How to analyze, formulate, and implement international strategies? Where might the firm expand outside domestic borders?

10/4/21

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How to formulate strategies?

INTERNATIONAL-LEVEL

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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?

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What is strategy

formulation

PROCESS BY WHICH AN ORGANIZATION CHOOSES COURSES OF ACTION TO ACHIEVE ITS DEFINED GOALS

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Inputs Resources Capabilities Competencies

Outcomes Accounting, Shareholder, Stakeholder returns

Internal processes Strategy formulation & implementation

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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

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Strategy levels

BUSINESS CORPORATE INTERNATIONAL

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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

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Why go international? Global opportunities

Increased market size

Return on investment

Economies of scale and learning

Location advantage

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Where do you internationalize?

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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

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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/

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Porter’s Diamond of National Advantage

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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/

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U.S.A.

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Strategies & entry modes Explore your capabilities

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International entry modes

Export

License / Franchise

Strategic alliance

Acquire

Greenfield venture / new subsidiary

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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

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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

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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

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Acquisition

Most rapid expansion mode

Can be very costly

Regulatory requirements may present barriers to foreign ownership

Complex and costly negotiations

Corporate culture differences

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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

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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

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Paradigms for international strategies

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International strategies

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

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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

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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

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

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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]