International Strategy: Standardization vs. Adaptation

Question 1

Standardization/ global Integration

Answer 1

• Make and sell standardized products
• compete on a regional or worldwide basis
• maximize the efficiency of the value chain and achieve economies of scale
• usually, decisions are made in a central headquarter

Question 2

Adaptation/ localization

Answer 2

• firms adapt to different customer needs and the competitive environment, thereby foregoing economies of scale
• local managers are free to adjust offering, marketing, etc.

Question 3

Determinants Standardization vs Localization

Answer 3

• global convergence of taste
• cost reduction and efficiency
• cultural differences
• presence of strong local/global competitors
• availability and differences in distribution channels
• local restrictions

Question 4

Home replication

Answer 4

International markets are not considered a priority. merely a way of adding incremental sales

Not adaptation of products

Downsides:

• rely heavily on foreign intermediaries
• little control
• limit competive advantages abroad

Question 5

Multidomestic Strategy

Answer 5

Local managers operate foreign subsidiaries and have a high level of independence and autonomy to be locally responsive

Product adaptation

Managers often locals

Knowledge flows between subsidiaries are limited
Downsides:
- Strategies and cultures can differ considerably
- Subsidiaries and little incentive to share knowledge
- reduced economies of scale
- inefficiency in operations, marketing, etc

Question 6

Global Strategy

Answer 6

HQ has substantial control over all country operations. This strategy minimizes redundancy and maximizes efficiency.

Marketing etc. relatively standardized

Management views the world as one large marketplace.

Downsides:

• Challenging the management all across the globe
• Loss of responsiveness and flexibility in local markets

Question 7

Transnational Strategy

Answer 7

Responsive while retaining sufficient control of operations to ensure efficiency and learning.

Standardize where feasible and adapt where appropriate

Downsides:

• Complex, lower cost vs. adapt
• knowledge transfer is difficult to achieve
• selecting optimal locations for efficiency or right features is diificult

Question 8

Strong global brand

Answer 8

• increase the effectiveness of marketing programs
• ability to charge premium price
• leverage with resellers
• stimulates brand loyalty

Question 9

Change in strategy as markets evolve

Answer 9

Adjust strategy to growth - from franchising to JV

Innovation is essential, driven by

• ability to sense needs or opportunities
• ability to develop effective response to these stimuli

Choice of strategy is intertwined with the management of subsidiaries

Key issues:
- where R&D, innovation sources