Lecture- 5& 6
Global Strategic Management
It means how companies plan to work in international markets.
The strategy depends on goals, risk-taking ability, and resources.
Main aims:
- Grow business in more countries
- Use resources wisely
- Stay ahead of global competitors
1. Internationalization Strategies
Internationalization refers to the process by which a company begins operating in foreign markets. The main internationalization strategies
include:
✅ a. Exporting (Selling to Foreign Markets) ✅ b. Licensing (Giving Permission to Use Your Brand or Product)
Meaning: Selling products made in your own country to Meaning: Letting a foreign company use your brand, name,
other countries. or technology for a fee.
Example: Boeing sells airplanes to many countries without Example: Disney allows toy makers in other countries to
building factories abroad. use its characters like Mickey Mouse.
Advantages: Advantages:
Low cost o Low investment
Less risk
Good for testing new markets o Earns money through royalties
Disadvantages:
Disadvantages:
o High shipping costs
o Less control over product quality
o Less control over product and brand in other
countries o Partner may become a competitor
✅ c. Franchising (Business Model Sharing) ✅ d. Joint Ventures (Partnership with Local/Foreign Company)
Meaning: Giving others the right to use your full business Meaning: Two companies from different places work
model, brand, and support. together and share profits, losses, and control.
Example: McDonald’s allows people in other countries to Example: Sony-Ericsson combined two companies'
open and run McDonald’s restaurants. strengths — electronics and telecom.
Advantages: Advantages:
o Fast growth in new markets o Share costs and risks
o Low cost for the main company (franchisor) o Get help from local market experts
o Local owners take the risk Disadvantages:
Disadvantages: o Hard to manage due to different company
cultures
o Hard to control brand quality everywhere
o May face conflicts between partners
o Service may vary across locations
✅ e. Wholly-Owned Subsidiaries (Foreign Direct Investment –
FDI)
Meaning: A company builds or buys a full business in
another country and owns 100% of it.
Example: Toyota has its own factories in the USA to make
cars for the local market.
Advantages:
o Full control over the business
o Keeps all profits
o Can follow own rules and systems
Disadvantages:
o Very expensive to start
o Risky if the foreign country has political or
economic problems
2. Entry Modes into Foreign Markets
Companies use different ways to enter foreign markets.
Each way (or mode) has a different level of:
Investment (how much money is needed)
Risk (chance of loss)
Control (how much control the company has)
These modes work like a spectrum:
Exporting = low investment, low control
Wholly-owned subsidiary (FDI) = high investment, high control
3. Global Strategic Approaches
Companies use different strategies to run business worldwide.
Their choice depends on:
Global goals (what they want to achieve worldwide)
Industry type (how their business works)
Balance between local needs and global efficiency
Some companies focus more on global efficiency (doing things the same everywhere).
Others focus on local responsiveness (adapting to each country’s needs).
a. Global Strategy ✅ b. Transnational Strategy – Simple Points
Meaning: Selling the same product in all countries with little or no
change. Meaning: A mix of global and local strategies.
Goal: Save costs by doing things the same way everywhere. o Some things are the same worldwide (like
R&D).
Example:
o Other things are changed for local markets (like
Apple sells the same iPhones and MacBooks around the
marketing or flavors).
world.
Pros (Advantages): Example:
Saves money (cost-efficient) o Unilever: Uses global research but adapts
products (like food or soap) to local tastes.
Easier to manage and control
Pros (Advantages):
Strong and consistent global brand
o Saves money in some areas
Cons (Disadvantages):
o Also meets local customer needs
Cannot meet specific local customer needs
Cons (Disadvantages):
Less flexible in different markets
o Hard to manage and coordinate
o Complex structure
✅ c. Multidomestic Strategy – Simple Points
Meaning: Focuses on local needs. Each country has its own
version of the product and marketing.
Example:
o Nestlé: Changes its products based on each
country’s taste, like spicy noodles in Asia or
different coffee types in Europe.
Pros (Advantages):
o Very flexible
o Matches local customer preferences
Cons (Disadvantages):
o Expensive to manage
o Each country needs its own team, products, and
plans
