SEO-Optimized Title for Global Business Module Discussion Replies

Reply to both people about a paragraph each*
Reply One:
In the last module, I had discussed reasons in which I believe I
will experience late-mover disadvantages. In chapter 11, it
discussed some key terms associated with creating value within
your company. On page 363 it brings up the topic of value
creation. Value creation is performing activities that increase
the value of goods or services to consumers. In order to
establish myself among an already budding market, I have
decided to try to make my imports of cotton more appealing to
the consumer. I will market it in a way to create value (i.e.
value creation). In order to do such, I will make sure that my
product is harvested sustainably. More and more companies see
value in the eyes of consumers when it comes to sustainably
sourcing their goods. Consumers in today’s age are becoming
more and more cognizant of where products are coming from
and do pay a premium for those companies that take extra
measures to ensure sustainable practice. For example,
companies like Unilever are exceling due to their sustainably
driven supply chain. In fact, Unilever was ranked number one in
Gartner’s supply chain index, with much credence to their
sustainable practice. I will also allow my consumers to know
that we are making every effort to financially empower those
within the impoverished state Burkina Faso resides. Being that
sourcing and importing cotton will be something new to me,
over time I will certainly understand to term “experience curve”
(page 373). An experience curve is a systematic reduction in
production costs that have been observed to occur over the life
of the product. Essentially, in the beginning of my sourcing
process, I will incur costs that will eventually be alleviated due
to experience. The more you work at a process, the more apt
you are to come up with processes that are more efficient and

cost effective. One thing that will also benefit me will be
universal needs (page 378). Universal needs arise when the
tastes and preferences of consumers in different nations are
similar if not identical. This is beneficial to me because cotton
is a pretty common commodity in most nations.
Reply Two:
As I have stated in the previous discussion post, Burkina Faso’s
main export is 70% gold. Compared to cotton being only 13%.
The partners associated with the export of gold are, Singapore,
Ivory Coast, Switzerland, France, China, and Turkey. Gold is
steadily increasing in demand and is considered as a universal
need (pg.378) because, tastes and preferences in different
nations are similar if not identical. So, everyone wants gold for
just different reasons. The Gold World Council has a report
based on the demand of gold overall during 2015 and it states
that there was a 4% growth rate in demand even though in
certain areas there were slight deficits. I have stated that the
popular uses for gold are, jewelry, financial, technology,
dentistry, medical, and aerospace. The report by GWC shows
that during certain quarters within the year 2015, there was a
decrease in demand in jewelry and technology but was
overcome by the central bank and investments. So, a company
looking to export gold would have to look at previous quarterly
and yearly reports on global demand for gold and look towards
which countries are demanding the most. In the fourth quarter
of 2015, United States was tied with India with + 6%, East Asia
with +5%, China with +3%, and the rest of the world below 0,
in demand for gold. This is all depicted in GWC’s reports and
with the current connections Burkina Faso has with exporting
gold, I can tell I won’t gain that much profit by just sticking
with them. United States is the only other place in the world

that is having an increase in demand and we are not exporting to
them. My plan is to is to use the localization strategy (pg.382)
on USA, which is increasing profitability by customizing the
firm’s goods and services so that they provide a good match to
tastes and preferences in different national markets. I need to
know the latest usage update on gold in United States and find
out what specific field is requiring gold the most. Once I find
that out, I would rearrange the mining and export processes to
fit with the country’s demand. So far… the jewelry industry in
the US is something to look out for potential growth per GWC.
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
11-*
IntroductionQuestion: What actions can managers take to
compete more effectively in a global economy?
Managers must consider the benefits of expanding into foreign
marketswhich strategies to pursue in foreign markets the value
of collaboration with global competitorsthe advantages of

strategic alliances
11-*
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 firmTypically, strategies focus on
profitability and profit growthProfitability refers to the rate of
return the firm makes on its invested capitalProfit growth is the
percentage increase in net profits over time
11-*
Strategy and the Firm
Determinants of Enterprise Value
11-*
Value Creation
Question: How do you increase the profitability of a firm?
To increase profitability, value must be created for the
consumerValue 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
11-*
Strategic PositioningTo maximize profitability, a firm must pick

