HW 7 Strategy of international Business

Managers must have a way to identify new and good ideas and skills and provide incentives to share and experiment with these ideas.

Capturing and using new skills

Mature multinational enterprises have been successful, but skills to lower costs of production and enhance perceived value may come from other locations.

Capturing and using new skills

People from every nation rely on the same petroleum and steel to drive their cars and build their homes. These two products are examples of ________ needs.

Universal

Profitability is calculated by dividing the total sales of the firm by total invested capital.

False

Responding to pressures to be locally responsive requires a firm to standardize its products.

False

The way to increase the profitability of a firm is to create less-expensive products.

False

Distribution Channels

Pressures for local responsiveness

Host Government Demands

Pressures for local responsiveness

IKEA's ability to design functional, attractive furniture at a reasonable price that can be sold in a similar way across multiple countries is an example of

A core competence

IKEA maintains a global network of suppliers across 50 countries. This benefit of this strategy is that it allows IKEA to

Achieve the location economies associated with producing its product in the optimal location.

Unlike firms pursuing a global standardization strategy, firms pursuing an international strategy

Are not confronted with pressures to reduce their cost structure.

Which of the following is true about core competence?

Core competence skills are typically expressed in product offerings that other firms find difficult to match or imitate.

Over time, labor learns the most efficient way to perform particular tasks by repetition.

Cost reduction in start ups

When a task is complex and involves more steps, there is more that can be learned, and each time a step is performed more efficiently, costs will be decreased.

Cost reductions in start ups

IKEA's decision to redesign its European-style sofas to better meet the needs of its American consumers

Created value for U.S. buyers

A localization strategy focuses on increasing profitability by

Customizing the firm's goods or services to local conditions.

The ________ shows all of the different positions a firm can adopt with regard to adding value to the product and low cost, assuming the firm's internal operations are configured efficiently to support a particular position.

Efficiency frontier

Changing a firm's strategic posture to build an organization capable of supporting a transnational strategy is a relatively simple task. Group starts

False

Core competencies enable a firm to reduce the costs of value creation and/or to create perceived value in such a way that premium pricing is possible.

Firm capacity

The skills may exist in developing, producing, and marketing goods and services beyond the original goods and services. It can also mean extending the business model.

Firm capacity

Economies of scale come from spreading fixed costs over large volumes, servicing large markets, and working with global sources of supply.

Fixed and variable costs

The way to recoup development costs and achieve leverage with suppliers is to expand into global markets, as domestic markets may not produce sufficient volumes.

Fixed and variable costs

Firms that pursue a transnational strategy are trying to simultaneously do many things. Which of the following is one of those things?

Foster a multidirectional flow of skills between different subsidiaries

Jake's multinational company wants to reduce its costs by leveraging economies of scale, and it doesn't want to customize its products offerings or marketing plans for local conditions because that will increase costs. Which strategy should Jake's firm pursue?

Global standardization strategy

A firm facing low pressures for local responsiveness and few pressures to contain costs might best pursue a(n) _______________________.

International Strategy

Pressures for local responsiveness may make it difficult to

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

_________ 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.

Localization strategy

A U.S. company imports raw materials from Africa, has manufacturing facilities in China, and uses a company in India for assembly. This company is benefiting from ________ economies.

Location

Managers must assess transportation costs, trade barriers, and political and economic risks to determine the best location for each value creation activity.

Location economies

The firm will benefit by basing each value creation activity it performs at that location where economic, political, and cultural conditions are most conducive.

Location economies

Strategy

Low cost, Differentiation

Firms respond to pressures for cost reduction by trying to

Lower the costs of value creation

In China, IKEA has opened stores near public transportation, while in most Western countries, IKEA's stores are located in suburban shopping areas. This strategy is consistent with

Pressures for local responsiveness

Universal Needs

Pressures for local responsiveness

Markets are dynamic, and any firm will face competition. In time, international and localization strategies tend to become less viable, and managers need to ________________________________.

Orient their companies toward either a global standardization or transnational strategy

Experience Curve

Pressures for cost reduction

Optimal Location

Pressures for cost reduction

Outsourcing

Pressures for cost reduction

Differences in Infrastructure

Pressures for local responsiveness

Differences in Preferences

Pressures for local responsiveness

Operations

Primary activities, Support activities

IKEA's stores in China reflect the layout of typical Chinese apartments rather than the more traditional IKEA store layout. In addition, the stores in China include a section dedicated to balconies to better meet the needs of Chinese buyers. Actions like these that managers take to achieve the goals of the firm are part of the firm's

Strategy

Organization

Structure, Architecture

Which of the following is least likely to add to the pressure for a firm to be locally responsive?

Switching costs for consumers

The experience curve refers to

Systematic reductions in production costs that have observed to occur over the life of a product.

_________ is the most appropriate strategy when the firm simultaneously faces strong pressures for both cost reductions and local responsiveness.

Transnational strategy

A firm's strategy is defined as the actions managers take to attain the goals of the firm.

True

Superior value creation relative to rivals does not necessarily require a firm to have the lowest cost structure in an industry, or to create the most valuable product in the eyes of consumers.

True

When a firm creates a global web of value creation activities, the company disperses different stages of the value chain to those locations in the world where perceived value is maximized or where the costs of value creation are minimized.

True

One characteristic of learning effects is that they

Typically disappear after a while, in spite of the complexity of the task.