Page 301 - DMGT545_INTERNATIONAL_BUSINESS

International Business

notes l z Due to national differences, it may pay a firm to base each value creation activity it performs
at that location where factor conditions are most conducive to the performance of that
activity. This strategy is referred to as focusing on the attainment of local economies.

l z By rapidly building sales value for a standardized product, international expansion can
assist a firm in moving down the experience curve.
l z International expansion may enable affirm to earn greater returns by transferring the skills
and product offerings derived from its core competencies to markets where indigenous
competitors lack those skills and product offerings.

l z A multinational firm can create additional value by identifying valuable skills created
within its foreign subsidiaries and leveraging those skills within its global network of
operations.

l z The best strategy for a firm to pursue often depends on a consideration of the pressure for
cost reductions and for local responsiveness.
l z Pressures for cost reductions are greatest in industries producing commodity-type products
where price is the main competitive weapon.

l z Pressures for local responsiveness arise from differences in consumer tastes and preferences,
national infrastructure and traditional practices, distribution-channels and from host-
government demands.

l z Firms pursuing an international strategy transfer the skills and product derived from
distinctive competencies to foreign markets, while undertaking some limited local
customization.
l z Firms pursuing an multi-domestic strategy customize their product offering, market
strategy, and business strategy to national conditions.

l z Firms pursuing a global strategy focus on reaping the cost reductions that come from
experience curve effects and location economies.

l z Many industries are now so competitive that firms must adopt a transnational strategy.
This involves a simultaneous focus on reducing costs, transferring skills and products, and
boosting local responsiveness. Implementing such a strategy a may not be easy.

15.8 keywords

Economies of Scale: Cost advantages associated with large scale production.

First-mover Advantages: Advantages accruing to the first to enter a market.
Global Strategy: Strategy focusing on increasing profitability by reaping cost reductions from
experience curve and location economies.
International Strategy: Trying to create value by transferring core competencies to foreign
markets where indigenous competitors lack those competencies.
Multi-domestic Strategy: Emphasizing the need to be responsive to the unique conditions
prevailing in different national markets.
Trans-national Strategy: Plan to exploit experience-based cost and local economies, transfer core
competencies with the firm, and pay attention to local responsiveness.

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