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The Strategy of International Business (Profitability and Profit Growth (a…
The Strategy of International Business
Profitability and Profit Growth
add value
lower costs
sell more in existing markets
expand internationally
a firm can
Expand their market
increase growth by selling goods or services developed at home internationally
Realize location economies
the economies that arise from performing a value creation activity in the optimal location for that activity, wherever in the world that might be
Realize greater cost economies from experience effects
refer to the reductions in unit cost achieved by producing a large volume of a product
Earn a greater return
leverage skills developed in foreign operations and transfer them elsewhere in the firm
Value Creation
the difference between
V (the price that the firm can charge for that product given competitive pressures)
C (the costs of producing that product)
Primary activities
R&D, production, marketing and sales, customer service
Support activities
information systems, logistics, human resources
differentiation strategy
adding value to a product so that customers are willing to pay more for it
low cost strategy
lowering costs
Competitive Pressure
Pressures for cost reductions
force the firm to lower unit costs
Pressures to be locally responsive
require the firm to adapt its product to meet local demands in each market—a strategy that raises costs
Competition Strategy
Global standardization
increase profitability and profit growth by reaping the cost reductions from economies of scale, learning effects, and location economies
Localization
increase profitability by customizing goods or services so that they match tastes and preferences in different national markets
Transnational
tries to simultaneously achieve low costs through location economies, economies of scale, and learning effects, differentiate the product offering across geographic markets to account for local differences, and foster a multidirectional flow of skills between different subsidiaries in the firm’s global network of operations
International
take products first produced for the domestic market and sell them internationally with only minimal local customization
CHERIN VADILA Y / 1406574932