international business strategy

L/O/G/O

http://dichvudanhvanban.com

INTERNATIONAL BUSINESS

MANAGEMENT


Lecturer: Lê Thị Minh Thủy

Group:

1. Lê Sơn Tùng

2. Nguyễn Thị Hiền Duyên


Contents

I. What is strategy

II. Value creation

III. Strategic positioning

IV. Operation: the firm as a value chain

V. Global expansion


Contents

VI. Leveraging products and competencies

VII. Location economies

VIII.Leveraging subsidiary skills

IX. Competitive pressures

X. Choosing a strategy


I. WHAT IS STRATEGY

A firm’s strategy refers to the actions that the manager take to attain the goals of the firm.

Firm need to pursue strategies that increase profitability and profit growth.

•Profitability: the rate of return that the firm makes on its invested capital.

•Profit growth: the proportion increase in the net profits over time.


To increase profitability and profit growth:

Add value and raise price Lower costs

Sell more in existing markets Expand internationally


II. VALUE CREATION


Firms need to creat more value to increase profitability.

Value creation is the difference between V and C.

V: the price that the firm can

charge for that product given competitive pressures.

C: the costs of production per unit


How can value be created ?

Using a differentiation strategy

Using a low cost strategy


III. STRATEGIC POSITIONING

However, firms need to choose either differentiation or low cost and then configure internal operations to support the choice.


3 things firms must do to maximize its profitability:

Pick a viable position on the efficiency frontier

Configure internal operation to support that position.

Has the right organizati-on structure in place to execute the strategy.

http://dichvudanhvanban.comIV.OPERATIONS: THE

FIRM AS A VALUE CHAIN


• As a value chain, the firm’s operations composed of a series of distinct value creation activities:

Production Marketing and sales

Materials management

Research and

development

Information system

Human resources

Infrastructure


• All of these activities must be managed effectively and be consistent with a firm strategy.

• Operations = value creation activities can divided into 2 types is primary activities and support activities.


Primary activitiesResearch and development

(R&D)

Production

Marketing and sales

Customer service


Support activities

Company infrastructure

Information systems

Logistics system

Human resource


V. Global expansion


Firms that operate internationally are able to:

• Expand their marketSell their domestic product in international markets.

• Realize location economiesDisperse value creation activities to locations where they can be performed most efficiently and effectively.


• Realize greater cost economies from experience effects Serve an expanded global market from a central location.

• Earn a greater returnLeverage valuable skills developed in foreign operations and transfer them to other entities.


VI.LEVERAGING PRODUCTS AND COMPETENCIES

• Firms can increase its growth rate by taking goods or services developed at home and selling them internationally.


For example: • Microsoft developed its software in the US

and always focus on selling that software in the international market.

• Volkswagen developed their car at home and selling them in the international market.


The returns from such a strategy are likely to be greater if indegenous competitors in the nations which firms enters lack comparable products.


The firm’s core competencies

Skills within the firm that competitors cannot easily

match or imitate.

These skills may exist in any value creation

activities: production, marketing, R&D, etc and allow a firm ruduce the

cost or create perceived value


For example: • Toyota has a core competence in the

production of cars (able to produce high quality, well-designed cars at lower delivered cost than any other firm in the world).

• McDonald’s has a core competence in managing fast food operations.


VII.LOCATION ECONOMIESEconomies that arise from performing a value creation activity in the optimal location for that activity, wherever in the world that might be.


1.Achieve a low-cost position

2.Differentiate their products.


• Firms can create Global web as a result of location economies.

• Global web: different stages of the value chain being dispersed to those locations around the globe where perceived value is maximized or where the costs of value creation are minimized.


For example

Designed in the US

Case, keyboard and hard drive are made in Thailand

Display screen and memory in

South Korea

• Lenova’s ThinkPad laptop computers


For example

The built-in wireless card in

Malaysia

The microproces

-sor in the US

Ship to Mexico,

where the product is assembled

• Lenova’s ThinkPad laptop computers


VIII. LEVERAGING SUBSIDIARY SKILLS

It is important for managers to:

Recognize that valuable skills that could be applied elsewhere in the firm can arise anywhere within the

firm’s global network (not just at the corporate center).

Establish an incentive system that encourages local employees to acquire new skills.

Have a process for identifying when valuable new skills have been created in a subsidiary.


Sumary:

Managers need to keep in mind the complex relationship between profitability and profit growth when making strategic decisions about pricing.

In some cases, it may be worthwhile to price products low relative to their perceived value in order to gain market share.


IX. COMPETITIVE PRESSURE

Firms that compete in the global marketplace typically face two types of competitive pressures:

pressures for cost reductions

pressures to be locally responsive

These pressures place conflicting demands on the firm

Pressures to be locally responsive: require the firm to adapt its product to meet local demands in each market but, this strategy can raise costs

Pressures for cost reductions: force the firm to lower unit costs


1. Pressures for cost reductions: are greatest in industries producing commodity-type products where price is the main competitive weapon: Where differentiation on non-price factors is difficult Where competitors are based in low-cost location Where consumers are powerful and face low

switching costs Where there is persistent excess capacity The liberalization of the world trade and investment

environment


2. Pressures for local responsiveness arise from:

- Differences in infrastructure and traditional practices: Strong pressure emerges when there are

significant differences in infrastructure and/or traditional practices between countries

Differences in local consumer tastes and preferences: Strong pressures for local responsiveness emerge when

consumer tastes and preferences differ significantly between countries--as they may for historic or cultural

reasons. In such cases, product and/or marketing messages have to be customized to appeal to the tastes and

preferences of local consumers. This typically prompts delegating production and marketing functions to national

subsidiaries.


2. Pressures for local responsiveness arise from:

- Host government economic and political demands: economic and political demands

imposed by host country governments may require local responsiveness

Differences in distribution channels among countries: A firm's marketing strategies may have to

be responsive to differences in distribution channels between countries. This may necessitate the delegation of marketing functions to national

subsidiaries.


X. CHOOSING A STRATEGY

There are four basic strategies to compete in international markets: Global standardization strategy (chiến lược toàn cầu) Localization strategy (chiến lược địa phương hóa) Transnational strategy (chiến lược xuyên quốc gia) International strategy (chiến lược quốc tế)The appropriateness of each strategy depends on the pressures for cost reduction and local responsiveness in the industry.


1. Global standardization

Increase profitability and profit growth by reaping the cost reductions from economies of scale, learning effects, and location economies.

Global strategy to deal with high cost pressures branches and low pressure localization.


2. Localization

Increase profitability by customizing goods or services so that they match tastes and preferences in different national markets

Localization strategies to deal with the low cost pressure branches and high pressure localization.


3. Transnational

Tries to simultaneously achieve low costs through location economies, economies of scale, and learning effects.

The company met both the cost pressures and pressures for local responsiveness, ask them both reduce costs and change to suit local.


4. International

Take products first produced for the domestic market and sell them internationally with only minimal local customization.

This strategy makes sense when there are low cost pressures and low pressures for local responsiveness.


An international strategy may not be viable in the long term◦ to survive, firms may need to shift to a global standardization

strategy or a transnational strategy in advance of competitors

Localization may give a firm a competitive edge, but if the firm is simultaneously facing aggressive competitors, the company will also have to reduce its cost structures◦ would require a shift toward a transnational strategy

L/O/G/O


Thank You!ahihi ^^

international business strategy

Education