Day4 The Strategy of International Business

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STRATEG
Y A
N
D
 FIRM
BEFO
RE W
E START TO
 THIS SUBJECT! W
E SHALL W
O
RK O
N
 ARE YO
U 
G
IVIN
G
 G
LO
BALIZATIO
N
 THE RIG
HT AM
O
UN
T O
F ATTEN
TIO
N
? W
O
RLD 
3.0 ARTICLE IN
 TEAM
 W
O
RK SETTIN
G
!
1
STR
A
TEG
Y
 A
N
D
 TH
E FIR
M
2
Profitability
Rate of return concept; i.e.
return on sales (RO
S).
RO
S= p
/TR
Profit (p)
The difference between
total revenue (TR) and 
total costs (TC):
p
=TR-TC
Value
CreationFirm
 as
Value Chain
Role of
Strategy
S
trategy
A
ctions
taken by m
anagers
to attain firm
’s goals.M
axim
ize
Long-term
profitability
VA
LU
E C
R
EA
TIO
N
3
V = Consum
er Value
P = M
arket Price
C = Cost of Production
V-P = Consum
er S
urplus
P-C = Profit M
argin
V-C = Value A
dded
V -
P
P -
C
C
V
P
C
TH
E RO
LE O
F STRATEG
Y
4
Identifying and taking actions that will
lower costs
of value creation and/or 
differentiate
the firm
’s product offering 
through superior design, quality service, 
functionality, etc.
PRO
FITIN
G
 FRO
M
 G
LO
BA
L EX
PA
N
SIO
N
v
R
ealize location econom
ies.
v
R
ealize greater cost econom
ies.
v
Earn a greater return from
 the firm
’s distinctive 
skills or core com
petencies.
v
Earn a greater return by leveraging valuable skills 
developed in foreign operations and transferring 
them
 to the firm
’s other operations.
5
Firm
s operating internationally are able to:
Profitability is constrained by product custom
ization 
and the “im
perative of localization”.
6
Parts
Parts
Parts
A
ssem
bly
A
dvertising
D
esign
Sales
Exam
ple: Location Econom
ies
Pontiac
LeM
ans
Creating a G
lobal W
eb
N
eeds for consıderatıon
v
Transportation costs
v
Trade barriers
v
Political risks 
v
Econom
ic risks
7
8
Please figure out:
•H
ow
 your com
pany uses location econom
ies effect? 
If any? Show
 it in m
ap if possible!
Poll Q
uestion: 
•
Does your com
pany rely on location econom
ies w
hile com
peting 
internationally? Please explain w
hy YES/N
O
? 
•
If YES how
? 
SM
A
LL W
O
RK O
N
 LO
C
ATIO
N
 EC
O
N
O
M
IES AT C
LA
SS
EX
PER
IEN
C
E
CU
RV
E
v
LEARN
IN
G
 EFFECTS:
v
C
O
ST SAV
IN
G
S 
TH
AT C
O
M
E FRO
M
 
“LEA
R
N
IN
G
 BY
 
D
O
IN
G
.”
v
M
O
RE SIG
N
IFIC
A
N
T 
IN
 C
O
M
PLEX TA
SKS.
v
EC
O
N
O
M
IES O
F SC
A
LE:
v
RED
U
C
TIO
N
 IN
 U
N
IT C
O
ST 
AC
H
IEV
ED
 TH
RO
U
G
H
 
