobile Communications Device Solutions Corporate Management
Cadbury Schweppes
Top Management
North / South
United Kingdom Europe Asia / Pacific Other Countries
America
As of: 2014
The integrated international structure – examples (2):
Kraft Foods
Regions
Top-
Management North America Europe International (other)
Strategy Strategy/North America Strategy/Europe Strategy/International (other)
Marketing Marketing/North America Marketing/Europe Marketing/International (other)
Finance Finance/North America Finance/Europe Finance/International (other)

Functions
Human Human Resources/North Human Resources/

Human Resources/Europe
Resources America International (other)
Operations Operations/North America Operations/Europe Operations/International (other)
Corporate & Corporate & Legal Affairs/ Corporate & Legal Affairs/ Corporate & Legal Affairs/
Legal Affairs North America Europe International (other)
R&D and R&D and Quality/ R&D and Quality/ R&D and Quality/
Quality North America Europe International (other)
The reference date for all information is 2010.
3.1 Overview
3.1.5 International network structure
Another important structure is the international network structure:
• The intra-organizational network structure (see Bartlett/Ghoshal’s “integrated network” of

international firms with transnational strategy)
– strong and interdependent links between the domestic and foreign units of an international firm
– especially between headquarters and subsidiaries
– mixture of decentralization and integration
– differentiated treatment of business units, functions, regions and subsidiaries
• The inter-organizational network structure

– strong and interdependent links between two or more firms from different countries
– e.g. in the form of franchising systems, strategic alliances, or joint ventures
• In business reality, international network structures often take a mixture of intra-

organizational and inter-organizational networks
• However, inter-organizational networks are much more wide spread than are intra-
organizational networks
3.1.5 International network structure
The international network structure – example:
: Inter-Organizational
Network Ties of Firm A
Export partner
Network of Firm A
Export
State/
HQ: Headquarters Society
Firm
Customers
FS
Investors FS FS Firm
C
HQ
Suppliers
Strategic Firm
FS FS
Alliance D
FS
Licensing
Firm
H
Firm
Firm Firm E
G F

4.1 Introduction
4.2 Studies on societal/country culture
4.3 Business practices influenced by societal/country culture
4.4 Organizational forms influenced by societal/country culture
4.5 Convergence/Divergence of societal/country culture

4.1 Introduction
4.1 Introduction to the international firm and culture
A definition of culture:
Culture is defined as the shared basic assumptions, values, norms, attitudes, and beliefs of a social
unit (e.g. an organization or a society/country), which are expressed in a variety of symbols and
behavioral patterns.
symbols
and beha-
vioural patterns
basic assumptions, values,

norms, attitudes, and beliefs
International firms are confronted with high cultural diversity at different levels:
…
department industry
culture culture
(e.g. marketing department vs. (e.g. banking vs. IT/internet)
finance department)
societal/country
culture
organizational profession
culture culture
(e.g. HP vs. IBM) (e.g. business vs.
engineering)
…
Corporate culture at Google (videos): Google‘s Standard
Logo
Please answer the following questions regarding the videos
about Google‘s corporate culture:
Birthday of
Pablo Picasso
– Which parts of the percepta and concepta layer are
expressed in the video?
Begin of Fall
– In terms of „system compatibility“ would you think Google‘s
corporate culture can be characterized as a successful
corporate culture?
Olympic Games in
Beijing, China
– Could the U.S. American culture have a key influence on
Google‘s corporate culture?
Alexander Popov‘s
Invention of the Radio
Birthday of
Michael Jackson

4.1 Introduction
As regards culture at the societal/country level, there are various studies attempting to
categorize and describe different cultures; the most famous are:
Major managerial studies on

societal/country culture
The cultural The cultural The cultural The cultural The cultural
dimensions of dimensions of dimensions of dimensions of dimensions of the
Kluckhohn/
Hall Hofstede Trompenaars GLOBE study
Strodtbeck
Focus: Focus: Focus: Focus: Focus:

basic communication values basic assump- values and
assumptions tions and values practices
Major managerial studies on societal/country culture and their dimensions:
Study by Study by Study by Study by GLOBE

