07 Global Corporate Strategy

BUS 4321
International Business Management

Department of Business Administration

Faculty of Management Studies and Commerce
University of Sri Jayewardenepura 1
 Learning Outcomes
At the end of this session students
should be able to identify and
describe what is Global Corporate
Strategy and Various forms and
modes of Overseas Expansion and
Management Strategies that OCE’s
could adopt to establish their
global presence.
 Corporate Global Strategy
Corporate Global Strategy is mainly concerned with
the long term scope and direction of the Overseas
Corporate Entities (OCE’s) in expanding and
establishing their products, markets and businesses in
other countries of the world. Hence, it primarily deals
with;

• Overseas Expansion/Growth Strategies

• Overseas Market/Country Entry Strategies
• Overseas Country Portfolio Management Strategies
Overseas Expansion Strategy

Here the firms strategy is to diversify

their markets beyond the borders of
the home country through gradual
overseas expansion and to establish
a strong presence in those overseas
regions, countries and markets.
 Forms of Overseas Expansion

OCE intends to operate in few countries and

Internationalisation in one region (5-20), with ambitions to
Strategy expand further

OCE intends to operate in several countries

Multinationalisation and regions (20-100), with ambitions to
Strategy expand further

OCE intends to operate in almost all the

Globalisation countries and almost in all the regions of
Strategy the world with an ambition to be a global
giant
Extent of Overseas Expansion

• Export-Oriented Domestic Company

• International Company

• Multinational Company

• Global Company
 Main concerns of an Overseas
Expansion Strategy
• Which world regions or sub regions to enter?

• Which country, area or city of the country to enter?

• What would be the overseas expansion path?

• What would be the mode/s of entry to these countries/regions?

• When to enter the countries, areas and cities?

• On what scale to enter the countries, areas and cities?

• How to establish and sustain the globalized presence and position?

Main regions of the World

8
Main sub-regions of the World
Concentric Overseas Expansion Strategy

In this overseas expansion strategy, the OCE’s

concentrate their overseas growth and expansion
confining to only one country, few countries or one
region or sub region of the world.
Under this strategy, the OCE’s try to establish their
dominant business position and presence in a
selected region or sub region of the world.

This is also known a regiocentric growth strategy

Diversificative Overseas Expansion Strategy
In this overseas expansion strategy, the OCE’s have
an intention of gradually grow and expand into
almost all the countries and regions of the world
without confining to only one country, few
countries or one region or sub region of the world.
Under this strategy, the OCE’s try to establish their
dominant business position and presence in the
entire globe and all regions of the world.

This is also known a geocentric growth strategy

Geographic Diversification vs. Concentration

Diversify or Concentrate: The Role of Product and Market Forces

Which world regions or sub
regions to enter?
Pre-entry world regional or sub
regional attractiveness analysis
needs to be carried out.
A regional and sub-regional opportunity and treat
assessment should be carried out with regard to the
considered products, markets, businesses and
industries of the overseas corporate entity.

Must consider about the benefits, cost, risk and ease

of doing business in the respective regions and sub-
regions of the world along with any regional specific
factors.
World Regional Assessment Template
Least Attractive Most Attractive
1 2 3 4 5 6 7 8 9 10

Western Europe South East Asia Oceania

Political
Legal
Economic
Can use a simple rating scale score
Financial
or
Social
Cultural Weighted rating scale score
Demographic
Geographic to select the most attractive region

Technological
Ecological
Regional Specific Factors
Which Country to enter?
Pre-entry country attractiveness
analysis needs to be carried out.
A country opportunity and treat assessment
should be carried out with regard to the
considered products, markets, businesses and
industries of the overseas corporate entity.

