1. Chapter 11 Global Strategy
Chapter Outline With Lecture Notes and Teaching Tips
INTRODUCTION
A) The primary concern so far in this book has been with aspects of the larger environment in which international businesses compete. Now, our focus shifts from the environment to the firm itself and, in particular, to the actions managers can take to compete more effectively as an international business.

2. Global Strategy
Strategy: “the action managers take to attain the goals of a firm”
General purpose: maximize/make profit
Differentiate products, increase price: add value, features, quality, service
Achieve low cost
Key means: allocation of scarce resources to attain goals
STRATEGY AND THE FIRM
A firm’s strategy can be defined as the actions that managers take to attain the goals of the firm. Profit is defined as the difference between total revenues and total costs. Profitability is a ratio or return concept.
The goal is where we want to be. The objectives are the steps needed to get there

3. Differentiation Strategy
= P X Q
Differentiation Strategy
Low Cost Strategy
Usually firms are trying to maximize their profits
Value Creation
B) Two basic conditions determine a firm’s profits: the amount of value customers place on the firm’s goods or services and the firm’s costs of production. In general, the more value customers place on the firm’s products, the higher the price the firm can charge for those products.
C) The value created by a firm is measured by the difference between V (the price that the firm can charge for that product given competitive pressures) and C (the costs of producing that product).
Firms can increase their profits in two ways: by adding value to a product so that customers are willing to pay more for it and by lowering the costs. Thus there are two basic strategies for improving a firm’s profitability- a differentiation strategy and a low cost strategy.
Usually firms are trying to maximize their profits and values. Keep in mind that profit equals revenues minuses expenses.
The right product strategies will help the company create the right products with lower production cost and other related expenses and at the right product will attract more customers to buy your products hence increasing in sales volumes.
With the right pricing strategies, companies will draw more consumers to buy their products and hence increase in sales. But pricing is a bit tricky, some people buy because it’s cheap; however, some people buy because it’s expensive ‘cuz they think it indicates higher quality. So firms have to choose who they want to sell their product to.
Both strategies influence the demand for the products the firm produces and the amount of revenue the firm will generate during a particular temporal period.
design, quality, functionality, service

4. Figure 11.1: Determinants of Enterprise Value
Strategy and the Firm
Figure 11.1: Determinants of Enterprise Value
So, as you can see, the firm’s value is a function of profitability and profit growth. Profitability is a result of lowering costs and adding value and raising prices, while profit growth comes from selling more in existing markets and expanding into new markets.

5. Firm as a chain of discrete value creating activities
The Firm as a Value Chain
D) It is useful to think of the firm as a value chain composed of a series of distinct value creation activities, including production, marketing, materials management, R&D, human resources, information systems, and the firm infrastructure. We can categorize these value creation activities as primary activities and support activities.
Teaching Tip: An insightful article on the strategy, staffing, and structure of a multinational enterprise is available at {
Primary Activities
E) The primary activities of a firm have to do with creating the product, marketing and delivering the product to buyers, and providing support and after-sale service to the buyers of the product.
Support Activities
F) Support activities provide the inputs that allow the primary activities of production and marketing to occur. The materials management function controls the transmission of physical materials through the value chain - from procurement through production and into distribution. The efficiency with which this is carried out can significantly reduce the cost of creating value.
The Role of Strategy
G) Strategy is often concerned with identifying and taking actions that will lower the costs of value creation and/or will differentiate the firm’s product offering through superior design, quality, functionality, service and the like.