Kluckhohn/Strodtbeck Hall Hofstede Trompenaars study
(1) Belief towards human (1) Context orientation (1) Power distance (1) Universalism vs. (1) Power distance
nature (evil, good, mix; (high-context vs. low- (2) Uncertainty avoidance particularism (2) Uncertainty avoidance
mutable vs. immutable) context communication) (2) Individualism vs.
(3) Individualism vs. (3) Institutional
(2) Attitude towards (2) Space orientation collectivism collectivism collectivism
nature (subjugation, (definition of privacy and (3) Affectivity vs.
harmony, mastery) territory) (4) Masculinity vs. (4) In-group collectivism
femininity neutrality
(3) Relation between (3) Time orientation (5) Gender egalitarianism
(5) Long-term vs. short- (4) Specificity vs.
humans (individualistic, (sequential vs. parallel) diffusivity (6) Assertiveness
collectivistic, collateral) term orientation
(4) Information speed (5) Status assignment vs. (7) Future orientation
(4) Time orientation status achievement (8) Performance
(past, present, future) orientation
(6) Time orientation
(5) Activity orientation (sequential vs. parallel; (9) Humane orientation
(being, being-in- past, present, future)
becoming, doing)
(7) Attitude towards
nature (subjugation vs.
mastery)
The most recent study is the GLOBE* Study:
* GLOBE = Global Leadership and Organizational Behavior Effectiveness
• GLOBE is an international research program initiated in the 1990s

THE PROJECT
• More than 170 researchers from 60 countries are involved
The major objective of GLOBE is to analyze the effects between culture and leadership,
GOALS
especially regarding the appropriateness of different leadership styles across cultures
• Interviews with more than 17,000 middle managers

CONTENTS • 951 companies from 60 countries and three industries
• Research regarding organizational culture, societal/country culture, and leadership
• 10 cultural clusters
RESULTS • 9 cultural dimensions
• 6 global leadership styles, which are similarly appropriate/inappropriate across cultures
The GLOBE study – cultural dimensions:
Power Distance Uncertainty Avoidance Institutional Collectivism

extent to which members of an extent to which members of an extent to which organizational or
organization or society expect and organization or society strive to societal institutional practices encourage
agree that power should be stratified and avoid uncertainty by relying on and reward collective distribution of
concentrated at higher levels established norms, rituals, resources
of an organization or government and bureaucratic practices and collective action
In-Group Collectivism Gender Egalitarianism Assertiveness
extent to which an organization or society extent to which individuals in

extent to which individuals express pride,
minimizes gender role differences while organizations or societies are
loyalty, and cohesiveness in
promoting assertive, confrontational, and aggressive
their organizations or families
gender equality in social relationships
Future Orientation Performance Orientation Humane Orientation
extent to which individuals in

extent to which individuals in
organizations or societies engage in extent to which an organization or society
organizations or societies encourage and
future-oriented behaviors such as encourages and rewards
reward individuals for being fair, altruistic,
planning, investing in the future, group members for performance
friendly, generous,
and delaying individual or improvement and excellence
caring, and kind to others
collective gratification
Example of the questionnaire of the GLOBE study: the dimension „Institutional Collectivism“:
Organization As Is
The pay and bonus system in this organization is designed to maximize:

1 2 3 4 5 6 7
Individual Interests Collective Interests
Organization Should Be
In this organization, the pay and bonus system should be designed to maximize:
1 2 3 4 5 6 7
Society As Is
The economic system in this society is designed to maximize:

1 2 3 4 5 6 7
Society Should Be
I believe that the economic system in this society should be designed to maximize:
1 2 3 4 5 6 7
Source: House (2004), p. 23.
The GLOBE study – cultural clusters:
Anglo Saxon Germanic Europe Latin Europe Nordic Europe Eastern Europe
Albania
Australia
France Georgia
Canada (English) Austria
Israel Greece
England Germany (former East) Denmark
Italy Hungary
Ireland Germany (former West) Finland
Portugal Kazakhstan
New Zealand Netherlands Sweden
Spain Poland
South Africa (white) Switzerland (German)
Switzerland (French) Russia
USA
Slovenia
Latin America Confucian Asia Southern Asia Middle East Sub-Saharan Africa
Argentina
Bolivia
Brazil China India
Egypt Namibia
Columbia Hong Kong Indonesia
Kuwait Nigeria
Costa Rica Japan Iran
Morocco South Africa (black)
Ecuador Singapore Malaysia
Qatar Zambia
El Salvador South Korea Philippines
Turkey Zimbabwe
Guatemala Taiwan Thailand
Mexico
Venezuela
The GLOBE study – examples of cultural clusters characterized by cultural dimensions:
Power Distance Uncertainty Avoidance
Nordic Europe Nordic Europe

