To develop international, multinational and global business strategies, we’re going to use the model below which identifies the main issues. We examine each part in more depth.
Essentially, the model begins by analysing the markets in which the company is already engaged – perhaps only in one country, perhaps in several but without a fully-developed international strategy. In addition, the company should also begin looking at the prospects around the world for its products or services – not in detail by individual country, but in general terms.
As a starting point, it’s worth using some basic international data to analyse different countries. The type of data is shown in the two graphs – economic data that explores the total wealth of some selected countries and the wealth per person for the same countries.
There’s not much doubt that the USA is the world’s wealthiest country. However, the countries of the European Union – for example Germany, the UK and France – are not far behind individually. Importantly from an international trade perspective, the EU countries can be grouped together. This means that the European Union as a combined market would come much closer to the USA in terms of total wealth.
Although China has been catching up over the last few years in terms of total wealth, there are many more people in China than the USA – hence the wealth per head in China is below that of that of the USA.
These basic types of comparison are explored in more depth in the country selection film:
The next step is then to identify the company’s resources for international expansion, especially those that have competitive advantage. For example, the company may have special patents or brands that can be used in international expansion. Again, we’ll explore this in a more structured way shortly.
It’s only after this that a company should set its international and global objectives. Some companies may find this surprising – why shouldn’t a company begin by setting out what it wants to achieve internationally?
The reason for leaving objective-setting until now is that objectives need to be set in the realistic context of what opportunities exist in the marketplace and what resources the company possesses for its international expansion. To take a simple example, there would be little point in a car company setting a target for major expansion in the US car market in 2009 when that market is under such pressure. Equally, small computer services company may simply not have the resources for a global product launch, however attractive its service. It would be better to define its objectives more realistically.
Having defined its objectives, a company can then begin to explore which markets around the world represent the best opportunities: usually called market entry and mode. At the same time, it will want to think about how it enters such markets – perhaps a product launch, perhaps a joint venture and so on. These two aspects are represented by the two circular arrows in the model above. We’ll look in more depth at these issues later.
Finally, whatever choice is made about market entry and mode, the company will wish to think about pricing, products, distribution and a whole range of other factors related to its international objectives. This is called developing the product or service offering and forms the last part of the model.
Importantly, there is an important aspect missing from the model – innovation and learning. The reason for leaving this out is to avoid over-complicating the basic international development process.