Required to manage operations in more than one country.

Step 1 - identify opportunites

  • Increased market size - more people
  • Improve return on investment - more market for your R & D
  • Economies of scale and learning - more demand, cheaper product
  • Local advantage - Demand for something in a locality

Step 2 - Identify a strategy

International strategy

  • Transfer main products or services to foreign markets lacking them
  • Keep development at home
  • Manufacture in host country
  • Limited customization
  • Strong home business

Multidomestic strategy

  • Decentralized business units for each region
  • Products and services highly tailored to the local market
  • Each unit is independent
  • Assumes markets differ
  • Focuses on local competition
  • Popular in European firms

Global strategy

  • Products are standardized across entire nations
  • Decisions regarding business strategy are centralized at home
  • Emphasizes economies of scale
  • Can lack responsiveness
  • Requires resource sharing - coordination required

Transnational strategy

  • Seeks both global efficiency and local responsiveness
  • Difficult to achieve because it required central control to be adaptive to individual markets
  • Requires significant organizational learning

Step 3 - choose entry mode


  • Easy
  • Distribution through contractual arrangements
  • No need to establish external operations
  • High transportation costs
  • Less control
  • Difficult to customize


  • Licensee takes on risks
  • Loss of control
  • Low profit potential
  • Risk of licensee learning technology

Strategic alliances

  • Share risks and resources
  • Foreign company knows the local market well
  • Can be difficult to integrate cultures of the two companies
  • May not fully understand company goals


  • Expensive
  • Very rapid
  • Can be legal hurtles
  • Requires complex and costly negotiations
  • Potential for incompatible corporate cultures

New wholly owned subsidury

  • Most expensive
  • Most control
  • Very profitable if successful
  • Need to gain local knowledge


  • Cultural differences: Language, time & values
  • Differences in effective management strategy
  • Political issues
  • Economic variation: change in dollar value
  • Ethics: Differences in ethics
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