the strategy of international business ...
DESCRIPTION
The Strategy of International Business Chapter 12. 12-1. The Firm as a Value Chain. Primary Activities: - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/1.jpg)
© McGraw Hill Companies, Inc., 2000
The Strategy of International Business
Chapter 12
![Page 2: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/2.jpg)
© McGraw Hill Companies, Inc., 2000 12-1
![Page 3: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/3.jpg)
© McGraw Hill Companies, Inc., 2000
The Firm as a Value Chain Primary Activities:
Those activities having to do with creating, marketing and delivering the product to customers and providing support and after-sales service.
Support Activities: Provide inputs that allow primary activities to occur.
An Efficient Infrastructure: helps create value and reduce the cost of creating
value.
12-2
![Page 4: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/4.jpg)
© McGraw Hill Companies, Inc., 2000
The Firm as a Value Chain
Figure 12.1
Organizational infrastructureInformation systems
Human resourcesResearch and development
Materials managementManufacturing Marketing
Primary activities
Supportactivities
The Firm as a Value Chain
12-3
![Page 5: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/5.jpg)
© McGraw Hill Companies, Inc., 2000
The Role of Strategy
Strategy: Actions managers take to attain the goals of the
firm. Need to identify and take action that lowers the
cost of value creation and/or differentiates the firm’s product through superior design, quality, service, or functionality.
12-4
![Page 6: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/6.jpg)
© McGraw Hill Companies, Inc., 2000
Profiting from Global Expansion
International firms can: Earn a greater return from
distinctive skills or core competencies. Realize location economies by dispersing value
creation activities to locations where they can be performed most efficiently.
Realize greater experience curve economies, which reduces the cost of value creation.
12-5
![Page 7: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/7.jpg)
© McGraw Hill Companies, Inc., 2000
Parts
PartsParts
Assembly
Advertising Design
Sales
Location Economies
Pontiac LeMans
12-6
![Page 8: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/8.jpg)
© McGraw Hill Companies, Inc., 2000
Caveats
When making location decisions: Consider trade barriers and
transportation costs. Assess political and
economic risks.
12-7
![Page 9: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/9.jpg)
© McGraw Hill Companies, Inc., 2000
Experience Curve Economies Learning Effects:
Labor productivity increases over time as individuals learn the most efficient ways to perform particular tasks.
Economies of Scale: Reductions in unit cost achieved by producing a large
volume of a product. Strategic Significance:
Moving down the experience curve allows a firm to reduce its cost of creating value.
12-8
![Page 10: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/10.jpg)
© McGraw Hill Companies, Inc., 2000
The Experience Curve
B
A
Accumulatedoutput
Unit costs
Figure 12.2
Moving down the curve reducesthe cost of creating value
12-9
![Page 11: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/11.jpg)
© McGraw Hill Companies, Inc., 2000
Firms Face Two Conflicting Concepts (Pressures) Overseas
Reduce costs. Be responsive to local
needs.
12-10
![Page 12: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/12.jpg)
© McGraw Hill Companies, Inc., 2000
Pressures for Cost Reduction and Local Responsiveness
Figure 12.3
CompanyA
CompanyC
CompanyB
High
Cost pressures
LowLow High
Generally reflects the position of most
companies
Pressures for local responsiveness
12-11
![Page 13: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/13.jpg)
© McGraw Hill Companies, Inc., 2000
Cost Reduction Desire to reduce costs by:
Mass production Product standardization. Optimal location production.
Hard to do with commodity-type products. products serving universal needs.
Also hard where competition is in low cost producing location.
Finally, int’l competition creates price pressures.
12-12
$
![Page 14: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/14.jpg)
© McGraw Hill Companies, Inc., 2000
Local Responsiveness
Different consumer tastes and preferences.
Different infrastructure and practice. Differences in distribution channels. Government demands.
12-13
![Page 15: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/15.jpg)
© McGraw Hill Companies, Inc., 2000
McDonalds McDonald’s overseas experience. Detailed planning Export of management skills. Foreign partners. Adaptation/Adopting ideas.
12-14
![Page 16: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/16.jpg)
© McGraw Hill Companies, Inc., 2000
Strategic Choice
Four basic strategies: International strategy. Multidomestic strategy. Global strategy. Transnational strategy.
12-15
![Page 17: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/17.jpg)
© McGraw Hill Companies, Inc., 2000
Four Basic Strategies
Figure 12.4
GlobalGlobalStrategyStrategy
TransnationalTransnationalStrategyStrategy
Multi domesticMulti domesticStrategyStrategy
High
Cost pressures
Low
Low High
InternationalInternationalStrategyStrategy
Pressures for local responsiveness
12-16
![Page 18: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/18.jpg)
© McGraw Hill Companies, Inc., 2000
International Strategy
Go where locals don’t have your skills. Little adaptation. Products developed at home
(centralization). Manufacturing and marketing in each location. Makes sense where low skills, competition,
and costs exist.
12-17
![Page 19: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/19.jpg)
© McGraw Hill Companies, Inc., 2000
Multi-domestic Strategy Maximize local responsiveness.
Customize the product and marketing strategy to national demands.
Skill and product transfer. Transfer all value-creation activities, no
experience curve rewards. Good for high local responsiveness and low
cost reduction pressures.
12-18
![Page 20: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/20.jpg)
© McGraw Hill Companies, Inc., 2000
Global Strategy
Best use of the experience curve and location economies.
This is the low cost strategy. Utilize product standardization. Not good where local responsiveness
demand is high.
12-19
![Page 21: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/21.jpg)
© McGraw Hill Companies, Inc., 2000
Transnational Strategy Christopher Bartlett and Sumantra Ghoshal Core competencies can develop in any of the
firm’s worldwide operations. Flow of skills and product offerings occurs
throughout the firm - not only from home firm to foreign subsidiary (global learning).
Makes sense where there is pressure for both cost reduction and local responsiveness.
12-20
![Page 22: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/22.jpg)
© McGraw Hill Companies, Inc., 2000
The Advantages and Disadvantages of the Four Strategies
Strategy Advantages DisadvantagesGlobal Exploit experience curve
effectsExploit location economies
Lack of localresponsiveness
International Transfer distinctive
competencies to Foreign Markets
Lack of localresponsivenessInability to realizelocation economiesFailure to exploit experience curve effects
Figure 12.6a
12-21
![Page 23: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/23.jpg)
© McGraw Hill Companies, Inc., 2000
The Advantages and Disadvantages of the Four Strategies
Strategy Advantages DisadvantagesMulti-domestic Customize product offerings
and marketing in accordancewith local responsiveness
Inability to realize locationeconomies
Failure to exploitexperience curve effects
Failure to transferdistinctive competenciesto foreign markets
Transnational Exploit experience curveeffects
Exploit location economiesCustomize product offeringsand marketing in accordancewith local responsiveness
Reap benefits of global learning
Difficult to implement dueto organizationalproblems
Figure 12.6b
12-22
![Page 24: The Strategy of International Business Chapter 12](https://reader033.vdocument.in/reader033/viewer/2022061506/56816867550346895ddecf26/html5/thumbnails/24.jpg)
© McGraw Hill Companies, Inc., 2000
Cost Pressures and Pressures for Local Responsiveness Facing Caterpillar
Figure 12.5
CaterpillarCaterpillarTractorTractor
High
Cost pressures
Low Low HighPressures for local responsiveness
12-23