Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 11-1 Part Two Global, Strategy, Structure, and Implementation Chapter Eleven The Strategy Of International Business

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 11-2 Chapter Objectives To examine the idea of industry structure, firm strategy, and value creation To profile the features and functions of the value chain framework To appreciate how managers configure and coordinate a value chain To identify the dimensions that shape how managers develop strategy To profile the types of strategies firms use in international business

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 11-3 The Role of Strategy in International Business

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 11-4 Industry, Strategy, And Firm Performance Managers, as agents of their firms, devise strategies to engage international markets in ways that sustain the company’s boost its profitability and growth Strategy is defined as the efforts of managers to build and strengthen the company’s competitive position within its industry in order to create superior value

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 11-5 Industry, Strategy, And Firm Performance Firm performance is influenced by both the structure of the company’s industry and the insight of managers’ strategic decision making Estimates vary on the degree of influence for both factors Managers need to be familiar with industry- and firm-level conditions in making strategy

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 11-6 The Five Forces Model Managers typically anchor analysis of industry structure by modeling the strength and importance of the so-called “five fundamental forces.”:  the moves of rivals battling for market share  the entry of new rivals seeking market share  the efforts of other companies outside the industry to convince buyers to switch to their own substitute products  the push by input suppliers to charge more for their inputs  the push by output buyers to pay less for products

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 11-7 The Five Forces Model of Industry Structure

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 11-8 Events that can change industry structure Competitors’ moves. Government policies. Changes in economics. Shifting buyer preferences. Technological developments. Rate of market growth.

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 11-9 Strategy and Value Strategy is defined as the efforts of managers to build and strengthen the company’s competitive position within its industry in order to create superior value Value is the measure of a firm’s ability to sell what it makes for more than the cost it incurred to make it

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Creating Value Firms create value either through a low- cost leadership strategy or a differentiation strategy

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall The Firm As Value Chain Interpreting the firm within the context of the value chain provides a strong tool to improve the accuracy of strategic analyses and decisions

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall The Value Chain Framework

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall What Is a Value Chain? The value chain lets managers deconstruct the general idea of “create value” into a series of discrete activities The function of the value chain is shaped by how managers opt to configure and then coordinate discrete value activities

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Dimensions of The Value Chain Primary activities that create and deliver the product. Support activities that aid the individuals and groups engaged in primary activities. Profit margin reports the difference between the total revenue generated by sales and the total cost of the activities that led to those sales. Orientation—namely, whether the particular activity takes place upstream or downstream.

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Using the Value Chain Configuration is the way that managers arrange the activities of the value chain. Coordination is the way that managers connect the activities of the value chain. Firms pay close attention to location economics when configuring their value chain Devising a way to coordinate value chain activities must be in ways that leverage a firm’s core competencies

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Pressures for Global Integration Companies that operate internationally face the asymmetric pressures of global integration versus local responsiveness Change, whether in managers, competencies, industries, or environments, often spurs companies to rethink and reset their value activities

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Integration-Responsiveness (IR) Grid (I): Industry Types

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Types Of Strategy The firm entering and competing in foreign markets can adopt either an:  international  multidomestic  global  transnational strategy Often, firms use a mix of these four types due to company, industry, and environmental situations

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Integration-Responsiveness (IR) Grid (II): Strategy Types