summary chapter 8 - business strategy and enterprise modelling

8/12/2019 Summary Chapter 8 - BUSINESS STRATEGY AND ENTERPRISE MODELLING

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MM 5012

BUSINESS STRATEGY AND ENTERPRISE MODELLING

SUMMARY ASSIGNMENT CHAPTER 8 & RM 10

R48A

Henny Zahrany

29112551

MASTER OF BUSINESS ADMINISTRATION

SCHOOL OF BUSINESS AND MANAGEMENT

INSTITUT TEKNOLOGI BANDUNG

2014


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INTERNATIONAL STRATEGY

International strategy is a strategy through which the firm sells its goods or services outsideits domestic market.

There are some reasons for a company to implement an international strategy: International markets yield potential new opportunities To secure needed resources Pressure has increased for a global integration of operations Technology drives globalization because the economies of scale necessary to reduce

costs to the lowest level often require an investment greater

Pressure for cost reductions, achieved by purchasing from the lowest-cost globalsuppliers.

Because of currency fluctuations, firms may also choose to distribute their operationsacross many countries

There are four basic benefits:1. Increased market size2. Greater returns on major capital investments or on investments in new products and

processes

3. Greater economies of scale, scope, or learning4. A competitive advantage through location

International Business-Level Strategy

Michael Porters model describe the factors contributing to the advantage of firms in adominant global industry and associated with a specific home country or regional

environment:

1. Factors of Production (inputs necessary to compete in any industry)2. Demand Conditions (nature and size of buyers needs)3. Related and Supporting Industries4. Firm Strategy, Structure, and Rivalry


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International Corporate-Level Strategy

International corporate level strategy focuses on the scope of a firms operations through both

product and geographic diversification. There are three international corporate-level strategies:

1.MultidomesticIt is decentralized to the strategic business unit in each country so as to allow that unit to tailor

products to the local market.

2.GlobalIt is centralized and controlled by the home office, it is an international strategy through

which the firm offers standardized products across country markets, with competitive strategy

being dictated by the home office.

3.TransnationalIt is an international strategy through which the firm seeks to achieve both global efficiency

and local responsiveness. It requires close global coordination while the other requires local

flexibility.

Environmental trends

Liability of foreignnessResearch shows that global strategies are very difficult to implement. As such, firms may

focus less on truly global markets and more on regional adaptation, even the implementation

of Web-based strategies also requires local adaptation.

RegionalizationBecause a firms location can affect its strategic competitiveness, it must decide whether to

compete in all or many global markets or to focus on a particular region or regions.

Choice of International Entry Mode

After the firm selects its international strategies and decides whether to employ them in regional

or world markets, it must choose a market entry mode.


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Type of Entry Characteristics

Exporting High cost, low control

Licensing Low cost, low risk, little control, low returns

Strategic alliances Shared costs, shared resources, share risks, problems of integration

Acquisition Quick access to new market, high cost, complex negotiations, problems

of merging with domestic operations

New wholly owned

subsidiary

Complex, often costly, time consuming, high risk, max control,

potential above average returns

New Wholly Owned Subsidiary: Greenfield venture, it affords maximum control to the firm,

require high levels of professional skills, specialized know how, and customization, preferred inservice industries where close contacts with end customers.

International Diversification and Returns: its a strategy through which a firm expands the

sales of its goods or services across the borders of global regions and countries into different

geographic locations or markets.

International diversification provides the potential for firms to achieve greater returns on their

innovations and lowers the often substantial risks of R&D investments.

Risk in an International Environment: Political and Economic risks

THE INTERNATIONAL COMPETITIVENESS OF ASIAN FIRMS

What are the main ideas of the reading materials?

To analyze the international competitiveness of a large countries we can use the single diamond

framework (Porter) and use the double diamond framework for smaller countries as advanced by

Rugman and DCruz. Its analyzed with consideration of four determinants and through the useof FSA/CSA and the regional matrix, from there we can define the best strategy for each firm by

strengthening their FSA and CSA.


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What are the requirements for implementing the ideas in your own context?

First I have to understand the four determinants of international competitiveness, such as factor

costs, domestic demand, related and supported industries in the home country, and the amount of

rivalry in the home country between leading firms by sector. And then by using the FSA/CSA

and the regional matrix, I have to know and understand their position in the matrix and why

theyre in them, last step, is knowing the best strategy to enhance the FSA and CSA of a

international firm.

What are practical implications for you?

From the paper, it showed that international competitiveness should not be confused with

globalization, so before going internationally, a firm must consider factors related to their FSA

and CSA through the four determinants to be able to know a firm position in the foreign country.

What are the lessons learned?

As most Asian firms operate regionally, they should focus on developing regional

competitiveness. Cross border activities of an MNE (multinational enterprise) have two goals:

first, an MNE can reach economies of scale and scope by integrating across homogeneous

countries, and Second, an MNE may leverage diversification benefits by expanding into

heterogeneous markets, however an MNE may develop some FSAs and CSAs in a foreign region

only when those FSAs and CSAs are unavailable in its home region.

summary chapter 8 - business strategy and enterprise modelling

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