[국제경영론] The strategy of international business

국제경영론 International Business

Chapter. The strategy of international business

• firms operate internationally → global expansion for profitability and profit growth
  • to expand market for their domestic product offerings by selling their 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 the greater economies of scale by serving an expanded global market from a central location, reducing the unit costs of value creation
  • Earn a greater return by leveraging any valuable skills developed in foreign operations and transferring them to other entities within firm’s global network of operations

 

firms compete in global marketplace face two competitive pressure

• (1) cost pressures = global standardization
• pressures for cost reductions
  • in industries producing commodity type products that fill universal needs (needs that exist when the tastes and preferences of consumers in different nations are similar if not identical)
  • when major competitors are based in low cost locations
  • where there is persistent excess capacity
  • where consumers are powerful and face low switching costs
  • manufacture 산업군에서 비용 절감 하고자하는 움직임이 높음 high level of cost reduction pressure → unit of cost 낮추어서 → 규모의경제 달성 가능 (자동차, tv)
  • low level of cost reduction : premium industry (ex. channel .. luxury brand)
  → to respond to these pressures, firms need to lower the c osts of value creation
• pressure fr cost reductions are greatest
• (2) pressures for local responsiveness
  • Differences in Consumer Tastes and Preferences− When consumer tastes and preferences differ significantly between counries, firms face strong pressures for locla responsiveness (맥도날드, india— 원래는 significantly vegetarian 국가,, 맥도날드는 그래서 이에 적합한 시그니처 버거를 개발함. japan- 데리야끼버거 를 국가 시그니처로 개발 판매→ adapt local preference)
  • Differences in Infrastructure and Traditional Practices− When there are differences in infrastructure and/or traditional practices between countries, pressures for local responsiveness emerge (E.g., Crest Solar, Voltage, GSM vs. CDMA)
  • Differences in Distribution Channels − A firm’s marketing strategies may be influenced by differences in distribution channels between countries (E.g., Pharma sales, supermarket) (domestic firm과 우호적인 관계 맺기)
  • Host Government Demands − Economic and political demands imposed by host country governments may necessitate a degree of local responsiveness (E.g., Economic nationalism, local content (Bombardier in railcar))pressures for local responsiveness
• Pressures for local responsiveness arise from→ Firms facing these pressures need to differentiate their products and marketing strategy in each country.
  • differences in consumer tastes and preferences
  • differences in traditional practices and infrastructure
  • differences in distribution channels
  • host government demands

 

4 kinds of strategy

• (1) international strategy
• when does international strategy make sense?
  • involves taking products first produced for the domestic market and then selling them internationally with only minimal local customization
  • 적용시기 : there are low cost pressures and low pressures for local responsiveness
• (2) global standardization strategy
• when does global standardization strategy make sense?
  • focus on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies
  → goal is to pursue a low-cost strategy on a global scale
  • 적용시기 : there are strong pressures for cost reductions and demands for local responsiveness are minimal
• (3) localization strategy
• when does localization strategy make sense?
  • increasing profitability by customizing so that they provide a good match to tastes and preferences in different national markets
  • resonance
  • 적용시기 : there are substantial differences across nations with regard to consumer tastes and preferences, and where cost pressures are not too intense
• (4) transnational strategy (toyota)
• when does transnational strategy make sense?
  • 동시에 아래 3가지 하는
  • achieve low costs through location economies, economies of scale, and learning effects
  • differentiate the product offering across geographic markets to account for local differences
  • foster a multidirectional flow of skills between different subsidiaries
  • 적용시기 : there are both high cost pressures and high pressures for local responsiveness → balance between two (hybrid strategy)
• is choice of strategy static? no→ as competition increase : international and localization strategy are less viable
  • 화살표 방향은 경쟁자가 나타났을 때 전략의 변화를 나타낸 것
  • Emergence of competitor 은 전략의 우선순위를 바꿈
• → to survive, firms need to shift to other strategy in advance of competitors

 

organizational structure

• worldwide geographic area structure
  • localization strategy
  • product characteristics tailored to local preferences
  • isolation from global competition → establish protected market position
  • compete in industry segments most affected by differences among local countries
• worldwide product divisional structure
  • global standardization strategy
  • standardized products across countries → economies of scope and scale
  • outsource some primary or support activities to the world’s best providers
  • decision-making authority centralized in worldwide division headquarters
  • 장점 : consistency (세계적으로 동일한 양과 질)
• combination structure
  • transnational strategy
  • emphasis on both geographic and product structures
  • local responsiveness (localization strategy)
  • global efficiency (global standardization strategy)
  • <hybrid form of combination structure for implementing transnational strategy>