Location economies can be achieved by dispersing value creation activities to locations where they can be performed most efficiently and effectively. A location might be more attractive cost-wise because of favorable political, legal & economic factors.

Pressures for cost reductions are greatest:
❗ in industries producing commodity-type products that fill a universal need the price is the main competitive weapon;
❗ when major competitors are based in low-cost locations;
❗ where consumers are powerful and face low switching costs.

Home replication strategy is usually the first strategy that a company adopts when expanding globally. The company is simply exporting and works if it has a strong brand.
Is not a viable strategy in the long-run as the company does not invest in R&D to adapt products to local market. Thus there will be lack of local responsiveness.

With Localization strategy the company will incur more cost than any other strategy to adapt to every nation or sector. Can be viable if there is focus on stand-alone markets worthy of significant attention and adaptation e.g. China, USA, Saudi Arabia.
If implemented well, can be very effective. If a company put a manager with a feel for the culture and the people and what people want. Example of KFC vs Burger King

Companies move to a Global standardization strategy to manage cost pressures. Usually has a highly centralized structure. Firms who use this strategy are able to take advantage of scale economies. Another benefit is global product recognition where customers pay for a brand they recognize and trust. Coca-cola. But many types of products (food, leisure products, etc) have very different norms in different countries. In these cases, localization is a more appropriate approach.

Transnational strategy aims to be both cost efficient and locally responsive. A firm achieves low costs through location, scale economies, and learning effects. At the same time, it tries to differentiate the product offering across geographic markets. A con to this strategy is that it gets very complicated and it is hard for companies to control. IKEA

Experience curve effects can be achieved by having more experience labor. This brings to a systematic reduction in production costs over product lifetime. Example. In aircraft production labor input decreased by 10-15% for every doubling of that labor's experience.

Economies of scale can be achieved by producing a large volume of a product. Sources of economies include spreading fixed development & production costs over a larger volume of output. In the automobile industry, an efficient factor needs to scale at 200 000 units per year. The only way is to sell cars that number is to serve international markets, so as to use factory assets more intensively.

Pressures for local responsiveness arise from the following.
❗ When consumer tastes and preferences differ significantly between countries (Japan, Saudi Arabia, Germany)
❗ When there are significant differences in infrastructure and/or traditional practices between countries
❗ Differences in distribution channels
❗ Economic and political demands imposed by host country governments may require local responsiveness (ECT vs RCT)