chapter 7 - international strategy

Question 1

Understand the importance of international expansion as a viable diversification strategy

Answer 1

Managers face many opportunities and risks when they diversify abroad.1 The trade among nations has increased substantially over the years.

In a variety of industries such as semiconductors, automobiles, commercial aircraft, telecommunications, computers, and consumer electronics, it is almost impossible to survive unless firms scan the world for competitors, customers, human resources, suppliers, and technology

Question 2

globalization

Answer 2

The rise of globalization—meaning the rise of market capitalism around the world—has undeniably created tremendous business opportunities for multinational corporations. For example, while smartphone sales grow relatively slowly in Western Europe in 2021, they grew at a much higher rate in Africa, Asia, and the Middle East.

This rapid rise in global capitalism has had dramatic effects on the growth in different economic zones.

Question 3

One of the challenges with globalization is

Answer 3

determining how to meet the needs of customers at very different income levels. In many developing economies, distributions of income remain much wider than they do in the developed world, leaving many living below the poverty line even as the economies grow. The challenge for multinational firms is to tailor their products and services to meet the needs of developing countries. Global corporations are increasingly changing their product offerings to meet the needs of the billions of people in the world living in developing countries.

Question 4

michael porter and the diamond of national advantage (4 factors)

Answer 4

Michael Porter of Harvard University conducted a four-year study in which he and a team of 30 researchers looked at the patterns of competitive success in 10 leading trading nations.

Their research concluded that there are four broad attributes of nations that individually, and as a system, constitute what is termed the diamond of national advantage. In effect, these attributes jointly determine the playing field that each nation establishes and operates for its industries.

These factors are:

Factor endowments. The nation’s position in factors of production, such as skilled labor or infrastructure, necessary to compete in a given industry.
Demand conditions. The nature of home-market demand for the industry’s product or service.
Related and supporting industries. The presence or absence in the nation of supplier industries and other related industries that are internationally competitive.
Firm strategy, structure, and rivalry. The conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry.”

Question 5

diamond of national advantage factor - factor endowments

Answer 5

Factor endowments. The nation’s position in factors of production, such as skilled labor or infrastructure, necessary to compete in a given industry.

Question 6

diamond of national advantage factor - demand conditions

Answer 6

Demand conditions. The nature of home-market demand for the industry’s product or service.

Question 7

diamond of national advantage factor - related and supporting industries

Answer 7

Related and supporting industries. The presence or absence in the nation of supplier industries and other related industries that are internationally competitive.

Question 8

diamond of national advantage factor - firm strategy, structure, and rivalry

Answer 8

Firm strategy, structure, and rivalry. The conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry.”

Question 9

Identify the sources of national advantage; that is, why an industry in a given country is more (or less) successful than the same industry in another country

Answer 9

classical economics suggests that factors of production such as land, labor, and capital are the building blocks that create usable consumer goods and services.

However, companies in advanced nations seeking competitive advantage over firms in other nations create many of the factors of production. For example, a country or industry dependent on scientific innovation must have a skilled human resource pool to draw upon. This resource pool is not inherited; it is created through investment in industry-specific knowledge and talent.

Question 10

demand conditions

Answer 10

Demand conditions refer to the demands that consumers place on an industry for goods and services. Consumers who demand highly specific, sophisticated products and services force firms to create innovative, advanced products and services to meet the demand.

This consumer pressure presents challenges to a country’s industries. But in response to these challenges, improvements to existing goods and services often result, creating conditions necessary for competitive advantage over firms in other count

Question 11

related and supporting industries

Answer 11

Related and supporting industries enable firms to manage inputs more effectively. For example, countries with a strong supplier base benefit by adding efficiency to downstream activities.

Related industries offer similar opportunities through joint efforts among firms. In addition, related industries create the probability that new companies will enter the market, increasing competition and forcing existing firms to become more competitive through efforts such as cost control, product innovation, and novel approaches to distribution.

Question 12

rivalry

Answer 12

Rivalry is particularly intense in nations with conditions of strong consumer demand, strong supplier bases, and high new-entrant potential from related industries.

This competitive rivalry in turn increases the efficiency with which firms develop, market, and distribute products and services within the home country. Domestic rivalry thus provides a strong impetus for firms to innovate and find new sources of competitive advantage

Question 13

intense rivalry forces

Answer 13

This intense rivalry forces firms to look outside their national boundaries for new markets, setting up the conditions necessary for global competitiveness. Among all the points on Porter’s diamond of national advantage, domestic rivalry is perhaps the strongest indicator of global competitive success.

