strategy of international business chapter 12
DESCRIPTION
Strategy of International Business Chapter 12. International Business October 15, 2007. Cho, Hee-Joo Jang, Se-Yeop. Luo, Lin Morger, Raffael. Content. Strategy and the Firm Hee-Joo Global Expansion Luo Lin Cost & Localization PressureRaffael Morger - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/1.jpg)
Strategy of International BusinessChapter 12
Cho, Hee-Joo
Jang, Se-Yeop Luo, Lin
Morger, Raffael
International Business October 15, 2007
![Page 2: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/2.jpg)
2
Content
Strategy and the Firm Hee-Joo
Global Expansion Luo Lin
Cost & Localization Pressure Raffael Morger
Four Strategies Se-Yeop
![Page 3: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/3.jpg)
3
Strategy and the Firm
![Page 4: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/4.jpg)
4
Strategy and the Firm
Value Creation
C
P - C
V - P
C
P
VV - C
V = Value of product to and average consumer
P = Price per unit
C = Cost of production per unit
V – P = Consumer surplus per unit
V – C = Value created per unit
![Page 5: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/5.jpg)
5
Strategy and the Firm
Strategic Positioning
![Page 6: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/6.jpg)
6
Strategy and the Firm
Operations: the firm as a value chain
Primary Activities
Support Activities
Information Systems Logistics Human Resource
Company Infrastructure
![Page 7: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/7.jpg)
7
Global Expansion, Profitability, and Profit Growth
What can firms do after expanding globally?
Expanding the Market
Realizing Location Economies
Reducing Production Cost from Experience Effects
Earning a Greater Return by Leveraging Subsidiary Skills
![Page 8: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/8.jpg)
8
Global Expansion, Profitability, and Profit Growth
Expanding the Market
=>by selling products in international markets
• Leveraging Products
e.g. Microsoft ;Volkswagen and Toyota
• Core Competencies
e.g. Toyota
![Page 9: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/9.jpg)
9
Global Expansion, Profitability, and Profit Growth
Realizing Location Economies
=>by dispersing individual value creation activities
• Creating a Global Web
e.g. IBM’s ThinkPad X31 laptop computer
• Some Warnings
e.g. New Zealand (high transportation costs);
Political risk
![Page 10: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/10.jpg)
10
Reducing Production Cost from Experience Effects
=>by reducing the costs of value creation
Global Expansion, Profitability, and Profit Growth
Cumulative Output
Un
it C
os
ts
A
B
Cumulative output increases over time, and unit costs will lower gradually in one period. Why?
![Page 11: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/11.jpg)
11
• Learning Effects=>cost savings
e.g. Assembling airframe
• Economies of Scale=> reductions in unit cost
e.g. In the automobile industry
Global Expansion, Profitability, and Profit Growth
Reasons
![Page 12: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/12.jpg)
12
Global Expansion, Profitability, and Profit Growth
Earning a Greater Return by Leveraging Subsidiary
Skills
=>by leveraging any valuable skills developed in foreign operations and transferring them to other entities
e.g. McDonald's restaurant in France
![Page 13: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/13.jpg)
13
Pressures International Businesses
Firm A Firm C
Firm B
Pre
ssu
res
for
Co
st R
edu
ctio
n
Pressures for Local Responsiveness
Lo
wH
igh
Low High
--> Nowadays many companies are in the position of firm C
![Page 14: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/14.jpg)
14
Pressures for Cost Reductions
Companies have to lower cost of value creation
Outsourcing: eg. Call Centers to India, bank back office to developing nations
Pressures are particularly intense in commodity-type industries e.g. bulk chemicals, petroleum, steel, sugar etc
![Page 15: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/15.jpg)
15
Local Responsiveness (1)
Differences in Customer Tastes and Preferences
- Customer tastes and preferences
- Deeply embedded historic or cultural reasons
Marketing message have to be customized
e.g. Difference US vs. European automobile market
Differences in Infrastructure and Traditional Practices
- Electrical system
- Left side driving in Great Britain
- Mobile networks
![Page 16: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/16.jpg)
16
Differences in Distribution Channels
- Marketing strategies may have to be adapted
e.g. British and Japanese doctors will not accept or respond favorably to a US style high pressure sales force
Differences Host Government Demands
- Economic and political demands imposed by host-country government may require local responsiveness
- Threats of protectionism, economic nationalism
e.g. Pharmaceutical Companies are subject o local clinical testing, registration procedures etc.
Railcar production must be in purchasing country
Local Responsiveness (2)
![Page 17: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/17.jpg)
17
Four Basic Strategies
High
High
Low
Low
Pressures for Cost Reduction
Pressures for Local Responsiveness
Global Standardization
Strategy
Transnational Strategy
International Strategy
Localization Strategy
![Page 18: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/18.jpg)
18
Four Basic Strategies
High
High
Low
Low
Pressures for Cost Reduction
Pressures for Local Responsiveness
International Strategy
- Product of universal needs
- No major competitors
- Starts from domestic market and expands internationally
- Tight control over marketing and product strategy
=> Microsoft, Procter & Gamble
![Page 19: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/19.jpg)
19
Global Standardization Strategy
Global Standardization
Strategy
High
High
Low
Low
Pressures for Cost Reduction
Pressures for Local Responsiveness
- Low cost strategy on global Scale --> minimal adaptation
- Products usually serve universal needs
=> e.g. Samsung, Nokia
![Page 20: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/20.jpg)
20
Four Basic Strategies
High
High
Low
Low
Pressures for Cost Reduction
Pressures for Local Responsiveness
Localization
Strategy
- Customizing the product to local demands
- Value creation strategy in the local market
=> e.g. MTV
![Page 21: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/21.jpg)
21
Four Basic Strategies
High
High
Low
Low
Pressures for Cost Reduction
Pressures for Local Responsiveness
Transnational Strategy
- Focuses on leveraging subsidiary skills
- Build centralized manufacturing of components with assembling plants in each of its markets
=> e.g. Caterpillar
![Page 22: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/22.jpg)
22
The Evolution of Strategy - Xerox
- Invention of photocopier in 1960
- No major competition at first
- Expanded globally => pursuing international strategy
![Page 23: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/23.jpg)
23
Emergence of Competitors
Japanese companies such as Canon invented their way around Xerox’s patens.
1. produced their own photocopiers in very efficient
manufacturing system.
2. priced them below Xerox’s products.
- leads to Xerox’s failure in cost reduction
![Page 24: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/24.jpg)
24
The Evolution of Strategy
Mistake of Xerox: Failed in reducing cost before the emergence of competitors
=> In the long run, international strategy will face cost or localization pressure
![Page 25: Strategy of International Business Chapter 12](https://reader036.vdocument.in/reader036/viewer/2022082209/5681599e550346895dc6e9fc/html5/thumbnails/25.jpg)
25
Questions
? Cho, Hee-JooJang, Se-Yeop
Luo, Lin Morger, Raffael