Internation business strategies Flashcards
strategy
an intergrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competive advantage
competitive advantage
firm achieves a competitve advantage by implementing a value-creating strategy that current and potential competitors are not simultaneously implementing/ cannot implement due to cost
above average return
return that exceed return that investor expect for a given risk levels
external analysis: 4 assumptions
- external environment affect how firm choose strategy
- similiar competitors will try to implement strategy
- resources difference are short lived. long term: everyone has the same resource
- strategic decisions makers want to make profit
external analysis: 5 forces
potential entrants: new entry of competitors suppliers: suppliers' bargaining postion buyers threats from substitue product/ service rivalry from existing firms
internal analysis: 4 assumption
- firms acquire different resources
- unique in how they use the resources
- resources are not mobile between firms
- difference resources/ capabilities form the bases of competitive advatage, not their structural characteristic
internal analysis: resource based views
when firms acquired/ bundle their core competence well, leads to superior value that customers will pay for
VIRIN model
external analysis: competitive advantage
takes offensive/defensive actio ns against the 5 forces
identify/ position/ influence/ anticipate
internal analysis: competitive advantage
competitive advantage are difficult to sustain because core competence can be replicated or substituted
environmental change
internal analysis: VRIN model
V: valuable
R: Rare capabilities
I: hard to imitate. firms might have a historical unique brand name, ambiguous use/cause of competence, socially complex
N: nonsubstitutable capabilities
Cost leadership
set of action taken to produce goods/services with the lowest price relative to others and acceptable quality
differentiation
integrated sets of actions taken to produce goods or services (at an acceptable cost) that are different in ways that are important to them
appropriate when customer are value differentiated features than cost
cost leadership: key strategy elements
scale efficient plants
control of overheads
avoidane of marginal customer accounts
cost leadership: resources and organizational requirements
access to capital process engineering skills frequent reports tight cost control specialization of jobs & functions incentives for quantitative targets
differentiation : key strategy elements
emphasis on branding brand advertising design service quality
differentiation: resource & organization requirements
marketing product engineering creativity product R&D qualitative measurement & incentive strong cross functional coordination
3 sources of competitive advantage in internationalization
global efficiencies, multinational responsiveness, flexibility, leveraging competencies/ learning
Competitive advantage: Leveraging competencies & learning worldwide
transferring capabilities/ competencies that are not easily imitated/ substitute
transfering distinctive competencies: companies with unique competencies can expand global markets that lack the same competencies
competencies can be created anywhere within multinational operations (subsidiaries/ suppliers/ rivals)
competitive advantage: global efficiency: 3 subcategory
split into 3
location efficiencies
economies of scale
economies of scope
global efficiency: location efficiencies
base earch value creating activity where most favourable conditions exist (optimize value chain)
factors:
economic/political/ cultural conditions/logistics/factor costs
local skills needed to improve product- locate in industry cluster
global efficiency: economies of scale
having operations in more than one country increase total volume of production, allowing production facilite
global efficiency: economies of scope
diversifying portfolio of products to lower cost
competitive advantage: multinational responsiveness/flexibility
realising international growth through adaptation to local conditions
local taste/ custom/ regulation/ need/demographics/ physical factors
2 conflicting pressure on IB strategy
global integration and local responsiveness
leads to 4 types of international business strategy
pressure for global integration
globalization of market
multilateral & regional reduction in trade barriers
if homogenixation of consumer demand, then compete on price
maximize efficiency gains of standardization on homogenous tastes
pressure for local responsiveness
divergent consumer tastes &preference due to culture, history, nationalism economic distance, distribution channels
host gov. policies: variation in product, service standards, health, environment, financial regulation
optimize effectiveness of addressing heterogenous local demands
motive for global integration (7)
standardize products & processes to maximize scale, experience and learning effects
capitalize on converging preferences
source materials/inputs
directly engage global rivals
build global image
leverage expanding cross national connectivity
respond to globalization
exploit improvement on global logistic/ communication
motives for local responsiveness
customize products & services to local preferences/values
promote a local profile/goodwill by supporting national agenda
tap local inputs/ capabilities
adapt to circumstance/environment
accomodate differences in distribution channels& services
global strategy
firm views world as single market
primary goal is to create standardized products
low cost because value chain is built on location economics, products may be high quality
target global niche
decision are centralized: tight HQ coordination
low pressure for local responsiveness+ high pressure for global integration
international strategy
applying competencies from home to overseas operation (leveraging competencies)
foreign markets lack these competencies
centralized HQ control
foreign operation led by expatriates from home country
low pressure for local responsiveness+ low pressure for global integration
eg. Apple
localization strategy
management see overseas operation as portfolio of independent business adapted to national preference & condition
customisation: maximum local responsiveness
separate production, marketing, R&D in each market
decentralization
low experience curve/ location economies
high cost structure
high pressure for local responsiveness & low pressure for global integration
eg. IKEA (changes), Walmart
translational strategy
complex process of leveraging competencies/ learning world wide
shared decision making- decentralized
balance between concentration for location economies/low cost and dispersion to meet local preferences
high pressure for local responsiveness and global integration
eg. Zara
responsiveness vs differentiation
differentiation: what makes firms different from others
responsiveness: adapt to local condition
McDo making vegetarian burgers–> responsiveness to indian culture, but not differentiating if everyone else is doing it
frugal innovation
innovation that aims to radically lower the price for products aiming at bottom of pyramid consumers
more price oriented, but also culture oriented
product life cycle
new product: product in hom country, export
maturing product: rivals emerged, some production shift to other industrialized countries, some imports to home, others shift production
standardized product: cost is now factor, assembly shift to emerging market, home start primarily import
exception life cycle theory
luxury good–> low cost, people start doubting it
short life cycle product might not make it low cost stage
product locate near rare specialist, can’t be imported
life cycle theory overtaken by globalization aspect
simultaneous introduction of product in other parts of the world
offshoring/near shoring/ reshoring
globally dispersed production: components come from different places, assembly in different place
increase number of product/service with global leadership
National diamond
competive successful industry arises by interacting with 4 elements Factor condition deman conditions related/supporting industries firm strategy, structure, rivalry
plus maybe chance and governement
National diamond: Factor condition
basic factors : (must be supported by advance to succeed)
natural resources, climate, location, demographics
advance factor:
communication, skilled labour, research, technology
National diamond: Demand condtion
size sophisication (variety) demanding customers (quality)
national diamond: related+ supporting industries
provide advantage in innovation and upgrading through:
quick/ constant flow of information
ongoing exchange of ideas+innovation
successful industries within a country tend to be grouped into clusters of related industries
National diamond: firm strategy, structure and rivalry
vigorous domestic rivalry improves a company’s competitiveness
intense competitiveness of japanese markets forces manufacturers to continually developed + fine tune new products
national competitive advantage: poltical implication
promoting free trade is in home country best interest bc promote rivalry
not always in the short-term interest of the firm
government can’t make their own clusters, but they can help clusters grow
national competitive advantage: location implication
disperse production activities to countries where they can be performed most efficiently
national competitive advantage: first-mover implication
invest substantial financial resources in building first mover, or early- mover advantage
limitation of national competitive advantage
implicit stages model of internalization: become competitive in home market then internationalize
increasingly points on diamonds are virtual rather than domestic
risk becoming rationale for government to side with certain companies
