MANAGING GLOBALLY &

STRATEGIES FOR INTERNATIONAL

BUSINESS
- R.SHYAM PRASAD
International Growth Strategies
Exporting Strategies
Overseas Manufacturing
Multinational operations
Global Corporations
Merger
Diversification
Acquisitions
Joint Ventures
Strategic Alliance
Franchising
Exporting Strategies
Thefirm sells the products manufactured at Local Country and
exports them to various countries.
When the product is of better quality, low cost, differentiated than
the Importing countries product, there is good chance for further
Market Development.
Advantages
First step towards globalization
Economics of scale, due to larger production
No need for additional fixed capital investments
Diversify customer base
Exporting Strategies
Disadvantages
No direct customer relation, hence customization and long term
relationship are hard to create
Increased working capital, when goods are in transit
Forex risk
Credit status of the customer is unknown
Overseas Manufacturing
Local Company arranges to produce in abroad Foreign country and
sell there itself OR
Produce in abroad Foreign country & Import it to Local country for
sale
Advantages
Local company can get cheaper labor, raw material
Reduces transportation cost
Reduces ForEx
Can create a local brand as it has to be there for a long time
Also receives the goodwill from the Government for generating Jobs
Overseas Manufacturing
Disadvantages
Assets are exposed to foreign country (War, nationalization etc.)
Controls imposed on repatriation of profits
Change of government may cause risk of continuing business and policy
changes
Multinational operations
It
has a deliberate policy of coordinating its value adding activities
across national boundaries
Production of spare parts will take place in several countries

Assembling of the final product takes in a few countries

Sales may be done in the same country or in some other country

Company might be Domiciled in one country alone.

Ex: Unilever, P&G

Multinational operations
Advantages
Firm can take advantage of Cheaper natural resources and lower
production cost
Company is not affected by hostile Government
Company is not affected by Natural Disasters in a particular country
Firm can manage its taxation by routing all the sales low tax countries,
through Double taxation avoidance treaty
Global Corporations

Components and spares are sourced throughout the world

Production are done throughout the world
Human resources are diverse, every country where the company operates
will have both Expats and local Employees
Finance will be raised from the country where its the cheapest
Products are developed centrally in R&D centers and are customized
according to local needs
Motto of Think Global, Act Local
Ex: Google, Microsoft
Merger
A transaction where two firms agree to integrate their operations on a
relatively co-equal basis because they have resources and capabilities that
together may create a stronger competitive advantage.
The combining of two or more companies, generally by offering New
Company stock (C) in exchange for the surrender of their old company (A
&B ) stock
Example: Company A+ Company B= Company C.
MERGER:WHY & WHY NOT
WHY IS IMPORTANT
Increase Market Share.
Economies of scale
Profit for Research and development.
Benefits on account of tax shields like carried forward losses or
unclaimed depreciation.
Reduction of competition.

PROBLEM WITH MERGER

Clash of corporate cultures
Increased business complexity
Employees may be resistant to change
 Glaxo Smithkline Merger

In 2000, British pharmaceutical companies SmithKline Beecham and Glaxo Wellcome merged in a deal worth $76
billion. (76*6000cr = 4,56,000)
This gave birth to Glaxo SmithKline, which was slated to hold 7.3 percent share of the global pharmaceutical
market and have a combined market value of about $177 (2000), $210 (2014) .

consolidating resources to gain a competitive edge in marketing and Research & Development. (Innovation)
They invested $4 billion in 2011 in Research & Development. (Cost Effeciency)
Today it is one of the leading pharmaceutical companies and has strong presence in the drug market for asthma,
cancer, virus control, infections, mental health, diabetes, and digestive conditions. (Product Development)
They have a presence in 182 countries through their vaccines included in the immunization campaigns in these
countries. (Market Development)
ACQUISITION

A transaction where one firms buys another firm with the intent of more
effectively using a core competence by making the acquired firm a
subsidiary within its portfolio of business
It also known as a takeover or a buyout
It is the buying of one company by another.
In acquisition two companies are combine together to form a new company
altogether.
Example: Company A+ Company B= Company A.
ACQUISITION: WHY & WHY NOT
WHY IS IMPORTANT
INCREASED MARKET SHARE.
INCREASED SPEED TO MARKET
LOWER RISK COMPARING TO DEVELOP NEW PRODUCTS.
INCREASED DIVERSIFICATION
AVOID EXCESSIVE COMPETITION

PROBLEM WITH ACQUISITION

INADEQUATE VALUATION OF TARGET.
INABILITY TO ACHIEVE SYNERGY.
FINANCE BY TAKING HUGE DEBT.
 Mahindra acquires SsangYong
Mahindra acquired a 70% controlling stake in SsangYong, the South Korean auto maker for US $
463 million.

