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There are two global environment trends affecting the choice of international strategies, particularly international corporate-level strategies: liability of foreignness and regionalization.
Intrusion from Japanese brands like Toyota and Sony woke up the global market and made people realized the importance of international competition. However, there is “a set of costs associated with various issues firms face when entering foreign markets, including unfamiliar operating environments; economic, administrative, and cultural differences from their home institutional environments; and the challenges of coordination over distances. Four types of distances commonly associated with liability of foreignness are cultural, administrative, geographic, and economic.” (Hitt, 2019) For example, when McDonald’s and KFC decided to enter Chinese market at the very beginning, they faced the challenges of limited customer as they only selling fired chicken at the time, and it takes time for the audience to take in the new elements. After that, they both had to create new menu fitting in Asian stomach more to expand their customer groups.
Regionalization talks about where a firm choose to compete can be an element affecting its strategies. Generally, firm would avoid to directly compete in global area as it will spread the number of resources and effort into a large space. Rather, the firm would start from reginal places to compete effectively. Starting at a particular regain can help the firm better learn the culture, policy, and social norms in the area. As the author states in the article, “Think regional, act local, forget global.” (Moore & Rugman, 2002)
Reference:
• Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2019). Strategic management: Concepts and cases: Competitiveness and globalization (13th ed.). Cengage
• Moore, K., & Rugman, A. (2002, July 12). Don’t think Global – Think regional. strategy+business. Retrieved July 28, 2022, from https://www.strategy-business.com/article/20200
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