6. Global Expansion Benefits
Earn greater return from distinctive skills, core competences
Inimitable or difficult to imitate skills in value chain
Realize location economies
Choice of FDI location
Create multinational network of activities (global web)
Realize greater experience curve economies, which reduce the cost of value creation
Learning effects, economies of scale
PROFITING FROM GLOBAL EXPANSION
A) Firms that operate internationally are able to: (1) Earn a greater return from their distinctive skills, or core competencies (gain more revenue) (2) Realize location economies by dispersing particular value creation activities to locations where they can be performed most efficiently. (3) Realize greater experience curve economies, which reduce the costs of value creation.
Location Economies
B) Trade barriers and transportation costs permitting, the firm will benefit by basing each value creation activity it performs at that location where economic, political, and cultural conditions, including relative factor costs, are most conducive to the performance of that activity. Firms that pursue such as strategy can realize location economies, the economies that arise from performing a value creation activity in the optimal location for that activity, wherever in the world that might be.
C) Locating a value creation activity in the optimal location for that activity can have one of two effects. It can lower the costs of value creation and help the firm to achieve a low cost position, and/or it can enable a firm to differentiate its product offering from the offerings of competitors.
Creating a Global Web
D) MNE’s that take advantage of different locational economies around the world create a global web of value creation activities, with different stages of the value chain being dispersed to those locations around the globe where perceived value is maximized or where the costs of value creation are minimized.
Some Caveats
E) Introducing transportation costs and trade barriers complicates this picture. Due to favorable factor endowments, New Zealand may have a comparative advantage for automobile assembly operations, but high transportation costs would make it an uneconomical location for them. Another caveat concerns the importance of assessing political risks when making location decisions.
Experience Effects
F) The experience curve refers to the systematic reductions in production costs that have been observed to occur over the life of a product. The experience curve relationship between production costs and output is illustrated in Figure 11.6.
Learning Effects
G) Learning effects refer to cost savings that come from learning by doing. In other words, labor productivity increases over time as individuals learn the most efficient ways to perform particular tasks and management typically learns how to manage the new operation more efficiently over time.
Economies of Scale
H) The term economies of scale refers to the reductions in unit cost achieved by producing a large volume of a product. Economies of scale have a number of sources, one of the most important of which seems to be the ability to spread fixed costs over a large volume. Another source of scale economies arises from the ability of large firms to employ increasingly specialized equipment or personnel.
Strategic Significance
I) The strategic significance of the experience curve is clear. Moving down the experience curve allows a firm to reduce its cost of creating value. Serving a global market from a single location is consistent with moving down the experience curve and establishing a low-cost position.
Their Gaze Offshore {
Leveraging Core Competencies
J) The term core competence refers to skills within the firm that competitors cannot easily match or imitate. These skills may exist in any of the firm's value creation activities. For many firms, global expansion is a way of further exploiting the value creation potential of their skills and product offering by applying those skills and products in a larger market.
K) Trade barriers and transportation costs permitting, the firm will benefit by placing each value creation activity it performs at that location where economic, political, and cultural conditions, including relative factor costs, are more conducive to the performance of that activity.
Leveraging Subsidiary Skills
L) Leveraging the skills created within subsidiaries and applying them to other operations within the firm’s global network may create value. Managers must have the humility to recognize that valuable skills can arise anywhere within the firm’s global network, not just at the corporate center. Managers must also establish an incentive system that encourages local employees to acquire new skills.
Unit costs
Experience curve B A
Accumulated output

7. Entering markets where competitors lack similar competencies
Summary
Firms that expand internationally can increase their profitability and profit growth by
Entering markets where competitors lack similar competencies
Realizing location economies
Exploiting experience curve effects
Transferring valuable skills within the organization
So, global expansion offers companies numerous ways to increase profitability and profit growth.

8. Competitive Pressures
Figure 11.8: Pressures for Cost Reductions and
Local Responsiveness
Ball bearings,
wheat
Cosmetics, food,
household goods
As you can see, some firms face high pressure for cost reductions while others face high pressure for local responsiveness. Some really unlucky companies face pressures for cost reductions and local responsiveness simultaneously. Dealing with these pressures can be a strategic nightmare for companies! Let’s look at each type of pressure more closely.
Differences in
- consumer tastes/preferences
- infrastructure/practices
- distribution channels
- host government needs/requirements