M & M will be able to strongly utilise

the strong R & D capabilities of SsangYong. (Innovation)
Mahindra is planning to launch 3-5 models in the next couple of years (Technology
Development)
98 countries strong dealer network of SsangYong will help M&M (Market Development)
SsangYong also has an edge in premium segment vehicles and this could help Mahindra to
expand its profile into this particular segment. (Product Development)
Mahindra therefore aims to combine its strength in sourcing and marketing with SsangYongs
strong capabilities in technology. (Expertise & Capabilities)
Tata Steel-Corus: $12.2 billion
January 2007

Largest Indian take-over

After the deal TATAS became the

5th largest STEEL co.

100 % stake in CORUS paying Rs

428/- per share

Gives Quick Access to Metal

Resources, High End Technology,
Image: B Mutharaman, Tata Steel MD; Ratan
Tata, Tata chairman; J Leng, Corus chair; World Class Customers
and P Varin, Corus CEO.
 Ranbaxy-Daiichi Sankyo: $4.5 b
Image: Malvinder Singh (left), ex-CEO of
Ranbaxy, and Takashi Shoda, president
and CEO of Daiichi Sankyo.
Pharmaceuticals sector
June 2008
Acquisition deal
largest-ever deal in the
Indian pharma industry
Daiichi Sankyo acquired the
majority stake of more than
50 % in Ranbaxy for Rs
15,000 crore
Gives entry access into the
Indian Market, Patents, R&D,
Manufacturing Facilities.
Tata Motors-Jaguar Land Rover:
$2.3 billion
March 2008
Automobile sector
Acquisition deal
Entry
into the luxury car
makers, competing with
BMW, Audi, Toyota,
Honda
Joint Venture
A joint venture (JV) is a business agreement in which parties
agree to develop, a new entity and new assets by
contributing equity.
They exercise control over the enterprise and consequently
share revenues, expenses and asset.
Maruti Suzuki
Bharati Walmart
 Reasons to form Joint Venture
Internal reasons
Build on company's strengths
Spreading costs and risks
Improving access to financial resources
Economies of scale and advantages of size
Access to new technologies and customers
Access to innovative managerial practices
 Reasons to form Joint Venture
2. Competitive goals
Influencing structural
Evolution of the industry
Creation of stronger competitive units
Speed to market
Improved agility

3. Strategic goals
Synergies
Transfer of technology/skills
Diversification
NTT DoCoMo-Tata Tele: $2.7 b
November 2008
Telecom sector
Joint Venture deal
Japanese telecom giant
NTT DoCoMo acquired 26
per cent equity stake in
Tata Teleservices for about
Rs 13,070 cr.
Quick Entry into the Indian
Market where Tata provides
Market Research and
DOCOMO provides
technology Support
Strategic Alliances
An arrangement between two companies that have decided to share resources
to undertake a specific, mutually beneficial project.
A strategic alliance is less involved and less permanent than a joint venture, in
which two companies typically pool resources to create a separate business
entity.
In a strategic alliance, each company maintains its autonomy while gaining a
new opportunity.
A strategic alliance could help a company develop a more effective process,
expand into a new market or develop an advantage over a competitor, among
other possibilities.

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Alliance
Why collaborate?
1. Gain technological advancement at a relatively low cost.
2. Gain market access at a low cost.
3. Gain insights into the partners business practices and strategies.
4. Strengthen competitive advantages or core competencies.
5. Develop benchmarks through examination of the practices of the alliance firm.

Three situations can result in mutual collaboration is most successful:

1. The partners strategic goals converge while their competitive goals diverge.
2. The size and market power of both partners are modest compared with industry leaders.
3. Each partner believes it can learn from the other and at the same time limit access to
proprietary skills.
Strategic Alliances - Starbucks
Starbucks partnered with Barnes and Nobles bookstores in 1993 to provide in-
house coffee shops, benefiting both retailers.
In 1996, Starbucks partnered with Pepsico to bottle, distribute and sell the
popular coffee-based drink, Frappacino.
A Starbucks- United Airlines alliance has resulted in their coffee being offered on
flights with the Starbucks logo on the cups
a partnership with Kraft foods has resulted in Starbucks coffee being marketed in
grocery stores.

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Strategic Alliances Star
Alliance
An airline alliance is an agreement between two or more airlines to cooperate on
a substantial level.
The three largest passenger airline alliances are Star Alliance, SkyTeam, and
Oneworld.
Licensing
Licensing is another way to enter a foreign market with a limited degree of risk.
The international licensing firm gives the licensee patent rights, trademark rights,
copyrights or know-how on products and processes.
In return, the licensee will: produce the licensors products, market these products
in his assigned territory and pay the licensor fees and royalties usually related to
the sales volume of the products.
This type of agreement is generally welcomed by foreign public authorities
because it brings technology into the country.
Franchise
Franchising is an arrangement where by the manufacturer or
sole distributor (Franchisor) of trade mark product or service
gives excusive rights of local distribution to independent retailers
(Franchisee)
inreturn for their payment of royalties and conformance to
standardized operating procedures.
Famous Franchise brands