1. The Strategy of International Business
Chapter 13

2. What is Strategy ?
Can be defined as the actions that managers take to attain the goals of the firm. 
Strategy asks the question, How do competencies and capabilities help create and sustain competitive advantage? Strategy thus articulates the ways in which, the opportunities that are created by the firm’s capabilities, can be exploited.

3. Strategy in International Business
International strategy is often concerned with identifying and taking actions that will lower the cost of value creation.
And/or
Differentiate the firm’s product offering through superior design, quality, service, functionality and, so on.

4. Strategy and the Firm Maximize long–term profitability.
The rate or return that the firm makes on its invested capital. Profit growth is measured by the percentage increase in net profits over time.
Two basic conditions determine a firm’s profits: The amount of value customers place on the firms goods or services and the firm’s cost of Production.
Value Creation
Is measured by the difference between Increased value and Low Cost.

5. Value Creation

6. The Strategy of International Business

7. The basic strategy paradigm to maximize its profitability
pick a position on the efficiency frontier that is viable in the sense that there is enough demand to support that choice
Configure its internal operations , such as manufacturing, marketing, logistics, information systems, human resources and so on, so that they support that position.
Make sure that the firm has the right organizational structure to execute its strategy.

8. The Value Chain

9. Expand the market for their domestic product offerings by selling those products in the international markets.
Realize location economies by dispersing individual value creation activities to those locations around the globe where they can be performed most efficiently and effectively.
Realize greater cost reduction from experience effects by serving an expanded global market from a central location, thereby reducing the costs of value creation
Earn a greater return by leveraging any valuable skills developed in foreign operations and transferring them to other entities within the firm’s global network of operations.

10. Profiting From Global Expansion
Location Economies
Creating a global web
Some Caveats (Limitations)
Trade Barriers, Transportation Cost etc.
Experience Effects
Experience Curve: Systematic reductions in production costs that have been observed to occur over the life of a product.
Learning Effects
Economies of Scale
Strategic Significance
Leveraging Product and Core Competencies
Leveraging Subsidiary Skills

11. Pressures for Cost Reductions and Local Responsiveness
Pressures for Local Responsiveness
Differences in Consumer Tastes and Preferences
MTV case, Food taste, Culture etc
Differences in Infrastructure and Traditional Practices
110 Volts & 240 Volts, CDMA & GSM, Left & right hand driven cars etc.
Differences in Distribution Channels
Wholesale and Retail networks.
Host Government Demands
Bombardier example,
Implications
Local responsiveness may work against low cost strategy.

12. Assessing Multinational Enterprise’s mentality
International/Multinational Firms: Focus still on domestic market
Localization/Multinational Firms: Low coordination among units; high degree of national responsiveness.
Global/Multinational Firms: Centralised control and coordination; common set of strategies worldwide, treats world as one market.
Transnational/Multinational Firms: Attempt to balance global integration and local responsiveness.

13. International Firms HO
SBU

14. Localization/Multinational FirmsHO
SBU

15. Global Standardization FirmsHO
SBU

16. Transnational Firms HO
SBU

17. Strategic Choices International Strategy Multidomestic Strategy
Tries to create value by transferring valuable skills and products to foreign markets. Centralize product development functions at home
Multidomestic Strategy
Extensively customize both their product offering and their marketing strategies to match different national conditions.
Global Strategy
Prefer to market a standardize product worldwide so they can reap the maximum benefits from economies of scale.
Transnational Strategy
They must transfer core competencies within the firms and also pay attention to pressures for local responsiveness.

18. The Advantage and Disadvantage of the four strategies
Strategy
Advantage
Disadvantage
Global
Exploit location economies.
Exploit experience curve effects.
Lack of local responsiveness.
International
Transfer core competencies to foreign markets.
Inability to realize location economies.
Failure to exploit experience curve effects.
Localization
Customize product offerings and marketing in accordance with local responsiveness.
Failure to transfer core competencies to foreign markets.
Transnational
Exploit location economies
Reap benefits of global learning.
Difficult to implement due to organizational problem.