Strategic management jeff dyerthird editionchapter 9inter

Strategic Management
Jeff Dyer
Third Edition
Chapter 9
International Strategy
Professor’s Goals for this Lecture
There are many types of problems that can be solved for a
company by doing a cost analysis. A cost analysis can be used
to solve problems as diverse as marketing (e.g., how much to
spend to acquire additional customers) or HR (how much labor
costs go down per unit with increases in volume). The principle
tools to be learned in this chapter are designed to help the
student examine the relationship between a company’s size
(measured in volumes produced or market share) and cost per
unit. This is primarily reinforced by teaching students how to
create a scale/experience curve (both done in the same way with
“cost per unit” on the “Y” axis but the scale curve uses volume
for a given year on the “X” axis whereas the experience curve
uses cumulative volume on the “X” axis. The students will have
the opportunity to examine the relationship between
scale/experience in the following assignments:
- the homework assignment involving calculating an experience
curve in semiconductors
- Fry’s Credit Card Mini-case (in lecture); considers the
relationship between total number of subscribers (X axis) and
cost per subscriber (Y axis)
- the Southwest Case (after lecture); considers the relationship
between total passengers flown (or market share) and
performance (profitability) in the industry

1
What is an “International” Strategy
Strategy
A strategy is a goal and set of policies designed to achieve
competitive advantage in a particular marketplace
Global Strategy
A global strategy is a goal and set of policies to achieve
advantage by leveraging resources, assets, and knowledge
across geographic markets
Copyright ©2020 John Wiley & Sons, Inc.
2
2
Globalization of Business
Foreign Direct Investment- Direct investment in production or
business in one country by a business from another country.
Multinational Firms- Firms that sell or produce in multiple
countries.
Some of the differences between countries that increase
complexity and affect the success of international strategies
include variations in:
• Customer tastes, needs and income levels
• Government regulations
• Legal systems
• Public tolerance for foreign firms
• Reliability, and even existence, of basic infrastructure, such as
roads and electricity

3
3
Strategic Objectives
Efficiency
Managing
Risk
Learning
National
Differences
Economies
Of
Scale
Economies
Of
Scope
Why Firms Expand Internationally
Reasons for going global: Growth, Efficiency, Managing Risk
and Learning
4
These are the three reasons people tend to expand
internationally.
4

Efficiency
Managing
Risk
Learning
National Differences
Economies of
Scale
Economies of
Scope
Differences in factor costs
Extend product life cycle
First mover/only provider advantages
Cross subsidization
Diversify macroeconomic risk
Diversify operational risk
Learning from differences between countries
Innovation occurring in more, diverse units
Why Firms Expand Internationally Cont.
5
5

Economies of Scale
Economies of Scope
- Differences in factor costs
- Extend product life cycle
- First mover/only provider advantages
- Cross subsidization
- Diversify macroeconomic
risk
- Diversify operational risk
- Learning from differences
between countries
- Innovation occurring in
more, diverse units
* Economies of
scale
* Cross over
customers
* Increased
movement
down learning
curve

Efficiency
Managing
Risk
Learning
Why Firms Expand Internationally Cont.
6
Economies of Scale
Economies of Scope
- Differences in factor costs
- Extend product life cycle
- First mover/only provider
advantages
- Cross subsidization

- Diversify macroeconomic
risk
- Diversify operational risk
- Learning from differences
between countries
- Innovation occurring in
more, diverse units
Economies of
scale
Cross over
customers
- Increased

movement
down learning
curve
* Sharing investments
across products,
markets, businesses
* Sharing costs across
products, markets,
businesses
* Portfolio diversification
* Creation of options
and side-bets
* Shared learning across
products, markets,
businesses
Efficiency
Managing
Risk
Learning
Why Firms Expand Internationally
7
Where Firms Should Expand: CAGE
Geographic Distance
Cultural Distance
Economic Distance
Administrative Distance
Determinants
of Success
The smaller the distance the better
8