9. Strategic Choice High “Global” Strategy “Transnational” Strategy
Cost Reduction
(Global Integration)
Pressures
“International”
Strategy
“Localization
Strategy
Low
STRATEGIC CHOICES
A) Firms use four basic strategies to compete in the international environment: an international strategy, a multidomestic strategy, a global strategy, and a transnational strategy. The appropriateness of each strategy varies with the extent of pressures for cost reductions and local responsiveness. Figure 11.8 in the text illustrates when each of these strategies is most appropriate.
International Strategy
B) Firms pursuing an international strategy transfer the skills and products derived from core competencies to foreign markets, while undertaking some limited local customization. However, they may suffer from a lack of extensive local responsiveness and from an inability to exploit experience curve and location economies
Question: How do the pressures for cost reductions and local responsiveness influence a firm’s choice of strategy?
Answer:
There are four basic strategies to compete in the international environment
global standardization
localization
transnational
international
Low
Local Responsiveness Pressures
High

10. International MNC HK UK Chile USA India Japan Mexico
Coordinated Federation - Key assets, responsibilities decisions localized
Administrative Control - Centralized HQ control, formal planning and control, tight HQ-Sub linkage
International Mentality - Management sees overseas operations as appendages to a domestic operation
From: Bartlett and Ghoshal, Managing across borders, 1989

11. Global MNC HK Chile UK USA India Japan Mexico
Centralized Hub - Most strategic assets, resources, responsibilities
and decisions centralized
Operational Control - Tight HQ control of decisions, resources, information
Global Mentality - Management sees overseas operations as delivery pipelines to a unified global market
Global Strategy
D) Firms pursuing a global strategy focus on reaping the cost reductions that come from experience curve and location economies. However, they may suffer from a lack of local responsiveness.
From: Bartlett and Ghoshal, Managing across borders, 1989

12. Localization MNC HK UK Chile USA India Japan Mexico
Decentralized Federation - Many key assets, responsibilities
and decisions localized
Personal Control - Informal HQ-Sub relationship, simple financial controls
Multidomestic Mentality - Management sees overseas operations as portfolio of independent businesses
Multidomestic Strategy
C) Firms pursuing a multidomestic strategy customize their product offering, marketing strategy, and business strategy to national conditions. However, they may suffer from an inability to transfer skills and products between countries, and from an inability to exploit experience curve and location economies.
From: Bartlett and Ghoshal, Managing across borders, 1989

13. Transnational MNC HK UK Chile USA Japan India Mexico
Networked Organization - Distributed, specialized resources and capabilities
Interdependent Units - large flows of components, products, resources, people, and information
Transnational Mentality - Complex process of coordination and cooperation in an environment of shared decision making
Transnational Strategy
E) In a transnational strategy firms must exploit experience curve cost economies and location economies, transfer distinctive competencies within the firm, and pay attention to pressures for localization. To do these there needs to be flows of knowledge from the parent to subsidiaries, flows from foreign subsidiary to home country, and from foreign subsidiary to foreign subsidiary - a process called global learning.
From: Bartlett and Ghoshal, Managing across borders, 1989

14. Summary
G) The advantages and disadvantages of each of the four strategies are summarized in Table 11.1in the textbook.

15. International Strategic Alliances
Cooperative agreements between competitors from different countries
Advantages
Facilitate entry into a foreign country
Allow fixed costs of new products and processes to be shared
Bring together complementary skills and assets
Help establish industry standards in technology
Allow reduction of operating costs,e.g., shared training, purchasing
Disadvantages
Give competitors a low cost route to new technology / markets
Disproportional benefit accrual to partners
STRATEGIC ALLIANCES
A) The term strategic alliances refers to cooperative agreements between potential or actual competitors. In this textbook, we are concerned specifically with strategic alliances between firms from different countries.
Teaching Tip: The Association of Strategic Alliances Professionals has an interesting web site that includes various publications related to strategic alliances as well as links to other resources. The site can be accessed at {/}.
The Advantages of Strategic Alliances:
B) Strategic alliances may facilitate entry into a foreign market. Alliances allow firms to share the fixed costs (and associated risks) of developing new products or processes. An alliance is a way to bring together complementary skills and assets that neither company could easily develop on its own. It can make sense to form an alliance that will help the firm establish technological standards for the industry that will benefit the firm.
The Disadvantages of Strategic Alliances
C) The can give competitors low-cost routes to new technology and markets. Unless a firm is careful, it can give away more than it receives.

