INTERNATIONAL BUSINESS STRATEGY FORMULATION
Two International Strategies
A multinational strategy adapts products and marketing to suit each
national market separately. This allows responding to local preferences but
forfeits scale efficiencies. A global strategy standardizes the offering
across markets to gain cost savings but can miss local needs.
Corporate-Level Strategies
These guide a multifaceted corporation's choice of markets and business
units to target and the objectives and roles for each one. Main approaches
are growth expanding scale or scope; retrenchment cutting back scale or
scope; stability avoiding change to hold position; and combination mixing
the other strategies across units.
Business-Level Strategies
These are formulated for each individual business unit to set its
competitive positioning. Options are low-cost leadership through
economies of scale and cost control; differentiation by making unique,
reputable or well-designed products that support premium pricing; and
focus on a narrow, often specialized segment with cost advantages or
differentiation.
Department-Level Strategies
To support business and corporate approaches, functional area strategies
like manufacturing, marketing, distribution, R&D, HR, procurement,
accounting/finance must play to a firm's strengths in creating value via
lower costs or differentiation. Both primary and support activities
contribute here.
THE MOVE TO FLOATING RATES
Jamaica Agreement In 1976, the IMF formalized floating rates in a new
system, ending attempts to revive fixed rates. Rates would float managed
by government intervention rather than freely. The IMF became a lender
assisting countries with payment problems rather than just a fixed rate
system manager.
Today’s Exchange-Rate Arrangements
Most countries now have a managed float system with some government
intervention to realign rates. But some tie currencies to more stable ones.
Pegged rates allow a currency to fluctuate within 1 percent of a central
rate against a major currency. A currency board legally binds a country to
exchange domestic for foreign currency at a fixed rate.
Recent Financial Crises
Developing country debt - By 1982 many Latin American and African
countries announced inability to service debts. Rescheduling and Brady
Plan loans eased the crisis.
•Mexico’s 1994 peso devaluation and capital flight prompted $50 billion in
international loans with economic reform strings attached.
•1997 Asian currency contagion - Currencies and stock markets plunged
across Southeast Asia. IMF loans followed to Indonesia, South Korea, and
Thailand, aiming to restore confidence and restructure economies.
•1998 Russia ruble crisis - Falling oil revenue, meager tax collection, and
inflation undermined Russian currency and reserves despite IMF loans.
Eventually the ruble was allowed to devalue and float.
•Argentina’s 2001–2002 crisis - Recession amid a strong peg to the US
dollar led to default on massive debt obligations, scrapping the currency
board, peso devaluation, and limits on bank withdrawals.
