2.5 Allocation strategies

Question 1

Different allocation strategies

Draw tree

Answer 1

1. Configuration strategies : centralization and decentralization
2. Customization strategies : Standardization and Differentiation

Question 2

Allocation strategies - Configuration

Answer 2

• Decentralization (geographical dispersion) vs. centralization
  (concentration) of value added activities
• Ports value chain (pilen med primary and supportive activites)
• Map what value chain and identify activites in each country/market

Ex. BMW: Combined strategies, Decentralization less risk, must assembly in china pga regulations (JV), R&D more centralization (core)

Question 3

Types of configuration strategies

Answer 3

1. Concentration /Centralization: Everything in home country, no duplication

PRO

• Reach critical mass gives ec of scale
• learning benefits
• easy and fast coordination

2. Combines strategy: Different on differnet markets, connected toe eachother, some duplication
3. Decentralization: All part of value chain in each market, lots of duplication

PRO

• flexibility and risk distribution
• exploiting resource differences (cost, know-how)
• Higher acceptance in each country (local appearence)

Question 4

Allocation strategies - Customization strategies

Answer 4

• the extent of standardization or differentiation of firm’s goods or
  services that are offered worldwide

1. Standardization
2. Differentiation

• Map Ex design, quality, price etc and each country with standard or adaption
• Ex. IKEA cataloga same everywhere

Question 5

Standardization VS differentiation

Answer 5

Standardization: Offer identical in all foreign markets Ex. Pringels

PRO:

• lower costs, ec of scale in maketing
• lower price->higher sales
• creating brand with global appeal

Differentiation: Differnent in various markets Ex. iPod, Coke Classic different in different countries to locally adopt.

PRO

• Better response to local need
• higher willingness to pay
• create brand with local appeal

Question 6

Decision between standard or differentiation

Answer 6

1. Market conditions:
   - Potential ec of scale
   - cross country demand homogeneity and globalization degree
   - cross country price elasticy
2. Internal firm conditions and strategy
   - Product features
   - competative strategy
   - Global VS multinational strategy