V
O
LU
M
E PRO
D
U
C
TIO
N
.
v
SO
U
RC
ES:
v
SPREAD FIX
ED
 C
O
STS
O
VER VO
LUM
E.
v
EM
PLO
YIN
G
 
SPEC
IA
LIZ
ED
EQ
UIPM
EN
T O
R 
PERSO
N
N
EL.
9
TH
E EXPERIEN
C
E
C
U
RV
E
10
B
A
A
ccum
ulated O
utput
Unit Costs
S
trategic S
ignificance
M
oving down the curve reduces
the cost of creating value.
11
Core 
Com
petency
Sustainable 
Com
petitive 
Advantage
Resources
C
apabilities
C
om
petence
V
RIO
 A
N
A
LYSIS
C
O
RE C
O
M
PETEN
C
E!
LEV
ERAG
IN
G
 SU
BSID
IA
RY
SKILLS
12
Skills can be created
anywhere in a 
m
ultinational’s global
operations network.
N
ew
 Challenges
1.
H
um
ility to recognize
valuable skills can com
e
from
 anywhere.
2.
Establish incentives to
encourage local em
ployees
to acquire new skills.
3.
N
eed a process to identify 
new skill developm
ent.
4.
N
eed to facilitate transfer
of new skills within the 
firm
.
LEV
ERAG
IN
G
 C
O
RE C
O
M
PETEN
C
IES*
13
Firm
 skills that com
petitors
can not easily
m
atch
or im
itate.
Value greatest when:
1.
Skills and products
are m
ost unique.
2.
Value placed by
consum
ers is great.
3.
Few capable com
petitors
with skills or products.
There has been a trend;
com
panies has being focusing on their core com
petencies, and continually w
orking to build and reinforce 
them
!
IN
D
IV
ID
U
A
L
W
O
RK AT C
LA
SS!
14
Find your com
panies’ com
petencies 
and discuss w
hether these are core 
com
petencies! 
O
r m
aybe w
ork on: C
oca C
ola 
and apple case! 
Poll Q
uestion: Is there any core com
petencies of your com
pany? If so w
hat it is and w
hy?
C
O
M
PETIN
G
 IN
TER
N
ATIO
N
ALLY!
15
Com
pany
C
Com
pany
B
H
igh
Cost 
pressuresLow
Low
 H
igh Generally reflects
the position of m
ost 
m
ultinational com
panies
Pressures for local responsiveness
16
S
trategic Choices
Transnational
Exploit experienced 
based cost and location 
econom
ies, transfer core 
com
petencies within the 
firm
, and pay attention 
to local responsiveness 
needs.
International
create value by 
transferring skills to 
local m
arkets where 
skills are not present.
M
ultidom
estic
oriented toward
achieving m
axim
um
local responsiveness.
Global
increase profitability 
through cost reductions 
from
 experience curve 
effects and location 
econom
ies.
W
H
AT IN
TER
N
ATIO
N
AL STR
TAG
IES?
17
??
H
igh
Cost 
pressuresLow
Low
 H
igh
Pressures for local responsiveness
IN
TER
N
ATIO
N
AL STR
TAG
IES FO
LLO
W
ED
…
18
T
RA
N
SN
A
T
IO
N
A
L
M
U
LT
ID
O
M
EST
IC
H
igh
Cost 
pressuresLow
Low
 H
igh
Pressures for local responsiveness
The Advantages and D
ısadvantages of the Four Strategıes19
Table 12.1a
Strategy
A
dvantages
Disadvantages
G
lobal
Exploit experience curve effects
Exploit location econom
ies
Lack of localresponsiveness
International
Transfer distinctive 
com
petencies to
Foreign M
arkets
Lack of local
responsiveness
Inability to realize
location econom
ies
Failure to exploit 
experience curve effects
LEA
RN
IN
G
 BY D
O
IN
G
 EXERC
ISE AT C
LA
SS 
O
R FO
R TO
M
O
RRO
W
!
20
v
Please find how
 your firm
s;
v
C
reate location econom
ies?
v
Realize greater cost econom
ies?
v
Earn a greater return from
 the firm
’s distinctive 
skills or core com
petencies?
v
Please find out;
v
Your com
pany’s strategy w
hile com
peting 
internationally/ globally and,
v
Explain w
hy it follow
s this strategy?
SEA
RC
H
 FO
R
N
EXT C
LA
SS O
R AT C
LA
SS!!!
•
YO
U
R C
O
M
PA
N
Y’S ETH
IC
A
L STA
N
DA
RD
S (PRIN
C
IPLES, PO
LIC
IES, 
AU
D
ITIN
G
 M
EC
H
A
N
ISM
 FO
R IT ETC
.) A
N
D
 C
O
D
ES O
F 
C
O
N
D
U
C
TS (C
C
) IF TH
EY H
AV
E O
N
E!
•
PLEASE CREATE A FIG
URE AN
D SHO
W
 THE STAN
DARDS&
 CC IN
 IT.
•
PLEASE IN
DICATE THE M
ULTISTAKEHO
LDER
IN
ITIATIVE IF THE CO
M
PAN
Y TAKES PART 
IN
 AN
Y IN
ITIATIVES
•
PLEASE SUBM
IT AS PP FILE IN
 O
N
LY O
N
E PAG
E O
R TW
O
 AT THE M
O
ST BY 
M
O
N
DAY.
21