INTERNATIONAL

BUSINESS STRATEGY
702056

Presented by
Mcomm. Nguyen Thi Hong Hanh
Department of International Business
 Overall Course
Outline
1. Introduction
2. Strategizing Around the Globe
3. Analyzing the external environment
4. Analyzing resources and capabilities
5. Global competitive strategies
6. Foreign market entry strategies
7. Merger, Acquisitions and Alliances
8. Innovation
9. Ethics and corporate social responsibility in
international business strategy
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 A Quick look back

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 A Overarching Framework

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 A company’s strategy has two facets

– Assessing the company’s external environment

 Industry and competitive conditions
 Forces acting to reshape this environment
– Assessing the company’s internal environment
 Market position and competitiveness
 Competencies, capabilities, resource strengths and
weaknesses
Thinking strategically about a
firm’s external environment Select the best
Identify strategic international
options for the strategy for
Thinking strategically about a firm the firm
firm’s internal environment

Source: Thompson/Strickland/Gamble

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 Learning Outcomes

1. Understand why an organization’s resources and capabilities are

central to its strategic approach
2. Assess their potential for giving the organization a competitive
edge (VRIO framework)
3. Know how an organization’s value chain activities can affect the
organization’s cost structure, degree of differentiation and
competitive advantage
4. Evaluate the organization’s strengths and weakness in light of
market opportunities and external threats (SWOT Analysis)

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 Key terms

 A productive input or competitive asset that is owned or controlled by the

Resource organization (e.g., cash, buildings, a fleet of oil tankers, intellectual
s property)
 Tangible and intangible resources
 Capacity of a firm to perform some activity proficiently (a diverse set
of resources and to deploy them strategically
Capabilitie  Capabilities are by nature intangible
s  Capabilities are expressed in a firm’s structure, routines and processes
 Competitively superior internal strengths (Unique strengths)
Core  Allow firm to differentiation its products and services from those of its rivals
competencie  Is a well performed internal activity that is central to a firm’s strategy and
s competitiveness

 Business processes that enable firms to add value by transforming inputs

Activitie
(e.g., raw materials) into outputs (e.g., goods and services)
s

Source: Rothaermel,
2013
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 Identifying resources
Tangible resources

Physical resources:
 Access rights to natural resources (such as mineral deposits)
 Manufacturing plants, equipment, distribution facilities and
their location
 Real estate and land
Financial resources:
 Cash and cash equivalents
 Marketable securities
 Other financial assets, e.g. borrowing capacity
Organizational resources:
 IT and communication systems
 Planning, coordination and control systems
 Organizational design and reporting structure Page 8
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702056- Chapter 3: Analyzing resources and capabilities
 Identifying
Intangible resources
resources

•Brands, company image, and reputational assets:

 Brand names, trademarks, and buyer loyaltyilit
y
 Company image, reputation for quality, service, and reliab
 Reputation with suppliers and partners for fair dealing
•Relationships:
 Alliances or joint ventures
 Partnerships with suppliers
 Networks of distributors
•Company culture and incentive system:
 Norms of behavior, business principles, and employer loyalty
 The compensation system and the motivation of the employees
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 Change in capabilties over time:
Dynamic capabilities
• “A dynamic capability is the capacity of an
organization to renew and recreate its
resources and capabilities to meet the needs of
changing environment” (Teece, 1997)
• If resources and capabilities are to be
effective overtime; they cannot be STATIC
• 3 generic types of dynamic capabilities:

1. Sensing
2. Seizing
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3. Reconfiguring 702056- Chapter 3: Analyzing resources and capabilities

 IBM product scope 1993 & 2010

In 1993, hardware accounted

for 50% of IBM revenues

In 2010, software & services

accounted for 80% of IBM
revenues, hardware was down to
18%

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702056- Chapter 3: Analyzing resources and capabilities
 IBM product scope 1993 & 2010 & 2016
• From mainframes to services transformation
• In 1992, less than 8,000 people in global services
• In 2010, nearly 150,000 employees there
IBM started the PC revolution…then became a misfit in the
industry
Lou Gerstner joined as CEO of a nearly bankrupt IBM
• Moved IBM downstream toward services and thus higher value
added
Transformation of core competency:

8/19/19 https://www.nextplatform.com/2016/03/22/systems-services-ibm-floats-cloud-concept-2016/ Page 12

 Core competencies: Find examples!

Company Core competencies Application examples

 Superior IT capabilities  Online retailing: Largest selection of items online
 Superior customer service  Cloud computing: Largest provider through
Amazon Web Services (AWS)
 Superior design in
integration of hard- and  Creation of innovative mobil devices and
software software services
 Superior marketing
 Ecosystem establishment  World‘s most recognized brands, “secret formula"
 Superior marketing  Global availability of products
and distribution
 Fully furnished room setups, practical tools for all
 Superior in designing
rooms, do-it-yourself
modern
furnishings at low costs
 Superior retail experience  Customized handcrafted (coffee) beverages;
warm/ cold, seasonal, fruit drink; comfortable
 High quality beverages and
and convenient ambience
food  Free Wi-Fi Internet connections
 Superior customer service
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in a 702056- Chapter 3: Analyzing resources and capabilities
 Linking resources, capabilities, core competencies, and
activities to competitive advantage and superior performance

Reinvest, hone, and upgrade

Resources
Reinforc Leverage
e Core Competitiv Superior
Firm activities
competencie e firm
s Orchestrate advantage performanc
e
Capabilities

Reinvest, hone, and upgrade

Source: Rothaermel, 2013

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 The VRIO framework

VRIO scheme to identify core Illustration

competencies
Valuable?
Do resources and capabilities have a strategic value, i.e. do
they contribute to a sustained improvement of the
competitive position of the firm?