a position on the efficiency frontier that is viable in the sense
that there is enough demand to support that choiceconfigure its
internal operations so that they support that positionmake sure
that the firm has the right organization structure in place to
execute its strategySo, a firm’s strategy, operations, and
organization must all be consistent with each other in order to
achieve a competitive advantage and superior profitability
11-*
Operations: The Firm as a
Value ChainFirms are essentially value chains composed of a
series of distinct value creation activities, including production,
marketing, materials management, R&D, human resources,
information systems, and the firm infrastructureValue creation
activities can be categorized as
primary activities
support activities
11-*
Value Chain
1. Primary Activities involves creating the product, marketing
and delivering the product to buyers, and providing support and
after-sale service to the buyers of the product
2. Support Activities provides the inputs that allow the primary
activities of production and marketing to occur
11-*

Value Chain
The Value Chain
11-*
Classroom Performance System
All of the following are examples of primary activities except
Logistics
Marketing and sales
Customer service
Production
Multimedia Lecture Support Package to Accompany Basic
Marketing
Lecture Script 6-*
Classroom Performance System Answer: a
11-*
Organization: The Implementation
of StrategyOrganization architecture refers to the totality of a
firm’s organization (formal organizational structure, control
systems and incentives, organizational culture, processes, and
people) Organizational structure refers tothe formal division of
the organization into subunitsthe location of decision-making
responsibilities within that structurethe establishment of
integrating mechanisms to coordinate the activities of subunits
including cross functional teams and or pan-regional
committees

11-*
of StrategyOrganization Architecture
11-*
of StrategyControls are the metrics used to measure the
performance of subunits and make judgments about how well
the subunits are runIncentives are the devices used to reward
appropriate managerial behavior Processes are the manner in
which decisions are made and work is performedOrganizational
culture is the norms and value systems that are shared among
the employeesPeople refers to employees and the strategy used
to recruit, compensate, and retain those individuals
11-*
In Sum: Strategic FitSo, to attain superior performance and earn
a high return on capital, a firm’s strategy must make sense
given market conditionsThe operations of the firm must support
the firm’s strategyThe organizational architecture of the firm
must match the firm’s operations and strategyIf market
conditions shift, so must the firm’s strategy, operations, and
organization
11-*
In Sum: Strategic Fit

Strategic Fit
11-*
Global Expansion, Profitability
and Profit Growth Firms that operate internationally can
Expand the market for their domestic product offerings by
selling those products in international markets
Realize location economies by dispersing individual value
creation activities to locations around the globe where they can
be performed most efficiently and effectively
Realize greater cost economies from experience effects by
serving an expanded global market from a central location,
thereby reducing the costs of value creation
Earn a greater return by leveraging any valuable skills
developed in foreign operations and transferring them to other
entities within the firm’s global network of operations
11-*
Expanding the Market: Leveraging Products and Competencies
To increase growth, a firm can sell products or services
developed at home in foreign marketsSuccess depends on the
type of goods and services, and the firm’s core competencies
(skills within the firm that competitors cannot easily match or
imitate)Core competencies enable the firm to reduce the costs of
value creationcreate perceived value so that premium pricing is
possible
11-*
Location EconomiesFirms should locate value creation activities

where economic, political, and cultural conditions are most
conducive to the performance of that activityFirms that
successfully do this can realize location economies (the
economies that arise from performing a value creation activity
in the optimal location for that activity, wherever in the world
that might be)Locating value creation activities in optimal
locationscan lower the costs of value creation can enable a firm
to differentiate its product offering from those of competitors
11-*
Location EconomiesMultinationals that take advantage of
location economies create a global web of value creation
activitiesUnder this strategy, different stages of the value chain
are dispersed to those locations around the globe where
perceived value is maximized or where the costs of value
creation are minimizedHowever, introducing transportation
costs and trade barriers complicates this picturePolitical risks
must be assessed when making location decisions
11-*
Experience EffectsThe experience curve refers to the systematic
reductions in production costs that have been observed to occur
over the life of a productStudies show that a product’s
production costs decline by some quantity about each time
cumulative output doublesLearning effects are cost savings that
come from learning by doingLabor productivity increases when
individuals learn the most efficient ways to perform particular
tasks and management learns how to manage the new operation
more efficiently
11-*

