Daniels Ib14inppt 11

8/11/2019 Daniels Ib14inppt 11

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Copyright 2013 Pearson Education, Inc.publishing as Prentice Hall 11-1

International

BusinessEnvironments & Operations

14e

Daniels

Radebaugh

Sullivan


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Chapter 11

The Strategy ofInternational

Business


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Learning Objectives To evaluate industry structure, firm

strategy, and value creation

To profile the features and functions of the

value chain To assess how managers configure and

coordinate a value chain

To explain global integration and local

responsiveness To profile the types of strategies firms use

in international business


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IntroductionThe Role of Strategy in International Business


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Industry Structure

Learning Objective 1:

To evaluate industry structure, firmstrategy, and value creation


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Industry Structure

Industry structureinvolves therelationships among

Suppliers of inputs

Buyers of outputs Substitute products

Potential new entrants

Rivalry among competing firms


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Industry Change

Industry structure changes because of

Competitor moves

Government policies

Shifting preferences Technological developments


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Industry Structure,Strategy, and Value

The industry organization (IO)paradigm presumes that markets demonstrateperfect

competition where no firm or industry

consistently outperforms others

The power of innovative executives bright executives exploit market imperfections

to outperform rivals

Strategys hallmarks Value

Strategy


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Creating Value Value

the measure of a firms capability of sellingwhat it makes for more than the costs incurredto make it

Create value using A cost leadershipstrategy

make products for a lower cost thancompetitors

A differentiation strategy

make products for which consumers arewilling to pay a premium price


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The Firm as a Value Chain


To profile the features and functions of thevalue chain


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The Firm as a Value Chain

The value chain

the set of linked activities the companyperforms to design, produce, market,

distribute, and support a product The value chain consists of

Primary activities

design, make, sell, and deliver the product

Support activities

implement primary activities


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The Firm as a Value ChainPrimary and Support Activities


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The Firm as a Value ChainPrimary and Support Activities of the Value Chain


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Managing the Value Chain


To assess how managers configure andcoordinate a value chain


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Copyright 2013 Pearson Education, Inc.publishing as Prentice Hall

11-15


Configuration

distributing value chain activities around theworld

concentrated putting all value chain activities in one

location

dispersed

performing different value chain activitiesin different locations

location economies


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When configuring the value, consider

The business environment

Innovation context

Resource costs Logistics

Digitization

Scale economies


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Managing the Value Chain Coordination

linking the value chain activities

Factors that influence coordination

Operational obstacles Core competencies

special outlook, skill, capability, ortechnology that runs through the firmsoperations, threading disconnected activities

into an integrated value chain Subsidiary networks

social networks


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Change and the Value Chain

The configuration and coordination of avalue chain responds to changes incustomers, competitors, industries, and

environments Even a well configured and coordinated value

chain can become obsolete

So, designing and delivering a strategy

should be an ongoing process


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Global Integration vs.Local Responsiveness


To explain global integration and localresponsiveness


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11-20

Global Integration vs.Local Responsiveness

Firms face two conflicting pressures:

Pressures for global integration

the process of combining differentiated parts

into a standardized whole maximize efficiency

Pressures for local responsiveness

the process of disaggregating a standardizedwhole into differentiated parts

optimize effectiveness


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Pressures for Global Integration

Drivers of global integration

The globalization of markets

Technology helps standardize consumer

preferencesGlobal products have become popular

allows for standardization of productdesign

The efficiency gains of standardization Location, scale, and learning effects

WTO supports global standards

f l


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Pressures for LocalResponsiveness

Pressure for local responsiveness is drivenby

Consumer divergence

cultural predispositionhistorical legacy

nationalism

Host government policies

fiscal, monetary, and business regulations


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When Pressures InteractIntegration/Responsiveness (I/R) Grid


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Types of Strategy


To profile the types of strategies firms usein international business


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Types of Strategy

Characteristics of the Strategy Type Used by MNEs


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International Strategy

International strategy

leverage a companys core competencies intoforeign markets

critical elements of the value chain arecentralized at headquarters

The strategy works well when

the firm has core competencies that foreign

rivals lack there is low pressure for global integration

there is low pressure for local responsiveness


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Multidomestic Strategy

Multidomestic strategy

emphasizes responsiveness to the uniquecircumstances that prevail in a countrysmarket

value added activities are adapted to localmarkets


there is high pressure for local responsiveness there is low pressure for global integration


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Global Strategy

Global strategy

make standardized products that are marketedwith little adaptation to local conditions

exploit location economies and capture scaleeconomies


the MNE is the cost leader

there is low pressure for local responsiveness there is high pressure for global integration


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Transnational Strategy

Transnational strategy simultaneouslyleverages core competencies worldwide,reduces costs by exploiting location

economics, and adapts to local conditions The strategy works well when

global learning and knowledge flows areemphasized

there is high pressure for local responsiveness

there is high pressure for global integration

Wh t N i th W ld f


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Whats New in the World of

Strategy Types?

What types of strategies might firmsfollow in the future?

Evolution of the Multinational Company

The Metanational The Micro-Multinational

Glorecalization

The Cybercorp


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Copyright 2013 Pearson Education, Inc.

publishing as Prentice Hall

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Daniels Ib14inppt 11