Rare?
Do resources and capabilities create differentiation
advantages towards competitors or do those dispose
over
the same resource endowment?

In-Imitable?
Do firms without these specific resources and
capabilities encounter cost disadvantages Only resources and capabilities that fulfill
when imitating?
all 4 VRIO criteria can add to the
Organized to capture value? development of core competencies that
Does the organizational structure allow for the full may translate into a sustainable
exploitation of the resource and capability competitive advantage
potential?

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 Criteria for inimitability of resource & capabilities

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 The VRIO framework

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 The value chain
 Identifies the primary internal activities that create customer value and the related
support
activities.
 Permits a deep look at the firm’s cost structure and ability to offer low prices.
 Shows the emphasis that a firm places on activities that enhance differentiation and
support higher prices.
Primar
y activities Inbound
and logistics / Distribution
costs Operations /Outbound Sales and Service
supply chain Logistics marketing Each activity
management
adds value to the
product and thus
Product R&D, technology, procurement, systems development increases the
price a company
can charge for its
Human resource management products

Firm infrastructure / administration

Support activities and costs

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702056- Chapter 3: Analyzing resources and capabilities
 Example:
Cheap airlines

The University of Sydney

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19 2
 Example: Controlling the cost-drivers
at Rynair
2% - less administration
2% - uniform fleet
3% - less sales expenses
3% - crew costs
3% - higher flight time
6% - no food & beverages for free
6% - secondary airports
8% - lower sales commission

10% - ground
handling 16% - seat density

Cost reduction per passenger amounts to 59%

in comparison to traditional airlines

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 Activity system

Strategic activity system: Example cheap airline

• Relationship to the
value chain
• The importance of
linkages and fit
• Relationship to the
VRIO
• Superfluous activities

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 In-house vs Outsource
Pros Cons
Control over materials and Institution more limited to
work quality (internal what can accomplish alone:
understanding) lack of experience, time

Ability to make adjustment Lack of objective/perspective

In-house when needed

Institutional investment can High cost (large investment,

lead to sustainable project and staff trainings and
staff development development)

Access to expertise, support Loss of control over handling

and resources -> allow your materials and work quality
business to scale at a greater
Outsource level
(onshoring, offshoring)
Keep up with a rapidly Lack of organic connection
changing business world with internal brand knowledge

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 Merging the external with the
internal perspective

Internal Analysis
Dynamic External Analysis
Fit
 Macro environment
 Resources (PESTEL)
 Core  Industry and
competencies competitive
 Value chain environment (Five
forces)
 Strategic groups
Strengths &
weaknesses Opportunities
& threats
Strategy

Competitive advantage

The SWOT analysis is a framework that allows managers to synthesize

insights obtained from an internal analysis of a company’s strengths and
weaknesses (S and W) with those from an analysis of external opportunities
and threats (O and T).
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 The SWOT Analysis

Identify company Conclusions concerning the company‘s overall business

resource strength and situation:
competitive capabilities  Where on the scale from “alarmingly weak" to
"exceptionally strong“ does the attractiveness of the
company‘s situation rank?
Identify company resource  What are the attractive and unattractive aspects of
weaknesses and competitive the
company’s situation?
deficiencies
Implications for improving company strategy:
• Use company strength and capabilities as
Identify the company’s cornerstones of strategy
market • Pursue those market opportunities best suited
opportunities to company strengths and capabilities
• Correct weaknesses and deficiencies which impair
pursuit of important market opportunities or
heighten vulnerability to external threats
Identify external threats to
• Use company strength to lessen the impact of
the important external threats
company’s future well-being
Source: Thompson et al.
2011
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 Strategy inferences from
SWOT Analysis

STRENGTH WEAKNESSES

1 2
OPPORTUNITIES

How do I overcome the weaknesses that

How do I use these strengths to take
advantage of these opportunities? prevent me taking advantage of these
opportunities?
S&O Strategy
W&O Strategy

3 4
THREATS

How do I use my strengths to reduce How do I address the weaknesses

the likelihood and impact of these that will make these threats a
threats? reality?
S&T Strategy W&T Strategy
Source: Thompson et al. 2011; Rothaermel ,
2013
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 Next Week

Read “Uber’s ubiquitous business model” case study

(Exploring Strategy page 230) and prepare Q1 & Q2

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 Readings for next session

Relevant readings
- Global Strategy : Chapter 2 (page 45-48) & chapter 10
(page 295-311)
- Exploring Strategy: Chapter 7

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