7 7
Anglo Saxon 6 Eastern Europe Anglo Saxon 6 Eastern Europe
5 5
4 4
Southern Asia 3 Latin America Southern Asia 3 Latin America
2 Nordic Europe 2
7
1 Saxon
Anglo 6 Eastern Europe 1
5
4
Confucian Asia Southern Asia 3 Latin
Middle EastAmerica Confucian Asia Middle East
2
1
Confucian Asia Middle East

Sub-Saharan Africa Latin Europe Sub-Saharan Africa Latin Europe
Sub-Saharan Africa Latin Europe
Germanic Europe Germanic Europe
Germanic Europe
Culture as it is Culture as it should be ; 1 = very low; 7 = very high
The GLOBE study – leadership styles:
Charismatic Team-Oriented
being able to inspire, to motivate, and to expect focusing on effective team building and
high performance outcomes from others on the basis implementation of a common purpose or goal
of firmly held core values; charismatic leaders are visionary, among team members; team-oriented leaders
inspirational, self-sacrificing, integrative, decisive, and are collaborative, team-integrative, diplomatic, benevolent,
performance-oriented administratively competent
Participative Humane-Oriented
involving others in making and implementing being supportive, considerate,

decisions, and being participative and submissive compassionate, generous, and modest
Autonomous Self-Protective
ensuring the safety and security of the individual

or group member; self-protective leaders are
focusing on independency and individualism
self-centred, status conscious, conflict inducing,
face saving, and procedural
The GLOBE study – major findings:
Charis- Team- Partici- Humane- Autono- Self-
matic Oriented pative Oriented mous Protective
Anglo Saxon 6.05 5.74 5.73 5.08 3.82 3.08
Germanic Europe 5.93 5.62 5.86 4.71 4.16 3.03
Latin Europe 5.78 5.73 5.37 4.45 3.66 3.19
Nordic Europe 5.93 5.77 5.75 4.42 3.94 2.72
Eastern Europe 5.74 5.88 5.08 4.76 4.20 3.67
Latin America 5.99 5.96 5.42 4.85 3.51 3.62
Confucian Asia 5.63 5.61 4.99 5.04 4.04 3.72
Southern Asia 5.97 5.86 5.06 5.38 3.99 3.83
Middle East 5.35 5.47 4.97 4.80 3.68 3.79
Sub-Saharan Africa 5.79 5.70 5.31 5.16 3.63 3.55
Mean Average 5.85 5.73 5.43 4.86 3.86 3.36
Standard Deviation 0.21 0.14 0.33 0.31 0.24 0.38
1 = greatly inhibits outstanding leadership; 7 = contributes greatly to outstanding leadership.
The GLOBE study – exercise:
Please outline the benefits of the GLOBE study compared to previously discussed
studies on societal/country culture (e.g. Kluckhohn/Strodtbeck, Hofstede). Despite
these advantages, which drawbacks does the GLOBE study still have?

4.1 Introduction
Examples of organizational forms influenced by Asian country cultures:

Keiretsu Chaebol Family Business Network
Country Japan Korea China
complex network of legally and

network of small and
economically independent conglomerate operating
specialized family businesses
firms operating in different industries
Organizational Form lead by authoritarian patriarchs
in different industries and/or and being owned by a
and being owned by
carrying out different value particular family
related overseas Chinese
activities
large size medium to large size small size

wide variety of actors medium variety of actors (< 10 employees
Characteristics high density medium to high density per family business)
high stability medium to high stability low variety of actors
medium to high hierarchy high hierarchy low density
“Wa”: “Inhwa”: “Guanxi”:

group loyalty harmony particularism
consensus long-term orientation utilitarianism
Management Philosophy
cooperation obedience individualism
social cohesiveness loyalty closeness to outsiders
trust hierarchy medium-term orientation
The Japanese Keiretstu:
Cohesion of the Keiretsu: Structure of the Keiretsu:
• Reciprocal equity stakes
• Centralized role of the trading

upstream
company
companies
• Informal meetings: “Kais”
vertical Keiretsu
• Lifetime employment
industrial trading
bank
• … company company
horizontal Keiretsu
(„Inter-Market-Groups“)
downstream
companies
Mitsubishi – yet another Japanese car manufacturer?
Kinki Coca- Cola
Bottling
Mitsubishi Kinyō-kai Nippon Dry-Chemical
Kirin Beverage
Iwaki Glass
Paper Food Petroleum Real Estate &
Construction Nippon Carbide Inds.
Mitsubishi Paper Mills Kirin Brewery JX Holdings