The CAGE model is a very common one and important to
understand. Gives a good framework to make the decision to
expand internationally
8
Attributes
Different languages
Different ethnicities
Different religions
Different social norms
Products/Industries Affected
1. High linguistic content
2. Affects consumer national identity
3. Carries country specific associations
4. Product features vary easily (size,
packaging, standards, etc.)
Cultural Distance
9
9
Administrative Distance

Attributes
Absence of colonial ties
Absence of shared monetary system
Political hostility
Government policies
Institutional weakness
1. Producers of staple goods
2. Producers of “entitlements”
3. Large employers
4. Large suppliers to government
5. National champions
10
Geographic Distance
Attributes
Physical remoteness
Lack of common border
Lack of sea or river access
Size of country
Weak transportation infrastructure
Differences in climate

1. Low value to weight ratio
2. Fragile or perishable
3. Communication or connectivity
important
4. Local supervision important
11
Economic Distance
Attributes
Differences in consumer income
Differences in cost or quality of:
Natural, financial, human
resources
Infrastructure
Intermediate outputs
Information or knowledge
1. Nature of demand varies with income
2. Economies of scale important
3. Factor cost differences important
Different distribution systems

12
Global Strategies ComparisonMulti-
DomesticGlobalArbitrageCompetitive AdvantageAchieve local
relevance through national focus while achieving some
economies of scaleAchieve scale and scope economies through
international standardizationAchieve absolute economies
through international specializationConfigurationMainly in
foreign countries that are similar to home base (limit effects of
distance)In a more diverse set of countries (exploit
distance)CoordinationBy country (emphasis on local
presence)By business, region, or customer with emphasis on
horizontal relationships for cross-border economies of scale
By function, with emphasis on vertical relationships, even
across org. boundaries
13
Global Strategies ComparisonMulti-
DomesticGlobalArbitrageControlsExcessive variety or
complexityExcessive standardizationNarrowing spreadsChange
BlockersEntrenched country chiefsAll-powerful unit, regional,
or account headsHeads of key functionsCorporate
DiplomacyAddress issues of concern with discretion, emphasis
on cultivating local presenceAvoid appearance of homogeneity
or hegemonism (especially if US firm)Address exploitation or
displacement of suppliers, channels, or intermediariesCorporate
StrategyScope selection
Variation
Decentralization
Partitioning
Modularization

Flexibility
Partnership
Recombination
InnovationRegions and other country groupings
Product or business
Function
Platform
Competence
Client IndustryExploiting Distance
14
A Framework:
Global Integration - Local Differentiation
High
High
Low
Low
Pressures for Standardization
Pressures for Local Responsiveness
Global Strategy
(aggregation)
Multi-domestic Strategy
(adaptation)
15
15

EXAMPLE: THE MULTI-DOMESTIC APPROACH
Some Companies Emphasizing this Approach:
Philips
KPMG
FedEx
Unilever
Carrefour
Nestle
BASF
GM
pwc
16
16
These companies have “country heads” so that the company may
not look exactly the same in each nation
EXAMPLE: THE GLOBAL STRATEGY
Panasonic
HP
Toyota
American Express
Coca-Cola
Boeing
Sony
IBM
Intel
CAT
17

17
These are global in the sense that there is a head and each
country strives to be the same
High
Low
Same
Different
Global
Strategy
(Cost)
Transnational or
Mass Customization
Strategy
(some functions are
global, some are local)
Multi-Domestic
Strategy
(Differentiation)
TYPES OF INTERNATIONAL STRATEGY
Pressures for Standardization
Pressures for Local Responsiveness
18
Function/Activity
National

Regional
Global
Research & Development
Product Design
Components
Assembly
Marketing
Sales & Distribution
Service
X
X
X
X
X
X
X
X
X
X
X
Trans-national: Achieving both Integration and Differentiation
X
X
X
19
EXAMPLE: THE TRANSNATIONAL STRATEGY

