Chapter 12 Flashcards
(21 cards)
What is profitability?
The rate of return the firm makes on its invested capital
What is profit growth?
The percentage increase in net profits over time
What is value creation?
Activities that increase the value of goods or services to consumers
What are Michael Porter’s two basic strategies for value creation?
Differentiation and Low-cost
What are primary activities in the value chain?
R&D, production, marketing, sales, and customer services.
What are support activities in the value chain?
Information systems, company infrastructure, logistics, and human resources
How can firms expand their domestic products?
Selling their products in international markets
How to realize location economies?
Dispersing individual value creation activities to locations where they can be performed most effectively and efficiently
How to earn a greater return?
Leverage valuable skills in foreign operations and transferring them to other entities within the firms global network
What is the experience curve?
A reduction in production costs that occur over the life of a product.
What are learning effects?
Cost savings that come from learning by doing
What are economies of scale?
Reductions in unit cost achieved by producing a large volume of a product
What are some pressures for cost reduction?
When major competitors are based in low-cost locations or when there is excess capacity
What are some pressures for local responsiveness?
Differences in tastes, practices, distribution channels, host-government demands, and the rise of regionalism
What firms tend to face high pressures for local responsiveness?
The automobile industry
What is the global standardization strategy?
Focuses on increasing profit by using cost reductions that come from economy of scale, learning effects, and location economies. Strong pressure for cost-reduction and low pressure for local responsiveness
What is the localization strategy?
Increasing profit through customization. Has high pressure for local responsiveness but low pressure for cost reductions
What is a transnational strategy?
Increasing profit through low costs and differentiating product based on regions. High pressure for local responsiveness and cost reductions
What is an international strategy?
Increasing profits by producing locally and selling internationally with little to no customization. Low pressure for local responsiveness and cost reductions
What strategy will be most common if economic nationalism continues to increase?
The Localization Strategy
