#2 Types of International Strategy Flashcards
What is the difference between product strategy and competitive strategy?
Product strategy = Choices regarding a company’s product line in
different geographical markets
- Product mix - same or different in all markets
- Adaptation - same or different in all markets
Competitive strategy: Analyzing sources of competitive advantage and locating parts of the value chain in markets that offer the best opportunities.
What is product mix and product adaptation?
A product mix is the selection products offered in a given market.
Product adaptation is the process altering product features so that they fit the need and taste of a given market.
Strategies of product mix and product adaptation can be categorized in a 2x2 matrix. Each is measured on scale from “same in all countries” to “different in all countries”.
When to pursue global integration and when local responsiveness
Local responsiveness: Tailored products/services
- National or regional differences in customer needs
- Differences in cultures/tastes/norms
Ability to apply cross country arbitrage.
Global integration:
- Scale and scope advantages
- Little variation in customer preferences
Multi-country vs. global competitive strategy
Using the terminology of economics, multi-country strategies involve maximizing each market’s profits individually, while a global competitive strategy involves profit-maximization of the company as a whole.
Multi-country: Each market is self-contained. For a MNE, competition in each market is independent from the other markets. There are different rivals, different product offerings.
Global Competitive strategy: Prices and competitive position are strongly interlinked across markets. Same competitors in many markets. MNC’s advantage stems from worldwide operations.
Cross subsidization:
A strategy of using financial resources accumulated in one part of the world to fight a competitive battle in another
What are the 3 global competitive strategies?
1) Building global presence
2) Defending domestic position
3) Overcoming national fragmentation
Explain “building global presence”
- Achieve capability to make and sell globally
- Cross-subsidize important markets
- Reduce competitor’s margin
- Gain first-mover advantage
Explain “defending domestic position”
- Gain ability to retaliate
- Match costs of foreign competitors, seeking overseas manufacturing
- Match competitor’s investment in scale and process technology
- Seeking political solutions
Explain “overcoming national fragmentation”
- Shift in locus of strategic responsibility away from simple, divided country organization building integration between companies.
- Distribute decision-making among subsidiaries
- Rationalize R&D and production
What are the 5 regional strategies:
Homebase Portfolio Hub Platform Mandate
Explain “homebase strategy”
A regional strategy where: - The home base with all major operations serving close markets
- All upstream activities in home market
- For most global companies, this strategy can only be pursued to served a limited region. But for e.g. Samsung, the long-term strategy is to serve the global market with upstream facilities at home.
Explain “portfolio strategy”
A regional strategy where:
- Setting up or acquiring operations outside the home region that reports directly to the home base
- Subsidiary can have both manufacturing and sales activities
- E.g. Toyota setting up production in US
Explain “hub strategy”
A regional strategy where:
- A multi-regional version of the home base strategy
- Often transforming a foreign subsidiary into a standalone unit.
- Building regional hubs that provide a variety of shared resources and service to local operations. Such resources will often not have enough scale for one country, but works well when serving multiple markets.
E.g. GM having Opel as a hub
Explain “platform strategy”
A regional strategy where:
- Basic worldwide platforms -> regional customization
- Not to limit product variety, but to provide product variety at lower cost
- Hubs spread fixed costs within a region, platform spread them across regions. As this relates mainly to cost efficiency, the choice between hub/platform is almost invisible to the customer.
Explain “mandate strategy”
A regional strategy where:
- Like platform strategies, but benefits not only from economies of scale but also from specialization. Regions have particular roles.
- Can be upstream with responsibility for certain activities or providing specific resources.
- Example: Consultancies have specific knowledge centers with distinct responsibility areas.