16. Making alliances work Which partner?
A suitable partner
Helps achieve strategic goals
Adds needed, valuable capabilities
Shares the firm’s vision for purpose of the alliance
Is not likely to exploit the alliance to its own ends
Steps to select a partner
Thorough background check via public sources
Advice from third parties who have personal experience with likely partner(s)
A lot of face-to-face time with likely partner(s) in their environment
Making Alliances Work
D) The failure rate for international strategic alliances seems to be high. The success of an alliance seems to be a function of three main factors: partner selection, alliance structure, and the manner in which the alliance is managed.
Partner Selection
E) One of the keys to make strategic alliance work is to select the right kind of ally. A good ally or partner has three principal characteristics. First, a good partner helps the firm achieve its strategic goals- whether they are market access, sharing the costs and risks of new product development, or gaining access to critical core competencies. In other words, the partner must have capabilities that the firm lacks and that it values. Second, a good partner shares the firm’s vision for the purpose of the alliance. Third, a good partner is unlikely to try to opportunistically exploit the alliance for its own ends: that it, to expropriate the firm’s technological know-how while giving away little in return.

17. Making alliances work What Structure?
Protect technology/know-how that is not intended to be transferred
Draw a solid contract with safeguards against opportunism
Achieve equitable gain through agreed swaps of technology the other wants
Seek creditable, clearly articulated commitment to partner “behavior” a-priori
Alliance Structure
F) The alliance should be structures such that the firm’s risks of giving too much away to the partner are reduced to an acceptable level. Figure 11.9 depicts the four safeguards against opportunism by alliance partners. First, alliances can be designed to make it difficult (if not impossible) to transfer technology not meant to be transferred. Second, contractual safeguards can be written into an alliance agreement to guard against the risk of opportunism by a partner. Third, both parties to an alliance can agree in advance to swap skills and technologies that the other covets, thereby ensuring a chance for equitable gain. Fourth, the risk of opportunism by an alliance partner can be reduced if the firm extracts a significant credible commitment from its partner in advance.