Samsung
McDonald’s
P&G
Merck
Whirlpool
Hyundai
20
20
Exporting
Conditions favoring Exporting
Limited sales potential in target country; little product
adaptation required
Good available distribution channels; close to existing
production plants
High target country production costs
Liberal import policies (low tariffs); high political risk
Advantages
Minimizes risk, investment
Speed in entering market
Maximizes scale, utilization of existing facilities
Disadvantages
Trade barriers, tariffs (5%+)
Transportation costs
Limits access to local information
Company viewed as outsider

21
Licensing/Franchising
Conditions favoring Licensing/Franchising
Import and investment barriers that increase cost, limit FDI
(high tariffs)
Institutional environment that secures legal protection
Tangible or intangible assets can be fairly priced
Low sales potential in target country; large cultural distance
Licensee lacks ability/resources to become competitor
Advantages
Minimizes risk, investment
Speed in entering market
Able to circumvent trade barriers
High return on investment; average license royalty was 8.5% of
licensee revenues (2002).
Disadvantages
Lack control over use of assets
Licensee may become competitor
Potential for knowledge spillovers
Return is for limited period
22
Wholly Owned Operations
Conditions favoring Sole Ownership
Import barriers that increase import costs (e.g., tariffs)
Tangible or intangible assets can’t be fairly priced; a unique
product or service; want to minimize spillover and exploit the

unique product
Cultural distance between home/host countries is small
High sales potential in target country
Advantages
Greater knowledge on local market and customer
Increases ability to appropriate specialized skills
Minimizes knowledge transfers
Can be viewed as insider
Disadvantages
Most risky and expensive way to enter a market (investment,
resources, commitment)
Inability to manage local resources in local market
23
Joint Ventures/Alliances
Conditions favoring JVs/Alliances
Similar to sole ownership plus: cultural distance is large
Government restrictions on foreign ownership
Local company can provide complementary skills
Local knowledge, resources, distribution, brand name, etc.
Advantages
Overcome ownership restrictions and cultural distance
Combines resources of two companies, potential for learning
Viewed as insider
Reduces investment; can spread faster into more markets and
not be as constrained by funds
Disadvantages
Difficulties in managing JV

Dilution of management control
Greater risk (than export, license)
Partner may become competitor; potential for knowledge
spillovers
24
Choosing Between Greenfield, Acquisition, and Joint Venture
Company owns proprietary product/ process technology
Cultural Distance between home and target country is small.
Low political risk, neutral or positive attitude toward foreign
owners.
Important to achieve high level of integration/ coordination
with home country operations.
Greenfield
Acquisition
Foreign company owns or controls scarce resources
Cultural Distance between home and target country is small.
Low political risk, neutral or positive attitude toward foreign
owners.
Important to achieve high level of integration/ coordination
with home country operations.
Need to reduce rivalry, eliminate a competitor
Joint Venture
Foreign company owns or controls scarce resources.
Cultural Distance between home and target country is large.
High degree of political risk; negative attitude toward foreign
acquirers
Important to reduce rivalry, eliminate a competitor

Need local autonomy and flexibility to succeed (not high level
of coordination)
Strategy: Global Strategy (Integration) Multi-domestic
Strategy (Differentiation)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
------------------------------
More control and integration Less control but more
autonomy
Firm capabilities are most important Local
resources/knowledge are most important
25
Ownership Test
Can you achieve the same results without having to put forth the
capital and managerial time necessary to own?
26
Experience and Entry Modes
27