Mitsubishi Estate
Mitsubishi
Fudow Co.
Construction
JSP Corp.
3 top firms Nihon Nosan Kogyo
Chemicals
(strategic centre) Meiwa Trading
Diamond City
Glass
Mitsubishi Gas Chukyo Coca-Cola
Chemicals Bottling
Asahi Glass
Mitsubishi Chemicals Nitto Flour Milling
Holding Mitsubishi Pasco Corp.
Nitto Kako Mitsubishi Chemcials Corporation
Corp.
Taiyo Sanso
Toyo Carbon
Nippon Synthetic Chem. Electrical &

Ind. Machinery
Kawasaki Kasei Chem. Bank of Tokyo-
Mitsubishi UFJ Mitsubishi Electric
Tayca Corp.
Metals Mitsubishi Kakoki
Nikko Sanso
Nikon Corp.
Kodama Che-mical Ind. Mitsubishi Motors
Mitsubishi Rayon Mitsubishi Fuso Ryoden Trading
Mitsubishi Heavy Nihon Kentetsu
Mitsubishi Aluminium Inds.
Kodensha Co.
Mitsubishi Materials Kanaden Corp.
Mitsubishi Steel Mfg. SPC Electronics
Tokyo Takasago
Dry Battery
Finance &
Service Industry Optic Dai-ichi
Insurance
Saskai Chemical Ind. Denko
Z.R. Concrete
Mitsubishi Shipping &
P.S. Corp. Mitsubishi UFJ
Research Warehousing
Trust and
Institute
Banking
Meiji Yasuda
Seimei Hoken Nippon Yusen
Toyo Engineering Works
Tokio Marine Mitsubishi Logistics
Nichido Tokyo Sangyo
Mitsubishi UFJ
Securities
Tokyo Senpaku
Taiheiyo Kaiun

4.1 Introduction
4.4 Convergence/divergence of societal/country culture
• As we have seen, culture can differ from country to country affecting the management of an
international firm
• Will these cultural differences decrease or increase in the future?
Convergence Thesis Divergence Thesis
• Due to globalizing effects cultural • Due to regionalizing or even localizing

differences will decrease effects cultural differences will stay
important or even increase
• Hence, international firms soon will be able
to disregard aspects of societal/country • Hence, international firms will increasingly
culture in their management have to consider aspects of societal/
country culture in their management
4.4 Convergence/divergence of societal/country culture
Convergence/Divergence – exercise:
Please answer the following questions concerning the debate on convergence/divergence
of societal/country culture.
1) Would you rather support the convergence thesis or the divergence thesis? Please give
reasons and examples (e.g., from society, politics, law, economy) to support your
answer.
2) When it comes to globalization, many scholars speak of an “Americanization” of the

world. What is your opinion on that topic? Is the world increasingly Americanizing?
What are the advantages and disadvantages of the current development?
The international network structure – example:
: Inter-Organizational
Network Ties of Firm A
Export partner
Network of Firm A
Export
State/
HQ: Headquarters Society
Firm
Customers
FS
Investors FS FS Firm
C
HQ
Suppliers
Strategic Firm
FS FS
Alliance D
FS
Licensing
Firm
H
Firm
Firm Firm E
G F
The transnational/heterarchical network firm has the following characteristics:
• The firm has many centres which are of different nature (e.g. centres of competence)
• Subsidiaries are given strategic roles within the whole firm
• Mutual exchange of materials, capital, technologies, employees and capabilities within an
international network
• Integration is achieved primarily through corporate culture (normative control)
• The firm is conceived as a brain, since thinking is not restricted to one exclusive centre
• Coalitions with other firms and other types of actors occur frequently
Changes in the perspective of International Management:
Traditional view Modern view
Type of organization strictly hierarchical network
Source of competitive advantages country of origin country of origin and host countries
important strategic contributions,

Role of subsidiaries implementation
centres of competence/excellence
transcending domestic market

