GROUP 2

MODULE 7:
INTERNATIONAL
STRATEGY:
CREATING VALUE
IN GLOBAL
MARKETS
WHAT IS GLOBAL ECONOMY?
GLOBAL ECONOMY CAN BE DEFINED
AS THE SUM OF ACTIVITIES THAT
TAKE PLACE BOTH WITHIN A
COUNTRY AND BETWEEN DIFFERENT
COUNTRIES. EACH COUNTRY IS A
SEPARATE UNIT, WITH ITS OWN
INDUSTRIAL PRODUCTION, LABOR
MARKET, FINANCIAL MARKET,
RESOURCES AND ENVIRONMENT.
KEY ISSUES IN THE GLOBAL
ECONOMY
 THE GLOBAL ECONOMY IS UNDER
PRESSURE FROM MULTIPLE COMPLEX
AND INTERCONNECTED CRISES.
THESE CHALLENGES—INCLUDE
INFLATION, CLIMATE CHANGE, THE WAR
IN EUROPE, SUPPLY CHAIN DISRUPTIONS
AND THE COVID-19 PANDEMIC, TO NAME
A FEW—HAVE COALESCED INTO WHAT
EXPERTS HAVE CALLED A "POLYCRISIS."
GLOBALIZATION IN THE
EMERGING MARKETS
 MOVEMENTS OF GOODS, FINANCE AND
PEOPLE ASSOCIATED WITH
GLOBALISATION HAVE TRANSFORMED
THE WORLD ECONOMY OVER THE PAST
FEW DECADES. HOWEVER, AS FINANCIAL
ASPECTS HAVE BEEN RECENTLY
COVERED ELSEWHERE, THIS NOTE
FOCUSES PRIMARILY ON THE RISE OF
TRADE LINKAGES AND MIGRATION AND
HOW THIS RELATES TO OUTPUT AND
PRICES.
 FACTORS AFFECTING A
NATION'S COMPETITIVENESS

FACTOR CONDITIONS
Factors of production include not
only labor, capital, and natural
resources but also factors that can
be created. The latter are more
relevant to developed nations that
are seeking competitive
advantage over firms in other
countries.

FACTOR CONDITIONS
Factors of production include not
only labor, capital, and natural
resources but also factors that can
be created. The latter are more
relevant to developed nations that
are seeking competitive
advantage over firms in other
countries.
FACTORS AFFECTING A
NATION'S COMPETITIVENESS
DEMAND CONDITIONS
Demand conditions refer to the
demands that consumers place on
an industry for goods and
services. Consumers who demand
highly specific, sophisticated
products and services force firms
to be more innovative to meet
such demand.

FACTOR CONDITIONS
Factors of production include not
only labor, capital, and natural
resources but also factors that can
be created. The latter are more
relevant to developed nations that
are seeking competitive
advantage over firms in other
countries.
FACTORS AFFECTING A
NATION'S COMPETITIVENESS
RELATED & SUPPORTING
DEMAND CONDITIONS
INDUSTRIES
Demand conditions refer to the
Related and supporting industries
demands that consumers place on
enable firms to more effectively
an industry for goods and
manage inputs. For example,
services. Consumers who demand
countries with a strong supplier
highly specific, sophisticated
base benefit by adding efficiency
products and services force firms
in downstream activities. That is
to be more innovative to meet
because a competitive supplier
such demand.
base helps a firm obtain inputs
using cost-effective, timely
methods it contributes to reducing
manufacturing costs.

FACTOR CONDITIONS
Factors of production include not
only labor, capital, and natural
resources but also factors that can
be created. The latter are more
relevant to developed nations that
are seeking competitive
advantage over firms in other
countries.
FACTORS AFFECTING A
NATION'S COMPETITIVENESS
FIRM STRATEGY,
RELATED & SUPPORTING
DEMAND CONDITIONS STRUCTURE, AND
INDUSTRIES
Demand conditions refer to the RIVALRY
Related and supporting industries
demands that consumers place on Firms develop strategies and
enable firms to more effectively
an industry for goods and structures to compete with other
manage inputs. For example,
services. Consumers who demand firms in the same country that are
countries with a strong supplier
highly specific, sophisticated trying to capture the same
base benefit by adding efficiency
products and services force firms customer market. Rivalry is
in downstream activities. That is
to be more innovative to meet particularly intense in nations with
because a competitive supplier
such demand. strong consumer demand
base helps a firm obtain inputs
conditions, strong supplier bases,
using cost-effective, timely
and high new entrant potential
methods it contributes to reducing
from related industries.
manufacturing costs.
INTERNATIONAL
EXPANSION: A
COMPANY'S
MOTIVATIONS
AND RISKS
 A. MOTIVATION FOR
INTERNATIONAL EXPANSION
POTENTIAL BENEFITS OF INTERNATIONAL 1.

