1. Copyright © 2015 Pearson Education, Inc.11-1 International Business Environments & Operations 15e Daniels ● Radebaugh ● Sullivan

2. Copyright © 2015 Pearson Education, Inc.10-2 Chapter 12 The Strategy of International Business

3. Copyright © 2015 Pearson Education, Inc.10-3 Learning Objectives  Evaluate industry structure, firm strategy, and value creation  Profile the features, functions, configuration, and coordination of the value chain  Describe how and why companies choose to cluster in close geographic proximity  Describe how robots in specific and automation in general change how managers interpret the value chain

4. Learning Objectives  Discuss how the industry change affects the effectiveness of a value chain  Compare and contrast the strengths and drawbacks of a reality versus virtuality in designing the value chain  Explain the ideas of global integration and local responsiveness  Profile the types of strategies used by MNEs Copyright © 2015 Pearson Education, Inc.11-4

5. Copyright © 2015 Pearson Education, Inc.10-5 Introduction The Role of Strategy in International Business

6. Copyright © 2015 Pearson Education, Inc.10-6 Industry Structure Learning Objective: Evaluate industry structure, firm strategy, and value creation

7. Copyright © 2015 Pearson Education, Inc.10-7 Industry Structure  Industry structure involves the relationships among Suppliers of inputs Buyers of outputs Substitute products Potential new entrants Rivalry among competing firms

8. Copyright © 2015 Pearson Education, Inc.10-8 Industry Change  Industry structure changes because of Competitor moves Government policies Shifting preferences Technological developments

9. Copyright © 2015 Pearson Education, Inc.10-9 Industry Structure, Strategy, and Value  The industry organization (IO) paradigm presumes that markets demonstrate perfect competition where no firm or industry consistently outperforms others  The power of innovative executives bright executives exploit market imperfections to outperform rivals  Strategy’s hallmarks Value Strategy

10. Copyright © 2015 Pearson Education, Inc.10-10 Creating Value  Value the measure of a firm’s capability of selling what it makes for more than the costs incurred to make it  Create value using A cost leadership strategy  make products for a lower cost than competitors A differentiation strategy  make products for which consumers are willing to pay a premium price

11. Copyright © 2015 Pearson Education, Inc.10-11 The Firm as a Value Chain Learning Objective: Profile the features and functions of the value chain

12. Copyright © 2015 Pearson Education, Inc.10-12 The Firm as a Value Chain  The value chain the set of linked activities the company performs to design, produce, market, distribute, and support a product  The value chain consists of Primary activities  design, make, sell, and deliver the product Support activities  implement primary activities

13. Copyright © 2015 Pearson Education, Inc.10-13 The Firm as a Value Chain Primary and Support Activities

14. Copyright © 2015 Pearson Education, Inc.10-14 The Firm as a Value Chain Primary and Support Activities of the Value Chain

15. Copyright © 2015 Pearson Education, Inc.10-15 Managing the Value Chain  Configuration distributing value chain activities around the world  concentrated  putting all value chain activities in one location  dispersed  performing different value chain activities in different locations  location economies

16. Copyright © 2015 Pearson Education, Inc.10-16 Managing the Value Chain  When configuring the value, consider Where to go Business environmental quality Innovation context Economies of scale Labor costs Logistics Digitization

17. Copyright © 2015 Pearson Education, Inc.10-17 Managing the Value Chain  Coordination linking the value chain activities  Factors that influence coordination Operational obstacles Core competencies  special outlook, skill, capability, or technology that runs through the firm’s operations, threading disconnected activities into an integrated value chain Subsidiary networks  social networks

18. Copyright © 2015 Pearson Education, Inc.10-18 Change and the Value Chain  The configuration and coordination of a value chain responds to changes in customers, competitors, industries, and environments Even a well configured and coordinated value chain can become obsolete  So, designing and delivering a strategy should be an ongoing process

19. Copyright © 2015 Pearson Education, Inc.10-19 Global Integration vs. Local Responsiveness Learning Objective: Explain the ideas of global integration and local responsiveness

20. Copyright © 2015 Pearson Education, Inc.11-20 Global Integration vs. Local Responsiveness  Firms face two conflicting pressures:  Pressures for global integration the process of combining differentiated parts into a standardized whole maximize efficiency  Pressures for local responsiveness the process of disaggregating a standardized whole into differentiated parts optimize effectiveness

21. Copyright © 2015 Pearson Education, Inc.10-21 Pressures for Global Integration  Drivers of global integration The globalization of markets  Technology helps standardize consumer preferences  Global products have become popular  allows for standardization of product design The efficiency gains of standardization  Location, scale, and learning effects  WTO supports global standards

22. Copyright © 2015 Pearson Education, Inc.10-22 Pressures for Local Responsiveness  Pressure for local responsiveness is driven by Consumer divergence  cultural predisposition  historical legacy  nationalism Host government policies  fiscal, monetary, and business regulations

23. Copyright © 2015 Pearson Education, Inc.10-23 When Pressures Interact Integration-Responsiveness Grid: By Industry

24. Copyright © 2015 Pearson Education, Inc.10-24 Types of Strategy Learning Objective: Profile the types of strategies firms used by MNEs

25. Copyright © 2015 Pearson Education, Inc.10-25 Types of Strategy Characteristics of the Strategy Type Used by MNEs

26. Copyright © 2015 Pearson Education, Inc.10-26 International Strategy  International strategy leverage a company’s core competencies into foreign markets critical elements of the value chain are centralized at headquarters  The strategy works well when the firm has core competencies that foreign rivals lack there is low pressure for global integration there is low pressure for local responsiveness

27. Copyright © 2015 Pearson Education, Inc.10-27 Multidomestic Strategy  Multidomestic strategy emphasizes responsiveness to the unique circumstances that prevail in a country’s market value added activities are adapted to local markets  The strategy works well when there is high pressure for local responsiveness there is low pressure for global integration

28. Copyright © 2015 Pearson Education, Inc.10-28 Global Strategy  Global strategy make standardized products that are marketed with little adaptation to local conditions exploit location economies and capture scale economies  The strategy works well when the MNE is the cost leader there is low pressure for local responsiveness there is high pressure for global integration

29. Copyright © 2015 Pearson Education, Inc.10-29 Transnational Strategy  Transnational strategy simultaneously leverages core competencies worldwide, reduces costs by exploiting location economics, and adapts to local conditions  The strategy works well when global learning and knowledge flows are emphasized there is high pressure for local responsiveness there is high pressure for global integration

30. Copyright © 2015 Pearson Education, Inc.10-30 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.