Responsibilities of subsidiaries domestic market
(product and/or function)
Decision-making centralized at headquarters decentralized centralization
Management style top-down top-down and bottom-up
ethnocentric, polycentric moving towards the

Management orientation
or regiocentric geocentric orientation
There are different typologies for differentiating the subsidiary roles in the
transnational/heterarchical network firm:
Typology by Bartlett/Ghoshal Typology by Ferdows Typology by Gupta/Govindarajan

Differentiation criteria: Differentiation criteria: Differentiation criteria:
(1) Strategic importance of (1) Primary strategic (1) Knowledge outflow from the
the subsidiary’s environment reason for the subsidiary subsidiary to the rest of the firm
(2) Competence of the (2) Competence of the (2) Knowledge inflow from the
subsidiary subsidiary rest of the firm to the subsidiary
The typology by Bartlett/Ghoshal:
high
Contributor Strategic Leader

Competence of the
Subsidiary
Implementor Black Hole
low
low high
Strategic Importance of
Local Environment
The typology by Ferdows:
Paths to Higher Strategic Roles high
+ Become global hub for product or process knowledge
+ Supply global markets
Site Competence
+ Assume responsibility for product development
Lead Contributor
+ Make product-improvement recommendations Source
+ Assume responsibility for process development
+ Assume responsibility for the development of suppliers
+ Make process-improvement recommendations Server

+ Assume responsibility for procurement and local logistics Off- Shore
Outpost
+ Maintain technical processes low
+ Assume responsibility for production Access to Low- Access to Skills Proximity to

Cost Production and Knowledge the Market
Primary Strategic Reason

for the Subsidiary
The typology by Gupta/Govindarajan:
high
focal subsidiary to the rest of the

Outflow of knowledge from the
corporation Global Innovator Integrated Player
Local Innovator Implementor
low
low high
Inflow of knowledge
from the rest of the corporation to the
focal subsidiary
Transnational/heterarchical network – exercise:
The transnational/heterarchical network firm is not easy to realize.
1) Please discuss the problems of realizing the transnational/heterarchical model
in practice.
2) If you as a manager wanted to develop a firm with a multinational strategy closer
towards the transnational/heterarchical model, which management steps would you
recommend?
Key readings:
In transnational and heterarchical firms there is often room for subsidiary initiatives.
Please read the following article on initiatives of foreign subsidiaries:
Schmid, Stefan, Dzedek, Lars R., and Lehrer, Mark (2014): From rocking the boat to
wagging the dog: A literature review of subsidiary initiative research and integrative
framework. In: Journal of International Management, Vol. 20, No. 2, pp. 201-218.
International Management | Major lessons learned
• Before a firm goes international, it has to reflect upon its EPRG orientation and its
IMGT strategy.
• Furthermore, the objectives of why to go and operate abroad have to be clear.
• Moreover, the firm has to perform a strategic analysis to evaluate its strengths and
weaknesses as well as the environment’s opportunities and threats.
• Based on this, the firm can start to develop its internationalization strategy, which is
multi-faceted.
Dimensions of the internationalization strategy:
Market Entry Strategy Target Market Strategy Timing Strategy Allocation Strategy Coordination Strategy
Foreign Trade Market Presence Timing Strategy for Configuration Structural
(Export/Import) Strategy: One Country: Strategy: Coordination Strategy
- Geographical - Pioneer/First Mover/ - Concentration/
International Transfer Technocratic
- Fundamental Early Mover Centralization
of Resources: Coordination Strategy
- Follower/Late Mover - Dispersion/
- Licensing Market Selection
Decentralization Personal Coordination
- Franchising Strategy: Timing Strategy for
Strategy
- Management - Market Attractiveness Several Countries Customization
Contracting - Market Risks - Sequential Strategy:
- Market Entry Barriers - Parallel - Standardization
International
- Adaptation
Cooperation: Market Segmentation
- Consortium Strategy:
- Strategic Alliance - Intra-National
- Joint Venture - Integral
Foreign Direct
Investment:
- Branch
- Minority Stake
- Subsidiary
- Merger
• Furthermore, an international firm has to choose between different international
structures (unspecific, segregated, integrated, network) in order to organize its
international activities.
• International firms are confronted with a high cultural diversity at different levels;
in particular, they have to consider differences in societal/country culture when going
and operating abroad.
• An international firm should check whether it is appropriate to move towards the
transnational/heterarchical network model resulting in differentiated subsidiary roles.
International Management | Further readings
For those of you interested in deepening your knowledge in the field of International
Management on a voluntary basis, we suggest the following readings (not compulsory):
Bartlett/Ghoshal (2002): Managing Across Borders. The Transnational Solution. 2nd edition, Harvard Business School Press, Boston.
Cullen/Parboteeah (2017): Multinational Management. A Strategic Approach. 7th edition, South-Western Cengage Learning, Cincinnati.
Czinkota/Khan/Gupta/Ronkainen/Moffett (2021): International Business. 9th edition, Cambridge University Press, Cambridge.
Daniels/Radebaugh/Sullivan (2021): International Business. 17th edition, Pearson, Upper Saddle River.
Dunning/Lundan (2008): Multinational Enterprises and the Global Economy. 2nd edition, Edgar Elgar, Northampton.
Perlmutter (1969): The Tortuous Evolution of the Multinational Corporation. Journal of World Business, Vol. 4, No. 1, pp. 9-18.
Root (1998): Entry Strategies for International Markets. Rev. edition, Lexington/Macmillan, New York.
Schmid (2018, ed.): Internationalization of Business. Cases on Strategy Formulation and Implementation. Springer International Publishing,
Cham.
Whitley (2001, eds.): European Business Systems. Firms and Markets in Their National Contexts. Sage, London, Newbury Park, New Delhi.
Literature for participants familiar with German language:

