Define and Explain International Business Strategy

International strategy is “A strategy through which the firm sells its goods or services outside its domestic market.”

Companies adopt an international strategy when they aim to leverage their core competencies by expanding opportunistically into foreign markets. International firms include the likes of McDonald's, Kellogg, Google, Haier, Wal-Mart, and Microsoft.

The international model relies on local subsidiaries in each country to administer business as instructed by headquarters. Some subsidiaries may have freedom to adapt products to local conditions as well as to set up some light assembly operations or promotion Programs. Still, ultimate control resides with managers at headquarter who reason they best know the basis and potential extension of the company’s core competencies.

International strategy and the value Chain: Historically, critical elements of the company’s value chain, such as research and development to branding, have been centralized at headquarters.

Firms that pursue an international strategy try to create value by transferring core competencies and unique products to those foreign markets where rivals are unable to develop, match, or sustain them. The international strategy, therefore, facilitates the transfer of skills, expertise, and products from the parent company to its subsidiaries. Headquarters can translate their expertise in and control over important activities into powerful positions to command foreign operation to follow their lead.

This expertise and control can take place in manufacturing processes or general management skills. The latter, for example, explains the growth of international hotel chains such as Hilton International, Four Seasons, and Sheraton.

Liability of International Strategy: Under an international strategy, however, the central of headquarters often hinders identifying and responding to local conditions.

These limitations become costly when other companies emphasize customizing their goods and services to local conditions. Carrefour, for instance, ran into this problem in the United States. Carrefour tried shifting its strategy to deal better with local tastes and preferences, but this eventually proved too costly and the company shut down its U.S. operations.

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