Experience EffectsEconomies of scale refer to the reductions in
unit cost achieved by producing a large volume of a
productSources include the ability to spread fixed costs over a
large volumethe ability of large firms to employ increasingly
specialized equipment or personnelServing a global market from
a single location is consistent with moving down the experience
curve and establishing a low-cost position
11-*
Leveraging Subsidiary SkillsTo help increase firm value,
managers shouldrecognize that valuable skills can be developed
anywhere within the firm’s global network (not just at the
corporate center)incentive systems can encourage local
employees to acquire new skillsdevelop a process to identify
when new skills have been created act as facilitators to transfer
valuable skills within the firm
11-*
SummaryFirms that expand internationally can increase their
profitability and profit growth byEntering markets where
competitors lack similar competenciesRealizing location
economiesExploiting experience curve effectsTransferring
valuable skills within the organization
11-*
When different stages of a value chain are dispersed to those
locations around the world where value added is maximized or
where the costs of value creation are minimized, _____ is (are)

created.
Experience effects
Learning effects
Economies of scale
A global web
Marketing
Lecture Script 6-*
Classroom Performance System Answer: d
11-*
Cost Pressures and Pressures
for Local ResponsivenessFirms that compete in the global
marketplace typically face two types of competitive pressures
pressures for cost reductions
pressures to be locally responsiveThese pressures place
conflicting demands on the firm
11-*
Cost Pressures and Pressures
for Local Responsiveness
Pressures for Cost Reductions and Local Responsiveness
11-*
Pressures for Cost ReductionsPressures for cost reductions are
greatestin industries producing commodity type products that

fill universal needs (needs that exist when the tastes and
preferences of consumers in different nations are similar if not
identical) when major competitors are based in low cost
locationswhere there is persistent excess capacitywhere
consumers are powerful and face low switching costsTo respond
to these pressures, firms need to lower the costs of value
creation
11-*
Pressures for Local ResponsivenessPressures for local
responsiveness arise from
differences in consumer tastes and preferences
differences in traditional practices and infrastructure
differences in distribution channels
host government demandsFirms facing these pressures need to
differentiate their products and marketing strategy in each
country
11-*
Pressures for Local Responsiveness
1. Differences in Consumer Tastes and Preferences When
consumer tastes and preferences differ significantly between
countries, firms face strong pressures for local responsiveness
2. Differences in Infrastructure and Traditional PracticesWhen
there are differences in infrastructure and/or traditional
practices between countries, pressures for local responsiveness
emerge
11-*

Pressures for Local Responsiveness
3. Differences in Distribution Channels A firm’s marketing
strategies may be influenced by differences in distribution
channels between countries
4. Host Government Demands Economic and political demands
imposed by host country governments may necessitate a degree
of local responsiveness
11-*
Pressures for local responsiveness come from all of the
following except
Excess capacity
Host government demands
Differences in consumer tastes and preferences
Differences in distribution channels
Marketing
Lecture Script 6-*
Classroom Performance System Answer: a
11-*
Choosing a Strategy
Question: How do the pressures for cost reductions and local
responsiveness influence a firm’s choice of strategy?
There are four basic strategies to compete in the international
environment
global standardization
localization
transnational

international
Marketing
Lecture Script 6-*
Internet Extra: Cadbury has changed its strategy over the years
to respond to shifting market and competitive conditions. Go to
the company’s web site {http://www.cadbury.com/} to further
explore this and to see real examples of the different strategic
approaches outlined in this chapter.
Click on Investors, then on Our Vision and Strategy. From this
point, you can explore why the company is in its various
products lines and what it expects to achieve, where the
company is today, and why, the company’s structure and
organization, and where the company wants to go in the future.
11-*
Global Standardization Strategy
Question: When does a global standardization strategy make
sense?
A global standardization strategy focuses on increasing
profitability and profit growth by reaping the cost reductions
that come from economies of scale, learning effects, and
location economiesThe strategic goal is to pursue a low-cost
strategy on a global scaleThis strategy makes sense when there
are strong pressures for cost reductions and demands for local
responsiveness are minimal
Marketing
Lecture Script 6-*
Management Focus: Vodafone in Japan

