INBS 250 INBS 250
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This 4 page Class Notes was uploaded by Maria Notetaker on Thursday September 15, 2016. The Class Notes belongs to INBS 250 at Montclair State University taught by Nahra in Spring 2015. Since its upload, it has received 6 views. For similar materials see Introduction to International Business in International Business at Montclair State University.
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Date Created: 09/15/16
Ch. 13 Friday, March 20, 2015 10:20 AM Strategy: actions that managers take to attain the goals of the firm; focused on making a profit Profitability: rate of return the firm makes on its invested capital Profit growth: percentage increase in net profits over time * Japan built their 2nd plant from the profits of the 1st plant, built their 3rd plant from the profits from 2nd plant To lower the cost of products (to produce more profits) Sell more globally Value creation: first creating value for consumers (how it's going to be perceived, how they're going to be benefitted and given positive results; the feeling/experience) (intangible) Strategies that companies use: o Low cost strategy: lowering costs o Differentiation strategy: adding value to a product so customers are willing to pay more for it (why would you buy one brand over another?) Value chain: different departments within companies have to work together to create an end product o Primary: Research & Development, Production, Marketing and sales, Customer service (create profits) o Supporting activities: Help above depts. (^) do their job: information systems, logistics, human resources Expansion process: How firms can increase profits through international expansion Expand their market Realize location economies: ability to generate value Realize greater cost economies from experience effects Earn a greater return How firms leverage their products and competencies Selling goods or services developed at home internationally Duplicate the successes of home country in new country [changing from market to market; ex: McDonalds in china doesn't serve fries>rice] (core competencies: skills within the firm that competitors cannot easily match or imitate) Location economies Why are experience effects important? Experience curve: duplicating systems they established form market to market; benefiting from success; learning from experiences that help them Economies of scale: reductions in unit cost achieved by producing a large volume of a product (the lower the breakeven point, the higher the profits) Competitive pressures: Pressures for cost reductions > force the firm to lower unit costs o When they are greatest: 1. In industries producing commodity type products that fill universal needs where price is sthe main competitive weapon (universal needs: exist when the tastes and preferences of consumers in different nations are similar if not identical) 2. When major competitors are based in low cost locations 3. Where there is persistent excess capacity 4. Where consumers are powerful and face low switching costs Pressures to be locally responsive > requires the firm to adapt its product to meet local demands in each market *can raise costs o Pressures arise from: 1. Differences in consumer tastes and preferences : strong pressure emerges when consumer tastes and preferences differ significantly between countries (have to adjust their approach) 2. Differences in traditional practices and infrastructures : strong pressure emerges when there are significant differences in infrastructure and/or traditional practices between countries 3. Differences in distribution channels: need to be responsive to differences in distribution channels between countries 4. Host government demands: economic and political demands imposed by host country govs. May require local responsiveness Types of strategies companies can use (domestically and globally) International: take products first produced for the domestic market and sell them internationally (export product from home country) o Makes sense when there are low cost pressures and low pressures for local responsiveness Global standardization: increase profitability and profit growth by reaping the cost reductions from economies of scale, learning effects and location economies (work domestically and globally to minimize cost of changing products over and over again) o Makes sense where there are strong pressures for cost reductions and demands for local responsiveness are minimal Localization: increase profitability by customizing goods or services so that they match tastes and preferences in different national markets (different strategy/approach/features/products in each country) o Makes sense when there are substantial differences across nations (consumer tastes) Transnational: tries to achieve low costs [mix of localization and global standardization] (most difficult) o Makes sense when both cost pressures and local responsiveness are intense 4 P's
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