EXPANSION INCLUDE;

Optimize the Location of every

Increase Market Size Value Chain activity

Take Advantage of Arbitrage Learning Opportunities

Opportunities

Enhance a Product’s Growth

Explore Reverse Innovation
Potential
 B. POTENTIAL RISKS OF
INTERNATIONAL EXPANSION
 1. POLITICAL AND
ECONOMIC RISK CURRENCY RISKS MANAGEMENT RISKS
Management risks may be
Countries vary significantly in
Currency fluctuations considered the challenges and risks
their level of political risk. Such that managers face
can pose substantial
risk can lead to such when they must respond to the
problems as the destruction of
risks. inevitable differences that they
encounter in foreign markets.
property, nonpayment of goods
and services, and the
appropriation of a firm’s assets in
a country.
C. GLOBAL DISPERSION OF VALUE
CHAINS: OUTSOURCING AND
OFFSHORING
 OUTSOURCING OFFSHORING
Takes
ACHIEVING COMPETITIVE
Occurs when a firm decides to
place when a firm decides to shift
ADVANTAGES IN GLOBAL MARKETS
utilize other firms to
perform value-creating activities an activity that they were
that were previously performed previously performing in a
in-house. domestic location to a foreign
location.
 ACHIEVING COMPETITIVE
ADVANTAGES IN GLOBAL MARKETS
A. TWO OPPOSING PRESSURES
REDUCING COSTS ADAPTING TO LOCAL MARKETS
The pressures for local adaptation
It refers to reducing the cost when a
may elevate the firm's cost
firm is competing in the global structure.
market. decreased shipping and
For serving universal needs, cost transportation costs inherent in
reduction becomes a pressure on local production
single locations may lead to higher
firms.
tariffs and transportation costs.
 B. INTERNATIONAL STRATEGY

RISK AND CHALLENGES

The international strategy, with its tendency to
An international strategy is based on concentrate most of its activities in one location,
diffusion and adaptation of the parent fails to take advantage of the optimally
distributed value chain.
company’s knowledge and expertise to The strategy is susceptible to high levels of
foreign markets. currency and political risks. Being too closely
identified with a single country, an increase in
thevalue of the currency may make the product or
service unattractive abroad.
 C. GLOBAL STRATEGY
A global strategy emphasizes
economies of scale—due to the
standardization of products and
services as well as the centralization of
operations in a few locations.
RISK AND CHALLENGES
A firm can enjoy scale economies by concentrating
scale-sensitive resources and activities in one or a
few locations. Decisions about locating facilities
must weigh the potential benefits from
concentration against higher transportation and
tariff costs.
The geographical concentration of any activity may
also tend to isolate that activity from the targeted
markets.
Concentrating an activity in a single location also
makes the rest of the firm dependent on that
location.
 D. MULTIDOMESTIC STRATEGY
Multidomestic Strategy is a marketing approach where a
company focuses on customizing advertising and
commercial efforts to local markets.
The company might introduce a new brand for each region,
adjusting marketing, packaging, services and sometimes
product lines to match local preferences, norms and
customs.
Risks and Challenges
Higher costs
Difficulty in maintaining consistent quality
Duplication of effort
Examples:
1. Nestle: The company has a portfolio of over 2,000
brands, including KitKat and Nescafe. Nestle adapts
its products to local tastes and preferences in each
market.
2. Coca-Cola: Coca-Cola is a global beverage company
in over 200 countries. The company adapts its
marketing campaigns and products to local tastes in
each market.
 E. TRANSNATIONAL STRATEGY

Strive to optimize the trade- Examples:

offs associated with 1. Unilever: Offers different
efficiency, local adaptation, brands in different regions
Risks and Challenges:
and learning. It seeks but has a single corporate
efficiency not for its own sake, Potential of alienating local strategy and identity.
but as a means to achieve customers 2. McDonald's: A giant fast-
global competitiveness. Difficulty centralizing all food chain with the same
It recognizes the value of local core menu items worldwide,
locations
responsiveness, but as a tool as well as the same brand
for flexibility in international name, identity, and
operations. marketing.
F. GLOBAL OR REGIONAL? A SECOND LOOK AT
GLOBALIZATION

Full-scale globalization may not be Reasons:

the best strategic move for many
types of firms.
Recent research indicates that
most companies are regional or, at
best, bi-regional rather than global.
> distance still matters
> despite improved communications;
trading blocs exercise power over regions
> regional integration occurs faster than
global integration.
 THE FOUR ENTRY MODES OF
INTERNATIONAL EXPANSION

EXPORTING LICENSING and STATEGIC

ALLIANCES and
WHOLLY OWNED
1. Benefits FRANCHISING JOINT VENTURES SUBSIDIARIES
1. Benefits 1. Benefits 1. Benefits
2. Risks and 2. Risks and 2. Risks and
2. Risks and
Limitations Limitations Limitations Limitations