Summary
This feature examines the strategy of the United Kingdom’s
Vodafone, the world’s largest provider of wireless telephone
service. As part of its strategy to expand internationally,
Vodafone acquired Japan’s J-Phone in 2002, but later sold the
company for a loss. Analysts believe that the acquisition was
not successful because Vodafone failed to pay attention to local
market conditions in Japan, and instead tried to sell Japanese
consumers a standardized product. Discussion of the feature
can revolve around the following questions:
Suggested Discussion Questions
1. Why do you think that Vodafone was pursuing a global
standardization strategy? How did it hope that this strategy
would boost profitability and profit growth?
Discussion Points: Vodafone’s vision was to build a global
brand using a phone that would work anywhere in the world.
To achieve that vision, the company offered consumers a
standardized product with the same technology regardless of
where they were located. In theory, by offering the same basic
product everywhere, Vodafone would not only capitalize on a
brand name, it would also capitalize on a streamlined
production process. However, the company failed to recognize
that consumers in different locations values different features.
2. Why did the strategy not work in Japan? In retrospect, what
should Vodafone have done differently?
Discussion Points: In Japan, Vodafone was selling primarily to
younger people who did not travel much, and did not value the
global portability of the company’s phones. Instead, Japanese
consumers were more interested in other features like games
and cameras. In retrospect, Vodafone probably should have
paid more attention to local preferences. The company delayed
introduction of phones using 3G technology that would allow
users to watch video clips and teleconference because it wanted
to launch the technology only when it had a phone that would
work inside and outside Japan.
Teaching Tip: To learn more about Vodafone, go to

{http://www.vodafone.com/hub_page.html}.
Lecture Note: To extend this discussion, go to
{http://www.businessweek.com/globalbiz/content/may2008/gb2
0080527_542953.htm?chan=search}.
11-*
Localization Strategy
Question: When does a localization strategy make sense?
A localization strategy focuses on increasing profitability by
customizing the firm’s goods or services so that they provide a
good match to tastes and preferences in different national
marketsThis strategy makes sense when there are substantial
differences across nations with regard to consumer tastes and
preferences, and where cost pressures are not too intense
Marketing
Lecture Script 6-*
11-*
Transnational Strategy
Question: When does a transnational strategy make sense?A
transnational strategy tries to simultaneouslyachieve low costs
through location economies, economies of scale, and learning
effectsdifferentiate the product offering across geographic
markets to account for local differencesfoster a multidirectional
flow of skills between different subsidiariesThis strategy makes
sense when there are both high cost pressures and high

pressures for local responsiveness
Marketing
Lecture Script 6-*
11-*
International Strategy
Question: When does an international strategy make sense?
An international strategy involves taking products first
produced for the domestic market and then selling them
internationally with only minimal local customization This
strategy makes sense when there are low cost pressures and low
pressures for local responsiveness
Marketing
Lecture Script 6-*
11-*
The Evolution of Strategy
Question: Is the choice of strategy static?
As competition increases, international and localization
strategies become less viable To survive, firms may need to
shift to a global standardization strategy or a transnational
strategy in advance of competitors

Marketing
Lecture Script 6-*
Management Focus: The Evolution of Strategy at Procter &
Gamble
Summary
This feature explores the evolution of Procter & Gamble’s
global strategy. In 1915, Procter & Gamble opened its first
foreign operation in Canada. In the 1950s and 1960s, Procter &
Gamble expanded into Western Europe, and then, in the 1970s,
into Japan and other parts of Asia. Throughout this expansion,
the company maintained all product development at its
Cincinnati, Ohio headquarters, while each subsidiary took on
the responsibility for manufacturing, marketing, and
distributing the products. Procter & Gamble shifted its strategy
in the 1990s, closing several foreign locations and moving to a
more regional approach to global markets. More recently, the
company implemented “Organization 2005”, a business unit
approach whereby different units are entirely responsible for
generating profits for a product group. Discussion of this
feature can begin with the following questions:
1. Discuss the evolution of Procter & Gamble’s strategy. Do
you think Procter & Gamble was reactive or proactive in its
approach to strategy in the late 1990s and early 2000s?
Discussion Points: Many students will probably suggest that
Procter & Gamble took a reactive approach to its strategy in the
early 1990s, but was more proactive in the late 1990s and early
2000s. The company’s initial reorganization was a reaction to a
changing marketplace and sluggish profits, however, when it
became apparent that the reorganization attempt was not really
fixing the problems that existed, the company embarked on a
new strategy. This time, rather than simply trying to adjust its
existing strategy as the company had done in 1993, Procter &

