Presentation on theme: "The Strategy of International Business"— Presentation transcript:
1 The Strategy of International Business CHAPTER 12The Strategy of International Business
2 Learning ObjectivesShifting the focus form macro environment to Firm’s strategyWhat kind of pressures do firms experience in their attempts to expand globally?
3 Learning Objectives Strategies followed by International firms Multi-domestic firmsGlobal firmsTransnational firms
4 Learning Objectives Role of factors such as Standardization Price, Cost of productionLocation economiesEconomies of scaleLocal responsivenessExperience CurveCore competencies
5 Learning Objectives Strategies followed by Coca-Cola Dow Chemicals Proctor & GambleNokia
6 Chapter 12 1. There are two types of strategies: a. Low-cost Strategy: A firm lowers the costs of value creation.b. Differentiation Strategy: A firm adds value to its product by improving quality and service or by customizing the product.
7 Chapter 12 (cont)2. There are two types of Competitive Pressures that firms face in a global economy.a. Pressures for cost reductionb. Pressures for local responsiveness
8 Competitive Pressures These pressures often place conflicting demands on a firm.To reduce the cost of production a firm will offer a standardized product, mass production, or choose a low-cost location for production.On the other hand, a firm will face pressures for local responsiveness by differentiating the product and marketing from country to country to accommodate differences in consumer tastes and preferences. However, this requires unnecessary duplication of plants and distribution channels etc. resulting in increased costs of production.
9 Chapter 12 (cont) 3. Pressures for cost reductions Such pressures are generally high for:commodity products where meaningful differentiation is difficult and price is an important factor. These products serve universal needs reflecting a similarity in consumer tastes and preferences. ex. Industrial Products:steel, sugar, bulk chemicals, petroleum, tires, Consumer Products: personal computers, handheld calculatorsindustries where major competitors are in low-cost locations.low switching costs to the consumersconsumers are powerfulexcess capacityQuestion: How does liberalization and favorable investment climate affect the cost pressures?
10 Chapter 12 (cont) 4. Pressures for Local Responsiveness differences in tastes and preferences (meaningful differentiation possible) ex/carsdifferences in infrastructure and traditional practices ex/ volt system, left-hand or right-hand drivedifferences in distribution channelshost country demands such as local content requirements