International Business Chapter 13

28 cards·by lizarusakova

What is strategy?

Actions that managers take to attain the goals of the firm (usually to maximize the value of the firm for owners)

To maximize the value of the firms, the persued strategy should...

...increase profitability of the firm and its rate of profit growth over time

What is profitability and profit growth?

Profitability-rate of return on invested capital(ROIC). Net profits/total invested capital. PG-percentage increase of profit over time

Profitability can be increased by...

pursuing strategies that lower costs; add value(or differentiate) and raise prices

Profit growth can be increased by...

selling more in existing markets or entering new markets

The amount of value that firm creates is

the difference between its costs of production and the value that consumer perceives in product (V-C)

According to Michael Porter,what are 2 strategies to create value and attain a competitive advantage in the industry?

1.Low-cost strategy(lower production costs,C) 2.Differentiation strategy(increasing attractiveness of brand(V) bydesign,after-sales service)

Why is it not easy to change from low cost to high value strategy?

Due to diminishing returns.When firm already has significant value, increase it more will require significant additional costs

Basic strategy paradigm for the firm to maximize profits

1.Choose strategy2.Configure internal operations(HR,logistic) so they support your strategy 3.Make right organ.structure to execute strategy

The value chain(from raw material to final product) of the firm is composed of 2 types ofactivities

1.Primary(R ,Production,Marketing and Sales,Customer Service) 2.Supporting-allow primaries to occur(Information system,Logistics,HR)

Expanding a firm globally has 4 main benefits

Larger markets;localization advantage(move ValueCreation activity to different country);economies of scale;learning opportunities

What is economies of a scale?

Reduction in unit costs achieved by producing a larger volume of product (with expansion to different markets)

Other benefits of expanding to different markets

Risk reduction from diversification,tax advantage(tax avoidance),scale economies of intangibles(R ,HR)

What is core competence?

"Firm specific advantage" that implies specific skill in the firm competitors cannot easily imitate or match

What are location economies?

Economies that arise from performing ValCr activity in the best location wherever in the world(lower transportation costs,trade barries)

What is global web of value creation activities?

Locating different stages of Val.Chain to different locations around the world with maximum perceived value or minimum costs of Val.Cr

What does experience curve illustrate?

Systematic reduction in production costs obseved to occur over the life of product due tolearning effects and economies of scale

What are learning effects?

Costs savings that come from learning by doing (due to increased labor productivity and management efficiency)

Firms that compete in a global market face 2 types of pressures

Pressure for cost reductions and local responsiveness and

What is pressure for local responsiveness?

Pressure for adaptation due to national differences in tastes, distribution channels,government demands,infrastructure and traditions

What is the pressure for cost reduction?

Pressure to reduce costs per unit. Common for commodities and products that serve universal needs(similar national tastes)

What are 4 global strategies?

Global Standardization, International, Localization and Transnational

What are the characteristics of Global Standardization Strategy?

-High pressure for cost-reduction,low - for local responsiveness. Low-coststrategy-Common in industrial product serving universal needs

What are the characteristics of Localization Strategy?

High pressure for local response (customizing your products,services to meet dif.national tastes), Low pressure -for cost reduction

What are the characteristics of Transnational Strategy?

High pressure for cost reduction and local responsiveness. Low-cost strategy+differentiation

What are the characteristics of International Strategy?

Low cost reduction and local responsiveness pressure. Firms that serve universal needswithout severe competition(not common!)

According to George Yip, local responsiveness in expensive, therefore

"As global as possible, as local as necessary"

While competitors enter the market, strategies change from ... to...

From International and Localization to Global Standardizaion and Transnational