Gamble completely dismantled the structure that had been in
place for a quarter of a century and reorganized as a company
ready to operate in a global marketplace.
2. What factors have forced Procter & Gamble to change its
strategy? As a competitor to Procter & Gamble, what can you
learn from the company’s experiences?
Discussion Points: Numerous factors prompted Procter &
Gamble to change its strategy. Because of its country-by-
country approach to the market, the company had extensive
duplication of manufacturing, marketing, and administrative
facilities that were driving up costs. In addition, the retailers
that the company relied on were operating globally and
demanding deeper discounts from Procter & Gamble. With its
new strategy, the company has eliminated these problems.
Now, Procter & Gamble’s competitors are facing many of the
same challenges. Some students will probably suggest that a
key element that competitors can learn from Procter &
Gamble’s experiences is that operating in a global market is
significantly different from selling internationally to individual
markets.
3. How would you characterize Procter & Gamble’s current
strategy? What challenges do you foresee with the new
strategy?
Discussion Points: Students will probably suggest that Procter
& Gamble is trying to take a transnational approach to markets.
The company has reorganized into business units so that each
unit is responsible for its own profits. Each unit has been
directed to develop global brands where possible, and keep
costs low. While this new approach eliminates many of the
problems facing the company under its old structure, it does
introduce a new challenge in that there is little communication
between business units which effectively minimizes the
possibility of cross-unit learning and information sharing. So
far, the new strategy seems to be working. Profits at Proctor &
Gamble were up for the time period 2003-2007. Interestingly,
the company’s competitors – Kimberly-Clark and Colgate-

Palmolive reported more mixed results for the same time period.
Teaching Tip: To explore Procter & Gamble’s international
strategy in more depth, go to
{http://www.pg.com/en_US/index.jhtml}. Click on “P&G
Global Operations” to compare the company’s domestic
operations to those in numerous foreign locations.
Lecture Note: Unilever, a competitor to Proctor& Gamble, has
recently made changes to its strategy that could threaten Proctor
& Gamble’s success. To extend this discussion consider
{http://www.businessweek.com/innovate/content/mar2008/id200
8035_909480.htm?chan=search}.
11-*
When pressures are high for local responsiveness, but low for
cost reductions, a _______ makes sense.
Global standardization strategy
International strategy
Transnational strategy
Localization strategy
Marketing
Lecture Script 6-*
Classroom Performance System Answer: d
11-*
Strategic Alliances
Question: What is a strategic alliance?
Strategic alliances refer to cooperative agreements between
potential or actual competitorsExamples includeformal joint

venturesshort term contractual arrangementsThe number of
international strategic alliances has risen significantly in recent
decades
Marketing
Lecture Script 6-*
11-*
The Advantages of
Strategic Alliances
Question: Why form a strategic alliance?
Strategic alliances are attractive because they facilitate entry
into a foreign marketallow firms to share the fixed costs (and
associated risks) of developing new products or processesbring
together complementary skills and assets that neither partner
could easily develop on its owncan help establish technological
standards for the industry that will benefit the firm
Marketing
Lecture Script 6-*
Management Focus: Cisco and Fujitsu
Summary
This feature examines Cisco Systems’ joint venture with
Fujitsu. Cisco, the world’s largest manufacturer of Internet
routers, entered the alliance in 2004 in an effort to jointly
develop the next generation of high end routers for sales in
Japan. Cisco believed the Japanese market was important, and

