Bài giảng Global Business Today - Chapter 12 The Strategy of International Business

Global Business Today 8e© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.  by Charles W.L. HillChapter 12The Strategy of International BusinessIntroductionQuestion: What actions can managers take to compete more effectively in a global economy?Managers must consider: The benefits of expanding into foreign marketsWhich strategies to pursue in foreign markets The value of collaboration with global competitorsThe advantages of strategic alliancesStrategy and the FirmQuestion: What is strategy?A firm’s strategy can be defined as the actions that managers take to attain the goals of the firmTypically, strategies focus on profitability and profit growthProfitability refers to the rate of return the firm makes on its invested capitalProfit growth is the percentage increase in net profits over timeStrategy and the FirmTo increase profitability, value must be created Value creation is measured by the difference between V (the price that the firm can charge for that product given competitive pressures) and C (the costs of producing that product)The two basic strategies for creating value are: Differentiation Low cost Value creation activities can be categorized as: Primary activitiesSupport activitiesStrategy and the FirmA firm’s strategy, operations, and organization must all be consistent with each other in order to achieve a competitive advantage and superior profitabilityOrganization architecture refers to the totality of a firm’s organization Formal organizational structureControl systems and incentivesOrganizational culture, processes, and peopleStrategy and the FirmControls - the metrics used to measure the performance of subunits and make judgments about how well the subunits are runIncentives - the devices used to reward appropriate managerial behavior Processes - the manner in which decisions are made and work is performedOrganizational culture - the norms and value systems that are shared among the employeesPeople - employees and the strategy used to recruit, compensate, and retain those individualsStrategy and the FirmSo, to attain superior performance and earn a high return on capital, a firm’s strategy must make sense given market conditionsThe operations of the firm must support the firm’s strategyThe organizational architecture of the firm must match the firm’s operations and strategyIf market conditions shift, so must the firm’s strategy, operations, and organization Global Expansion and ProfitsFirms that operate internationally can:Expand the market for their domestic products by selling those products in international marketsSuccess depends on the type of goods and services, and the firm’s core competencies - skills within the firm that competitors cannot easily match or imitateRealize location economies by dispersing individual value creation activities to locations where they can be performed most efficiently and effectivelyLocate value creation activities where economic, political, and cultural conditions are most conducive Global Expansion and ProfitsRealize greater cost economies from experience effects by serving an expanded global market from a central location, thereby reducing the costs of value creationExperience curve - systematic reductions in production costs that occur over the life of a productLearning effects - cost savings from learning by doingEconomies of scale - the reductions in unit cost achieved by producing a large volume of a productEarn a greater return by leveraging any valuable skills developed in foreign operations and transferring them to other entities within the firm’s global network of operationsCompetitive PressuresFirms that compete in the global marketplace typically face two types of competitive pressures:Pressures for cost reductionsPressures to be locally responsiveThese pressures place conflicting demands on the firm Competitive PressuresPressures for cost reductions are greatest:In industries producing commodity type products that fill universal needs - needs that exist when the tastes and preferences of consumers in different nations are similar if not identical When major competitors are based in low cost locationsWhere there is persistent excess capacityWhere consumers are powerful and face low switching costsTo respond to these pressures, firms need to lower the costs of value creation Competitive PressuresPressures for local responsiveness arise from:Differences in consumer tastes and preferencesDifferences in traditional practices and infrastructureDifferences in distribution channelsHost government demandsFirms facing these pressures need to differentiate their products and marketing strategy in each countryChoosing a Strategy Question: How do the pressures for cost reductions and local responsiveness influence a firm’s choice of strategy?There are four basic strategies to compete in the international environment: Global standardization Localization Transnational InternationalChoosing a StrategyQuestion: Is the choice of strategy static?As competition increases, international and localization strategies become less viable To survive, firms may need to shift to a global standardization strategy or a transnational strategy in advance of competitors Strategic AlliancesQuestion: What is a strategic alliance? Strategic alliances refer to cooperative agreements between potential or actual competitorsFormal joint venturesShort term contractual arrangementsThe number of international strategic alliances has risen significantly in recent decadesStrategic AlliancesQuestion: Why form a strategic alliance? Strategic alliances are attractive because they: Facilitate entry into a foreign marketAllow firms to share the fixed costs (and associated risks) of developing new products or processesBring together complementary skills and assets that neither partner could easily develop on its ownCan help establish technological standards for the industry that will benefit the firmStrategic AlliancesQuestion: What are the drawbacks of strategic alliances?Strategic alliances can give competitors low-cost routes to new technology and marketsUnless a firm is careful, it can give away more in a strategic alliance than it receivesMaking Alliances WorkQuestion: How can firms increase the success of their alliances? Many international strategic alliances run into problemsThe success of an alliance seems to be a function of three main factors: Partner selection Alliance structure The manner in which the alliance is managed