International Strategic Management
After studying this chapter, students should be able to:
> Characterize the challenges of international strategic management. > Assess the basic strategic alternatives available to firms. > Distinguish and analyze the components of international strategy. > Describe the international strategic management process. > Identify and characterize the levels of international strategies.
OPENING CASE: Global Mickey
The opening case explores the Walt Disney Company’s international strategy. In particular, the case examines the difficulties Disney has faced in establishing a theme park in France.
1. The Walt Disney Company is a $23 billion MNC that currently earns over $150 million a year in royalties and licensing fees.
2. Disney expanded its popular theme park concept in 1984 from its original two sites in the United .States. to Japan. To limit its risk, Disney signed an agreement with the Oriental Land Company, which financed and owns Tokyo Disneyland and pays Disney royalties. Tokyo Disneyland proved to be an enormous success, and prompted Disney to seek other foreign opportunities.
3. Disney chose Paris, France as the site for its next theme park in 1988. Paris was selected because some 350 million people live within a two-hour plane ride of the city, and because the French government offered numerous incentives, including bargain-priced land and an extension of the Parisian rail system to the park. Disney was permitted to retain up to 49 percent of the stock in the new theme park.
4. Euro Disneyland however, proved not to have the fairy tale success of its Japanese counterpart. Critics feared that it would threaten the French culture, and likened it to “a cultural Chernobyl,” farmers condemned the decision of the government to sell their land to Disney, and the company found itself under fire for its dress code, training practices, and plans to ban alcohol from the park.
5. So far, although some 11 million people visit the park each year, the project has been struggling financially. Construction costs were higher than expected, visitors have spent less than anticipated on food and lodging, and the company has had to increase its staff and number of computer reservation terminals.
6. The park reached a major financial crisis after just 18 months of operation. Disney and its banks agreed to new financial arrangements in 1994, which included an agreement by Disney to relinquish royalty payments and management fees paid by Euro Disney. In addition, the project received an injection of much needed capital from a Saudi Arabian investor.
7. Disney executives remain optimistic about the park’s future, noting an anticipated rise in discretionary spending in France. In fact, by 1997, the park had become the number one tourist destination in Europe.
8. Disney’s international efforts continue. In 2001, Disney opened Tokyo DisneySea next door to Tokyo Disney, and Disney recently announced plans for a new park in Hong Kong.
9. Disney is still struggling in other areas of its international operations, especially in international subscriptions to the Disney cable channel and in worldwide licensing revenues.
Chapter Eleven explores the issue of international strategic management. The chapter begins with a discussion of the basic components of international strategy, and then moves on to consider the strategy formulation and implementation process. Finally, strategy development is examined at the corporate level, the business level, and the functional level.
I.THE CHALLENGES OF INTERNATIONAL STRATEGIC MANAGEMENT
• International strategic management is a comprehensive and ongoing management planning process aimed at formulating and...