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Globalization - International Business Environment and Strategy Name Abhishek Podar Chetan Devadiga Ronak Desai Sachin Gaikwad Sameer Thakker Sudeep Nair Roll Nos 202 208 232 235 236 243
New Production Pattern :Companies can locate different parts of their production, research and marketing in different countries
Globalization encompasses
Internationalization ( Trade & Investment ) Liberalization ( Freeing markets ) Universalization ( Culture Interchange )
History of Globalization
Sharing between world culture began 1000s of years ago In the 19th century Cultural Sharing exploded European discover the Americas European Imperialism Industrial Revolution In 20th Century Free Market Capitalism Internet Tele communication
Strategy of International Business focus to compete more effectively in international business How firms can increase their profitability by expanding into international markets Different strategies firm can use when competing internationally benefits, costs and Risks of strategic alliances
Components
Value creation Value creation strategies Strategic positioning Global expansion Location Economies
Value Creation
Value creation profits are determined by amount of value customers place on firm goods/ services Segment the market enough to charge a price that reflects Can create more value by making product more attractive with: Superior design Functionality Features Quality
Strategic Positioning
Strategic Positioning important for firm to be explicit about choice of strategic emphasis ( differentiation & cost ), important to make sure to configure internal operations accordingly & manage them efficiently Basic interest is to maximize long-run ROI & competitiveness. Pick a position that has a enough demand to support choice Configure internal operations to support position like Manufacturing Marketing Logistics Information systems
Global Expansion
Global expansion increase profitability
Realize location economies by dispersing individual value creation activities around the globe
Realize cost economies from experience effects by serving global market from central location Earn a greater return from firm distinctive skills or core competencies by leveraging & applying to new geographic markets Realize by leveraging valuable skills developed in foreign operations & transferring them to other locations
Location Economies
Location economies Countries differ along a range of dimensions ( economical, political, legal, cultural) these differences either raise or lower the cost of doing business Certain countries have a comparative advantage in the production of certain products. Trade barriers and transportation costs permitting firm will benefit from basing each value creation activity at that location where the economic, political, cultural, factor costs etc. are most conductive to the performance of the activity Location economy-economies that arise from performing a value creation activity in the optimal location for that activity, lower the costs of value creation help the firm achieve a low cost position Differences in factor costs
Weak patent protection in some countries implies that firms should expand overseas rapidly in order to preempt imitators
Expanding size or scope of markets helps to achieve economies of scale in manufacturing as well as marketing, R&D or distribution Can spread costs over a larger sales base Can increase profit per unit
Low cost markets aid in developing competitive advantage by providing access to: Raw materials Lower cost labor Key customers Energy
Multi-Domestic Strategy
Strategy and operating decisions are decentralized to strategic business units (SBU) in each country Products and services are tailored to local markets
Business units in one country are independent of each other Assumes markets differ by country or regions
Focus on competition in each market Prominent strategy among European firms due to broad variety of cultures and markets in Europe
Global Strategy
Products are standardized across national markets Decisions regarding business-level strategies are centralized in the home office Strategic business units (SBU) are assumed to be interdependent Emphasizes economies of scale Often lacks responsiveness to local markets Requires resource sharing and coordination across borders (hard to manage)
Transnational Strategy
Seeks to achieve both global efficiency and local responsiveness Difficult to achieve because of simultaneous requirements: Strong central control and coordination to achieve efficiency Decentralization to achieve local market responsiveness Must pursue organizational learning to achieve competitive advantage
Characteristics
High cost, low control Low cost, low risk, little control, low returns Shared costs, shared resources, shared risks, problems of integration Quick access to new market, high cost, complex negotiations, problems of merging with domestic operations
Complex, often costly, time consuming, high risk, maximum control, potential aboveaverage returns
Optimal Solution
Export
Optimal Solution
Licensing
Optimal Solution
Strategic Alliance
The firm needs to reduce its risk through the sharing of costs.
Optimal Solution
Wholly-owned Subsidiary
Expanding sales of goods or services across global regions and countries and into different geographic locations or markets: May increase a firms returns (such firms usually achieve the most positive stock returns) May achieve economies of scale and experience, location advantages, increased market size and opportunity to stabilize returns
Political Risks
Economic Risks
Political Risks
Economic Risks
Now these are factor endowments' which are inherited and cannot be influenced As a rule Competitive Advantage of nations has been the outcome of 4 interlinked advanced factors and activities in and between companies in these cluster These can be influenced in a pro-active way by Government
Firm Strategy, Structure and Rivalry Demand Condition Related Supporting Industries Factor Conditions
Thank You