08 Mar How to analyze, formulate, and implement international strategies? Where might the firm expand outside domestic borders?
Q about
- How to analyze, formulate, and implement international strategies?
- Where might the firm expand outside domestic borders?
- How might a firm enter an international market?
- How to staff and structure international operations?
10/4/21
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How to formulate strategies?
INTERNATIONAL-LEVEL
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Objectives: Understand how information about external and internal
environments affects formulated strategies
Learn and synthesize strategy across levels: business, corporate, international
How do business leaders formulate strategies for improved performance and competitive advantage?
2
What is strategy
formulation
PROCESS BY WHICH AN ORGANIZATION CHOOSES COURSES OF ACTION TO ACHIEVE ITS DEFINED GOALS
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Inputs Resources Capabilities Competencies
Outcomes Accounting, Shareholder, Stakeholder returns
Internal processes Strategy formulation & implementation
4
Inputs Resources Capabilities Competencies
Outcomes Accounting, Shareholder, Stakeholder returns
Internal processes Strategy formulation & implementation
Develop
vision, m ission, core
values
Set objectives Craft strategy
to achieve objectives
Execute
strategy
Evaluate &
adjust
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Strategy levels
BUSINESS CORPORATE INTERNATIONAL
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10/4/21
2
International strategies: key questions
How to grow market outside domestic borders
How to enter foreign markets
How to design global supply and value chains
How to manage political and economic risks in global markets
7
Why go international? Global opportunities
Increased market size
Return on investment
Economies of scale and learning
Location advantage
8
Where do you internationalize?
9
Where do you internationalize?
How about Mexico?
San Diego—Tijuana (Tecate)
• an international transborder agglomeration
• Largest binational conurbation between US and Mexico
• Population over 5 million
• Economic sectors: maritime, manufacturing, tech, tourism, etc.
• Governed by NAFTA/USMCA
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Where do you internationalize?
How about Mexico?
San Diego—Tijuana—Tecate trade opportunities
https://www.sandiego.gov/economic- development/sandiego/trade/mexico
https://www.sandiegobusiness.o
https://www.trade.gov/
USA Trade Guide: https://usa.think.global/utg2017/utg17/ index.html#1
Foreign Direct Investment Intelligence: https://www.fdiintelligence.com/
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Porter’s Diamond of National Advantage
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10/4/21
3
Hofstede’s cultural dimensions Framework for cross-cultural
communication.
Culture is defined as the
collective mental programming
of the human mind which
distinguishes one group of
people from another
Describes the effects of a
society’s culture on the values
of its members, and how these
values relate to behavior. S ou rce: H ofsted e, 1 9 8 4 Learn m ore: h ttp s://w w w.h ofsted e-in sigh ts.com /p rod u ct/com p are-cou n tries/
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U.S.A.
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15
Strategies & entry modes Explore your capabilities
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International entry modes
Export
License / Franchise
Strategic alliance
Acquire
Greenfield venture / new subsidiary
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Export
Common way to enter international markets
No need to establish own operations in other nations
Can enter multiple markets quickly
A lot of government support and resources for trade initiatives
Cost significantly influenced by transportation, tariffs
Difficult to customize product and to maintain control over marketing and
distribution
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10/4/21
4
License
Authorize another firm to manufacture
and/or sell your products
Receive royalty on each unit produced/sold
Licensee bears the risk
Least risky way to enter foreign market
Licensor loses control over product quality, distribution, etc.
Relatively low profit potential
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Alliance
Partners share risks and resources
Joint ventures (JVs) typically involve foreign co with product or tech and a host co with
access to distribution and marketing
Integration of cultures is an issue
Strategic intent differences can lead to
divergent goals
Preferred entry mode for most SMEs
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Acquisition
Most rapid expansion mode
Can be very costly
Regulatory requirements may present barriers to foreign ownership
Complex and costly negotiations
Corporate culture differences
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Greenfield venture
New wholly owned subsidiary
Most complex & costly of entry alternatives
Greatest degree of control
Potentially most profitable, if successful
Requires expertise & knowledge relevant to
host country
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OLI/Eclectic Paradigm Objective: help
m anagem ent choose
between several foreign
m arket entry-m ode
strategies
To engage in FDI, com pany
needs three advantages.
