The Strategy of International Business 11 chapter The Strategy of International Business McGraw-Hill/Irwin Global Business Today, 5e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.

Chapter 11: The Strategy of International Business INTRODUCTION In this chapter, we focus on the firm itself and, in particular, on the actions managers can take to compete more effectively as an international business.

Chapter 11: The Strategy of International Business STRATEGY AND THE FIRM A firm’s strategy can be defined as the actions that managers take to attain the goals of the firm. Profitability can be defined as the rate of return the firm makes on its invested capital. Profit growth is the percentage increase in net profits over time.

Chapter 11: The Strategy of International Business Value Creation Strategic Positioning Operations: The Firm as a Value Chain Organization: The Implementation of Strategy In Sum: Strategic Fit

Chapter 11: The Strategy of International Business GLOBAL EXPANSION, PROFITABILITY, AND PROFIT GROWTH Firms that operate internationally are able to: Expand the market for their domestic product offerings by selling those products in international markets Realize location economies by dispersing individual value creation activities to locations around the globe where they can be performed most efficiently and effectively Realize greater cost economies from experience effects by serving an expanded global market from a central location, thereby reducing the costs of value creation Earn 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 operations

Chapter 11: The Strategy of International Business Expanding the Market: Leveraging Products and Competencies Location Economies Experience Effects Leveraging Subsidiary Skills Summary

Chapter 11: The Strategy of International Business COST PRESSURES AND PRESSURES FOR LOCAL RESPONSIVENESS 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.

Chapter 11: The Strategy of International Business Pressures for Cost Reductions Pressures for Local Responsiveness

Chapter 11: The Strategy of International Business CHOOSING A STRATEGY Firms use four basic strategies to compete in the international environment: Global Standardization Strategy Localization Strategy Transnational Strategy International Strategy The Evolution of Strategy

Chapter 11: The Strategy of International Business STRATEGIC ALLIANCES Strategic alliances refer to cooperative agreements between potential or actual competitors The Advantages of Strategic Alliances The Disadvantages of Strategic Alliances Making Alliances Work