18. Making alliances work How to manage?
Show sensitivity to cultural differences that explain different managerial styles
Build trust
Set up framework for formal and informal face-to-face meetings to create a common value system
Build informal network of personal relationships
Learn from partners
Apply the knowledge within your own organization
Brief your employees on partner strengths
Managing the Alliance
G) Once a partner has been selected and an appropriate alliance structure has been agreed on, the task facing the firm is to maximize its benefits from the alliance. Part of the trick of managing an alliance successfully seems to be to build interpersonal relationships between the firms' managers.
H) After a five-year study of 15 strategic alliances between major multinationals, Gary Hamel, Yves Doz, and C.K. Prahalad concluded that a major determinant of how much a company gains from an alliance is its ability to learn from its alliance partners.
Critical Thinking and Discussion Questions
1. In a world of zero transportation costs, no trade barriers, and non-trivial differences between nations with regard to factor endowments, firms must expand internationally if they are to survive. Discuss.
Answer: Given differences in countries with respect to factor endowments, the theory of comparative advantage suggests that different activities should take place in the countries that can perform them most efficiently. If there are also no barriers or costs to trade, then it is likely that a lot of industries will be based out of the countries that provide the best set of factor endowments. For a firm that is located in a sub-optimal location, it will either have to expand internationally or switch to a different industry where the factor endowments are in its favor. For firms already located in the countries with the most favorable factor endowments for their industry, however, there may not be a need to expand internationally. Firstly, the firm may be content to simply focus on the domestic market. But if the firm does want to expand internationally, it may be able to do so via licensing or exporting, and need not necessarily undertake FDI. Thus not only in theory, but also in practice many firms are able to survive quite well without having to expand internationally.
2. Plot the position of the following firms on Figure Procter & Gamble, IBM, Nokia, Coca-Cola, Dow Chemical, US Steel, and McDonald's. In each case justify your answer.
Answer: Procter & Gamble would be located in the middle right-hand portion of the graph. This is a position of high pressures for local responsiveness and moderate pressures for cost reductions. P&G sells personal and home care products, which do face pressures for local responsiveness. Although these products are not commodities, there are many competitors in P&G industries, which implies a moderate degree of cost pressures. IBM would be in the upper middle portion of the graph. This is a position of moderate pressure for local responsiveness and high pressure for cost reductions. There is a moderate amount of pressure for local responsiveness for IBM products, due to language differences and differing voltage requirements for electronic products across countries. IBM is in a very competitive industry, and cost pressures are high. Nokia manufactures wireless handsets and infrastructures such as switches. Nokia, because it must customize its product offering according to the technical standards prevailing in a given country would be in the lower right hand side of the graph. Coca-Cola is a commodity type product, and it would be located in the upper left-hand portion of the graph. This is a position of low pressures for local responsiveness and high pressures for cost reductions. Dow Chemical and U.S. Steel would both be located in the upper left-hand portion of the graph. Both Dow and U.S. Steel sell products that are commodity-like by nature. As a result, cost pressures would be high and local responsiveness pressures would be low for these products. Finally, McDonalds would be located in the middle left-hand portion of the graph. Pressures for local responsiveness would be low, and cost reduction pressures would be moderate. McDonalds sells a semi commodity-like product, but not to the same degree as Dow Chemical of U.S. Steel.
3. Are the following global industries or multidomestic industries: bulk chemicals, pharmaceuticals, branded food products, moviemaking, television manufacture, personal computers, and airline travel?
Answer: Bulk chemicals are a global industry. Pharmaceuticals are a global industry. Branded food products are a multidomestic industry. Moviemaking is a multidomestic industry that is becoming more global. Many American films, for instance, are released overseas after they finish their run in U.S. theatres. These movies typically have to be modified, however, with foreign language subtitles. The commercial appeal for foreign films in America has yet to develop. Television manufacture is a global industry, as is personal computers. These products do have to be slightly modified to meet the language and voltage requirements of their local markets. Airline travel is a global industry.
4. What do you see as the main organizational problems that are likely to be associated with the implementation of a transnational strategy?
Answer: Simultaneously trying to achieve cost efficiencies, global learning, and local responsiveness places difficult and contradictory demands on an organization. Managing these conflicting demands requires the setting of control and motivational policies for people and organizations that force balancing of these demands at multiple levels within firms. The organizational challenges involve managing these inherent conflicts to resolutions that serve the best interests of the firm overall.
CLOSING CASE: Global Strategy at MTV Network
Summary
The opening case describes MTV’s global strategy. Since its start in 1981, the network has expanded to reach some 330 million customers spread across 140 countries. Interestingly, MTV has found that its global strategy has to be surprisingly local. Consumers in different markets, while enjoying some American programming, prefer to see their own local superstars. To maintain the company’s culture and operating principles, MTV transfers expatriates from elsewhere in the world to new stations, then moves them elsewhere once the local station is well established. Discussion of the closing can revolve around the following questions:
QUESTION 1: Using the framework developed in this chapter, how would you describe MTV’s strategy for competing internationally when it originally expanded internationally in 1987? What were the strengths of this strategy? What were the limitations?
ANSWER 1: MTV began its international expansion with a single live feed into Europe in The company mistakenly believed that European consumers would have the same tastes in music and programming as its American audience, and therefore the company simply extended its American programming to Europe. MTV suffered as a result, and local copycat stations were able to move in on the market.
QUESTION 2: Why did MTV change its initial strategy in 1995?
ANSWER 2: By 1995, MTV (and its competitors) realized that Europeans preferred their own pop stars to American ones, and MTV had to change its strategy to include the local stars. This localized strategy proved to be successful for MTV as it moved into the Asian market. Now, MTV uses regional feeds for various market groupings that allow the company to capitalize on global opportunities while still catering to local market preferences.
QUESTION 3: What strategy did MTV start to pursue in 1995? What were the benefits of this strategy to MTV? What were the drawbacks?
ANSWER 3: In 1995, MTV broke its markets into regional feeds. Digital and satellite technology have made the localization of programming cheaper and easier. MTV exercises creative control over the feeds, and all of them share the look and feel of American MTV, but with local programming and content. The company also establishes new stations using expatriates to transfer the MTV culture and operating principles. However, once these are established, local employees replace the expatriates.
QUESTION 4: Recently MTV has started to take ideas developed in national subsidiaries, and see if it can find ways of leveraging them globally. Does this represent a retreat from its post 1995 strategy, or a refinement of that strategy? What kind of company do you think MTV is striving to become—a multidomestic, international, global, or transnational company? Why?
ANSWER 4: In an effort to reduce costs, MTV is now exploring ways to globalize some of its programming. Students will probably be divided as to whether MTV should remain consistent with its post-1995 strategy of localization, or return to its pre-1995 strategy of globalization. In the end, it would seem that MTV is trying to do what so many companies strive for—follow a transnational strategy.
Teaching Tip: To clearly get a feel for the differences and similarities in MTV’s programming in various markets, students should go to { and click on the foreign sites.
Management Focus: Tailoring World Cars to the U.S. Market
This feature focuses on how the three big Japanese auto companies have changed their strategies to meet the needs of the U.S. market. Toyota, realizing that it had a major gap in its product line, introduced a pick-up truck. Nissan, in a complete departure from its traditional strategy, has handed over to its American engineers the development of most vehicles sold in North America. Nissan believes its new strategy will help the company better design vehicles that meet American tastes rather than Japanese preferences. Honda is also following a similar strategy by designing a new sport utility vehicle in the U.S. rather than in Japan.
Suggested Discussion Questions
1. Based on what you know about Toyota, Nissan, and Honda, discuss the notion of creating a global web of value creation activities. How does this concept play out with the Japanese auto companies? How does your response differ when you consider the American Big 3 auto companies?
2. Given that consumer preferences in America appear to be quite different from those of Japanese consumers, is there any way for automakers to realize the traditional benefits of selling in multiple markets?
3. Of the four basic international strategies described in the textbook (global, international, multidomestic, and transnational), which strategy is the most appropriate for most global automobile companies? Why?
4. Toyota’s homepage { Nissan’s homepage { and Honda’s homepage {
Management Focus: Ikea
This feature describes the expansion and philosophy of IKEA. IKEA’s cost focused global strategy served it very well as it expanded across Europe, and provided a growing middle class with furniture at much cheaper prices than the traditional craft-based furniture industry. The strategy was not as successful in the North American market, however, and changes were required.
1. What strategy was IKEA pursuing as it expanded throughout Europe during the 1970s and early 1980s - a multidomestic strategy, a global strategy, or an international strategy?
2. Why do you think this strategy did not work as well in North America as it did in Europe?
3. What strategy is IKEA currently pursuing? Does this strategy make sense? Can you see any drawbacks to this strategy?
4. Ikea’s web site {
Additional Readings and Sources of Information
Fine Tune That Alliance {
Wal-Mart Gives Globalism A Bad Name
PricewaterhouseCoopers Research Findings: CFOs Embrace Strategic Alliances as Major Growth Tool and Alternative to Higher-Risk M&A {
Ford To Suppliers: Let’s Get Cozier {
Autos: Not Your Father’s…….. Whatever
Can Wal-Mart Woo Japan?
The Next Wal-Mart?
VCs Turn

