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?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

1

How to formulate strategies?

INTERNATIONAL-LEVEL

1

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

3

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

5

Strategy levels

BUSINESS CORPORATE INTERNATIONAL

6

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

10

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/

11

Porter?s
Diamond of
National
Advantage

12

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/

13

U.S.A.

14

15

Strategies & entry modes
Explore your capabilities

16

International
entry modes

Export

License / Franchise

Strategic alliance

Acquire

Greenfield venture / new subsidiary

17

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

18

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

19

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

20

Acquisition

Most rapid expansion mode

Can be very costly

Regulatory requirements may present
barriers to foreign ownership

Complex and costly negotiations

Corporate culture differences

21

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

22

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

23

Paradigms
for
international
strategies

24

10/4/21

5

International
strategies

S ou rce: Leh m an n , 2 0 1 0

25

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

26

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

27

Doing business database
https://www.doingbusiness.org/

28

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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