The chapter discusses the role of strategy in international business. It examines how industry structure and competitive forces impact firm strategy and performance. Managers develop strategy to attract customers, operate efficiently, and compete effectively. The value chain framework helps managers analyze how the company creates value through primary and support activities. Firms face pressures for global integration to benefit from efficiencies but also pressures for local responsiveness to address host country needs. Different industry types and strategy types determine a firm's appropriate integration-responsiveness approach. The homework is to review exam performance, chapter 11, and prepare for chapter 12 by reading the case study on Burger King.

1. IAF 605 - International Business Management
The Strategy of International Business
Week 8

2. Agenda
midterm exam results and
discussion
Chapter 11 – The Strategy of
International Business

3. Midterm
Average (/45) Average Lowest (%) Highest (%)
35 77% 51% 91%
100%
90%
80%
70%
60%
50%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

4. Chapter Objectives
To identify how managers develop strategy
To examine industry structure, firm strategy, and value creation
To profile the features and functions of the value-chain framework
To assess how managers configure and coordinate a value chain
To explain global integration and local responsiveness
To profile the types of strategies firms use in international business

5. The Role of Strategy in International Business (p395)

6. Industry, Strategy, And Firm Performance
Strategy expresses
management’s
ideas on how to
best:
attract customers
operate efficiently
compete
effectively
create value

7. Industry Organization (IO) Paradigm (theoretical framework)
forces that have the greatest impact on a multinational
enterprise’s strategy: immediate industry and
competitive environment
Industry
• no individual affects price or
Organization quantities
(IO) • perfect info available to everyone
paradigm • few, if any, barriers to exit
presumes • full mobility of resources
• perfect knowledge among firms and
perfect buyers
competition:

8. What about imperfect competition?
performance of a firm is a
function of its market conduct,
which in turn is determined by
the structure of its industry)
few large sellers, barriers to
entry, passive buyers
many firms had outstanding
performance (GE, Toyota...)
Image source: http://img5.allocine.fr/acmedia/rsz/434/x/x/x/medias/nmedia/18/62/87/05/18954210.jpg

9. Industry Structure: Five Forces Model (p398)
firms in other industries
offering substitute
products
suppliers of raw rivalry
materials, among buyers
components or
other resources competing
inputs sellers
potential
new entrants

10. Competitors’ moves
Government policies
Changes in economics
Shifting buyer
preferences
Technological
developments
Rate of market growth

11. Competitor’s Moves

12. Government Policies

13. Change in Economics

14. Shifting Buyer Preferences
Source: http://flickr.com/photos/shapeshift/352593346

15. Technological Developments
Source: toyota.com

16. Rate of Market Growth

17. Reminder
July 27th:
group
assignment
due

18. Strategy and Value
Strategy helps
managers assess
the company’s
present situation, Value is the
identify the measure of a
direction the firm’s ability
company should go, to sell what
and determine how it makes for
more than
the company will the cost it
get there. incurred to
make it

19. Firms create value either through a low-cost leadership
strategy or a strategy. Can both be done at
the same time?

20. The Firm As Value Chain
How the company will design, make,
move, and sell products;
how it will find
efficiencies …how it will
in doing co-ordinate the decisions
so… in one part of the business
with those made in other parts

21. What Is a Value Chain?
The value chain lets managers deconstruct the general
idea of “create value” into a step-by-step system.
Product Operations Outbound Marketing Service
Design Logistics

22. Dimensions of The Value Chain
Primary activities -
create and deliver
the product.
Support activities -
aid the individuals
and groups engaged
in primary activities.

23. Primary and Support Activities (See Tables 11.2 and 11.3)
Outbound
Product Design Operations Marketing Service
Logistics
Materials and Firm Human Systems &
Equipment Infrastructure Resources Solutions

24. Managing the Value Chain
Configuration Coordination
• Way that managers • Way that managers
arrange the activities connect the activities
of the value chain – of the value chain.
concentrated to • Devising a way to
dispersed coordinate value chain
• Firms pay close activities must be in
attention to location ways that leverage a
economies when firm’s core
configuring their value competencies
chain

25. Technology and Coordination

26. The Risk of Strategy
crea-
tivity

27. Pressures for Global Integration vs. Local Responsiveness
global
integration
local responsiveness
managers, competencies, industries,
or environments
- companies rethink and reset their
value activities

28. Two Drivers of Global Integration
globalization of
markets efficiency gains of
• $...hard to acquire, difficult standardization
to save and scarce

29. Pressures for Local Responsiveness
host-
government
policies consumer
divergence
Source: AP Photo/Lefteris Pitarakis

30. Integration-Responsiveness (IR) Grid (I): Industry Types (p421)

31. Exercise
substitute products Use the five fundamental
forces model to analyze one of
the industries listed in the
integration-responsiveness
rivalry grid (page 421).
suppliers among buyers
competing
sellers
Does the pressure for local
responsiveness and/or global
integration impact the five
forces in the industry you
potential selected?
new entrants

32. Integration-Responsiveness (IR) Grid (II): Strategy Types

33. Homework
if you were not satisfied with your
mid-term exam mark, determine what
needs to change in preparation for the
next exam
review Chapter 11
read Chapter 12
Case: Burger King Beefs Up Global
Operations (page 465)