Michael_A._Hitt,_R._Duane_Ireland,_Robert_E._Hosk

266 Part 2: Strategic Actions: Strategy Formulation

country’s or a region’s economy with the potential to adversely

affect a firm’s ability to implement its international strategies).

■ Successful use of international strategies (especially an interna-

tional diversification strategy) contributes to a firm’s strategic

competitiveness in the form of improved performance and

enhanced innovation. International diversification facilitates

innovation in a firm because it provides a larger market to

gain greater and faster returns from investments in innovation.

In addition, international diversification can generate the

resources necessary to sustain a large-scale R&D program.

■ In general, international diversification helps to

achieve above-average returns, but this assumes that the

diversification is effectively implemented and that the firm’s

international operations are well managed. International

diversification provides greater economies of scope and

learning which, along with greater innovation, help produce

above-average returns.

■ A firm using international strategies to pursue strategic com-

petitiveness often experiences complex challenges that must

be overcome. Some limits also constrain the ability to manage

international expansion effectively. International diversifica-

tion increases coordination and distribution costs, and man-

agement problems are exacerbated by trade barriers, logistical

costs, and cultural diversity, among other factors.

KEY TERMS

Mini-Case

global strategy 247

greenfield venture 256

international strategy 239

international diversification strategy 262

multidomestic strategy 246

transnational strategy 248

REVIEW QUESTIONS

1. What incentives influence firms to use international strategies?
   2. What are the three basic benefits firms can achieve by success-
   fully using an international strategy?


2. What four factors are determinants of national advantage and
   serve as a basis for international business-level strategies?


3. What are the three international corporate-level strategies?
   What are the advantages and disadvantages associated with
   these individual strategies?


4. What are some global environmental trends affecting the
   choice of international strategies, particularly international
   corporate-level strategies?


5. What five entry modes do firms consider as paths to use to
   enter international markets? What is the typical sequence in
   which firms use these entry modes?


6. What are political risks and what are economic risks? How
   should firms approach dealing with these risks?


7. What are the strategic competitiveness outcomes firms
   can reach through international strategies, and particularly
   through an international diversification strategy?


8. What are two important issues that can potentially
   affect a firm’s ability to successfully use international
   strategies?

An International Strategy Powers ABB’s Future

ABB, headquartered in Zurich, Switzerland, is a major

competitor in the power and automation technologies

industries across the major markets globally. It has 140,000

employees operating in almost 100 countries. In fact, it has

five major businesses—power products, power systems,

discrete automation, low voltage products, and process

automation. It operates in eight major regions: (1) Northern

Europe, (2) Central Europe, (3) the Mediterranean,

(4) North America, (5) South America, (6) India, the

Middle East, and Africa, (7) North Asia, and (8) South Asia.

Over time, ABB has been a successful company using its

geographic diversification across the globe to its advantage.