Kutschker/Schmid (2011): Internationales Management, 7th edition, Oldenbourg, Munich (about 1,400 pages).
Oesterle/Schmid (2009, eds.): Internationales Management. Forschung, Lehre, Praxis. Schäffer-Poeschel, Stuttgart (about 800 pages).
Schmid (2013, ed.): Strategien der Internationalisierung. Fallstudien und Fallbeispiele. 3rd edition, Oldenbourg, Munich (about 700 pages).
ESCP Business School
Bachelor in Management (BSc)
2021/2022 | Semester 6
International Management

Chair of International Management and Strategic Management

International Management Slides

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

International Management Slides

Uploaded by

Copyright:

Available Formats

ESCP Business School

Bachelor in Management (BSc)

Prof. Dr. Stefan Schmid

II. What is the concept of this course?

III. What is the structure of this course?

IV. When does this course take place?

V. How is this course graded?

VI. What are the required readings for this course?

VII. What if there are further questions regarding this course?

II. What is the concept of this course?

III. What is the structure of this course?

IV. When does this course take place?

V. How is this course graded?

VI. What are the required readings for this course?

VII. What if there are further questions regarding this course?

1988-1990 Studies in Business Administration, Augsburg University

II. What is the concept of this course?

III. What is the structure of this course?

IV. When does this course take place?

V. How is this course graded?

VI. What are the required readings for this course?

VII. What if there are further questions regarding this course?

I will expect active participation from you as well as the ability

II. What is the concept of this course?

III. What is the structure of this course?

IV. When does this course take place?

V. How is this course graded?

VI. What are the required readings for this course?

VII. What if there are further questions regarding this course?

1 Introduction to International Management

2 The international firm and strategy

3 The international firm and structure

4 The international firm and culture

5 A network perspective on the international firm

II. What is the concept of this course?

III. What is the structure of this course?

IV. When does this course take place?

V. How is this course graded?

VI. What are the required readings for this course?

VII. What if there are further questions regarding this course?

Fri., February 4 Fri., February 11 Fri., February 18

Mon., March 7 Fri., March 18 Tue., March 22

mid-term exam: Wednesday, March 9, 2022 (1:00 pm)

All information about exams will be confirmed by the examination office;

1. To discuss the Amazon case.

II. What is the concept of this course?

III. What is the structure of this course?

IV. When does this course take place?

V. How is this course graded?

VI. What are the required readings for this course?

VII. What if there are further questions regarding this course?

Mid-term exam (50%)

Final exam (50%)

1. Which statement about strategic management is correct?

a. It is only relevant to large companies.

2. Porter’s value chain is crucial for:

a. Analyzing a firm’s external environment.

II. What is the concept of this course?

III. What is the structure of this course?

IV. When does this course take place?

V. How is this course graded?

VI. What are the required readings for this course?

VII. What if there are further questions regarding this course?