international business strategy
TRANSCRIPT
L/O/G/O
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INTERNATIONAL BUSINESS
MANAGEMENT
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Lecturer: Lê Thị Minh Thủy
Group:
1. Lê Sơn Tùng
2. Nguyễn Thị Hiền Duyên
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Contents
I. What is strategy
II. Value creation
III. Strategic positioning
IV. Operation: the firm as a value chain
V. Global expansion
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Contents
VI. Leveraging products and competencies
VII. Location economies
VIII.Leveraging subsidiary skills
IX. Competitive pressures
X. Choosing a strategy
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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.
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To increase profitability and profit growth:
Add value and raise price Lower costs
Sell more in existing markets Expand internationally
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II. VALUE CREATION
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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
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How can value be created ?
Using a differentiation strategy
Using a low cost strategy
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III. STRATEGIC POSITIONING
However, firms need to choose either differentiation or low cost and then configure internal operations to support the choice.
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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.
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FIRM AS A VALUE CHAIN
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• 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
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• 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.
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Primary activitiesResearch and development
(R&D)
Production
Marketing and sales
Customer service
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Support activities
Company infrastructure
Information systems
Logistics system
Human resource
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V. Global expansion
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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.
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• 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.
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VI.LEVERAGING PRODUCTS AND COMPETENCIES
• Firms can increase its growth rate by taking goods or services developed at home and selling them internationally.
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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.
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The returns from such a strategy are likely to be greater if indegenous competitors in the nations which firms enters lack comparable products.
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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
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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.
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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.
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1.Achieve a low-cost position
2.Differentiate their products.
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• 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.
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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
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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
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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.
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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.
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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
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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L/O/G/O
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