International Business

- Difference in consumer taste and preferences

- Difference in traditional practices and infrastructure

- Difference in distribution channels

- Take product from domestic market and sell it with only minimal local customization

- Critical elements of value chain stay centralizided (R&D, Procurement, Production)

- Transfering core competencies of the company to locations where local competitors in host market lack them

- Increase profitability by customizing goods or services

- Flexibly organized according to the needs of different national markets

- Minimizing political and exchange rate risk / Greater prestige through local / customized elements

- World is seen as a single integrated market / no differences in consumer preferences

- Concentration of R&D, Production and Marketing in the few most favourable locations

- Minimizing costs in industries with low margins and competition on a global scale

- World is seen as a portfolio of regionally integrated markets / Differences in consumer preferences from region to region

- Flexible based on constant environment scanning / Concentration of R&D, production and marketing in the most favourable locations

- Benefiting from both global integration and local responsiveness

Probably not!

An international (home replication) strategy may not be viable in the long term

- To survive firms may shift to a global standardization strategy or transnational strategy in advance of competitors

Localization may give a firm a competitive edge, but if the firm is simultaneously facing aggressive competitors, the company will also have to reduce its cost structure

Structure - Structure follows strategy

Centralization

Decentralization

- International division

- Area divisions

- Worldwide product division

- Global matrix

Foreign sales/total sales is low - start for internationalization

+ Easily integrated into existing

+ Logical first step

- Hard to coordinate

- Low synergies and isolation, difficutl introduction of new products and transfer of core competencies

> Foreign market are to be exploited systematically

> regional markets differ stronger from each other

> economies of scale are regional

> Foreign sales / Total sales is high

+ Suited to multi-domestic strategies

+ Make rapid decisions that depend upon local tastes and regulations

+ Eliminate costly transportation associated with importing goods produced overseas

- Large overhead

- May be hard to coordinate information flows

> A companys product share a common technology

> Competitive pressure push for a global strategy

+ Maximize scale economies

+ Focus on quality

+ Little duplication of facilities

+ Structure allows for tight, centralized control

- Slow information processing

- Difficult to coordinate the production and marketing areas

- Slow reaction to changing environments

> Cost pressure is high

> Pressure for local responsiveness are comparatively low

+ Econmies of scale can be reaped at a global level

+ Easier to coordinate (because both domestic and foreign manager report to the same person)

+ Allows each major product line to focus on the specific needs of its customers 

- Harder to be locally responsive

- May be hard to coordinate information flows between geographic regions

- Duplication of facilities and personnel within each division

Theoretical advantages

- Competition between product and area groups

- "Best of both worlds": Advantages of both area and product based primary structures

- Efficient information flows

Practical reality:

- Ego wars between manager leads to delayed decision making

- No unity of command, always to bosses to report to

- Resource waste through strategic hedging of group manager

Step 1: Motivation Check

Step 2: Readiness Check

Step 3: Market Selection & Entry Check

1. Drivers (What compels us to go (more) international?

2. Benefits (What do we hope to gain?

3. Synergies (How will this move helps us to gain synergies with other parts of our operations?

Proactive drivers (pull) 

- economies of scale

- growth opportunities

- favourable resource availability

- government incentives

Reactive drivers (push)

- Internationalization of customers and competitors

-Trade barriers

- Legal rules and restrictions

- revenues

- contribution margins

- relative market share

1. Company readiness (Are we ready for international operations - in general or to specific markets?)

2. Market readiness (Are there markets that are ready to receive our products or services?)

3. Product readiness (Is the product or service we have in mind ready to be sold internationally in general or in specific markets outside our home market?)

1. Lack of knowledge about foreign markets

2. Lack of ressources

3. Lack of networks

- Customer characteristics (demographics, growth of demand, size of customer segment, intensity, purchasing power)

- Competitive Positioning of focal brand (unique selling proposition (Angebot) of product / What are its superior features compared to competitive offerings)

- Competition (Intensity, Relative Strength, Potential reactions to market entrants)

- Pricing (The cost of product landed in the foreign market (shipping and so on), margins for distributor, wheter the firm pursues a penetration or a skimming price

- Channel effort and productivity (margins and incentives offered to distribution intermediaries)

- Customer receptivity (Aufnahmebereitschaft) (perceived benefits of product, promotional effort directed to customers

- Target (Which market do we want to enter?)

- Pacing (When do we want to enter these markets?)

- Scale (How do we enter - massive or low scale?)

- Target country (PESTEL)

- Target industry (industry analysis

- Set priorities

Favourable markets

- Are politically stable

- Have free market system

- Have relatively low inflation rates

- Have low private sector debt

Less desirable markets

- Are politically unstable

- Have excessive levels of borrowing

Markets are also more attractive when the product in question is not widely available yet!

Porters five forces 

+ The ability to pre-empt rivals by establishing a strong brand name

+ The ability to build up sales volume and ride down the experience curve ahead of rivals and gain a cost advantage over later entrants

- Pioneering costs arise the foreign business system is so different from that in a firm's home market that the firm first must devote considerable time, effort and expense to learning the rules of the game

-  The cost of business failure

- The cost of promoting and establishing a product offering, including the costs of educating customers 

A waterfall strategy is when you enter one market at one time and not like in the sprinkler strategy to enter various strategy at the same time. 

+ Minimization of investment risk

- Danger of neglecting important markets

+ standardized market entry

- bad investments are highly possible

Exporting or Foreign direct investment (There are a lot of different possibilities in between!)