11.4: Choosing a strategy Flashcards
What factors influence a firm’s choice of international strategy?
A firm’s choice of international strategy is influenced by the strength of pressures for cost reductions versus those for local responsiveness.
Firms typically choose among global standardization, localization, transnational, and international strategies based on these pressures.
What is a global standardization strategy?
A global standardization strategy focuses on increasing profitability by reaping cost reductions from economies of scale, learning effects, and location economies.
It aims to market a standardized product worldwide without significant local customization.
What is a localization strategy?
A localization strategy aims to increase profitability by customizing the firm’s products to local tastes and preferences in different national or regional markets, which may involve some duplication of functions and smaller production runs.
What is a transnational strategy?
A transnational strategy is an approach where a firm tries to simultaneously achieve low costs through economies of scale and learning effects, differentiate their product offerings to account for local differences, and foster a multilateral flow of skills between subsidiaries within the firm’s global network.
What is an international strategy?
An international strategy is used by firms that sell products serving universal needs with minimal local customization.
Such firms are not pressured to reduce their cost structure significantly and typically centralize product development while undertaking some local customization for marketing and product strategy.
What is the Achilles’ heel of the international strategy?
The Achilles’ heel of the international strategy is that over time, competitors emerge who can outflank the firm on cost, making an international strategy potentially unsustainable in the long term without shifts towards global standardization or transnational strategies.
Why might firms need to shift from an international or localization strategy to another strategy?
Firms may need to shift from an international or localization strategy to a global standardization or transnational strategy as competition intensifies and pressures for cost reductions and local responsiveness increase.
Advantages and Disadvantages of Global Strategy
Advantages of a global strategy include exploiting experience curve effects and location economies. The disadvantage is the lack of local responsiveness.
What are the advantages and disadvantages of an international strategy?
The advantage of an international strategy is the ability to transfer core competencies to foreign markets.
Disadvantages include lack of local responsiveness, inability to realize location economies, and failure to exploit experience curve effects.
What are the advantages and disadvantages of a multidomestic strategy?
The advantage of a multidomestic strategy is the ability to customize product offerings and marketing in accordance with local responsiveness.
Disadvantages include the inability to realize location economies, failure to exploit experience curve effects, and failure to transfer core competencies to foreign markets.
What are the advantages and disadvantages of a transnational strategy?
The advantages of a transnational strategy are the exploitation of experience curve effects, location economies, customization according to local responsiveness, and the benefits of global learning.
The primary disadvantage is the difficulty in implementation due to organizational challenges.
