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Lecture Global business today (6e): Chapter 11 - Charles W.L. Hill

Chapter 11 - The strategy of international business. In this chapter, you will learn to explain the concept of strategy. Recognize how firms can profit by expanding globally. Understand how pressures for cost reductions and pressures for local responsiveness influence strategic choice. Identify the different strategies for competing globally and their pros and cons. Explain the pros and cons of using strategic alliances to support global strategies. | Global Business Today 6e by Charles W.L. Hill McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 11 The Strategy of International Business Introduction Question: What actions can managers take to compete more effectively in a global economy? Managers must consider the benefits of expanding into foreign markets which strategies to pursue in foreign markets the value of collaboration with global competitors the advantages of strategic alliances Strategy and the Firm Question: What is strategy? A firm’s strategy can be defined as the actions that managers take to attain the goals of the firm Typically, strategies focus on profitability and profit growth Profitability refers to the rate of return the firm makes on its invested capital Profit growth is the percentage increase in net profits over time Strategy and the Firm To increase profitability, value must be created for the consumer Value creation is measured by the difference between V (the price that the firm can charge for that product given competitive pressures) and C (the costs of producing that product) The two basic strategies for creating value are differentiation low cost Value creation activities can be categorized as primary activities support activities Strategy and the Firm A firm’s strategy, operations, and organization must all be consistent with each other in order to achieve a competitive advantage and superior profitability Organization architecture refers to the totality of a firm’s organization (formal organizational structure, control systems and incentives, organizational culture, processes, and people) Strategy and the Firm Controls are the metrics used to measure the performance of subunits and make judgments about how well the subunits are run Incentives are the devices used to reward appropriate managerial behavior Processes are the manner in which decisions are made and work is performed Organizational culture is the norms and value systems | Global Business Today 6e by Charles W.L. Hill McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 11 The Strategy of International Business Introduction Question: What actions can managers take to compete more effectively in a global economy? Managers must consider the benefits of expanding into foreign markets which strategies to pursue in foreign markets the value of collaboration with global competitors the advantages of strategic alliances Strategy and the Firm Question: What is strategy? A firm’s strategy can be defined as the actions that managers take to attain the goals of the firm Typically, strategies focus on profitability and profit growth Profitability refers to the rate of return the firm makes on its invested capital Profit growth is the percentage increase in net profits over time Strategy and the Firm To increase profitability, value must be created for the consumer Value creation is measured by the difference between V .