GENERIC INTERNATIONAL STRATEGIES

1
GENERIC INTERNATIONAL STRATEGIES

• FEBRUARY 2002
• DAVID COLLIS

2
GENERIC INTERNATIONAL STRATEGIES AGENDA

• WHAT ARE THEY?
• IMPLICATIONS
• HOW DO YOU CHOOSE?

3
FUNDAMENTAL TRADEOFF
Local Responsiveness
Global Efficiency
4
GENERIC INTERNATIONAL STRATEGIES
Multi- domestic
Trans- national
Different Business System Similarity Same
Global
Export
No Yes Economies of
Integration
5
Local Strategy

• Choice is to compete in only one country
• celebrate domestic idiosyncrasies
• single market supports efficient producer
• barriers to trade, transport costs
• Example Ethnic food products
• Dry cleaning
• INDIGENOUS

6
Export Strategy

• Exploit a unique country factor advantage
• minerals
• raw material commodities
• low labour costs
• unique factor
• Companies sell the factor to whoever desires it
  worldwide
• limited presence outside the home country
• Example Wheat
• NFL
• FACTOR COST

7
Global Strategy

• Pure global strategy
• one standard product
• sold the same way around the world
• exploiting scale economies in shared activities
• appealing to a universal global customer
• Example Shipbuilding, aircraft, Rolex watches
• GLOBAL EFFICIENCY AND SIMPLICITY

B
C
A
8
Multidomestic Strategy

• A presence around the world but each country
  pursuing its own strategy
• transferring skills and people from the home
  country
• product development, marketing, operations
• choosing among and adapting strategies to the
  local market
• Limited interdependencies leave each country to
  stand on its own
• portfolio of individual country organisations
• - performance determined on a country by country
  basis
• Example Industrial gases, cookies/biscuits
• TRANSFER KNOW-HOW
• LOCAL RESPONSIVENESS

9
Transnational Strategy

• A coordinated but dispersed worldwide network
• locally responsive and globally efficient
• transferring skills and sharing activities where
  economic
• exploiting its worldwide flexibility and insider
  status
• learning/sensing
• option value
• Coordination becomes the competitive advantage
• Management becomes the challenge
• COORDINATED GLOBAL NETWORK
• TRANSCEND THE TRADEOFF

10
International Strategies
11
Business System Similarity

• How similar is the business system around the
  world?
• - Consumer taste
• - Culture
• - Media
• - Distribution channels
• - Logistics infrastructure
• - Rules and regulations
• - Raw materials
• - Related and supporting industries

Similarities Differences
12
Country Interdependencies

• Am I better off in country A by virtue of my
  presence in country B?

Pro Con Fixed RD cost High Transport
Costs Economies of Scale Government
Restrictions Experience Curve Different
Customer Needs Factor Cost Differences Incompatib
le Standards and Volatility Management
Costs Global Customers -
time/expense Global Brand Customers -
autonomy Common Worldwide Business System
Differences Competitors Imitative Innovations
13
Analytic Tool

• The value chain allows explicit calculation of
  the benefits of global integration
• varies by activity
• upstream/downstream divide

Support Activities
Primary Activities
14
Causes of Globalisation

• Some drivers of globalisation are environmental,
  exogenous to the firm
• rising RD costs
• changing scale economies
• homogenizing buyer needs/channels
• shifts in government policy
• Some drivers of globalisation are strategic and
  can be introduced by the firm
• homogenize demand by product design and marketing
• reduce cost of customizing
• disperse production without sacrificing scale
  economies
• exploit information systems to facilitate
  coordination

15
Choice of International Strategy

• Never black and white
• Varies by industry and segment
• Varies over time
• Occurs first within region
• Triad
• Ultimately is a firms strategic choice
• No one best strategy
• Choose one and implement consistently

16
Is there one best strategy?

• Rugman regional / multidomestic
• Doz et al metanational / transnational
• Govindarajan Gupta global
• Real issue is whether the generic strategies are
  mutually exclusive, or firms can pick and choose
  aspects of each
• Purchasing arbitrage, brand replication, sales
  localisation

17
Generic International Strategies
Multi- domestic
Trans- national
Dispersed Configuration Concentrated
Global
Export
Low High Coordination
18
Bibliography

• From global to metanational Doz, Santos and
  Williamson HBS Press 2001
• The quest for global dominance Govindarajan and
  Gupta Jossey-Bass 2001
• The end of globalisation Rugman Random House
  2000
• Total Global Strategy Yip Prentice Hall 1995
• Managing across Borders Bartlett and Ghoshal
  HBS Press 1989 and 2000
• The Dynamics of International Strategy
  Segal-Horn and Faulkner International Thomson
  Press 1999
• Competition in Global Industries Porter HBS
  Press 1986