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International Business > Chapter 13 > Flashcards

Chapter 13 Flashcards

1
Q

what is the goal of the basic strategy of a firm

A

maximize the value of the firm

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2
Q

what is strategy refering to

A

actions that managers take to attain the goals of the firm

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3
Q

maximizing value is done through (2)

A

Increasing profitability and increasing profit growth

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4
Q

what is increasing profitability

A

increasing the rate of return (ROI) a firm makes from invested capital

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5
Q

what is profit growth

A

profit growth is the percentage increase in net profits over time

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6
Q

How do we increase profitability of a firm

A

reduce costs and increase the value of the products to raise pries

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7
Q

how to increase profit growth

A

sell more in existing markets, or enter new markets

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8
Q

What is value creation

A

value creation is the diff bw a firms costs of production and the quality that consumers perceive in its products

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9
Q

The greater the value of the product in customers eyes

A

the higher the price the firm can charge

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10
Q

how is value creation measured

A

value in consumers eyes - cost of production

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11
Q

what are porters 2 strategies for creating value and obtaining a competitive advantage

A

low cost and product differentiation

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12
Q

what is V

A

value of product in the eyes of the consumer

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13
Q

p?

A

price per unit

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14
Q

c?

A

cost of production per unit

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15
Q

V-P?

A

consumer surplus per unit

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16
Q

P-C

A

profit per unit

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17
Q

v-c?

A

value created per unit

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18
Q

How does a firm achieve strategic positioning? 1st

A

the firm should be explicit about the choice of strategic emphasis regarding value creation( differentiation) and low cost

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19
Q

How does a firm achieve strategic positioning? 2nd

A

the firm should configure its internal operations to support the strategic emphasis

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20
Q

How does a firm achieve strategic positioning? 3rd

A

they should adopt a specific position on the efficiency frontier

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21
Q

what is an efficiency frontier

A

a graph that shows all the different positions a firm can adopt regarding adding value, lower cost, and we assume that the internal operations are configured to support the particular position

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22
Q

To maximize profitability a firm must (3)

A

pick a position on the efficiency frontier that is viable, configure internal operations for that specific position, make sure the firm has the right organization for that strategy

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23
Q

What 3 factors must be consistent with eachother in order to achieve a competitive advantage and garner superior profitability

A

strategy, operations, and organization

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24
Q

what are the 8 value creation activities

A

production, marketing and sales, materials management, R&D, human resources, info systems, infrastructure

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25
Q

acronym for 8 value creation activities

A

peter might make roasted ham inside immediately

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26
Q

what are the 4 primary activities

A

R&D, production, Marketing and Sales, Customer service

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27
Q

what are the 4 support activities

A

company infrastructure, info systems, logistics, human resources

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28
Q

How does research and development increase value

A

increases functionality of the products, which raises value for higher prices, also increases the efficiency of the production process which reduces cost

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29
Q

how does marketing increase value

A

brand positioning and advertising increases percieved value, and they discover consumer needs which they can communicate to R&D

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30
Q

how does customer service increase value

A

after sale service increases percieved value allowing us to increase price,

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31
Q

how does production increase value

A

production creates value but doing it efficiently to decrease costs, or producing high quality to charge more

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32
Q

why does the efficiency frontier have a convex shape

A

because of law of dimishing returns, high value products require significant increase in cost to further increase quality, and low cost goods require large decrease in quality to further lower cost by a little

33
Q

what are the support activities for

A

they provide inputs that allow the primary activities to occur

34
Q

how does info systems act as a support activity

A

Information systems can alter efficiency and effectiveness with which a firm manages its other value creation activities.

35
Q

how does logistics act as a support activity

A

Logistics controls transmission of physical materials through the value chain.

36
Q

how does HR act as a support activity

A

Human resources ensures company has the right mix of skilled people; ensures adequate training, motivation, and compensation.

37
Q

how does infrastructure act as a support activity

A

Infrastructure includes organization structure, control systems, and culture of the firm.

38
Q

through global expansion firms are able to (4)

A

expand potential size of market, realize location economies, realize greater cost economies from experience effects, earn a greater ROI

39
Q

How do firms expand their market

A

taking goods or services produced at home and selling them internationally

40
Q

the success of MNCs is not based on the lack of that good internationally but rather on

A

core competencies

41
Q

what are core competencies

A

core competencies are skills that competitiors cant match, such as production, marketing R&D and logistics

42
Q

Successful firms transfer core competencies to foreign markets where

A

they lack comparable competencies, so they lack the competitive advantage

43
Q

what are location economies

A

economies that arise from performing the value creation activity in the optimal location,
the lower cost of value creation helps achieve low cost position

