This document discusses strategy development in international trade and value chain analysis. It describes reasons for developing an international business strategy, including improved communication, globalization of markets, following competition, and availability of market information. It also explains Porter's classification of value chain activities into main activities and support activities. Main activities include inbound logistics, operations, outbound logistics, marketing and sales, and service. Support activities comprise procurement, technology development, human resource management, and firm infrastructure. The document outlines factors influencing international business locations and different production layouts used by companies. It stresses the importance of conducting a value chain analysis before economic analysis.

1. 4
STRATEGY
DEVELOPMENT IN
INTERNATIONA TRADE
Chapter

2. INTRODUCTION
Many companies seem to do very
well without a formal business
strategy. International operations very
often start with direct exports. These
are initiated by the indispensable
enterpreneural vision of top
management and the excellent
salesmanship of a few international
export managers, resulting in
immediate and atrractive financial
returns.
ADD A FOOTER 2

3. Good reasons for starting the
development of an international
business stratery are the following:
• IMPROVED
COMMUNICATION
• GLOBALIZATON OF MARKET
• FOLLOW THE COMPETITION
• AVAILABILTY OF MARKET
INFORMATION
• CREATIVE
ENTERPRENEURSHIP
ADD A FOOTER 3

4. Value chain describes the entire range of the activities that necessary to
bring the product or a service from the setting up level, through different
levels of production ( involving a combination of physical transformation and
different service utilization ) , delivery, to final the customer, and doing away
with it after using it.
4.1 THE FIRM AS A VALUE CHAIN
4
ADD A FOOTER

5. Value shows the total value and is made up of
value activities and values margin.
Values activities
- Are distinct activities from
physical and technological
point of view, develop by the
firm. These are the stones with
the help of ehich s firm creates
a valuable product for its
buyers.
Values margin
- The values margin can be
measured in different ways.
- The value chains of suppliers and
distributors also include a value
margin, whose separate
identification is important in order to
understand a firm’s cost position
sources , because the margin is a
part of the total cost born by the
buyer.
ADD A FOOTER 5

6. Values can be classified in two broad
categories, according to Michael Porter:
…
6
ADD A FOOTER
•MAIN ACTIVITIES
•SUPPORT
ACTIVITIES

7. 7
4.1.1 MAIN ACTIVITIES
There are five generic categories of main activities involved by
competition in any economic field, as presented in Figure.

8. • Inbound Logistics
• Operations
• Outbound Logistics
• Marketing Sales
• Service
ADD A FOOTER 8

9. 9
ADD A FOOTER
Procurement refers to the to the purchasing function. Among
purchased materials one can mention: raw materials, auxiliary
production materials and other consumable articles, as well as
assets such as equipment, laboratory installations, office devices
and buildings.
• Technology Development
• Human Resources Management
• Firm Infrastructure
4.1.2 SUPPORT ACTIVITIES

10. Types of activities
• DIRECT
• INDIRECT
• QUALITY ASSURING

11. Competitive advantages results from the firm’s ability to
perform the required activities, either a lower costs, or in ways
able to create value for the client and that allow the firm to ask
for a higher price.
Competitive advantages require that the value chain of a firm
to be rather a system that a collection of separate parts. A firm
is profitable if its value is higher than the total cost of
performing all activities.

12. The difference between value chains of competitors
are main source of competitive advantage. Looking for
sustainable competitive advantage, the firm should not
limit only to its own value chain, but it also should have
in view the value chains suppliers, contributors, and,
finally, of its customer.

13. 13
ADD A FOOTER
Multinational have located subsidiary business in other
countries for many years. In recent years, this trend has
gathered pace as part of globalization. There are specific
reasons why businesses might want to locate overseas
international location.
4.2 INTERNATIONAL BUSINESS
LOCATIONS

14. 14
ADD A FOOTER
Some Reasons for International
Location
• HISTORICAL SERVICE
• ACCESS TO MARKETS
• ACCESS TORAW MATERIALS
• ACCESS TO LABOR
• TAX AVOIDANCE
• LOCAL INCENTIVE

15. Some Problems of International Trade
15
ADD A FOOTER
Risk and uncertainties associated wih
international trade include the following; for
some companies,this risks are managed better
by having international offices, factos and so
on.
• Currency fluctuations
• Exchange controls
• Political instability and unrest
• Tariffs and other restrictive practices
• Language and cultural barriers UK firms
have an advantage that English is
widely spoken around the world
• Differences in ethical approaches

16. Factors Influencing Location
Factors influencing plant location:
1. Nature of the Product
2. Volume of Production
3. Basic Managerial Polies and Decision
4. Nature of Plant Location
5. Type of Industry Process

17. 17
ADD A FOOTER
7. Nature of Machines
8. Climate
9. Nature of Materials
10.Type of Machine
11. Human Factor and Working Conditions
12. Characteristics of the Building
6. Types of Methods of Production
(1) Job Order Production
(2) Batch Production, and
(3) Mass Production

18. 18
ADD A FOOTER
Product layout is also called as production lines or
assembly lines. They are designed and laid out in
such a way that only a few products are capable of
being manufactured as assembled. Materials flow
through the various facilities. They use special
machines to perform specific operations to
produce only one product at one time.
4.2.1 Production Layout

19. 19
ADD A FOOTER
• The skills required of the workers is low
• Supervision is minimal
• Training needs are small
• Precautions to be taken are
• Constant check on the process needs to be performed so that quality is
assured.
• Corrective measures have to be implemented immediately to avoid
rejections, since, the quantites that get manufactured will be continuous.
• Check for the behavioral attitude of the worker.
Using special machines and implementing standardizatiobn in
operationshave many advantages which are listed below.

20. 20
ADD A FOOTER
A value chain analysis, providing both qualitative and quantitative
background information, is to be undertaken for all cases studies
(products) included in the project before an economic analysis is
undertaken. Source of information for this analysis may include
secondary data, published or unpublished literature, surveys,
focus groups, and rapud appraisal.
4.3 VALUE CHAIN ANALYSIS

21. 21
ADD A FOOTER
The value chain analysis will include
the following stages:
• PRODUCTION
• PROCESSING
• TRANSPORTATION
• FINAL CONSUMPTION
• REGULATIONS
• MARKET STRUCTURE
• DATA AVAILABILITY

22. 22
ADD A FOOTER
End of Chapter Discussion