Upload
alok-prakash
View
227
Download
0
Embed Size (px)
Citation preview
7/28/2019 Strategy of International Business
1/24
McGraw Hill Companies, Inc., 2000
The Strategy of
International BusinessChapter 12
7/28/2019 Strategy of International Business
2/24
McGraw Hill Companies, Inc., 2000 12-1
7/28/2019 Strategy of International Business
3/24
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
7/28/2019 Strategy of International Business
4/24
McGraw Hill Companies, Inc., 2000
The Firm as a Value Chain
F igure 12.1
Organizational infrastructure
Information systems
Human resources
Research and development
Materials management
Manufacturing Marketing
Primary activities
Supportactivities
The Firm as a Value Chain
12-3
7/28/2019 Strategy of International Business
5/24
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
costof value creation and/ordifferentiates the
firms product through superior design, quality,
service, or functionality.
12-4
7/28/2019 Strategy of International Business
6/24
McGraw Hill Companies, Inc., 2000
Profiting from Global Expansion
International firms can:
Earn a greater return from
distinctive skills orcore competencies.Realize location economies by dispersing value
creation activities to locations where they can
be performed most efficiently.
Realize greaterexperience curve economies,
which reduces the cost of value creation.
12-5
7/28/2019 Strategy of International Business
7/24
McGraw Hill Companies, Inc., 2000
Parts
PartsParts
Assembly
Advertising Design
Sales
Location Economies
Pontiac LeMans
12-6
7/28/2019 Strategy of International Business
8/24
McGraw Hill Companies, Inc., 2000
Caveats
When making location decisions:
Consider trade barriers and
transportation costs.Assess political and
economic risks.
12-7
7/28/2019 Strategy of International Business
9/24
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
7/28/2019 Strategy of International Business
10/24
McGraw Hill Companies, Inc., 2000
The Experience Curve
B
A
Accumulated
output
Unit costs
F igure 12.2
Moving down the curve reducesthe cost of creating value
12-9
7/28/2019 Strategy of International Business
11/24
McGraw Hill Companies, Inc., 2000
Firms Face Two Conflicting
Concepts (Pressures) Overseas
Reduce costs.Be responsive to local
needs.
12-10
7/28/2019 Strategy of International Business
12/24
McGraw Hill Companies, Inc., 2000
Pressures for Cost Reduction and
Local Responsiveness
F igure 12.3
CompanyC
CompanyB
High
Costpressures
Low
Low High
Generally reflectsthe position of most
companies
Pressures for local responsiveness
12-11
7/28/2019 Strategy of International Business
13/24
McGraw Hill Companies, Inc., 2000
Cost ReductionDesire 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, intl competition creates price pressures.
12-12
$
7/28/2019 Strategy of International Business
14/24
McGraw Hill Companies, Inc., 2000
Local Responsiveness
Different consumer tastes and
preferences.Different infrastructure and practice.
Differences in distribution channels.
Government demands.
12-13
7/28/2019 Strategy of International Business
15/24
McGraw Hill Companies, Inc., 2000
McDonaldsMcDonalds overseas experience.
Detailed planning
Export of management skills.
Foreign partners.
Adaptation/Adopting ideas.
12-14
7/28/2019 Strategy of International Business
16/24
McGraw Hill Companies, Inc., 2000
Strategic Choice
Four basic strategies:
International strategy.
Multidomestic strategy.
Global strategy.
Transnational strategy.
12-15
7/28/2019 Strategy of International Business
17/24
McGraw Hill Companies, Inc., 2000
Four Basic Strategies
Figure 12.4
GlobalStrategy
TransnationalStrategy
Multi domesticStrategy
High
Costpressures
Low
Low High
InternationalStrategy
Pressures for local responsiveness
12-16
7/28/2019 Strategy of International Business
18/24
McGraw Hill Companies, Inc., 2000
International Strategy
Go where locals dont 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
7/28/2019 Strategy of International Business
19/24
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
7/28/2019 Strategy of International Business
20/24
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
7/28/2019 Strategy of International Business
21/24
McGraw Hill Companies, Inc., 2000
Transnational Strategy
Christopher Bartlett and Sumantra Ghoshal
Core competencies can develop in any of the
firms 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
7/28/2019 Strategy of International Business
22/24
McGraw Hill Companies, Inc., 2000
The Advantages and Disadvantages of the
Four Strategies
Strategy Advantages Disadvantages
Global Exploit experience curveeffects
Exploit locationeconomies
Lack of localresponsiveness
International
Transfer distinctive
competencies toForeign Markets
Lack oflocal responsivenessInability to realize
location economiesFailure to exploitexperience curveeffects
F igure 12.6a
12-21
Th Ad d Di d f h
7/28/2019 Strategy of International Business
23/24
McGraw Hill Companies, Inc., 2000
The Advantages and Disadvantages of the
Four Strategies
Strategy Advantages Disadvantages
Multi-domestic Customize product offeringsand marketing in accordancewith local responsiveness
Inability to realize locationeconomies
Failure to exploit
experience curve effectsFailure 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 organizational
problems
Figure 12.6b
12-22
7/28/2019 Strategy of International Business
24/24
McGraw Hill Companies, Inc., 2000
Cost Pressures and Pressures forLocal
Responsiveness Facing Caterpillar
F igure 12.5
Caterpillar
Tractor
High
Costpressures
Low
Low HighPressures for local responsiveness
12-23