International Business strategy

1. CHOOSING A STRATEGY

2. Choosing a Strategy
• The appropriateness of each strategy varies
according to
 The extent of pressure for cost reductions and
Local responsiveness.

3. Choosing a Strategy
• Pressure for cost reduction
• Pressure for cost reduction will be high in
industries producing commodity type
products where meaningful differentiation on
non price factors is difficult and price is
competitive weapon
• Eg.computers
• Bulk chemicals
• Steel,sugar etc.

4. Choosing a Strategy
• Pressure for Local Responsiveness
• Differences in customer tastes and
preferences
eg. Subway, KFC, coca-cola, Pepsi
o Difference in infrastructure and Traditional
Practices
o Eg.In the wireless telecommunication industry
different standards exist GSM and CDMA

5. Choosing a Strategy
• Difference in Distribution Channels
Eg. Pharamaceutical industry distribution
channel differ in US and in British and Japan.
• Host Government Demands
Eg. Carbon emission norms for automobiles.
o Raise of Regionalism
Eg. European union and NAFTA

6. Global
Standardization
strategy
Transnational
strategy
International
Strategy
Localization
strategy
High
Low
Low High
Pressures
for
cost
reduction
Pressures for Local Responsiveness
Four Basic Strategy

7. International Strategy
• Some international companies find themselves in the
fortunate position of being confronted with low cost
pressures and low pressure for local responsiveness.
• These companies produce products with minimal local
customization.
• Eg.
 Xerox
 Procter & Gamble
 McDonald
 Kellogg
 Wal-Mart
 Microsoft

8. Localization Strategy
• A localization strategy focuses on increasing
profitability by customizing the firms goods or
services so that they provide a good match to
tastes and preference in different national
markets.
• Eg. PEPSI & COKE products

9. Global standardization strategy
• Firms that pursue a global standardization
strategy focus on increasing profitability and
profit growth by reaping the cost reductions
that comes from economies of scale, learning
effects and location economies.
• These firms will prefer to market standardised
product
• Eg. Intel, Motorola

10. Transnational Strategy
• The firms that pursue a transnational strategy are
trying to simultaneously achieve low costs
through location economies, economies of scale
and learning effects.
• These companies differentiate their product
offering across geographic markets to account for
local differences and foster a multidirectional
flow of skills between different subsidiaries in the
firms global network of operations.
• Eg. Engineering companies

11. Reference
• Hill, Charles W.L. and Arun K Jain (2014).
International Business: Competing in the
Global Marketplace, 10/e; New Delhi: Tata
McGraw-Hill