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Advanced Strategy
M2/MSc 2012-2013
Stefano BORZILLO
stefano.borzillo@skema.edu
Learning outcomes and objectives
Advanced strategy course will prepare students to strategy formulation
and implementation using concepts, methods and tools of strategic
management focused on :
Growth strategy (internationalization, strategic alliances)
Chapters 8 & 10 *
Innovation and entrepreneurship
Chapter 9 * + entrepreneurial toolkit **
Strategic choices: Formulation and evaluation
Chapter 11 *
Strategy development process
Chapter 12 *
* Exploring Strategy – Text and cases – Ninth edition - Pearson
** SKEMA BS Entrepreneurial Mindset & Toolkit – Dept. of Strategy & Entrepreneurship
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Learning outcomes and objectives
A fundamental objective of this course is to make students proficient
in the analytical tools and techniques used by strategists. This course
will instruct students how to:
Identify growth strategy options with a focus on internationalization
Analyze businesses portfolios from a growth alternative perspective
Identify and respond to different types of innovation dilemmas
Manage the process of identification, evaluation and exploitation of
entrepreneurial opportunities
Use non‐financial and financial criteria and tools for evaluating
strategic options
Assessment method
3 evaluations : 2 group works and 1 individual exam
1) Case studies (50% of evaluation)
2 graded case studies (3 h each)
2) Individual exam
MCQ + mini case study (50% of evaluation)
For the case studies, students will group in 3 people max. All
groups will be ranked on the content of their analysis (PP or
Word presentation)
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Course support
“EXPLORING « ENTREPRENEURIAL
STRATEGY” – Ninth MINDSET & TOOLKIT »
edition SKEMA BS
Chapters 8, 9, 10, 11, 12
International
Strategy (1)
Advanced Strategy
M2/MSc 2012-2013
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Learning outcomes
• Assess the internationalization potential of different
markets.
• Identify sources of competitive advantage in
international strategy.
• Rank markets for entry or expansion, taking into account
attractiveness, cultural and other forms of distance and
competitor retaliation threats.
• Assess the relative merits of different market entry
modes, including joint ventures, licensing and foreign
direct investment.
Key questions of Corporate strategy
• Should the firm focus its activities on a specific market
or diversify in several segments or sectors?
• Should the firm limit its business to the local market or
internationalize?
• Should the firm favour endogenous development or
cooperate with other stakeholders active in the
business environment (clients, suppliers, competitors,
R&D centres, academic units, …) via corporate,
commercial, technical alliances?
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International strategy framework
Location
Advantage
Source: Exploring Strategy, 9th edition, Pearson, 2011
Internationalisation drivers
Why go
international?
The YIP’s matrix
Drivers of internationalization
Source: Pearson, Adapted from G. Yip, Total Global Strategy II, Financial Times Prentice Hall, 2003, Chapter 2
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Location advantages:
Porter’s diamond
• Porter’s Diamond – explains why some locations
tend to produce firms with sustained competitive
advantages in some industries more than others.
The four drivers in Porter’s Diamond stem from:
local factor conditions
local demand conditions
local related and supporting industries
local firm strategy structure and rivalry.
Location advantages: Porter’s diamond
Domestic market
environment can be a
source of competitive
Domestic favorable advantage abroad
production factors used
as a competitive
advantage abroad
How to gain a
competitive
advantage?
Domestic client
power can help
creating competitive
advantage abroad
Local ecosystems
such as competitive
clusters leverage
firm’s innovativeness
Porter’s Diamond – the determinants of national advantages
Source: Pearson. Adapted with permission of The Free Press, a Division of Simon & Schuster, Inc., from The Competitive Advantage of Nations by Michael E. Porter. Copyright © 1990, 1998
by Michael E. Porter. All rights reserved
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Market selection:
Market characteristics
Four elements of the PESTEL framework are
particularly important in comparing countries for
entry:
Political. Political environments vary widely
between countries and can alter rapidly.
Economic. Key comparators are levels of Gross
Domestic Product and disposable income which
indicate the potential size of the market.
Social. Factors like population characteristics and
lifestyle as well as cultural differences.
Legal. Countries vary widely in their legal regime.
Market selection:
Market characteristics
important dimensions in comparing and choosing countries for entry
Political Economic
Social Legal
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Market selection: the CAGE framework
Cultural Administrative and
distance political distance
Geographic Economic/ wealth
distance distance
Ex: International cross‐cultural comparison
Figure 8.5 International cross-cultural comparison
Source: M. Javidan, P. Dorman, M. de Luque and R. House, ‘In the eye of the beholder: cross-cultural lessons in leadership from Project GLOBE’, Academy of Management
Perspectives, February 2006, pp. 67–90 (Figure 4: USA vs China, p. 82). (GLOBE stands for ‘Global Leadership and Organizational Behavior Effectiveness’.)