wanted to expand its presence there. Fujitsu wanted the routers
so that it can offer end-to-end communications solutions to its
customers. Discussion of the feature can begin with the
following questions.
1. What did Cisco hope to gain by forming an alliance with
Fujitsu? What risks are involved for Cisco with this alliance?
How can Cisco limit those risks?
Discussion Points: Cisco hoped to achieve several goals
through its alliance with Fujitsu. The company hoped that by
sharing R&D, new product development would be quicker, that
combining its technology expertise with Fujitsu’s production
expertise would result in more reliable products, that it would
gain a bigger sales presence in Japan, and that by bundling its
routers together with Fujitsu’s telecommunications equipment,
the alliance could offer end-to-end communications solutions to
customers. Students will probably suggest that the biggest risk
for Cisco is that by sharing its proprietary technology with
Fujitsu, it could potentially create a competitor. To avoid this,
Cisco will need to take steps to protect its technology by
making sure that safeguards are written into alliance
agreements, and it will need to ensure that it is getting an
equitable gain from the agreement.
2. What did Fujitsu bring to the alliance? Why was it important
for Cisco to have a Japanese presence? What were the
advantages of the alliance for Fujitsu?
Discussion Points: One of the key attractions of an alliance with
Fujitsu’s was the company’s strong presence in the Japanese
market. Japan is at the forefront of second generation high
speed Internet based telecommunications networks, and Cisco
wanted to be a part of that market. For Fujitsu, the alliance
meant that it could fill the gap in its product line for routers,
reduce product development costs and time, and produce more
reliable products.
3. What does the alliance between Cisco and Fujitsu mean to
other competitors in the router market?

Discussion Points: For other competitors in the market, the
alliance between Cisco and Fujitsu is significant. Together, the
companies can offer one-stop shopping end-to-end
communications solutions. Furthermore, because the two
companies are pooling their resources, development costs are
lower, which will put additional pressure on competitors.
Teaching Tip: To find out more about Cisco and Fujitsu,
students can visit the company web sites at
{http://www.cisco.com/} and {http://www.fujitsu.com/global/}.
In addition, a new release about the Cisco- Fujitsu alliance is
available at
{http://www.cisco.com/web/partners/pr67/fujitsu/index.html}.
11-*
The Disadvantages of
Strategic Alliances
Question: What are the drawbacks of strategic alliances?
Strategic alliances can give competitors low-cost routes to new
technology and marketsUnless a firm is careful, it can give
away more in a strategic alliance than it receives
Marketing
Lecture Script 6-*
11-*
Making Alliances Work
Question: How can firms increase the success of their
alliances?

Many international strategic alliances run into problemsThe
success of an alliance seems to be a function of three main
factors
partner selection
alliance structure
the manner in which the alliance is managed
Marketing
Lecture Script 6-*
11-*
1. Partner Selection A good partner helps the firm achieve its
strategic goals and has the capabilities the firm lacks and that it
valuesshares the firm’s vision for the purpose of the
alliancedoes not expropriate the firm’s technological know-how
while giving away little in return
Marketing
Lecture Script 6-*
11-*
2. Alliance StructureA good alliance shouldbe designed to make

it difficult to transfer technology not meant to be
transferredhave contractual safeguards to guard against the risk
of opportunism by a partnerinvolve an agreement in advance to
swap skills and technologies to ensure a chance for equitable
gainextract a significant credible commitment from the partner
in advance
Marketing
Lecture Script 6-*
11-*
3. Managing the Alliance A good alliance requires managers
from both companies to build interpersonal relationships should
promote learning from alliance partnersshould promote the
diffusion of learned knowledge throughout the organization
Marketing
Lecture Script 6-*
11-*
Critical Discussion Question
1. In a world of zero transportation costs, no trade barriers, and
non-trivial differences between nations with regard to factor
endowments, firms must expand internationally if they are to

survive. Discuss.
Marketing
Lecture Script 6-*
Answer: Given differences in countries with respect to factor
endowments, the theory of comparative advantage suggests that
different activities should take place in the countries that can
perform them most efficiently. If there are also no barriers or
costs to trade, then it is likely that a lot of industries will be
based out of the countries that provide the best set of factor
endowments. Firms located in sub-optimal locations, will either
have to expand internationally or switch to a different industry
where the factor endowments are in their favor. For firms
already located in the countries with the most favorable factor
endowments for their industry, however, there may not be a
need to expand internationally. The firm may be content to
simply focus on the domestic market. But if the firm does want
to expand internationally, it may be able to do so via licensing
or exporting, and need not necessarily undertake foreign direct
investment. Thus, not only in theory, but also in practice many
firms are able to survive quite well without having to expand
internationally.
11-*
2. Plot the position of the following firms on Figure 11.8 -
Procter & Gamble, IBM, Nokia, Coca-Cola, Dow Chemical, US
Steel, and McDonald's. In each case justify your answer.
Marketing

