Page 139 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 7: Corporate Level Strategies

7.3 Combination Strategies Notes

A company can pursue a combination of two or more corporate strategies simultaneously. But
a combination strategy can be exceptionally risky if carried too far. No organisation can afford
to pursue all the strategies that might benefit the firm. Difficult decisions must be made. Priorities
must be established. Organisations like individuals have limited resources, so organisations
must choose among alternative strategies.
In large diversified companies, a combination strategy is commonly employed when different
divisions pursue different strategies. Also, organisations struggling to survive may employ a
combination of several defensive strategies.

7.4 Internationalisation

When the focus of a business is its domestic operations, but a portion of its activities are outside
the home country, it is called an "International Company". In other words, an international
company is one that is primarily based in a single country but that acquires some meaningful
share of its resources or revenues from other countries. For example, a small company engaged
in exporting some of its products beyond its home country, is called "international" in its
operations.
Internationalisation involves creating an international division and exporting the products
through that division. The firm really focuses on the domestic market, and exports what is
demanded abroad. All control is retained at home office regarding product and marketing
strategies. As a firm becomes more successful abroad, it might set up manufacturing and
marketing facilities in the foreign country, and allow a certain degree of customization. Country
units are allowed to make some minor adaptations to products to suit local needs. But they have
far less independence and autonomy compared to multi-domestic companies. All sources of
core competencies are centralized.
The majority of large US multinationals pursued the international strategy in the decades
following World War II. These companies centralized R&D and product development but
established manufacturing facilities as well as marketing divisions abroad. Companies such as
Mc Donald's and Kellogg's are examples of firms that followed such a strategy in the beginning.
Although these companies do make some local adaptations, they are of a very limited nature.
With increasing pressure to reduce costs due to global competition, especially from low-cost
countries, the use of this strategy has become limited.
The disadvantages of this strategy are:
1. By concentrating most of its activities in one location, it fails to take advantage of the
benefit of an optimally distributed value chain.
2. It is susceptible to higher levels of currency risks, because the company is too closely
associated with a single country and increase in the value of currency may suddenly make
the product unattractive abroad.

Exporting

This means selling the products in other countries through an agent or a distributor. This choice
offers avenues for larger firms to begin their international expansion with a minimum investment.
There are merits and demerits.

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