Table 9.2 Entry Modes
28
Copyright
Copyright © 2020 John Wiley & Sons, Inc.
All rights reserved. Reproduction or translation of this work
beyond that permitted in Section 117 of the 1976 United States
Act without the express written permission of the copyright
owner is unlawful. Request for further information should be
addressed to the Permissions Department, John Wiley & Sons,
Inc. The purchaser may make back-up copies for his/her own
use only and not for distribution or resale. The Publisher
assumes no responsibility for errors, omissions, or damages,
caused by the use of these programs or from the use of the
information contained herein.
29
29
Copyright
Copyright © 2020 John Wiley & Sons, Canada, Ltd.
All rights reserved. Reproduction or translation of this work
beyond that permitted by Access Copyright (The Canadian
Copyright Licensing Agency) is unlawful. Requests for further
information should be addressed to the Permissions Department,
John Wiley & Sons Canada, Ltd. The purchaser may make back-

up copies for his or her own use only and not for distribution or
resale. The author and the publisher assume no responsibility
for errors, omissions, or damages caused by the use of these
programs or from the use of the information contained herein.
30
30
Exporting
Licensing / Franchising
Alliance / Joint Venture
Wholly Owned Subsidiary
Investment required
Low
Low
Medium
High
Level of risk
Low
Low
Medium
High
Overcome trade barriers?
No
Yes
Yes
Yes
Speed of entry
Fast
Fast
Medium
Slow (faster for acquisition than greenfield)

Acquire local resources, including knowledge?
No
No
Yes
Yes
Viewed as insider or outsider?
Outsider
Insider
Possibly Insider
Possibly Insider
Degree of control
Low
Low
Medium
High
Strategic Analysis 2
The Five Forces of Porter
The Five Forces framework derived by Porter identifies the
factors in a specific market that have a substantial bearing on an
organization’s viability in its industry. These significant factors
include: “the threat of substitute products or services, the
bargaining power of suppliers, the bargaining power of buyers,
the threat of new entrants, and the rivalry among existing
competitors” (The Five Forces, n.d.).
The most prominent substitute product that Barnes & Noble
faces is the expansive digital market. The digital market
represents a high threat to Barnes & Noble as the company has
been unable to capture a sustainable competitive advantage in
this regard. As e-books and tablets began to trend in 2009, the
company was one of the first in the industry to find success
with e-readers and a self-publishing platform (Alter & Hsu,
2019). Unfortunately, overly frequent product releases in the

quickly evolving market hurt the company. “The company’s
digital strategy turned out to be a financial disaster. It has lost
more than a billion dollars on its Nook business, and online
sales remain anemic,” (Alter & Hsu, 2019).
In the case of Barnes & Noble, the bargaining power of buyers
(customers) is a high threat to the company’s overall
sustainability. Buyers in a market hold power when “there are
few switching costs to shifting business from one competitor to
another” (The Five Forces, n.d.). When the price of a hardcover
book or special edition from Barnes & Noble typically costs
close to $30, customers can easily switch to the major
competitor, Amazon, and find the same product for less (Tyler,
2018). This increases the power of buyers substantially.
The threat of new entrants in the bookseller industry maintains
a high threat for Barnes & Noble. The company has shifted the
strategy of some locations to illuminate the café setting as the
core business, and the new owner is hoping that more localized
and specific products will bring consumers back (Alter & Hsu,
2019). Despite these changes, independent bookstores are a
viable threat to the bookselling superstore. “Independent
bookstores are thriving again, and print sales are rising while e -
book sales are declining” (Alter & Hsu, 2019).
Concerning any competition within the industry, Amazon is
Barnes & Noble’s biggest rivalry, representing a high threat to
the sustainability and profitability of the company. The online
retailer provides a vast selection of books, as well as a cohesive
and synergized e-book and e-reader marketplace (Alter & Hsu,
2019). If rivalry in an industry is especially intense, product
prices can be driven down and overall profitability is likely to
suffer (The Five Forces, n.d.). These circumstances cultivate a
highly competitive environment wherein firms must endeavor to
lower prices, improve customer service, and match
technological advancements. Barnes & Noble is often beat
through price competition and improvements in technology.
Five Forces Summary
Porter’s Five Forces analysis highlights the problem that Barnes

