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My takeaway on the IB learnings from Prof.

Saptarshi Purkayastha
Primary Reason why companies fail in International Market : Culture
Organization culture
Interoffice politics
Head Office Culture
Subsidiary Culture
National Culture
Local Culture
Customer Group Culture
How do firms grow?
Horizontal: Static Arbitrage demand side scope economy-a Product or a
strategic capability
Vertical: Supply side scope economy: static arbitrage-supply side scope
economy - factor cost advantage
Globalisation is all about the MINDSET.
Ownership:
Its only when the firm extend the scope of activities under its own management
to a foreign country that it enters the domain of international strategy.
Globalisation is the interplay between two forces
1. World is Homogeneous: Standard Product and Services: Entry &Exit
barriers are minimum
2. World is Heterogeneous: Non-standard product and Services:
Interaction between culture, products & systems
Static arbitrage leads to strategic decision on what product to sell. Global
efficiency shows where to compete and Dynamic arbitrage decides where to
locate firms activities.
International strategy is a trade-off. The challenge is to strike the right balance
between economies to scale and responsiveness to local conditionals. The more
focus on global scale of economies will lead company strategy more global.

IB learnings from Prof.Saptarshi Purkayastha, IIMK


Jobi George EEPGM-12-015

AAA Model
Adaptation: Boost revenues and market share by maximising a firms local
relevance
Country centric Organisation
Strategy Best: If company spend too much on regional advertising

Aggregation:
operations

Deliver economies of scale by creating regional or global


Cross boarder grouping of global business units or product divisions
Strategy Best: If company spend too much on R&D

Arbitrage:

Exploitation of differences between national or regional markets


Balancing of supply and demand within and across organisational

boundaries
Strategy Best: If companys labour cost is high
Models: IBM-> Adaptation Aggregation; TCS-> Arbitrage-Adaptation
Theory of Internationalisation
Theory 1: International Product Life Cycle: IPLC: How Innovation starts
from developed country and go to developing country and be a part of it.
Theory 2: OLI Framework:
Condition 1: Ownership: It need to have ownership of certain resources
which any other fim in the host market cannot have.
Condition 2: Location: Because the unique resource the particular
company have will not be valued across the country or world. Find out the
unique resource can go to the country where the company need to go.
Should it be valued there?
Condition 3: Internalisation: Do all the product or activities do in the host
country or outsource some of the activity? What part to keep themselves
and what to outsource?
Theory 3 Stages Theory:
Process of Internationalization: Do firms internalize? -Incrementally?-Radically?

IB learnings from Prof.Saptarshi Purkayastha, IIMK


Jobi George EEPGM-12-015

The process does not depend on industry dynamics, rather more or less its
identical. Normally when this process starts its incremental and then make a
radical jump.
Stages theory states the process done by alternate incrementally and radically.
Incremental-> Radical->Incremental->Radical
CAGE Framework
Cultural Distance: Religions and Culture
Administrative /Political Distance
Absence of colonial ties
Political hostility ( Eg: India and Pakistan)
Geographic Distance: Physically remote country
Economic Distance: Difference in consumer income

IB learnings from Prof.Saptarshi Purkayastha, IIMK


Jobi George EEPGM-12-015

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