MNGT 375 Chapter 12

Pressure for cost reduction greatest when (4)

1. Commodity goods that fill universal needs 2. Major competitors based in low cost locations 3. Persistent excess capcity 4. Consumers are powerful and face low switching costs

Pressure for Local Responsiveness come from (4)

1. Differences in consumer tastes and preferences 2. Differences in infrastructure and traditional practices 3. Differences in distribution channels 4. Host government's political and economic demands

Organizational Structure (3 parts)

1. Formal division into subunits (divisions) 2. Location of decision-making responsibilities within the formal structure 3. Establishment of integrating mechanisms to coordinate division activities

Competitive Pressures (2)

1. Pressure for cost reduction 2. Pressure for local responsiveness

Firms can choose among various strategies to compete in foreign markets. An international firm faces more complex challenges and almost limitless opportunities in foreign markets compared to the domestic ones. The challenges come from the need for cost reductions by standardizing the product and utilizing the economies of scale, "pressures for cost reductions," and from the need for local responsiveness by modifying its products to the local tastes and preferences, "pressures for local responsiveness." Thus, to compete successfully, the firm could use one of the four basic strategies (an international strategy, a localization strategy, a global standardization strategy, and a transnational strategy) or some combinations of them. A leading market analyst suggests that Samsung could return its lost market share along with attaining greater competitive advantage in the industry and creating value by using these two basic strategies identified by a well-known strategy scholar Michael Porter. A. Differentiation and low cost B. Differentiation and comparison C. Standardization and low cost D. Standardization and comparison

A. Differentiation and low cost

Pressures for local responsiveness come from all of the following except A. Excess capacity B. Host government demands C. Differences in consumer tastes and preferences D. Differences in distribution channels

A. Excess capacity

All of the following are examples of primary activities except A. Logistics B. Marketing and sales C. Customer service D. Production

A. Logistics

___________________________ is the most appropriate strategy when the firm simultaneously faces strong pressures for both cost reductions and local responsiveness. A. Transnational strategy B. International strategy C. Localization strategy

A. Transnational strategy

Samsung can increase its market share by spreading fixed costs over even larger volumes to lower its costs, which is referred to as A. economies of scale. B. economies of scope. C. location economies. D. volume costs.

A. economies of scale

A firm facing low pressures for local responsiveness and few pressures to contain costs might best pursue a(n) _______________________. A. international strategy B. transnational strategy C. localization strategy

A. international strategy

Based on the information in the video, Samsung has been and will be in the future most likely to pursue a _________________strategy, because it has to respond to strong pressures for local responsiveness and strong cost pressures. A. transnational B. global C. localization D. international

A. transnational

Transnational Strategy

Attempting to simultaneously achieve low costs through location economies, economies of scale, and learning effects while also differentiating product offerings across geographic markets to account for local differences and fostering multidirectional flows of skills between different subsidiaries in the firm's global network of operations

Xiaomi, a new Chinese firm producing cheaper and better budget smartphones, was able to overtake Samsung in the market share in China by reaching 14% versus 12% held by Samsung according to video. This recent Xiaomi's success indicates that most likely Xiaomi performs its value creation activity in the optimal location for that activity. In other words, by pursuing such a strategy of locating its value creation activity where it can take place most effectively, Xiaomi is most likely to realize A. core competence. B. location economies. C. economies of scale. D. economies of scope.

B. location economies

Markets are dynamic, and any firm will face competition. In time, international and localization strategies tend to become less viable, and managers need to ________________________________. A. revitalize their original strategies with more intense focus to avoid spreading energies too thinly B. orientate their companies toward either a global standardization or transnational strategy C. develop an appropriate exit strategy to withdraw profitably from markets that become too competitive

B. orientate their companies toward either a global standardization or transnational strategy

Samsung's ability to increase its profitability and gain back some of the recently lost market shares is constrained by ___________________. A. the diversification B. the imperative of localization C. economies of scale D. economies of scope

B. the imperative of localization

__________________________is the most appropriate strategy when there are substantial differences across nations with regard to consumer tastes and preferences, and where cost pressures are not too intense. A. International strategy B. Transnational strategy C. Localization strategy

C. Localization strategy

Your firm has been a leader in several lines of fast-moving consumer goods. The firm has been following a localization strategy. Your products have been distributed in a number of foreign markets and regions, and they are distinct enough in local markets to respond to national tastes and preferences. Competition, however, has become more intense, with many competitors using lower cost structures to undercut your prices and still satisfy your customers. The firm must decide what kind of strategy it needs to follow to meet the demands of the local markets as well as the increased competitive pressures on cost. Pressures for local responsiveness may make it difficult to ______________________________. A. compete effectively in more than one international market B. monitor and adapt to changing customer tastes in a large number of foreign markets C. leverage skills and products associated with a firm's core competencies from one country to another

C. leverage skills and products associated with a firm's core competencies from one country to another

Strategic Alliances

Cooperative agreements between potential or actual competitors in form of Joint Ventures or Short-term Contractual Agreements

Location Economies

Cost advantages from performing a value creation activity at the optimal location for that activity

When different stages of a value chain are dispersed to those locations around the world where value added is maximized or where the costs of value creation are minimized, _____ is (are) created. A. Experience effects B. Learning effects C. Economies of scale D. A global web

D. A global web

When pressures are high for local responsiveness, but low for cost reductions, a _______ makes sense. A. Global standardization strategy B. International strategy C. Transnational strategy D. Localization strategy

D. Localization strategy

A smartphone industry has intense pressures for cost reduction because consumers Check All That Apply: A. have different tastes. B. are not powerful. C. face high switching costs. D. face low switching costs.

D. face low switching costs

Primary Activities

Firm activities that add value directly by creating or supporting the product including R+D, production, marketing, sales, and customer service

Support Actvities

Firm activities that allow primary activities to occur including HR, IT, logistics, and other infrastructure

Globalization Strategy

Focuses on increasing profitability/profit growth by reaping the cost reductions that came from economies of scale, learning effects, and location economies with goal of low-cost strategy on a global scale

Efficiency frontier

Graph that shows all of the possible positions a firm can adopt regarding adding value or lowering cost

Localization Strategy

Increasing profitability by customizing the firm's goods and services so that they provide a good match to tastes and preferences in different national markets

Subsidiary Skills

Skill developed in a foreign sub and transferred to other entities within the MNC

Core Competencies

Skills within the firm that competitors cannot easily match or imitate

Strategic Fit

Strategy chosen must make sense given the market conditions to attain superior performance and earn high return on capital

Experience Effects

Systematic production cost reductions that occur over the life of a product - Reducing cost of value creation

International Strategy

Taking products first produced for their domestic market and selling them internationally with only minimal local customization

Organization Structure

The totality of a firm's organization including formal org structure, control systems and incentives, org culture, process, and people

Transnational strategy makes sense when:

There are both high cost pressures and high pressure for local responsiveness

Localization strategy make sense when:

There is high pressure for local customization but cost pressures are not too intense

Globalization Strategy makes sense when:

There is strong pressure for cost reduction but low demand for local responsiveness

Differentiation

Value creation through increasing product attractiveness

Lowering cost

Value creation through lowering production costs

Global Web

When different stages of value chain are dispersed to those locations around the globe where value added is maximized or where costs of value creation are minimized

International strategy makes sense when:

there are low cost pressures and low pressures for local responsiveness