& Noble currently faces. The organization struggles in
increasing product sales and overall profitability. All five
competitive forces indicate that the bookseller is part of a
highly competitive industry of specialty retail. Powerful buyers
and suppliers influence the market and pose threats to the
sustainability of Barnes & Noble. Moreover, the market is flush
with new entrants in the form of independent bookstores, while
Amazon serves as the firm’s biggest rival and most prominent
disruptor (Hyken, 2018). Given this information, several
popular strategies could be employed. Barnes & Noble could:
· shift its focus to services rather than products,
· develop new sustainable differentiation,
· build a more sufficient supply chain, or
· innovate new products to recapture lost interest.
BCG Analysis
BCG matrix is a framework was created by the Boston
Consulting Group and is used to evaluate the strategic position
of the business brand portfolio and its potential. It breaks down
the business portfolio into four categories and is based on
growth rate and market share.
Category 1 is Stars: This section focuses on products or services
that are in high growth markets in which organizations should
invest more. For Barnes & Noble, investment should be
increased in curated home goods that meet the needs
specifically of each community the locations serve (Wiener-
Bronner, 2018). A comparable company, Indigo, has found
success in Canada with this strategy by implementing a
“cultural department store for booklovers”.
Category 2 is Question Marks: Included in this category are
products/services of Barnes & Noble that represent the low
market share and high market growth. Products in this quadrant
typically grow quickly but consume copious amounts of
resources along the way (Kenton, 2019). The current agreement
with Starbucks Coffee falls into this section of the matrix. The
current agreement between the two companies seems to benefit
Starbucks more than Barnes & Noble. Overall sales should be

watched closely and analyzed to ensure the partnership is
mutually beneficial. As an alternative, the company could keep
the café service, but with the use of more localized and
independent coffee brands (Wiener-Bronner, 2018).
Category 3 is Dogs: These are those products or services that
are “prime candidates for divestiture,” (Kenton, 2019 para. 4).
In this regard, Nook has proven to be a failure and a cash trap
for the company. With more than a billion dollars in lost
profits, the company should stop attempting to revitalize the
project and move toward revamping its brand in other ways
(Alter & Hsu, 2019).
Category 4 is Cash Cows: This quadrant identifies products or
services that are a significant source of revenue for the
organization and that should be milked for as long as possible.
Despite a decline of store sales by 1.9% between 2018 and
2019, Barnes & Noble’s biggest source of profit remains to be
its retail stores (Barnes & Noble Reports, 2019). Under the
direction of new ownership, the organization is expected to
revamp its locations into brick-and-mortar locations that tailor
to each community it serves (Alter & Hsu, 2019). This
rebranding could be essential in milking the company’s cash
cow for as long as possible.
BCG Analysis Summary
This tool shows the areas of opportunities that the company
should explore and develop further. Though typically presented
in the form of a matrix, the BCG Analysis classifies potential
areas of growth and loss that have a profound influence over
Barnes & Noble’s profitability. Ultimately, Barnes & Noble
needs a more sustainable competitive advantage in the
constantly evolving market. After evaluating the stars, question
marks, dogs, and cash cows, the growth opportunities are
clearer and the stagnate components of the company have been
identified.
Resource-Based Analysis
The resource-based analysis could be argued as one of the most
widely accepted theories in understanding the competitive