Source: Dunning, 1979
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Paradigms for international strategies
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10/4/21
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International strategies
S ou rce: Leh m an n , 2 0 1 0
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Strategies
Multidomestic: strategy and operational decisions are decentralized to SBU in each country to tailor products to the local market
Global: assumes more standardization of products across country markets
Transnational: seeks to achieve both global efficiency and local responsiveness
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International risks Political:
– government instability
– changes in local attitudes or regulation
regarding foreign ownership
– legal authority obtained from previous
administration may change
– nationalization of firms’ assets
Economic:
– interdependent of political risks
– trade wars and tariffs
– fluctuations in currency rate
– inflation rates differences
– interest rates changes and different national bank policies
– enforcement of property rights and other
regulations
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Doing business database https://www.doingbusiness.org/
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3/3/22, 4:39 PMCitigroup Has Nearly $10 Billion in Total Russian Exposure – WSJ
Page 1 of 4https://www.wsj.com/articles/citigroup-has-nearly-10-billion-in-total-russian-exposure-11646066390
Citigroup Has Nearly $10 Billion in Total Russian Exposure Sanctions complicate Citigroup’s attempt to sell its Russian consumer bank David Benoit Feb. 28, 2022 11:39 am ET
Customers at a Citibank bank branch in Moscow on Monday.
Photo: Andrey Rudakov/Bloomberg News
Citigroup Inc. C -3.26% disclosed Monday it had nearly $10 billion in total exposures to Russia at the end of 2021, some of which sit in a consumer bank it has been trying to sell and may now be stuck with.
The New York giant, which bills itself as the world’s truly global bank, is by far the most exposed of the big U.S. banks to Russia in the midst of a global
3/3/22, 4:39 PMCitigroup Has Nearly $10 Billion in Total Russian Exposure – WSJ
Page 2 of 4https://www.wsj.com/articles/citigroup-has-nearly-10-billion-in-total-russian-exposure-11646066390
sanctioning regime that is threatening Russia’s economy after its invasion of Ukraine last week. Russia is, nonetheless, a small part of Citigroup’s $2.29 trillion in assets.
Sanctions from the U.S., Europe and countries around the world have targeted Russia’s biggest banks, oligarchs and companies—all aimed at pressuring Russian President Vladimir Putin after he ordered the invasion.
Citigroup operates with an on-the-ground presence in both Russia and Ukraine, unique among U.S. banks, part of its far-reaching outposts that help global companies move money around the world.
Its exposures to Russia include $2.2 billion in corporate loans and $700 million in consumer loans, it said in a filing Monday. It also holds $1.5 billion in investment securities.
Outside of its Russian unit, Citigroup units around the globe also have $1.6 billion in exposures to Russian entities.
On top of those loans and investments, Citigroup added an additional disclosure Monday that it had $1 billion in cash at financial institutions including the Russian Central Bank and $1.8 billion in reverse repurchase agreements with other entities.
Citigroup had halved its Russian exposures following Russia’s 2014 annexation of Crimea, and it and other banks have refrained from making big bets on the country since then.
The bank didn’t disclose if any of its loans or assets were connected to any sanctioned entity and didn’t provide any updates on the assets since the war broke out.
Swift Sanctions: How Cutting Off Banks Pressures Russia
3/3/22, 4:39 PMCitigroup Has Nearly $10 Billion in Total Russian Exposure – WSJ
Page 3 of 4https://www.wsj.com/articles/citigroup-has-nearly-10-billion-in-total-russian-exposure-11646066390
Swift Sanctions: How Cutting Off Banks Pressures Russia
A powerful coalition of democracies announced it would cut off some Russian banks from the global payment
system Swift. Here’s how Swift works, and how the move could ramp up pressure on Russian President Putin.
Photo: Anton Vaganov/Reuters
Citigroup’s Russian consumer bank operates three branches in Moscow, two in St. Petersburg and a smattering around the country. The bank had announced it would sell the unit as it pares back its international consumer operations. The sale was already expected to be complicated, but the current sanctions make it harder. A foreign bank is unlikely to want more Russian exposure and the Russian banks are now under sanction, raising questions about who could buy it.
An official from Russian giant VTB said publicly last year his bank was interested in bidding for the asset, but VTB is now under sanctions.
Citigroup has already been forced to shut one foreign consumer bank, in South Korea after failing to sell it, a move that cost it more than $1 billion. The Russian bank is far smaller.
A bank spokeswoman declined to comment about the ongoing sale.
3/3/22, 4:39 PMCitigroup Has Nearly $10 Billion in Total Russian Exposure – WSJ
Page 4 of 4https://www.wsj.com/articles/citigroup-has-nearly-10-billion-in-total-russian-exposure-11646066390
On the other side of the conflict, Citigroup has been working to ensure the safety of some 200 employees in Ukraine. The bank evacuated foreigners working in Ukraine weeks ago as Russia mobilized, people familiar with the bank said. It worked to get dollars into employees’ hands and move them around the country if they wanted, the people said.
Over the weekend, Alexander McWhorter, the head of the bank’s operations in the country, posted on LinkedIn that he was safe and that the bank was still working to help where it could.
Write to David Benoit at [email protected]
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