Multinational and participation strategies 1


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Multinational and participation strategies 1

  1. 1. Multinational and Participation Strategies
  2. 2. The Firm as Value Chain • What is the value chain? • Using the value chain – – – – – – – Configuration Macro Cost Factors Cluster Effects Logistics Digitization Economies of Scale Business Environment 11-2
  3. 3. Change and the Value Chain • The configuration and coordination of value chains respond to changes in customers, competitors, industries, and environments. • Caveat: The Risk of Strategy 11-3
  4. 4. Global Integration versus Local Responsiveness • Pressures for Global Integration – Globalization of Markets – Efficiency Gains of Standardization • Pressures for Local Responsiveness – Consumer Divergence – Host Government Policies 11-4
  5. 5. When Pressures Interact The Integration-Responsiveness grid helps managers measure the global and local pressures that influence the configuration and coordination of their value chains. 11-5
  6. 6. Integration Responsiveness Grid 11-6
  7. 7. Types of Strategy 11-7
  8. 8. Supply Chain and Production Network 8
  9. 9. Multinational Strategies: Dealing with the Global-Local Dilemma • Local-responsiveness solution: customize to country or regional differences • Global integration solution: conduct business similarly throughout the world • Global-local dilemma: choice between a local-responsiveness or global approach to a multinational’s strategies
  10. 10. Multidomestic Strategy • The company attempts to offer products or services that attract customers by closely satisfying their cultural needs and expectations • Emphasizing local-responsiveness issues - Ex.: different packages, colors - Costs more to produce, need to charge higher prices to recoup - A form of the differentiation strategy - Not limited to large multinationals
  11. 11. Transnational Strategy • Two goals get top priority - Seeking location advantages - Gaining economic efficiencies from operating worldwide
  12. 12. Transnational Strategy (cont.) • Location advantages: dispersing valuechain activities anywhere in the world where they can be done best or cheapest • Global platform: country location where a firm can better perform some of its valuechain activities
  13. 13. Transnational strategy (cont.) • With upstream location advantages, the transnational can: - Locate subunits near cheap sources of high-quality raw material - Locate subunits near centers of research and innovation - Locate subunits near sources of high-quality or lowcost labor - Seek low-cost financing anywhere in the world - Share discoveries and innovations made in one part of the world with operations in other parts of the world
  14. 14. Transnational Strategy (cont.) • Comparative advantage: advantages of nations over other nations - No longer only available to domestic firms • Location advantages can exist for all activities of the value chain
  15. 15. International Strategy • International strategy: selling global products and using similar marketing techniques worldwide - A compromise approach - Limited adjustment in product offerings and marketing strategies - Upstream and support activities remain concentrated at home country
  16. 16. Regional Strategy • Regional strategy: managing raw-material sourcing, production, marketing, and support activities within a particular region - Another compromise strategy - Attempts to gain economic advantages from regional network - Attempts to gain local adaptation advantages from regional adaptation
  17. 17. Resolving the Global-Local Dilemma: Formulating a Multinational Strategy • Selection of strategy depends on degree of globalization in an industry • Globalization drivers: conditions in a industry that favor transnational or international strategies • Four categories of global drivers: markets, costs, governments, and competition
  18. 18. Global Markets • Are there common customer needs? • Are there global customers? • Can you transfer marketing?
  19. 19. Costs • Are there global economies of scale? • Are there global sources of low-cost raw materials? • Are there cheaper sources of highly skilled labor? • Are product-development costs high?
  20. 20. Governments • Do the targeted countries have favorable trade policies? • Do the target countries have regulations that restrict operations?
  21. 21. The Competition • What strategies do your competitors use? • What is the volume of imports and exports in the industry?
  22. 22. Competitive Advantage in the Value Chain • Location of competitive advantage in value chain determines choice of generic strategy • Upstream advantages: low-cost or highquality design - Favor transnational strategy or an international strategy • Downstream advantages: marketing, sales, service - Favor multidomestic strategy
  23. 23. Competitive Advantage in the Value Chain (cont.) • Mixed conditions - Competitive strength downstream in industry with strong globalization drivers - Competitive strength upstream in industries with local adaptation pressures • Both favor regional strategies