Lecture Script 6-*
Answer: Procter & Gamble would be located in the middle
right-hand portion of the graph. This is a position of high
pressures for local responsiveness and moderate pressures for
cost reductions. P&G sells personal and home care products,
which do face pressures for local responsiveness. Although
these products are not commodities, there are many competitors
in the industry, which implies a moderate degree of cost
pressures. IBM would be in the upper middle portion of the
graph. This is a position of moderate pressure for local
responsiveness and high pressure for cost reductions. There is a
moderate amount of pressure for local responsiveness for IBM
products, due to language differences and differing voltage
requirements for electronic products across countries. IBM is
in a very competitive industry, and cost pressures are high.
Nokia manufactures wireless handsets and infrastructures such
as switches. Nokia, because it must customize its product
offering according to the technical standards prevailing in a
given country would be in the lower right hand side of the
graph. Dow Chemical and U.S. Steel would both be located in
the upper left-hand portion of the graph. Both Dow and U.S.
Steel sell products that are commodity-like by nature. As a
result, cost pressures would be high and local responsiveness
pressures would be low for these products. Finally,
McDonald’s and Coca Cola would be located in the middle left-
hand portion of the graph. Pressures for local responsiveness
would be low because a selling feature for both companies is
the “American experience,” and cost reduction pressures would
be moderate.
11-*
3. Re-Read the Management Focus box on Procter & Gamble
and then answer the following questions:

a) What strategy was Procter & Gamble pursuing when it first
entered foreign markets in the period up until the 1980s?
b) Why do you think this strategy became less viable in the
1990s?
c) What strategy does Procter & Gamble appear to be moving
toward? What are the benefits of this strategy? What are the
potential risks associated with it?
Marketing
Lecture Script 6-*
Answer: Procter & Gamble initially expanded internationally
when it entered Canada in 1915. However, even after
expanding into Western Europe and Asia in the 1960s and
1970s, the company sill maintained all product development at
its headquarters location in Cincinnati, Ohio. Subsidiary units
were responsible for manufacturing, marketing, and distributing
the products in their local markets. However, by the 1990s
several factors caused Procter & Gamble to reconsider its
international strategy. Barriers to low-cost trade were falling
rapidly worldwide, and fragmented national markets were
merging into larger regional or global markets. In addition, the
retailers through which the company distributed its products
were growing larger and more global, and were demanding price
discounts from Procter & Gamble. The company now appears to
be moving towards a transnational strategy in which there are
seven self-contained business units, each responsible for the
complete generation of profits from its products, and for
manufacturing, marketing, and development. A transnational
strategy is complex, and the company will have to balance the
demands of responding to local market needs for its consumer
products, while at the same time reaching its cost savings goals.
11-*

4. What do you see as the main organizational problems that are
likely to be associated with the implementation of a
transnational strategy?
Marketing
Lecture Script 6-*
Answer: Simultaneously trying to achieve cost efficiencies,
global learning, and local responsiveness places difficult and
contradictory demands on an organization. Managing these
conflicting demands requires the setting of control and
motivational policies for people and organizations that force
balancing of these demands at multiple levels within firms. The
organizational challenges involve managing these inherent
conflicts to resolutions that serve the best interests of the firm
overall.
11-*
5. Reread the Management Focus box on the alliance between
Cisco and Fujitsu. What are the benefits to Cisco and Fujitsu
respectively of the alliance? What are the risks to Cisco? How
can Cisco mitigate those risks?
Marketing
Lecture Script 6-*
Answer: The Cisco-Fujitsu venture was important to both
companies as they develop the next generation of routers. The
firms will be able to pool their R&D efforts, share

complementary technology, and get products to market more
quickly. The two companies also believe that the combination
of Cisco’s technology together with Fujitsu’s production
expertise will enable them to produce more reliable products.
In addition, the alliance provides Cisco with access to the
Japanese market, a market that it believes will be important in
the future, and a more complete product line for Fujitsu. Cisco
will have to ensure that it puts proper safeguards in place as it
shares its technology with Fujitsu, or it risks creating a
competitor.

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