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26 Cards in this Set
- Front
- Back
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What is an International Strategy?
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The set of goals and objectives of the firm
Actions managers take to attain the goals of the firm. Two generic types: 1.) low cost 2.) differentiation through design, quality, service, or functionality. |
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Value Chain for Firms
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Primary Activities:
Those activities having to do with creating, marketing and delivering the product to customers and providing support and after-sales service. Support Activities: Provide inputs that allow primary activities to occur. An Efficient Infrastructure: helps create value and reduce the cost of creating value. |
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How do you reduce costs?
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Mass production
Product standardization. Optimal location production |
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What is local responsiveness?
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Different consumer tastes and preferences.
Different infrastructure and practice. Differences in distribution channels. Government demands. |
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What are Four basic International Strategies?
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Global
International Transnational Multidomestic |
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What is a Multi-Domestic Strategy?
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The use of the same product making techniques in each country from start to finish
---> Shows that costs don’t not matter because each country is making the same product (low cost pressure) - Maximize local responsiveness because the product and marketing strategy are customized to national demands. - Skill and product transfer. Transfer all value-creation activities, no experience curve rewards. Benefits A lot of FDI Locally responsive Skill Transfer Problems: No exports or imports |
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What is a Global Strategy?
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Standardized Production
Ex.) Coke that has one ad that appeals to everyone, like role models Best use of the experience curve and location economies. Reduces cost by efficient production.. Problems: - No to little FDI because one country is producing, and then exporting to multiple countries - Not good where local responsiveness is high Benefits - Economies of Scale - Exports from the Producting Country |
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What is Transnational Strategy?
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Breaks apart value chain
Each country engages in a different activity based on competitive advantage Makes sense where there is great pressure for both cost reduction and local responsiveness. Core competencies can develop in any of the firm’s worldwide operations. Flow of skills and product offerings occurs throughout the firm - not only from home firm to foreign subsidiary (global learning). BENEFITS: - Economies of Scale - Local Responsiveness - A lot of FDI - Exports and Imports PROBLEMS: - High cost pressures ---> Ex.) Transportation costs - Coordination- If one part of the value chain messed up, the following suffer |
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What is an International Strategy?
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Only exporting to a couple countries, and producing in only one other country (FDI)
Primary Emphasis on Home Market because most of their sales are domestic Makes sense where low competition and cost pressures exist abroad Problems: - DON’T get the benefits of Economies of Scale - Not locally responsive because products are developed at Home (Centralized) Benefits: Exports from Home Country |
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Why is organization important in International Business?
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The firm needs to make sure that its strategy (a) is carried out and (b) is working.
Affects the firm’s ability to control its operations |
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What are Organizational questions facing international firms:
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Where are decisions made?
How can the firm optimize globally? How should country units report to headquarters? |
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Why is controll important in International Business?
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Foreign control is usually more difficult because of:
Distance—it takes more time and expense to communicate Diversity—country differences make it hard to compare operations Uncontrollables—there are more outside stockholders and governmental dictates Degree of uncertainty—there often are rapid changes in the environment and data problems |
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Location of Decision Making
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Should decisions be centralized (HQ) or decentralized (subsidiary)?
Depends on pressures for global integration or local responsiveness |
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Global Strategy- Centralized or Decentralized?
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Centralized
product standardized across countries scale economies are important (low costs) |
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Multidomestic strategy: - Centralized or Decentralized?
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Decentralized
Product being produced in multiple countries so cultural, legal and economic differences affect product strategy in different countries scale economies are less important |
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Transnational Strategy- Centralized or Decentralized?
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Both Centralized and Decentralized
Hybrid of multidomestic and global strategies Country differences AND scale economies important at the same time |
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What are control and coordination mechanisms?
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If org structure is the “hardware,” then control mechanisms are the “software” of orgs. Includes:
- Organizational culture - Networks - Reporting systems - Cross-cultural teams - Reward and incentive systems |
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What is Target Market selection?
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No firm has unlimited access to resources with which it can exploit all opportunities.
Need to choose carefully among opportunities in order to identify best use of its limited resources. To do this, a firm must engage in a fair amount of research in order to ensure success and reduce risks. |
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How/why do buisness screen and research countries
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Data (information) helps to reduce uncertainty in the decision-making process
Data is often unavailable, of low quality, or uncomparable Secondary data predominates at the beginning stages of the screening process, while primary data predominates at the latter stages. |
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Timing and Scale of Entry:
First-mover Advantages and Disadvantages |
First-mover advantages
- preempt rivals - ride down the experience curve - switching costs First-mover disadvantages - pioneering costs - ignorance of the market - political risk Strategic commitment - issue of flexibility - signaling effects |
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What is Licencing?
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= Contractual arrangement through which one firm allows another to use its proprietary knowledge, technology, patent, copyright, trademark, etc. in return for payment
Specified duration of the license Specified royalty rate and conditions of use Exclusive or non-exclusive Cross-licensing: exchange of technology Host governments may set price controls |
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What is Franchising?
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= provision of a trademark and continual infusion of necessary assets in return for fees/royalties
more interdependence between the parties than mere licensing Franchising difficult to accomplish abroad: ---> the more standardization, the less acceptance in the foreign country ---> the more adjustment, the less the franchisor is needed |
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What are Management Contracts?
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= contractual arrangement in which one firm sells its managerial ability or expertise to another.
Ongoing payment over a specified duration. Examples include the running of a power plant, airport facility, chemical plant, waste disposal plant, etc. May involve training local personnel in the process. |
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What are TurnKey Operations?
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= contractual arrangement in which one firm will build a facility (plant, factory, etc.) to the specifications of another firm.
Once completed, is the responsibility of owning firm. Involves an a priori established fee (may be paid over stages). Such contracts can be huge, with few competing firms. Involves government customers |
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What are International Joint Ventures?
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= ownership sharing of an organizational entity: long-term option
Often 50/50, but can be any combination beginning with 10/90 Can give the benefit of ownership while reducing the risks of ownership Highly complex type of collaborative arrangement High rate of partner dissatisfaction and premature dissolution ---> Most companies enter into Joint venture to reduce cost and risk, but they tend to fail because of management |
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What is Primary Data?
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political risk, cultural issues, corruption and government efficiency, and demand for our product
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