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Chapter 15 - Entry Strategy and Strategic Alliances
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4. Chrysler is hoping to add some Fiat models that are popular in Europe to its U.S.
product line. Is it possible to standardize cars across markets? Is there such a thing as a
world car?
Answer: The question of whether the marketing mix can be standardized across borders
has been the basis for considerable discussion among scholars for decades. In the auto
industry, many efforts to standardize cars have been disappointing. Yet, it can be done as
INTEGRATING VIDEOS
There are also several longer video clips that can be integrated with the material
presented in this chapter. In particular, you might consider the following from
International Business DVD Volume 6:
Title: UK Company Expands to Ukraine for Farming
Learning Objectives
The purpose of this video is to help you:
❖ Explore the ethics involved in foreign ownership of a country’s fundamental assets
like farmland.
Key Words
❖ Foreign direct investment
❖ Impact of the multinational company on the host country
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Synopsis
Until a couple of years ago, swaths of land in Ukraine that had been previously used for
agriculture stood untouched and filled with weeds and grass. Today, the fields are busy
with British combine harvesters bringing in a successful wheat crop. The fields are part
of huge tracts of land about the size of England that have been unused for the fifteen
years or so since the collapse of the Soviet farming system. As evidenced by the crops
The investment by Landkom is part of a growing trend in the world. Countries and
companies, in response to dire predictions of global food shortages, are investing in land
with the hopes of growing crops. Britain has invested in Ukraine, China is buying up land
in Cambodia, and the Arab countries are investing in Africa. However, some are
questioning whether the investments are actually ethical. The British Food Security
For now, the debate over whether foreign ownership of farmland is ethical will probably
continue. Regardless of the outcome of the discussion, the fields are once again
productive and more much-needed food is being produced. What is not clear though is
whether handing over control of the land to foreign companies was really the best way to
achieve this outcome.
Discussion Questions
1. Discuss the issues involved when countries and companies buy farmland in other
countries. Is the practice ethical? Why or why not? Are investors from rich countries
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exploiting the assets of developing countries? Do the investors have a moral obligation to
give back to the countries where they have invested?
2. What is foreign direct investment? Using the information provided in the video,
3. Consider the trend of investing in foreign farm land using different political ideologies.
How would those taking a radical perspective view the trend? What arguments would
those taking a free market approach make?
INCORPORATING globalEDGE™ 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.
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
The U.S. Commercial Service prepares reports known as the Country Commercial Guide
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Exercise 2 Answer
Search phrase: Country Commercial Guide
Additional Info:
The Country Commercial Guides are detailed reports about each country in the world
drafted by U.S. Commercial Service specialists and commercial attachés responsible for
each of these markets. Each report is several hundred pages long and provides a detailed
economic overview of each market, as well as analysis of attractive sectors for U.S.
exporters, trade barriers they will face, appropriate market entry modes and successful
marketing and advertising strategies they can consider utilizing in those markets.
End of Part Case Notes
Part Five
The Evolving Strategy of IBM
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: In 1972, IBM moved away from its international strategy where most activities
were undertaken in the United States and products were then sold through overseas sales
2. By the 1990s the classic multinational strategic orientation was no longer working well
for IBM. Why not?
Answer: Over time, IBM’s multinational approach to strategy began to lose its
effectiveness forcing the company to develop a new strategy. Three major trends
Chapter 15 - Entry Strategy and Strategic Alliances
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: IBM refers to its new strategy as a global integration approach. Under this
strategy, IBM has integrated operations both vertically and horizontally, located
4. In terms of the strategic choice framework introduced in this part of the text, what
strategy do you think IBM is pursuing today?
Answer: Most students will probably agree that IBM’s current strategy most closely
resembles the transnational approach to markets.
IKEA in 2013: Furniture Retailer to the World
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: 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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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: 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
3. How would you characterize IKEA’s strategy prior to its missteps in North America?
How would you characterize its strategy today?
Answer: Most students will probably agree that prior to its missteps in North America,
4. What is IKEA’s strategy toward its suppliers? How important is this strategy to
IKEA’s success?
Answer: 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 external
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?
Answer: Many students will probably attribute IKEA’s continued success to it ability to
remain on the leading edge of the industry. The company is forward thinking and willing
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General Electric’s Joint Ventures
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: Many companies choose acquisitions or greenfield investments as an entry
because they give the company full control and all the profits. Firms may also find
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 upon this
preference in any way? If so, how?
Answer: General Electric has shifted away from its traditionally preferred method of
entering new markets via wholly owned subsidiaries to entering new markets through
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: 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 control.
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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: 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
5. In addition to its reputation for being a good partner, what other assets do you think
GE brings to the table that make it an attractive joint venture partner?
Answer: Students may suggest that GE is recognized as being a good partner not only
because of the management knowledge is shares with its partners, but also because of its
vast experience doing business in other countries. While GE may form a joint venture
The Globalization of Starbucks
1. Where did the original idea for the Starbucks’ format come from? What lesson for
international business can be drawn from this?
Answer: 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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2. What drove Starbucks to start expanding internationally? How is the company creating
value for its shareholders by pursuing and international expansion strategy?
Answer: After Starbucks grew from a single store to more than 700 locations in just a
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: 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 replicate
4. Is Starbucks a force for globalization? Explain your answer.
Answer: Most students will probably agree that Starbucks in indeed a force for
globalization. The company has successfully replicated its coffeehouse experience in
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: Fair trade focuses on non-exploitative and environmentally sound growing
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Coca-Cola’s Strategy
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: Goizueta believed that the main difference between the U.S. market and foreign
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: 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
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: 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
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?
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