International Business Environments Operations 15 e Global Edition
International Business Environments & Operations 15 e, Global Edition Daniels ● Radebaugh Sullivan ● 11 -1
Chapter 12 The Strategy of International Business 10 -2
Learning Objectives Evaluate industry structure, firm strategy, and value creation p Profile the features, functions, configuration, and coordination of the value chain p Describe how and why companies choose to cluster in close geographic proximity p Describe how robots in specific and automation in general change how managers interpret the value chain p 10 -3
Learning Objectives Discuss how the industry change affects the effectiveness of a value chain p Compare and contrast the strengths and drawbacks of a reality versus virtuality in designing the value chain p Explain the ideas of global integration and local responsiveness p Profile the types of strategies used by MNEs p 11 -4
Introduction The Role of Strategy in International Business 10 -5
Industry Structure Learning Objective: Evaluate industry structure, firm strategy, and value creation 10 -6
Industry Structure p Industry structure involves the relationships among Suppliers of inputs n Buyers of outputs n Substitute products n Potential new entrants n Rivalry among competing firms n 10 -7
Industry Change p Industry of structure changes because Competitor moves n Government policies n Shifting preferences n Technological developments n 10 -8
Industry Structure, Strategy, and Value p The industry organization (IO) paradigm n p The power of innovative executives n p presumes that markets demonstrate perfect competition where no firm or industry consistently outperforms others bright executives exploit market imperfections to outperform rivals Strategy’s hallmarks n n Value Strategy 10 -9
Creating Value p Value n p the measure of a firm’s capability of selling what it makes for more than the costs incurred to make it Create value using n n A cost leadership strategy p make products for a lower cost than competitors A differentiation strategy p make products for which consumers are willing to pay a premium price 10 -10
The Firm as a Value Chain Learning Objective: Profile the features and functions of the value chain 10 -11
The Firm as a Value Chain p The value chain n p the set of linked activities the company performs to design, produce, market, distribute, and support a product The value chain consists of n n Primary activities p design, make, sell, and deliver the product Support activities p implement primary activities 10 -12
The Firm as a Value Chain Primary and Support Activities 10 -13
The Firm as a Value Chain Primary and Support Activities of the Value Chain 10 -14
Managing the Value Chain p Configuration n distributing value chain activities around the world p concentrated § putting all value chain activities in one location p dispersed § performing different value chain activities in different locations qlocation economies 10 -15
Managing the Value Chain p When configuring the value, consider n n n n Where to go Business environmental quality Innovation context Economies of scale Labor costs Logistics Digitization 10 -16
Managing the Value Chain p Coordination n p linking the value chain activities Factors that influence coordination n Operational obstacles Core competencies p special outlook, skill, capability, or technology that runs through the firm’s operations, threading disconnected activities into an integrated value chain Subsidiary networks p social networks 10 -17
Change and the Value Chain p The configuration and coordination of a value chain responds to changes in customers, competitors, industries, and environments n Even a well configured and coordinated value chain can become obsolete p So, designing and delivering a strategy should be an ongoing process 10 -18
Global Integration vs. Local Responsiveness Learning Objective: Explain the ideas of global integration and local responsiveness 10 -19
Global Integration vs. Local Responsiveness Firms face two conflicting pressures: p Pressures for global integration p n n p the process of combining differentiated parts into a standardized whole maximize efficiency Pressures for local responsiveness n n the process of disaggregating a standardized whole into differentiated parts optimize effectiveness 11 -20
Pressures for Global Integration p Drivers of global integration n n The globalization of markets p Technology helps standardize consumer preferences p Global products have become popular § allows for standardization of product design The efficiency gains of standardization p Location, scale, and learning effects p WTO supports globa standards 10 -21
Pressures for Local Responsiveness p Pressure for local responsiveness is driven by n n Consumer divergence p cultural predisposition p historical legacy p nationalism Host government policies p fiscal, monetary, and business regulations 10 -22
When Pressures Interact Integration-Responsiveness Grid: By Industry 10 -23
Types of Strategy Learning Objective: Profile the types of strategies firms used by MNEs 10 -24
Types of Strategy Characteristics of the Strategy Type Used by MNEs 10 -25
International Strategy p International strategy n n p leverage a company’s core competencies into foreign markets critical elements of the value chain are centralized at headquarters The strategy works well when n the firm has core competencies that foreign rivals lack there is low pressure for global integration there is low pressure for local responsiveness 10 -26
Multidomestic Strategy p Multidomestic strategy n n p emphasizes responsiveness to the unique circumstances that prevail in a country’s market value added activities are adapted to local markets The strategy works well when n n there is high pressure for local responsiveness there is low pressure for global integration 10 -27
Global Strategy p Global strategy n n p make standardized products that are marketed with little adaptation to local conditions exploit location economies and capture scale economies The strategy works well when n the MNE is the cost leader there is low pressure for local responsiveness there is high pressure for global integration 10 -28
Transnational Strategy Transnational strategy simultaneously leverages core competencies worldwide, reduces costs by exploiting location economics, and adapts to local conditions p The strategy works well when p n n n global learning and knowledge flows are emphasized there is high pressure for local responsiveness there is high pressure for global integration 10 -29
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