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Entry modes: The staged international
expansion model
The staged international expansion model proposes a
sequential process whereby companies gradually
increase their commitment to newly entered markets,
as they build market knowledge and capabilities.
This model is however challenged by two phenomena:
‘Born‐global’ firms ‐ new small firms that internationalise
rapidly (usually in new technologies)
Emerging‐country multinationals ‐ building unique
capabilities in the home market but exploiting them in
international markets very quickly.
Modes of entry : the staged model
Exporting
Licensing/Franchising
Joint ventures and alliances
Foreign direct investment
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Modes of international market entry
Modes of international market entry
Exporting
Advantages Disadvantages
• No need for • Lose any location
operational facilities in advantages in the host
host country country
• Economies of scale in • Dependence on
the home country export intermediaries
• Internet can facilitate • Exposure to trade
exporting marketing barriers
opportunities • Transportation costs
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Joint ventures and alliances
Advantages Disadvantages
• Shared investment risk • Difficult to find good
• Complementary partner
resources • Relationship
• May be required for management
market entry (ex: • Loss of competitive
Brazil, China, …) advantage
• Difficult to integrate
and coordinate
Licensing/Franchising
Advantages Disadvantages
• Contractual source of • Difficult to identify
income good partner
• Limited economic and • Loss of competitive
financial exposure advantage
(ex. Biotech, • Limited benefits from
Consulting, …) host nation
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Foreign direct investment
Advantages Disadvantages
• Full control • Substantial
• Integration and investment and
coordination possible commitment
• Rapid market entry • Acquisitions may
through acquisitions create integration/
• Greenfield coordination issues
investments are • Greenfield
possible and may be investments are time
subsidised consuming and
unpredictable
Entry modes: The staged international
expansion model
The staged international expansion model is however
challenged by two phenomena:
‘Born‐global’ firms (=“mini multinationals”) ‐ new
small firms that internationalise rapidly (usually in new
technologies)
Emerging‐country multinationals ‐ building unique
capabilities in the home market but exploiting them in
international markets very quickly.
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FDI : the Liability Of Foreignness issue
Def_ Liability Of Foreignness
The additional tacit and social costs that
foreign firms face when entering a particular
host market. These costs are not in incurred
by well‐embedded indigenous companies.
Source: Denk et al., Journal of International management, 2012
FDI : the Liability Of Foreignness issue
Costs of LOF are due to 3 types of hazards
• Unfamiliarity hazards: incorrect market assessment,
insufficient and erroneous information, inadequate
knowledge of the host country’s culture, norms, values, and
business practices
• Relational hazards: higher organizational costs for internal
and external firm‐to‐firm interactions within the buyer‐
supplier‐competitor network due to lack of embeddedness
in local networks.
• Discrimination hazards: cost arising from unfavorable
treatment due to consumer or political “ethnocentricity” in
the host country
Source: Denk et al., Journal of International management, 2012
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World 3.0 and semi globalization
Globalization: Integrating and
Regulating Foreign Markets
Market Integration Market Regulation
+ +
– –
World 3.0 and semi globalization
Globalization? Reality Check
< 2% international telephone calling minutes
< 20% internet traffic routed across borders
~ 19% international news covered by journals
~ 2% students studying overseas
~ 24% exported products/services as a % of GDP
~ 10% foreign direct investment as a % of total fixed invesment
0% 100%
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World 3.0 and semi globalization
What about the Globalization of
« Global » Firms? (1) – Firm Nationality
World 3.0 and semi globalization
What about the Globalization of
« Global » Firms? (2) – World presence
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Summary (1)
• Internationalisation potential in any particular
market is determined by Yip’s four drivers:
market, cost, government and competitors’
strategies.
• Sources of advantage in international strategy
can be drawn from both global sourcing
through the international value network and
national sources of advantage, as captured in
Porter’s Diamond.
Summary (2)
• Market selection for international entry or
expansion should be based on attractiveness,
multidimensional measures of distance and
expectations of competitor retaliation.
• Modes of entry into new markets include
export, licensing and franchising, joint ventures
and overseas subsidiaries.
• Globalization: one‐size does not fit all. Industry
characteristics and strategic configuration
shape firms’ internationalization
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Briefing for TD1 – Case study practice
Students are requested to read the following case
study for TD1:
TESCO : from domestic operator to
multinational giant
During TD1, students will group by 3 max.
2 groups will present their work (PP presentation)
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