1. Strategies
Types

2. Strategy is about creating value.
Creating value-by producing a product for which customers are willing to pay more than the full cost of delivering the product to that customer.
Customers differ in their perceptions
Hence process involves selecting target customers and tailoring the product for those customers.

3. Capturing value-securing profit from the value the company creates.
Strategic choice-trade off between willingness to pay and costs.

4. Location choice as part of strategy
Reasons for going global
Going global-issue-degree to which companies adapt the product to the foreign market.
Choice on how these companies adapt the product is driven by cost versus willingness to pay.
When going global-companies pick a place that has a cost advantage.
Each activity is done where it can be done cheapest.
Cost to interacting at a distance

5. Key cost concerns Labour costs Cost of supplies Transportation costs
Communication/coordination costs within the firm.
Tariffs and trade barriers
Economies of scale

6. Key willingness to pay concerns includes
Product adaptations
Responsiveness to customer’ orders and service requirements
Communications with customers
Reputation.

7. Broad categories of strategies
Exporting
Multi domestic
Global
Variations of these three basic strategies
Transnational
Branching
Off shore outsourcing

8. Exporting strategy Everything is done in one place-home country
Centralization
Adopted by companies that have following features/traits:
Large fixed cost
High internal communication costs
Low transportation and border costs
Home country is the major market even in the long run
Home country has a cost advantage

9. Multidomestic strategy
In pure multidomestic organisation,each subsidiary is a self sufficient entity
Firm’s activities are replicated in each location
Adopted by companies that have following traits:
High transportation costs,high border cost
Low fixed costs
No substantial cost difference between countries

10. Global strategy
Each function is performed in one place,but the functions are not at all performed in same place
Ex: Finance in U.S., R&D functions in Germany etc
It is also called as specialization strategy.
Adopted by companies that have following traits:
Costs vary substantially across countries for different kinds of production and services
Low transportation costs and low border costs.
Fixed costs are large
Sometimes companies switch specialization strategy when facing competitive pressures.

11. Branching Strategy Hybrid of exporting and multidomestic
Some functions are centralised,some are not.
Adopted by companies that have following traits:
High transportation cost on final goods and low transportation cost on parts.
High border costs on final goods and low border costs on parts.
Large economies of scale in engineering,design,strategic management and manufacture of key components, and high communication costs between these functions.
Home country has cost advantage on parts, but there are no substantial costs
Differences between countries on final assembly
Large foreign markets.

12. Offshore outsourcing strategy
Firm contracts other firms to carry out its foreign operations.
Combination of exporting and global strategy
Firms own activities are centralised.
Ex: Nike

13. Transnational strategy
Hybrid of other strategies
Firm uses a multidomestic strategy only for those activities where that strategy makes sense and global strategy for activities where global strategy