International Strategic Management (ISM)

When a company decides to sell or market its products and/or services in a foreign country (s), it is major management decision involving management strategy and implementation.

International Strategic Management is a management planning process for developing strategy to enter international market and compete internationally. A specific international strategy is used depending on the countries to enter through strategic planning. International marketing involves tremendous amount of planning:-

• To determine what products/services to market,
• When and how to make the products/services,
• How to acquire the resources for such an entry,
• Develop strategies to outperform competitors in those countries.

Sources of competitive advantage from a global strategy:

Efficiency:

• Economies of scale for more customers and markets,
• Exploit other country`s labor and raw materials,
• Extend product life-cycle – older products can be sold in a less developed country,
• Operational flexibility – shift production as costs, exchange rate, etc change over time.

Strategy:

• Being the first mover for advantage and only provider of a product to a market,
• Cross subsidization between countries,
• Transfer price

Risk:

• Diversify macro economic risks, business cycles not perfectly correlated among countries,
• Diversify operational risks (labor problems, war, earth quakes),

Learning:

• Broaden learning opportunities due to diversity of operating environments,

Reputation:

• Cross over customers between markets – reputation and brand identification,

The nature of competitive advantage in global industries:

A global industry can be defined as an industry in which companies must compete in all world markets of that products in order to survive; an industry in which company`s competitive advantage depends upon economy of scale, and economy of scope gained across markets.

There are also certain factors or `drivers` which decide the potential of a product for globalization. Some of these are cost, customers, competition and government policies and regulations.

Modes of foreign market entry are:

An important part of international strategy is the method of entering a foreign market:

• Exporting.
• Licensing(including franchising).
• Joint Venture.
• Foreign Direct Investment.

These options vary in their degree of speed, control and risk, level of investment and market knowledge. The mode also decides the company`s success in the foreign market.

Questions:

1. What are the sources of competitive advantage in a global strategy?

2. What are the four modes of entry to a foreign market?