19. Chapter 11: The Strategy of International Business
CRITICAL THINKING AND DISCUSSION QUESTIONS
2. Plot the position of the following firms on Figure Procter & Gamble, IBM, Nokia, Coca-Cola, Dow Chemical, US Steel, and McDonald's. In each case justify your answer.
Answer: Procter & Gamble would be located in the middle right-hand portion of the graph. This is a position of high pressures for local responsiveness and moderate pressures for cost reductions. P&G sells personal and home care products, which do face pressures for local responsiveness. Although these products are not commodities, there are many competitors in P&G industries, which implies a moderate degree of cost pressures. IBM would be in the upper middle portion of the graph. This is a position of moderate pressure for local responsiveness and high pressure for cost reductions. There is a moderate amount of pressure for local responsiveness for IBM products, due to language differences and differing voltage requirements for electronic products across countries. IBM is in a very competitive industry, and cost pressures are high. Nokia manufactures wireless handsets and infrastructures such as switches. Nokia, because it must customize its product offering according to the technical standards prevailing in a given country would be in the lower right hand side of the graph. Coca-Cola is a commodity type product, and it would be located in the upper left-hand portion of the graph. This is a position of low pressures for local responsiveness and high pressures for cost reductions. Dow Chemical and U.S. Steel would both be located in the upper left-hand portion of the graph. Both Dow and U.S. Steel sell products that are commodity-like by nature. As a result, cost pressures would be high and local responsiveness pressures would be low for these products. Finally, McDonalds would be located in the middle left-hand portion of the graph. Pressures for local responsiveness would be low, and cost reduction pressures would be moderate. McDonalds sells a semi commodity-like product, but not to the same degree as Dow Chemical of U.S. Steel.

