978-1259929441 Chapter 15 Part 2

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Chapter 15 ‒ Entry Strategy and Strategic Alliances

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Another Perspective: To explore Starbucks’ international strategy further, go to:

{https://www.forbes.com/sites/greatspeculations/2016/01/18/how-starbucks-plans-to–

grow-its–international-operations/#187a86e21941} and

{https://news.starbucks.com/news/investor-day-2016-press-release}.

Teaching Tip: To expand the discussion of Starbucks’ international strategy, consider

Starbucks CEO Howard Schultz on First Roastery in Italy in the International Business

Library at http://bit.ly/MHEIBVideo. Click “Ctrl+F” on your keyboard to search for the

video title.

MHE INTERNATIONAL BUSINESS VIDEO LIBRARY

Please click here to visit our International Business Video Library which provides an

ongoing stream of updated video suggestions correlated by key concept and major topic.

Every new clip posted is supported by teaching notes and discussion questions. Please

feel free to leave comments in the library that you feel might be helpful to your

colleagues.

INCORPORATING globalEDGE™ EXERCISES

Use the globalEDGE™ site {globaledge.msu.edu/} to complete the following exercises:

Exercise 1

The Entrepreneur annually publishes a ranking of the top global franchises. Provide a list

of the top 25 companies that pursue franchising as their preferred mode of international

expansion. Study one of these companies in detail, and provide a description of its

business model, its international expansion pattern, desirable qualifications in possible

franchisees, and the support and training the company typically provides.

Exercise 2

The U.S. Commercial Service prepares reports known as the Country Commercial Guide

for countries of interest to U.S. investors. Utilize the Country Commercial Guide for

Russia to gather information on this country’s energy and mining industry. Considering

that your company has plans to enter Russia in the foreseeable future, select the most

appropriate entry method. Be sure to support your decision with the information

collected.

Answers to Exercises

Exercise 1 Answer

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McGraw-Hill Education.

Website: http://www.entrepreneur.com/franchises/topglobal/index.html

globalEDGE™ Category: Rankings

Additional Info:

Entrepreneur Magazine publishes two rankings of franchises, one for the United States

and one for International. The International one lists the top ranking 200 Franchise 500

companies that are seeking international franchisees. Each company listing includes an

overview of the company, as well as how much investment is required to open up a

franchise, what type of support is provided, and the type of financing available.

Exercise 2 Answer

End of Part Case Notes

Part Five

The Evolving Strategy of IBM

QUESTION 1: In the 1970s and 1980s Palmisano states that IBM was organized as a

classic multinational enterprise. What does this mean? Why do you think IBM was

organized that way? What were the advantages of this kind of strategic orientation?

ANSWER 1: In 1972, IBM moved away from its international strategy where most

activities were undertaken in the United States and products were then sold through

QUESTION 2: By the 1990s the classic multinational strategic orientation was no longer

working well for IBM. Why not?

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ANSWER 2: Over time, IBM’s multinational approach to strategy began to lose its

effectiveness forcing the company to develop a new strategy. Three major trends

QUESTION 3: What are the strategic advantages to IBM of its globally integrated

enterprise strategy? What kind of organizational changes do you think had to be made at

IBM to make this strategy a reality?

ANSWER 3: IBM refers to its new strategy as a global integration approach. Under this

strategy, IBM integrates operations both vertically and horizontally; locates operations in

QUESTION 4: In terms of the strategic choice framework introduced in this part of the

text, what strategy do you think IBM is pursuing today?

Another Perspective: Students can explore IBM’s global operations at the company’s

website as {http://www.ibm.com/}.

IKEA in 2013: Furniture Retailer to the World

QUESTION 1: By the early 1970s IKEA had established itself as the largest furniture

retailer in Sweden. What was the source of its competitive advantage at that time?

ANSWER 1: Many students will probably attribute IKEA’s success in the 1970s to

innovation. The company continually looked for new and better ways to do everything

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QUESTION 2: Why do you think IKEA’s expansion into Europe went so well? Why did

the company subsequently stumble in North America? What lessons did IKEA learn from

this experience? How is the company now applying these lessons?

ANSWER 2: IKEA’s experiences in the United States were in stark contrast to its

experiences in Europe. The company met with great success in Europe, where its concept

of inexpensive, quality furniture with clean design lines was well received. Many

students will probably suggest that IKEA failed to recognize the fact that consumers in

QUESTION 3: How would you characterize IKEA’s strategy prior to its missteps in

North America? How would you characterize its strategy today?

ANSWER 3: Most students will probably agree that prior to its missteps in North

America, IKEA largely followed a global standardization strategy whereby it sold the

QUESTION 4: What is IKEA’s strategy toward its suppliers? How important is this

strategy to IKEA’s success?

ANSWER 4: IKEA’s suppliers are central to the company’s success. In 2013, the

company had more than 2,000 suppliers located in over 50 countries, and relied on

QUESTION 5: What is the source of IKEA’s success today? Can you see any

weaknesses in the company? What might it do to correct these?

