Strategic Decisions in International Business

Abstract

Reasoning about internationalization strategy starts with defining the key business units of your firm—as we have seen in other chapters of this book, many internationalization decisions are specific to industries, and even to types of products and services. Decisions about internationalization strategy concern both the corporate level and the level of the business unit. Three “classical” internationalization strategy models selected for this chapter—the OLI paradigm of Professor J. Dunning, the AAA framework of Professor P. Ghemawat and the adaptation/global coordination decisions approach of Professors C. Bartlett and S. Ghoshal—deal with decisions taken at both levels. Internationalization decisions are taken in conditions of uncertainty. Therefore, we recommend organizing the process of defining internationalization strategy around real strategic options (investments that create opportunities to respond to future contingent events) and using effectuation principles (that is, decisions are made only if we can afford to be wrong), and even some elements of military planning, such as alternative courses of action and the crystal ball technique. We also suggest that you reflect, drawing on the ideas of Professors H. Mintzberg and J. Waters, on whether your firm’s strategy in global markets is deliberately chosen or created ad hoc as a reaction to external events; likewise, whether your strategy positioning on the continuum of planned, entrepreneurial, umbrella, process, consensus, imposed, ideological and unconnected strategies is an intentional one. Awareness of your personal cognitive biases is the final piece in the puzzle, as we discuss overconfidence, false positives and false negatives in the evaluation of a project; the availability, anchoring and representativeness biases; the gambler’s fallacy, focalism and impact bias; the planning fallacy, framing, confirmation and blind-spot biases; and the endowment effect.