final review
tiantian 123
chapter13strategy.pptxStrategy of international business
Chapter 13
What Is strategy of international business?
Strategy – an interrelated set of activities designed to achieve a common set of goals
Business Strategy – the coordinated actions managers take to achieve a set of goals.
International Business Strategy – the coordinated set of activities firms deploy across international markets to achieve the stated goals of the firm.
Value of firm is determined by profitability + profit growth
Primary methods to create value
Managers can increase the profitability of the firm by pursuing strategies that lower costs or by
Pursuing strategies that add value to the firm’s products, which enables the firm to raise prices and/or to maintain an existing customer base.
Managers can increase the rate at which the firm’s profits grow over time by pursuing strategies to sell more products in existing markets (Market Penetration)
Or by pursuing strategies to enter new markets (Market Development, Diversification)
Value creation – (V-C = value zone)
Value happens when everyone wins
How do firms create value
Primary activities have to do with the design, creation, and delivery of the product; its marketing; and its support and after-sale service.
The support activities of the value chain provide inputs that allow the primary activities to occur
Profitability and growth through global expansion
Expand the market for their domestic products by selling those products (or services) in international markets
Expanding globally allows firms to increase their profitability and rate of profit growth in ways not available to purely domestic enterprises
Realize location economies by dispersing value creation activities to those worldwide locations where they can be performed most efficiently and effectively.
Realize greater cost economies from experience effects by serving an expanded global market
from a geographically central location, thereby reducing the costs of value creation.
Earn a greater return by leveraging any valuable skills developed in foreign operations and transferring them to other entities within the firm’s global network of operations.
Core competency
The term core competence refers to skills within the firm that competitors cannot easily match or imitate
It can be transferrable – but maybe not in the full sense, and depends on many independent factors:
Applying core competency in the global context
For a firm that is trying to survive in a competitive global market, this implies that trade barriers and transportation costs permitting, the firm will benefit by basing each value creation activity it performs at that location where economic, political, and cultural conditions, including relative factor costs, are most conducive to the performance of that activity
LOCATION CAN HAVE A BIG IMPACT ON CORE COMPETENCY
Clear Vision optical
Moved production to HKG to obtain better skills at lower prices
HKG rents and costs escalated, then moved to mainland China
Then started to pursue premium market – so leveraged credibility and design assets in Japan, Europe, etc. to position as higher perceived value.
Reducing production and service costs
Experience curve
Learning effects
Economies of scale
The global competitive landscape
Cost pressures
Global competitors
Local competitors with access to lower cost inputs
Commodities are sensitive to price (some industries are very local)
Localization pressures
Tastes and preferences
Distribution
Host country demands
Different strategies
GLOBAL STANDARDIZATION
When there are strong pressures to reduce costs and the needs for customization are minimal
LOCALIZATION
most appropriate when there are substantial differences across nations with regard to consumer tastes and preferences and where cost pressures are not too intense
INTERNATIONAL
taking products first produced for their domestic market and selling them internationally with only minimal local customization.
TRANSNATIONAL
when the firm simultaneously faces both strong cost pressures and strong pressures for local responsiveness
Evolution of strategies