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ANSWER 5: Many students will probably attribute IKEA’s continued success to its

ability to remain on the leading edge of the industry. The company is forward thinking

General Electric’s Joint Ventures

QUESTION 1: GE used to have a preference for acquisitions or greenfield ventures as an

entry mode, rather than joint ventures. Why do you think this was the case?

ANSWER 1: Many companies choose acquisitions or greenfield investments as an entry

QUESTION 2: Why do you think that GE has come to prefer joint ventures in recent

years? Do you think that the global economic crisis of 2008-2009 might have impacted

this preference in any way? If so, how?

ANSWER 2: General Electric has shifted away from its traditionally preferred method of

entering new markets via wholly owned subsidiaries to entering new markets through

joint ventures with local firms for a number of reasons. Two key factors in the strategic

QUESTION 3: What are the risks that GE must assume when it enters into a joint

venture? Is there any way for GE to reduce these risks?

ANSWER 3: Most students will probably focus on the fact that joint ventures, while

offering firms the opportunity to share costs and risks, also imply that firms are sharing

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McGraw-Hill Education.

for minority stakes in some ventures when it would have preferred to have a majority

position.

QUESTION 4: The case mentions that GE has a well-earned reputation for being a good

partner. What are the likely benefits of this reputation to GE? If GE were to tarnish its

reputation by, for example, opportunistically taking advantage of a partner, how might

this impact the company going forward?

ANSWER 4: GE is well recognized in the industry as being a good partner. GE’s partners

find the firm’s innovative management techniques and strong management development

QUESTION 5: In addition to its reputation for being a good partner, what other assets do

you think GE brings to the table, making it an attractive joint venture partner?

ANSWER 5: Students may suggest that GE is recognized as being a good partner not

only because of the management knowledge it shares with its partners, but also because

Another Perspective: To explore General Electric’s international operations in more

depth, go to {http://www.ge.com/} and click on “worldwide.”

The Globalization of Starbucks

QUESTION 1: Where did the original idea for the Starbucks’ format come from? What

lesson for international business can be drawn from this?

ANSWER 1: The original idea for the Starbucks format came from Italy. The founder of

Starbucks, Howard Schultz, was inspired to start the chain after experiencing Italy’s

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McGraw-Hill Education.

vehicles after Japanese automakers successfully invaded the U.S. auto market and made

quality a key buying point.

QUESTION 2: What drove Starbucks to start expanding internationally? How is the

company creating value for its shareholders by pursuing an international expansion

strategy?

ANSWER 2: After Starbucks grew from a single store to more than 700 locations in just

a decade, the company began to explore growth opportunities elsewhere. Today

QUESTION 3: Why do you think Starbucks decided to enter the Japanese market via a

joint venture with a Japanese company? What lesson can you draw from this?

ANSWER 3: Starbucks began its international expansion in Japan with a 50–50 joint

venture with a local company, Sazaby Inc. Because it was important for the company to

QUESTION 4: Is Starbucks a force for globalization? Explain your answer.

ANSWER 4: Most students will probably agree that Starbucks in indeed a force for

globalization. The company has successfully replicated its coffeehouse experience in

QUESTION 5: When it comes to purchasing coffee beans, Starbucks adheres to a “fair

trade” program. What do you think is the difference between fair trade and free trade?

How might a fair trade policy benefit Starbucks?

ANSWER 5: Fair trade focuses on non-exploitative and environmentally sound growing

policies while free trade refers to trade without barriers. Starbucks’s fair trade program is

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Another Perspective: Students can explore Starbucks’ global operations at the company’s

website as {http://www.starbucks.com/}.

Coca-Cola’s Strategy

QUESTION 1: Why do you think that Roberto Goizueta switched from a strategy that

emphasized localization toward one that emphasized global standardization? What were

the benefits of such a strategy?

ANSWER 1: Goizueta believed that the main difference between the U.S. market and

foreign markets was the level of penetration in the foreign markets. Goizueta felt that the

QUESTION 2: What were the limitations of Goizueta’s strategy that persuaded his

successor, Daft, to shift away from it? What was Daft trying to achieve? Daft’s strategy

also did not produce the desired results. Why do you think this was the case?

ANSWER 2: Most students will probably agree that it was the emergence of smaller,

more nimble competitors that forced Daft to change Coca-Cola’s course. The smaller

companies were producing beverages designed to meet the demands of local markets, and

markets, economies of scale in production and marketing, and so on.

QUESTION 3: How would you characterize the strategy pursued by Coca-Cola under

Isdell’s leadership? What is the enterprise trying to do? How is this different from the

strategies of both Goizueta and Daft? What are the benefits? What are the potential costs

and risks?

ANSWER 3: Coca-Cola has taken a more transnational approach to its strategy. The new

strategy allows the firm to vary pricing, product offerings, and marketing messages from

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QUESTION 4: What does the evolution of Coca-Cola’s strategy tell you about the

convergence of consumer tastes and preferences in today’s global economy?

ANSWER 4: Many students will probably agree that Coca-Cola’s experience confirms

Another Perspective: Students can explore The Coca-Cola Company’s global operations

at the company’s website {http://www.coca-cola.com/global/}.