20. Video Case
1. Why did Allen & Overy make a decision to outsource its data processing to India? What pressures are present in the industry?
2. Reflect on the growth in India. What does investment from Western companies mean for the country?
3. What is strategy? How does strategy relate to profitability? Based on what you know about Allen & Overy, how would you define its strategy and profitability objectives?
4. What does the trend toward outsourcing higher-skilled jobs mean for white collar workers in Great Britain and the United States?
5. Where does data processing fit in the company’s value chain? What is the difference between primary and support activities? How does outsourcing this activity improve the firm’s competitive position?

21. Chapter 11: The Strategy of International Business
CRITICAL THINKING AND DISCUSSION QUESTIONS
5. Reread the Management Focus box on the alliance between Cisco and Fujitsu. What are the benefits to Cisco and Fujitsu respectively of the alliance? What are the risks to Cisco? How can Cisco mitigate those risks?
Answer: The Cisco (San Jose, CA, US)-Fujitsu (japanese)venture was important to both companies as they develop the next generation of routers. The firms will be able to pool their R&D efforts, share complementary technology, and get products to market more quickly. The two companies also believe that the combination of Cisco’s technology together with Fujitsu’s production expertise will enable them to produce more reliable products. In addition, the alliance provides Cisco with access to the Japanese market, a market that it believes will be important in the future, and a more complete product line for Fujitsu. Cisco will have to ensure that it puts proper safeguards in place as it shares its technology with Fujitsu, or risk creating a competitor.

22. Classroom Performance System
All of the following are examples of primary activities except
Logistics
Marketing and sales
Customer service
Production
Now, let’s see how well you understand the material in this chapter. I’ll ask you a few questions. See if you can get them right. Ready?
Question 1: All of the following are examples of primary activities except
Logistics
Marketing and sales
Customer Service
Production
If you picked A, you’re right!

23. Classroom Performance System
When different stages of a value chain are dispersed to those locations around the world where value added is maximized or where the costs of value creation are minimized, _____ is (are) created.
Experience effects
Learning effects
Economies of scale
A global web
Question 2: When different stages of a value chain are dispersed to those locations around the world where value added is maximized or where the costs of value creation are minimized, _____ are created.
Experience effects
Learning effects
Economies of scale
Global webs
If you picked D, you’re correct!

24. Classroom Performance System
Pressures for local responsiveness come from all of the following except
Excess capacity
Host government demands
Differences in consumer tastes and preferences
Differences in distribution channels
Question 3: Pressures for local responsiveness come from all of the following except
Excess capacity
Host government demands
Differences in consumer tastes and preferences
Differences in distribution channels
The correct answer is A. Did you get it right?

25. Classroom Performance System
When pressures are high for local responsiveness, but low for cost reductions, a _______ makes sense.
Global standardization strategy
International strategy
Transnational strategy
Localization strategy
Question 4: When pressures are high for local responsiveness, but low for costs reductions, ________ makes sense.
A global standardization strategy
An international strategy
A transnational strategy
A localization strategy
Did you pick D? I hope so!