1 twelve c h a p t e rc h a p t e r the strategy of international business part five competing in a...
TRANSCRIPT
![Page 1: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/1.jpg)
1
Twelve
C h a p t e rThe Strategy of
International Business
Pa
rt Fiv
e C
om
pe
ting
in a
Glo
bal M
ark
etpla
ce
![Page 2: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/2.jpg)
2
Chapter TwelveTHE STRATEGY OF
INTERNATIONAL BUSINESS
1. Strategy and the Firm
2. Global Expansion Benefits
3. Formulating a Global Strategy
OBJECTIVES
![Page 3: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/3.jpg)
3
THE ROLE OF STRATEGY
Strategy:● Actions managers take to attain the goals of
the firm.● Need to identify and take action that lowers
the cost of value creation and/or differentiates the firm’s product through superior design, quality, service, or functionality.
![Page 4: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/4.jpg)
4
THE FIRM AS A VALUE CHAIN
Sequential process of value-creating activities
Identifies the separate activities and business processes performed to design, produce, market, deliver, and support a product / service.
Firm is profitable to the extent the value it receives exceeds the total costs involved in creating its product or service.
Consists of two types of activitiesPrimary activities Support activities
![Page 5: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/5.jpg)
5
VALUE CHAIN: PRIMARY AND SUPPORT ACTIVITIES
General administration
Human resource management
Technology development
Procurement
Inbound logistics
OperationsOutbound logistics
Marketing and sales
Service
Copyright The McGraw-Hill Companies, Inc. All rights reserved.
![Page 6: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/6.jpg)
6
2. GLOBAL EXPANSION BENEFITS
International firms can:● Earn a greater return from distinctive skills or core
competencies.● Realize location economies by dispersing value
creation activities to locations where they can be performed most efficiently.
● Realize greater experience curve economies, which reduces the cost of value creation.
![Page 7: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/7.jpg)
7
BENEFITS FOR INTERNATIONAL FIRMS
Learning Effects:● Labor productivity increases over time as individuals
learn the most efficient ways to perform particular tasks. Economies of Scale:
● Reductions in unit cost achieved by producing a large volume of a product.
Strategic Significance:● Moving down the experience curve allows a firm to
reduce its cost of creating value.
![Page 8: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/8.jpg)
8
GlobalFirm
GlobalFirm
Domestic Firm
Domestic Firm
ManufacturingManufacturing
Economies of ScaleEconomies of Scale
R & DR & DProcurementProcurement
MarketingMarketing LogisticsLogistics
ECONOMIES OF SCALE FOR GLOBAL FIRMS
![Page 9: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/9.jpg)
9
EXPERIENCE CURVE EFFECTS
Copyright The McGraw-Hill Companies, Inc. All rights reserved.
![Page 10: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/10.jpg)
10
CAVEATS
When making location decisions:● Consider trade barriers and
transportation costs.● Assess political and
economic risks.
![Page 11: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/11.jpg)
11
3. FORMULATING A GLOBAL STRATEGY
OrganizationOrganizationEnvironmentEnvironment Int’lInt’lStrategyStrategy
Int’lInt’lMarketMarket
Success !Success !
• Economic• Socio-cultural• Political/Legal• Local competition
• Firm Resources• Firm Capability• Core competence• Strategic Disadvantages
Generic competitive StrategiesChoice of Entry Modes
Constraints
Opportunity
Constraints
Opportunity
![Page 12: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/12.jpg)
12
$ Cost Reduction
Local Responsiveness
TWO COMPETING FORCES
![Page 13: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/13.jpg)
13
COST REDUCTION
Desire to reduce costs by:
Mass production
Product standardization.
Optimal location production.
Hard to do with commodity-type products.
products serving universal needs.
Also hard where competition is in low cost producing location.
Finally, int’l competition creates price pressures.
$
![Page 14: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/14.jpg)
14
LOCAL RESPONSIVENESS
Different consumer tastes and preferences.
Different infrastructure and practice.
Differences in distribution channels.
Government demands.
![Page 15: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/15.jpg)
15
High
Cost Pressures
Low
Low High
Pressures for Local Responsiveness
GlobalGlobalStrategyStrategy
TransnationalTransnationalStrategyStrategy
MultidomesticMultidomesticStrategyStrategy
CHOICE OF GLOBAL STRATEGY
InternationalInternationalStrategyStrategy
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
![Page 16: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/16.jpg)
16
INTERNATIONAL STRATEGY
Go where locals don’t have your skills.
Little adaptation. Products developed at home (centralization).
Manufacturing and marketing in each location.
Makes sense where low skills, competition, and costs exist.
![Page 17: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/17.jpg)
17
MULTIDOMESTIC STRATEGY Maximize local responsiveness. Customize the product and marketing strategy to
national demands.
Skill and product transfer.
Transfer all value-creation activities, no experience curve rewards.
Good for high local responsiveness and low cost reduction pressures.
UK Chile
IndiaJapan
USA
HK
Mexico
![Page 18: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/18.jpg)
18
GLOBAL STRATEGY
Best use of the experience curve and location economies.
This is the low cost strategy.
Utilize product standardization.
Not good where local responsiveness demand is high.
B
A
Accumulated output
Unit costsMoving down the curve reduces
the cost of creating valueEconomies of Scale
![Page 19: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/19.jpg)
19
Chile
Japan
Mexico
India
Korea
UK
China
USAUSA
TRANSNATIONAL STRATEGY(Distributed but Networked Organization)
![Page 20: 1 Twelve C h a p t e rC h a p t e r The Strategy of International Business Part Five Competing in a Global Marketplace](https://reader033.vdocuments.net/reader033/viewer/2022051620/56649ef35503460f94c0543f/html5/thumbnails/20.jpg)
20
TRANSNATIONAL STRATEGY
Makes sense where there is pressure for both cost reduction and local responsiveness.
Global coordination and national flexibility Link local operations to each other, and to center in
flexible systems Flow of skills and product offerings occurs throughout
the firm (global learning). Link diverse org’ perspectives and resources. Organizational characteristics: Reciprocal dependence, sharing resources, ideas, opportunities.
Integrating mechanism: difference solving system, Information system, Forums, HRM, Corporate Identification