IAF605 week 8 the strategy of international business
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IAF 605 - International Business Management
Week 8
The Strategy of International Business
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Agenda
midterm exam results and discussion
Chapter 11 – The Strategy of International Business
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Midterm
Average (/45) Average Lowest (%) Highest (%)
35 77% 51% 91%
50%
60%
70%
80%
90%
100%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
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Chapter Objectives
To identify how managers develop strategy
To examine industry structure, firm strategy, and value creation
To profile the features and functions of the value-chain framework
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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The Role of Strategy in International Business (p395)
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Industry, Strategy, And Firm Performance
Strategy expresses management’s ideas on how to best:
attract customers
operate efficiently
competeeffectively
create value
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Industry Organization (IO) Paradigm (theoretical framework)
forces that have the greatest impact on a multinational enterprise’s strategy: immediate industry and
competitive environment
• no individual affects price or quantities
• perfect info available to everyone
• few, if any, barriers to exit
• full mobility of resources
• perfect knowledge among firms and buyers
Industry Organization
(IO)paradigm presumes
perfect competition:
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What about imperfect competition?
performance of a firm is a function of its market conduct, which in turn is determined by the structure of its industry)
few large sellers, barriers to entry, passive buyers
many firms had outstanding performance (GE, Toyota...)
Image source: http://img5.allocine.fr/acmedia/rsz/434/x/x/x/medias/nmedia/18/62/87/05/18954210.jpg
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rivalry
among
competing
sellers
potentialnew entrants
suppliers of raw materials,
components or other resources
inputs
buyers
firms in other industries offering substitute
products
Industry Structure: Five Forces Model (p398)
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Competitors’ moves
Government policies
Changes in economics
Shifting buyer preferences
Technological developments
Rate of market growth
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Competitor’s Moves
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Government Policies
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Change in Economics
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Shifting Buyer Preferences
Source: http://flickr.com/photos/shapeshift/352593346
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Technological Developments
Source: toyota.com
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Rate of Market Growth
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Reminder
July 27th: group assignment due
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Strategy and Value
Strategy helps managers assess the company’s present situation, identify the direction the company should go, and determine how the company will get there.
Value is the measure of a firm’s ability to sell what it makes for more than the cost it incurred to make it
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Firms create value either through a low-cost leadership strategy or a strategy. Can both be done at the same time?
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The Firm As Value Chain
How the company will design, make, move, and sell products; how it will find efficiencies in doing so…
…how it will co-ordinate the decisions
in one part of the businesswith those made in other parts
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What Is a Value Chain?
The value chain lets managers deconstruct the general idea of “create value” into a step-by-step system.
Product
Design
Operations Outbound
Logistics
Marketing Service
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Dimensions of The Value Chain
Primary activities -create and deliver
the product.
Support activities -aid the individuals
and groups engaged in primary activities.
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Primary and Support Activities (See Tables 11.2 and 11.3)
Product Design OperationsOutbound Logistics
Marketing Service
Materials and Equipment
Firm Infrastructure
Human Resources
Systems & Solutions
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Managing the Value Chain
Configuration
• Way that managers arrange the activities of the value chain –concentrated to dispersed
• Firms pay close attention to location economies when configuring their value chain
Coordination
• Way that managers connect the activities of the value chain.
• Devising a way to coordinate value chain activities must be in ways that leverage a firm’s core competencies
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Technology and Coordination
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The Risk of Strategy
crea-tivity
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Pressures for Global Integration vs. Local Responsiveness
global integration
local responsiveness
managers, competencies, industries, or environments
- companies rethink and reset their value activities
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Two Drivers of Global Integration
globalization of markets
• $...hard to acquire, difficult to save and scarce
efficiency gains of standardization
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Pressures for Local Responsiveness
host-government
policies consumer divergence
Source: AP Photo/Lefteris Pitarakis
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Integration-Responsiveness (IR) Grid (I): Industry Types (p421)
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Exercise
Use the five fundamental forces model to analyze one of the industries listed in the integration-responsiveness grid (page 421).
Does the pressure for local responsiveness and/or global integration impact the five forces in the industry you selected?
rivalry
among
competing
sellers
potentialnew entrants
suppliers buyers
substitute products
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Integration-Responsiveness (IR) Grid (II): Strategy Types
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Homework
if you were not satisfied with your mid-term exam mark, determine what needs to change in preparation for thenext exam
review Chapter 11
read Chapter 12
Case: Burger King Beefs Up Global Operations (page 465)
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