1. 2. 3. 4.
 High WHOLLY OWNED
SUBSIDIARIES

JOINT
Extent of Investment Risk
VENTURE
STRATEGIC
ALLIANCE

FRANCHISING

LICENSING

EXPORTING
Low
Low High
Degree of Ownership and Control
 EXPORTING

Exporting consists of BENEFITS RISKS AND LIMITATIONS

provides a low cost/risk you can lose focus on your
producing goods in home markets and existing
way to enter foreign customers.
one country and no willingness to share market
markets
selling them in expand your markets
information with the exporting
firm.
another.
 LICENSING
BENEFITS
not need to incur the costs of
is when you allow producing, promoting, packaging,
someone else to sell or selling your product.
your royalty payments can last a
your products very long time.
RISKS AND LIMITATIONS
only receive a portion of the
profits from the sale of your
product
If your product does not sell
well, you will not receive
royalty payments.
 FRANCHISING
means that you're BENEFITS
limiting the risk exposure
allowing another that a firm has in overseas
person to duplicate markets while expanding
your business in the revenue base of the
parent company.
another location.
RISKS AND LIMITATIONS
includes restrictions on how
you can run the business.
receives only a portion of the
revenues in the form of
franchise fees instead of the
entire revenue
 STRATEGIC
ALLIANCE
strategic partners

BENEFITS RISKS AND LIMITATIONS

maintain their status as
independent and
separate entities, share organizational advantage Uneven alliances
the benefits and control economic advantage may also create a
over the partnership, and strategic advantage competitor
political advantage
continue to make
contributions to the
alliance until it is
terminated
 JOINT VENTURE

entail the creation of a

third-party legal entity
a combination of two or
BENEFITS RISKS AND LIMITATIONS
sharing of risks and costs work and resources
more parties that seek
access to new knowledge , aren't distributed
the development of a
expertise and greater equally
single enterprise or resources
project for profit, complex
flexibility
sharing the risks
associated with its
development
 WHOLLY OWNED
SUBSIDIARIES
is a situation in which a
multinational company
owns 100 percent of the
BENEFITS RISKS AND LIMITATIONS
Complete control Burden of entire loss
stock in the venue.
"GREENFIELD VENTURE"
Diversification Diverse rules and
- a form of market entry
Secrecy regulations
strategy with establishment
of a new wholly owned
subsidiary in a foreign
country by constructing its
facilities from start.
THANK
YOU
 TWO
TRUTHS
ONE
LIE
 TWO TRUTHS
ONE LIE
1. Global economy can be defined as the sum of activities that take place both
within a country and between different countries.
2. Each country is a combined unit, with its own industrial production, labor market,
financial market, resources and environment.
3. The global economy is under pressure from multiple complex and interconnected
crises.
 TWO TRUTHS
ONE LIE
1. Global economy can be defined as the sum of activities that take place both
within a country and between different countries. TRUE
2. Each country is a combined (separate) unit, with its own industrial production,
labor market, financial market, resources and environment. WRONG
3. The global economy is under pressure from multiple complex and interconnected
crises. TRUE
 TWO TRUTHS
ONE LIE
POTENTIAL BENEFITS OF INTERNATIONAL EXPANSION INCLUDE;

1. Increase Market Size.

2. Explore Reverse Innovation.
3. Enhance a Product's Economic Potential.
 TWO TRUTHS
ONE LIE
POTENTIAL BENEFITS OF INTERNATIONAL EXPANSION INCLUDE;

1. Increase Market Size. TRUE

2. Explore Reverse Innovation. TRUE
3. Enhance a Product's Economic (Growth) Potential. WRONG
 TWO TRUTHS
ONE LIE
1. Countries vary significantly in their level of political risk.
2. Currency fluctuations can pose substantial risks.
3. Management risks is may not be considered the challenges and risks that
managers face when they must respond to the inevitable differences that they
encounter in foreign markets.
 TWO TRUTHS
ONE LIE
1. Countries vary significantly in their level of political risk. TRUE
2. Currency fluctuations can pose substantial risks. TRUE
3. Management risks is may not (may) be considered the challenges and risks that
managers face when they must respond to the inevitable differences that they
encounter in foreign markets. WRONG
 TWO TRUTHS
ONE LIE
Risks and Challenges in the Multidomestic Strategy
1. Higher costs.
2. Difficulty in maintaining consistent quality.
3. Duplication of comfort.
 TWO TRUTHS
ONE LIE
Risks and Challenges in the Multidomestic Strategy
1. Higher costs. TRUE
2. Difficulty in maintaining consistent quality. TRUE
3. Duplication of comfort (effort). WRONG
 TWO TRUTHS
ONE LIE
Reasons why there are more Regional companies than Global:
1. distance still matters
2. despite improved communications; trading blocs exercise
power over regions
3. global integration occurs faster than regional integration.
 TWO TRUTHS
ONE LIE
Reasons why there are more Regional companies than Global:
1. distance still matters. TRUE
2. despite improved communications; trading blocs exercise
power over regions. TRUE
3. global (regional) integration occurs faster than regional
(global) integration. WRONG
THE
END! PREPARED BY:
ADAYA, SHEENA MEA
BONAO, NIKKI
MUNAR, DANICA
NAVAL, KAYE ELLYZA
RAFAEL, CAMILA MARIE
SELGA, GWYNETH