advantage of a firm (D’Angelo, 2018). When analyzing Barnes
& Noble, the tangible assets, intangible assets, heterogeneous
resources, and immobile resources will be evaluated. Barnes &
Noble has significant tangible assets when considering brick
and mortar locations, distribution centers, products, and capital.
The company currently operates 627 bookstores in 50 states and
approximately 1,745,000 square feet of distribution center
capacity (Barnes & Noble, Inc., 2019b). Each location is
reported to have an average overall title base of 66,000 titles,
with as many as 133,000 in some locations (Barnes & Noble,
Inc., 2019b). As of April 30, 2019, the company had a debt-to-
equity ratio of 0.46, which is a significant decline from the
previous year’s ratio of 0.67 (Barnes & Noble, 2019a). At the
end of the fiscal year, the assets were valued at $1.784 billion
(Barnes & Noble, 2019a).
For the world’s largest brick and mortar bookseller, brand
reputation represents a significant intangible asset.In 2018, the
Reputation Institute recognized Barnes & Noble as the most
reputable retailer in the United States (Barnes & Noble, Inc.,
2019b). Furthermore, the processes within Barnes & Noble are
supported by a proprietary bookstore inventory management
system called Book Master. This technological advancement
assimilates POS features with a data warehouse-based
replacement system (Barnes & Noble, Inc., 2019b). The
company’s publisher, Sterling Publishing, also serves as an
intangible asset that could be further developed.
Barnes & Noble’s heterogeneous resources are a culmination of
publishers, wholesalers and distributors, and physical locations.
The supply chain for the company is comprised of over 500
publishers and over 30 wholesalers or distributors (Barnes &
Noble, Inc., 2019b). As noted, the physical locations carry an
average of 66,000 titles, but the locations also offer something
that the largest competitor does not: personal and face-to-face
interaction. As such, the combination of each of these factors
represents heterogeneous resources for the company.
The intangible assets of the company are difficult to imitate,

especially when considering brand equity. The Barnes & Noble
name is well-known and nearly synonymous with book sales.
While the major competitors specialize in other retail markets,
books are the primary product of Barnes & Noble and the sales
thereof are the core activity of the company. These assets could
also be considered immobile resources as they would be
difficult to move to another firm.
Resource-Based Analysis Summary
In a resource-based analysis, assets are evaluated to determine
if they create value, are rare, are hard to imitate, and whether
the organization exploits the resource in its processes. An asset
that creates value, is rare and is hard to imitate and that is used
effectively in an organization is considered a competitive
advantage.
References
Alter, A. & Hsu, T. (2019, June 7). Barnes & Noble is sold to a
hedge fund after a tumultuous year. The New York Times.
Retrieved from
https://www.nytimes.com/2019/06/07/books/barnes-noble-
sale.html
Barnes & Noble, Inc. (2019a, June 19). Barnes & Noble reports
fiscal 2019 year-end financial results [Press release.]. Business
Wire. Retrieved from
https://www.businesswire.com/news/home/20190619005407/en/
Barnes & Noble, Inc. (2019b). Form 10k for the fiscal year
ending April 27, 2019. Retrieved
fromhttps://www.sec.gov/Archives/edgar/data/.htm
D’Angelo, E. (2018, February). A resource-based perspective to
assess firms’ profitability in the food industry: evidence from
the Italian cheese industry. Pegaso Telematic University.
Naples, Italy Doi: 10.19044/esj. 2018.v14n4p1
Hyken, S. (2018, April 8). Barnes & Noble, Amazon,
independents: Who’s disrupting whom? Forbes Magazine.
Retrieved from
https://www.forbes.com/sites/shephyken/2018/04/
08/arming-the-Davids-of-industry-against-

disruptive-goliaths/#49dbb61a66c8
Kenton, W. (2019, July 2). McKinsey 7s model. Investopedia.
Retrieved from
https://www.investopedia.com/terms/m/mckinsey-7s-model.asp
The Five Forces (n.d.). Harvard Business School. Retrieved
from https://www.isc.hbs.edu/strategy/business-
strategy/Pages/the-five-forces.aspx
Weiner-Bronner, D. (2018, January 17). 5 things Barnes &
Noble can do right now to save itself. CNN Business. Retrieved
from https://money.cnn.com/2021/02/12/news/companies/save-
barnes--noble/index.html

Strategic management jeff dyerthird editionchapter 9inter

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Ähnlich wie Strategic management jeff dyerthird editionchapter 9inter

Ähnlich wie Strategic management jeff dyerthird editionchapter 9inter (20)

Mehr von cherry686017

Mehr von cherry686017 (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

Strategic management jeff dyerthird editionchapter 9inter