Strategic Management slides

BUAD497
Strategic Management
Fall 2013
Session 20:
International Strategy
Yong Paik, Ph.D.
Assistant Professor
Marshall School of Business
University of Southern California

International Expansion

Concept? => Why? => Where? => How?
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International Strategy Concept
 What is International Strategy?
 A strategy through which the firm sells its goods or services outside its domestic market (country of origin):
 cf. “host country” means foreign country
 Multi-National Corporations (MNCs)

 Corporate Strategy: Geographical Expansion

 When international strategies are successful, firms can derive four basic benefits:
1.
2.
3.
4.

Increased market size (Growth)
Return on Investment (Efficiency)
Economies of Scale and Learning (Knowledge)
Location advantages
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Benefits of International Strategy
1. Increased market size
 Increase growth opportunities
Ex. Coke & Pepsi, Wal-Mart

 Domestic market may lack the size to support efficient scale of manufacturing facilities
Ex. Boeing

 The size of an international market affects a firm’s willingness to invest in R&D to build competitive advantage  Larger markets usually offer higher potential returns and thus pose less risk for a firm’s investment (which leads to our second point)
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Benefits of International Strategy
2. Return on Investment
 Large investment projects may require global markets to justify the capital outlays (Ex. Pharmaceutical R&D)
 Weak patent protection in some countries implies that firms should expand overseas rapidly in order to preempt imitators
 Extend a product’s life cycle:
 innovation occurs in home-country market, especially in an advanced economy, and demand for product develops in other countries, so exports provided by domestic organization (ex; mobile phones)
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Benefits of International Strategy
3. Economies of Scale and Learning
 Expanding size or scope of markets helps to achieve economies of scale in