Must consider about the benefits, cost, risk and

ease of doing business in the respective country
and any country specific factors.
 Country Assessment Template
Least Attractive Most Attractive
1 2 3 4 5 6 7 8 9 10

Malaysia Thailand Indonesia

Political
Legal
Economic
Can use a simple rating scale score
Financial
Social or

Cultural Weighted rating scale score

Demographic
Geographic to select the most attractive country

Technological
Ecological
Country Specific Factors
Which area or city of the
country to enter?
Pre-entry area/city attractiveness
analysis needs to be carried out.
An area/city opportunity and treat assessment
should be carried out with regard to the
considered products, markets, businesses and
industries of the overseas corporate entity.

Must consider about the benefits, cost, risk and

ease of doing business in the respective
area/city and any area/city specific factors.
 Area/City Assessment Template
Least Attractive Most Attractive
1 2 3 4 5 6 7 8 9 10

Kuching Kuala Lumpur Johor Bahru

Political
Legal
Economic
Can use a simple rating scale score
Financial
Social or

Cultural Weighted rating scale score

Demographic
Geographic to select the most attractive area/city
Technological
Ecological
Area/City Specific Factors
Main Factors to be considered
• Size and density of the Population
• GDP and Per Capita Income (Purchasing Power Parity – PPP / Inflation)
• Extent of Political and Economic freedom
• Extent of transparency (corruptions and bribes)
• Ease of doing business (Legal and regulatory mechanisms)
• Availability of raw materials
• Cost and skill of the labour market
• Extent of terrorism
• Extent of economic and human development
• Main modes of transportation
• Life styles of the people / Education level / Language diversity
• Religious and philosophical ideologies
• Availability and accessibility to technology
• Extent of natural disasters / Weather and climatic conditions
• Influence from world regional integrations and institutions
• Extent of regional competitiveness
• Extent of compliance with human and labour rights
Major Indices to be considered
• Index of Economic Freedom
• Global Economic Power Index
• Global Competitiveness Index
• Ease of doing business Index
• Corruption Perception Index
• Human Development Index
• Purchasing Power Parity and Exchange Rates Index
• Global Innovation Index
• Global Climate Risk Index
• Global Terrorism Index
• Global Slavery Index
• Global Peace Index
• Digital Country Index
Best Countries to do Business
The Forbes Magazine rank the best 100
countries to do business every year considering
many factors and indices.

You can access the details by visiting the

following web site:

https://www.forbes.com/best-countries-for-
business/list/2/#tab:overall
 What would be the
overseas expansion path?
Overseas Expansion Paths
• City-wide path (within one country)

• Area-wide path (within one country)

• Country-wide path (within one region)

• Region-wide path (within several regions)

• Global expansion path (within all the regions)

City or Area wide Expansion Path

7
8
6

5
4
3

1
Country or Region wide Expansion Path

1
4 2

5
 Oman
 Kenya
What would be the mode of
entry to these Regions and
Countries?

Overseas Market/Country
Entry Strategies
Modes of entry to International Markets
• Equity Modes
International Merges
International Acquisitions
International Joint Ventures
International Strategic Alliances
International Sole Venturing (FDI – Wholly owned subsidiary)

