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Chapter 10 : The Strategy of International Business, Presure for local…
Chapter 10 : The Strategy of International Business
Strategy And the Firm
The Actions that managers take to attain the goals of the firm
Value Creation
Porter emphasizes two basic strategies to create value and attain competitive advantage: low cost and differentiation strategy.
Strategic Positioning
Not all positions on the efficiency frontier are viable. Firms must choose a strategic position that is viable
Global Expansion,Profitability and profit growth
allows firms to increase their profitability and rate of profit growth in ways not available to purely domestic enterprises.
Expanding the market :
Leveraging Product And competencies
The success of firms that expand internationally depends on the goods or services they sell, and on their core competencies
Location Economies
the economies that arise from performing a value creation activity in the optimal location for that
Experience Effects
systematic reductions in production costs over the life of the product.
Leveraging Subsidiary Skills
the company must have sophisticated processes that identify new skills that could be of interest.
Choosing Strategy
Global Standardization Strategy
Focuses on increasing profitability & profit
Growth by reaping the cost reductions that
Come from economies of scale, learning effects and location economies
International Strategy
Involves taking products first produced
for the domestic market and then Selling
them internationally with only minimal
local customization
Localization Strategy
Focuses on increasing profitability by
customizing the firm's goods or services so that they provide a good match to tastes and preferences in different national market
Transnational Strategy
-Achieve low cost through location economies
-Differentiate the product offering across geographic market
-Foster a multidirectional flow of skills between different
Pressures for Cost Reduction
International businesses often face pressures for cost reductions because of the competitive global market.
• In industries producing commodity type products that fill universal needs (needs that exist when the tastes and preferences of consumers in different nations are similar if not identical) where price is the main competitive weapon
• When major competitors are based in low cost locations
• Where there is persistent excess capacity
• Where consumers are powerful and face low switching costs
Pressures for Local Responsiveness
Pressure for local responsiveness comes from differences in consumer tastes, infrastructure, distribution channels, or host government demands.
• Differences in consumer tastes and preferences strong pressure emerges when consumer tastes and preferences differ significantly between countries
• Differences in traditional practices and infrastructure strong pressure emerges when there are significant differences in infrastructure and/or traditional practices between countries
• Differences in distribution channels need to be responsive to differences in distribution channels between countries
• Host government demands economic and political demands imposed by host country governments may require local responsiveness
Presure for local responsiveness
Low
Low
High
High
Pressures for Cos Reduction