Chapter 11

The Strategy of
International
Business
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Learning Objectives

To evaluate industry structure, firm strategy, and

value creation
To profile the features and functions of the value
chain
To assess how managers configure and
coordinate a value chain
To explain global integration and local
responsiveness
To profile the types of strategies firms use in
international business

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Introduction
The Role of Strategy in International Business

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Industry Structure

Industry structure involves the

relationships among

Suppliers of inputs
Buyers of outputs
Substitute products
Potential new entrants
Rivalry among competing firms

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Industry Change

Industry structure changes because of

Competitor moves
Government policies
Shifting preferences
Technological developments
If changes are significant, firms may have to
reassess their strategy.

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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

Strategys hallmarks

Value
Strategy

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Creating Value

Value

the measure of a firms capability of selling what it makes for

more than the costs incurred to make it

Create value using

A cost leadership strategy

A differentiation strategy
make products for which consumers are willing to pay a premium price

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The Firm as a Value Chain

The value chain consists of

Primary activities
design, make, sell, and deliver the product
And?
Support activities
Which?
Implement primary activities

Which

model? Other models?

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The Firm as a Value Chain

1.

Which model? Other models?

Porter

.2.

Other

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Managing the Value Chain

Learning Objective 3:
To assess how managers configure and
coordinate a value chain

Configuration

distributing value chain activities around the world

concentrated or dispersed

location

economies

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Managing the Value Chain

Coordination

linking the value chain activities

Factors that influence coordination

Operational obstacles (global)

Core competencies
?!

Subsidiary networks
social networks

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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

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Global Integration vs.

Local Responsiveness
Learning Objective 4:
To explain global integration and local
responsiveness

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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

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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

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Pressures for Local

Responsiveness

Pressure for local responsiveness is driven

by

Consumer divergence
cultural predisposition (sensitivity)
historical legacy
Nationalism
Host government policies
fiscal, monetary, and business regulations

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Important slide!

When Pressures Interact

Integration/Responsiveness (I/R) Grid

BOEING

WHIRLPOOL

E&Y

DSM

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Types of Strategy
Learning Objective 5:
To profile the types of strategies firms use in
international business
Characteristics of the Strategy Type Used by MNEs :

International
Multi-domestic
Global
Transnational

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International Strategy

International strategy

leverage a companys 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

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Multidomestic Strategy

Multidomestic strategy

emphasizes responsiveness to the unique

circumstances that prevail in a countrys
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

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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

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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

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Whats New in the World of

Strategy Types?

What types of strategies might firms follow

in the future?

Evolution of the Multinational Company

The Metanational (no headquarters; combining
pockets of information from the globe)

The Micro-Multinational (less than 250

employees)

Glocalization (globalisation & localisation)

The Cybercorp (information highways &
microelectronics)

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All rights reserved. No part of this publication may be reproduced, stored in

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mechanical, photocopying, recording, or otherwise, without the prior
written permission of the publisher. Printed in the United States of America.

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