• Non-Equity Modes
Exporting (Indirect and Direct)
Franchising
Licensing
Management Contracting
Contract Manufacturing
What is the best strategy to enter?
There are more than 220 countries in the world
– 195 are member-nations of the UN
Each country’s situation is unique and different
Hence, OCE’s entry strategy selection would depend
on:
– The firm’s objectives and philosophy
– A balance of benefits, costs, and risks attached
to each different entry strategies.
 Equity mode strategies
Entry Mode Advantage
Wholly  Enables global strategic
owned coordination
subsidiaries  Protects technology
 Realizes (potentially) location
and experience economies
International  Gives access to local partner's
Joint knowledge
Ventures  Allows sharing of development
costs and risks
 May be more politically
acceptable than 100% foreign
ownership
 Allows foreign parent do
deploy resources across more
national markets at once
International  Similar to international joint
Strategic ventures
Alliances
Disadvantage
 High costs and risks
 Requires overseas
management skills
 May be slower to implement
 Loss of control over
technology and ma nagerial
know-how
 May impede global
coordination
 May make realization of
location and experience
economies more difficult
 Sharing of profit "pie"
 May be more difficult to
manage than international
joint ventures
 Non-equity mode strategies
Entry Mode Advantage Disadvantage
Franchising  Low financial risk  Lack of direct control over quality
 Relatively low  Successful international franchising
developmen t costs requires considerable start-up and
ongoing pre sence overseas (cost)
 Is likely to impede, make global
coordination costlier than ownership
 Growth may be slower depending
on franchisee's intentions
 Sharing of profit "pie"
 Possible loss of know-how to
potential competitor
Licensing  Similar to franchising  Similar to franchising
 Fewer "maintenance"
costs than franchising
Exporting  Ability to realize  Transport costs
experience curve  Trade barriers
economies  Motivation of local agents a
challenge
Assessing the effectiveness of the
entry strategies
An entry strategy effectiveness assessment
should be carried out with regard to the
considered country or region.

Must consider about the benefits, cost and risk

associated with each potential entry strategy.
 Entry Strategy Assessment Template
Highly Unfavorable Highly Favorable
1 2 3 4 5 6 7 8 9 10

FDI Joint Venture Franchise Exporting

Risk involved
Needed Investment
Time taken to realize
Agree with employees Can use a simple rating scale score

Agree with management or

Competitor reaction
Company philosophy Weighted rating scale score

Company capabilities
Legal compliance to select the most effective entry strategy
Transaction cost
Home country policies
Host country policies
What would be the best time
to enter these countries
and regions?
When to enter? (Timing of the entry)
• 1st Mover Advantage (Before other competitors)
• At times of political stability or instability
• At festival times
• At different seasons (Winter, Summer, Autumn,
Spring)
• At times of war or peace
• At time of economic recession or boom
• At times of religious observations
What would be the best scale
to enter these countries
and regions?
On what scale to enter?
• Very small scale
• Small scale
• Medium scale
• Large scale
• Very Large scale
 Scale of entry
Level of resources
– How much needed to commit for success?
– What level can firm afford to commit?
– 1st mover advantages and large scale linked
– Small scale entry allows learning at low risk
– Entry in small or large potential market may require the
same level of initial resources

A strategic commitment is difficult to reverse

– Has a long-term impact
– Means that the resources cannot be used elsewhere
How to establish and sustain
the globalised presence and
position?
Country Portfolio Management Strategies

Business Strength
Country Attractiveness Index

Country Attractiveness
OCE Strength Index

High Country Attractiveness & High OCE Strength

Strategic Decisions based on
Country Portfolio Analysis
• Country Investment Decisions

• Country Divestment Decisions

• Country Re-Location Decisions

• Country Resource Steering Decisions

• Country Portfolio Structuring Decisions

Country Portfolio Structuring Strategies

MNE’s could use different country portfolio structuring

strategies to effectively manage the overall country
portfolio of MNEs, namely;

• Centralised Country Portfolio Structuring Strategy

• Decentralised Country Portfolio Structuring Strategy

• Interactive Country Portfolio Structuring Strategy

 Centralized Country Portfolio Structuring Strategy

• Corporate advantage is built in each separate national or regional market.

• Countries are required to be dependent on the Head Quarters.
• Centralized controls of activities, reporting initiate from Head Quarters.
 Decentralized Country Portfolio Structuring Strategy

• Corporate advantage is built in each separate national or regional market.

• Countries are treated independently from one another.
• Decentralized controls of activities, reporting back to Head Quarters.
 Interactive Country Portfolio Structuring Strategy

• Corporate advantage is built in each separate national or regional market.

• Countries are required to be interactive with other countries as well as HQs
• Empowered controls of activities, reporting among the countries and HQs.
Questions
or
Clarifications