44
Q

what is a global web

A

when different stages of the production process are scattered to where value added is maximized or costs of value creation are minimized

45
Q

What are some caveats to having a global web

A

transportation costs, trade barriers, and economic risks

46
Q

what are experience effects

A

experience effects are systematic reductions in production costs that occur over the life of a product

47
Q

what 2 factors explain the experience effects

A

learning effects and economies of scale

48
Q

what are learning effects

A

when individuals learn the most efficient ways to produce which increases labor productivity

49
Q

what are economies of scale

A

when a firm lowers its unit costs and increases profitability through serving a global market and increased volume

50
Q

what is the strategic significance of the experience curve

A

moving down the curve allows a firm to reduce its costs and thereby increase profitability, which increases cost advantage

51
Q

what type of firm benefits from experience curves

A

a firm that serves a global market from a single location because of the large volume

52
Q

a low cost position can act as

A

a barrier to competition

53
Q

what are subsidiary skills

A

skills that are developed in foreign subsidiaries that help lower costs or increase percieved value

54
Q

what are the 4 ways a firm can leverage subsidiary skills

A

-have a process for identifying the skills when theyve been created
-recognize the skills,
-establish an incentive system for the local employees to acquire new skills
-act as facilitators to help transfer the skills

55
Q

SUMMARY, 4 ways a firm that expands globally can increase profitability and profit growth

A

-enter markets where competitors lack core competencies,
-lowering cost and adding value through core competencies,
-exploiting experience curves
-transfer valuable skills between subsidiaries

56
Q

firms that compete in the global market can experience

A

competitive pressures

57
Q

what are the competitive pressures from competing in a global market

A

cost reduction pressures, local responsiveness pressures

58
Q

pressures for cost reduction are higher in (2)

A

industries that produce commodity type products because there is a universal need
-industries where major competitors are based in low cost locations

59
Q

pressures for local responsiveness (5)

A

-differences in taste and preferences,
-differences in infrastructure and traditional practices
-difference in distribution channels
-host government demands
-regionalism

60
Q

how does differences in consumer tastes affect local responsiveness

A

products and marketing strategy needs to be altered to appeal to tastes

61
Q

how does differences in infrastructure affect local responsiveness

A

change production and manufacturing to make the product suit the infrastructure (plugs, car with driver on diff sides )

62
Q

how does differences in distribution channels contribute to the local responsiveness

A

alter marketing strategy

63
Q

how do host gov demands cause local responsiveness

A

different laws and regulations, threats of protectionism, economic nationalism , and local content rules affect international businesses

64
Q

how does the rise of regionalism affect local responsiveness

A

when there is regionalism and tastes and preferences apply to a broad region rather than 1 country we can standardize the product for the whole region to allow for greater economies of scale

65
Q

what are the 4 international strategies

A

global strategy, localization strategy, transnational strategy, international

66
Q

Global standardiation strategy looks to reap :

A

-cost reductions that come from economies of scale, learning effects, location economies
-low cost strategy on a global scale,
-avoids customization
-supply chain activities are concentrated in a few favorable locations

67
Q

Global standardization strategy makes sense for firms that have what type of competitive pressure?

A

have strong cost reduction pressures and minimal local responsiveness

68
Q

LOCALIZATION STRATEGY works through

A

Customizes goods or services so they are a good match to tastes and preferences in different national markets.

69
Q

Localization strategy is appropriate in industries with what kind of competitive pressures

A

-Substantial differences across nations regarding consumer tastes and preferences.
-Cost pressures are not too intense.

70
Q

What is the problem with localization strategy

A

Customization limits the ability to capture the cost reductions associated with mass-producing a standardized product for global consumption.

71
Q

What is transnational strategy

A

when managers try to achieve a
- low cost position through location economies, economies of scale and learning effects, while
-differentiating their product offering across geographic markets to account for local differences and
-foster multidirectional flow of skills between subsidiaries

72
Q

what are the conflicts in transnational strategy

A

differentiating product to respond to local demands in different markets raises costs which counters goal of reducing costs

73
Q

What is international strategy

A

taking products developed for domestic markets and selling them internationally with minimal customization

74
Q

international strategy is good for firms with what types of competitive pressures

A

low cost pressures and low pressures for local responsiveness

75
Q

how is R&D, marketing and manufacturing controlled in an international strategy

A

R&D in home country, but manufacturing and marketing in each major country or region that they do business

76
Q

why does strategy evolve

A

competitors emerge so firms might need to shift strategies

77
Q

when a firm using localization strategy faces competition they will have to shift to a

A

transnational strategy

78
Q

which 2 strategies are less viable as competitors emerge

A

international and localization strategy

79
Q
A

International Business (7 decks)

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