Forelæsning 6 Flashcards
Strategy
A plan to survive with long-term goals.
International Strategy
Trying to create value by transferring core competencies to foreign markets where indigenous competitors lack those competencies
Reactive Reasons for Going International
- Globalization of competitors: Be where your competitors are (cross-subsidize “charge one price for one group, and another price for another group”)
- Trade barriers,
Regulations and restrictions (taxes at home can be avoided) - Globalization of Customers: Be where your customers are
Proactive Reasons for Going International
Growth Imperative:
- Future growth- changing economic and demographic situation in emerging markets.
- Tax breaks and other incentives in emerging markets.
Knowledge Imperative:
- The advantage of possessing local know how and leverage globally new local inventions.
Economies of Scale:
- A firm’s average cost may decline initially as it spreads fixed costs over increasing output. If AC declines as output increases, then the MC of the last unit will be less than AC. The point is to find a MC that is the lowest. (Most efficient production)
Economies of Scope:
- This is an economic concept that the unit cost to produce a product will decline as the variety of products increases.
7 Steps in Strategy
- What do you want to achieve- clarity of goals
- Scanning the external environment - threats/opportunities
- Conducting an internal resource analysis of company - strengths/weaknesses
- Depending on the analysis what are my strategy options
- Decisions, Decisions, Decisions
- Implement the strategy with structure that is fitting and enabling
- Feedback loops- is it working
External Analysis Tools
PESTL, CAGE, Diamond, P5F, Vermons Lifecycle Theory
Internal Analysis Tools
VRIO, SWOT, Choise of Products, Choise of Markets
PESTEL
Consists of 6 risks parameters. Political, Economic, Social, Technological, Environmental and Legal
CAGE Framework
The analytical framework used to understand country and regional differences along the distance dimensions of culture, administration, geography, and economics
Porter’s Diamond Model
This framework is used to explain why some countries are better than others in specific industries.
4 Conditions:
- factor conditions:
Factors of production, labor, capital, natural resources.
Do they have skilled labor? - demand conditions:
- Related and supporting industries:
Communication with suppliers- innovation.
Competition between suppliers drives down prices - firm strategy, structure, and rivalry:
Specific types of corporate cultures fit some industries better.
Tough competition at home - improvement and innovation
Porter’s Five Forces
This framework is used to see how attractive a specific industry is.
We look at 5 forces that affects the attractiveness of an industry:
Threat of substitutes, Buyer power, threat of new entrants, supplier power and competitive rivalry.
VRIO Framework
A theoretical framework that explains and predicts firm-level competitive advantage.
You look at 4 parameters:
Valuable, Rare, Inimitable and Organization (Can the organization exploit the resources?)
Competitive disadvantage - Competitive parity - Temporary competitive advantage - Unused competitive advantage - Sustained competitive advantage
SWOT analysis
strengths, weaknesses, opportunities, threats
Choice of Products
4 Quadrants, with “Required Degree of Local Adaption” along the Y-axis and “Expected Payoffs from Globalization along the X-axis.
(Low-High-Low-High)
- Quadrant: Most attractive
- Moderately attractive
- Moderately attractive
- Least attractive
Is your brand strong enough to gain high payoff.
The first quadrant is the best product to move to international markets, as it requires low adaption from the locals, and the pay-off is high.
Choice of Markets
4 Quadrants, starting with top right:
- Rapid Entry
- Phased-in-entry
- Opportunity entry
- Ignore for now.
Y-axis: Strategic importance of makrte.
X-axis: Firm’s ability to exploit the market.
(High-low-low-high)
If you have what it takes t enter a market, and the market is great in its potential (size, safe) and learning opportunity, then rapid entryis ideal.
If your ability doesn’t reach as high, then go for phased-in entry.
If you have the ability, but the market is either too small or risky or would not teach you anything, it is a vise option to keep growing/securing high cash flow- opportunistic entry.
