Module 2

Strategies for international

growth
 4 strategies for going
international
Transnational
Global
Specialized facilities
Views the world as a
permit local
High single market;
responsiveness; complex
operations are controlled
coordination
centrally from the
mechanisms provide
Integratio corporate office.
global integration.
n
Multinational
International
Several subsidiaries
Low Uses existing
operating as stand-alone
capabilities to expand
business units in
into foreign markets.
multiple countries.

Low High

Local Responsiveness
Exploiting Global Integration
Nokia- 100 year old Finnish company-
Pulp & Paper business
Oil crisis- 1973- Go for TV & PC-
Wireless telecommunication- Mobile
phones
R & D consumer driven, market
driven
 The logic of global
integration
Global integration means centralized
control over key resources and
operations that are strategic in value
chain.
Many companies expand
internationally while maintaining
close control over value chain
The company that focuses on global
integration as a way of creating
competitive advantage is a
 Global integration
Not necessarily imply selling same
product all over the world
It is about How to address local
customers needs
The business advantage of
GI

Economies of scale
Value chain linkages
Serving global customers
Global branding
Leveraging capabilities
World class standardization
Competitive platforms
Information advantage
 The tools for global
integration
5 ways of exercising control
1. Centralization or personal control
2. Standardization based on control through
formalization
3. Contracting focused on control of outputs
4. Socialization built around control over
norms and values
5. Mutual adjustment or control through
informal interaction
 Implementing global
integration
1. Alignment
2. Standardization
3. Socialization
 Expatriation: the heart of global
integration
1. Expatriation allows firm to avoid the
pathologies of excessive
centralization
2. The standards of parent firm are
transferred abroad via expatriates
3. Mobility promotes the diffusion of
shared values
 Mastering expatriation
The evolution of expatriation
Understanding expatriate
phenomenon
The purpose of expatriation
Managing international transfers
 Purpose of expatriation
Corporate agency

Long
term

Assignm
ent
duration
Short
term

Demand driven Learning

driven

Assignment
purpose
 Managing international
transfers
Selecting expatriates
Preparing and orienting them
Adjusting to expatriate role
Managing the performance
Compensation
Repatriation
 Beyond the traditional expatriate
model
Growing women expatriates, TCN,
younger expatriates
The tensions in the expatriate cycle
Home / host country tensions
Global/ local tensions
Short term/ long term tensions
Tension between cost and investment
Demand & supply tensions
 Limits of global integration
Decreases firms ability to be locally
responsive to local needs and
demands
Local customers demand specific
solutions fitting local needs requiring
extensive customization
Insensitivity to local issues
Lack of speed
The new motto think local act local
Becoming locally responsive
The roots of responsiveness
Understanding diversity
Responding to diversity
The challenges of localization
 The roots of responsiveness
Local responsiveness was chosen in early part of 20th century
Challenges: logistical delays, local competitors
1960-70 US companies faced less pressure of
internationalization
Coca cola 1990 new globally integrated firm CEO noted in
2000 we do not do business in markets, we do business in
society , we should stay out of way of our local people and let
them do their jobs
Local does not imply national but to any market having
dictinct needs

Business advantages of responsiveness: Sensitivity to

local conditions, Behave like domestic firms, adjustment to local
taste, More receptive to local trends, less likely to miss market
opportunities,
 Understanding diversity
Relates to cultural differences between parent country & its
local subsidiary
Know yourself: The cultural perspective
Culture differentiates management practices
Universalist culture: Believe in guiding rules, procedures and
principles
Particularistic culture: everything depends on nature of relationship
and specific context
Know where you are: The institutional perspective
Differences in institutional environments
Institutional perspective: Understanding business behavior in
different countries, Interrelationship between economic,
educational, financial, legal and political system
Know who you talk to : The network perspective
Pressure to conform to international peers or competitors
Learning from friends when abroad
Global fashion & fads
 Responding to diversity
Diversity exists, be it cultural, or institutional,
minimized or maximized by networks.
It appeals to some, and horror to others
The internationazation sequence: Where next?
Entry mode: how to go in?
HR practices: how strategic are they?
Barlett & Ghosahal rightly emphasized that
national afiliates in multinational firm have
differentiated roles ad responsibilities
 Black hole
High

Strategic
importance of
local
environment

Low

Low High

Level of local resources &

 Capitalize on diversity
Build cultural synergy
Moving jobs to people
 The challenges of localization

Why localize?
Local authorities and public opinions
Local network
Local workforce
Cost
Managing alliances & Joint ventures

Chemco case study

Will equity buy more respect?
Will more expatriates help
integration
What can be done to change the
direction of the joint venture?
Whys & whats of alliances
Whys?
International growth
To cut cost of entry
To reduce Cost of exit
Objective of leveraging opportunities
Aim of acquiring knowledge
Economies of scale
Economies of scope
Entering into protected market
 What kind of alliance?
What is the business objective?
What is the value added of engaging in
business relationship that ill inevitably
consume significant resources before
yielding results?
What form of alliance should a company
choose given its objectives?
What are the HR implications of such a
choice?
 A joint venture (JV) is a business agreement in which the parties
agree to develop, for a finite time, a new entity and new assets by
contributing equity. They exercise control over the enterprise and
consequently share revenues, expenses and assets
A strategic Alliance is an agreement for cooperation among two or
more independent firms to work together toward common
objectives. Unlike in a joint venture, firms in a strategic alliance do
not form a new entity to further their aims but collaborate while
remaining apart and distinct .
A strategic Alliance is a relationship between two or more parties
to pursue a set of agreed upon goals or to meet a critical business
need while remaining independent organizations, partners may
provide the strategic alliance with resources such as products,
distribution channels, manufacturing capability, project funding,
capital equipment, knowledge, expertise, or intellectual property.
The alliance is a cooperation or collaboration which aims for a
synergy where each partner hopes that the benefits from the
alliance will be greater than those from individual efforts.
 A strategic framework for
understanding international alliances
Resource alliance

Competitiv 2 dimensions of
e alliances related to
HRM that require
careful consideration:
1. The strategic intent
Long term
of the partners
strategic
2. The expected
context
contribution of the
Complement venture to the
ary creation of new
knowledge

Low High

Opportunities for Knowledge creation

Types basis
What matters is the process not the
deal?
 Planning & negotiating alliances
HR role in developing the initial
strategy
Partner selection