Firms that have experienced intense domestic competition are more likely to have designed strategies and structures that allow them to successfully compete in world markets

Question 14

multinational firms and increasing market size

Answer 14

Many multinational firms are intensifying their efforts to market their products and services to countries such as India and China as the ranks of their middle class have increased over the past decade. The potential is great. An OECD study predicts that consumption by middle-class consumers in Asian markets will grow from $4.9 trillion in 2009 to over $30 trillion by 2020.

Increase Market Size - There are many motivations for a company to pursue international expansion. The most obvious motivation is to increase the size of potential markets for a firm’s products and services

Question 15

arbitrage opportunities

Answer 15

Taking advantage of arbitrage opportunities is a second advantage of international expansion. In its simplest form, arbitrage involves buying something where it is cheap and selling it where it commands a higher price.

A big part of Walmart’s success can be attributed to the company’s expertise in arbitrage.

Question 16

Enhancing a Product’s Growth Potential

Answer 16

Enhancing the growth rate of a product that is in its maturity stage in a firm’s home country but that has greater demand potential elsewhere is another benefit of international expansion.

Question 17

Optimize the Location of Value-Chain Activities

Answer 17

Optimizing the physical location for every activity in the firm’s value chain is another benefit. Recall from our discussions in Chapters 3 and 5 that the value chain represents the various activities in which all firms must engage to produce products and services.

It includes primary activities, such as inbound logistics, operations, and marketing, as well as support activities, such as procurement, R&D, and human resource management. All firms have to make critical decisions as to where each activity will take place

Question 18

Optimizing the location for every activity in the value chain can yield one or more of three strategic advantages:

Answer 18

performance enhancement, cost reduction, and risk reduction

Question 19

Optimizing the location for every activity in the value chain can yield one or more of three strategic advantages: performance enhancement

Answer 19

Microsoft’s decision to establish a corporate research laboratory in Cambridge, England, is an example of a location decision that was guided mainly by the goal of building and sustaining world-class excellence in selected value-creating activities.

This strategic decision provided Microsoft with access to outstanding technical and professional talent. Location decisions can affect the quality with which any activity is performed in terms of the availability of needed talent, speed of learning, and the quality of external and internal coordination.

Question 20

Optimizing the location for every activity in the value chain can yield one or more of three strategic advantages: cost reduction

Answer 20

Two location decisions founded largely on cost-reduction considerations are

(1) Nike’s decision to source the manufacture of athletic shoes from Asian countries such as China, Vietnam, and Indonesia, and
(2) the decision of Volkswagen to locate a new auto production plant in Chattanooga, Tennessee, to leverage the relatively low labor costs in the area as well as low shipping costs due to Chattanooga’s close proximity to both rail and river transportation.

Such location decisions can affect the cost structure in terms of local manpower and other resources, transportation and logistics, and government incentives and the local tax structure.

Question 21

Optimizing the location for every activity in the value chain can yield one or more of three strategic advantages: risk reduction

Answer 21

Given the erratic swings in the exchange ratios between the U.S. dollar and the Japanese yen (in relation to each other and to other major currencies), an important basis for cost competition between Ford and Toyota has been their relative ingenuity at managing currency risks.

One way for such rivals to manage currency risks has been to spread the high-cost elements of their manufacturing operations across a few select and carefully chosen locations around the world. Location decisions such as these can affect the overall risk profile of the firm with respect to currency, economic, and political risks

Question 22

learning oppurtunities

Answer 22

By expanding into new markets, corporations expose themselves to differing market demands, R&D capabilities, functional skills, organizational processes, and managerial practices. This provides opportunities for managers to transfer the knowledge that results from these exposures back to their home office and to other divisions in the firm. Thus, expansion into new markets provides a range of learning opportunities

Question 23

explore reverse innovation

Answer 23

finally, exploring possibilities for reverse innovation has become a major motivation for international expansion. Many leading companies are discovering that developing products specifically for emerging markets can pay off in a big way.

In the past, multinational companies typically developed products for their rich home markets and then tried to sell them in developing countries with minor adaptations. However, as growth slows in rich nations and demand grows rapidly in developing countries such as India and China, this approach becomes increasingly inadequate.”

Question 24

why did reverse innovation become important

Answer 24

Reverse innovation becomes increasingly important because customers and governments in high-income countries are trying to reduce healthcare costs.

Facing significant demographic changes such as an aging population and longer lifespans, high-income countries may be able to benefit tremendously from adopting process innovations invented in the healthcare delivery sector of emerging market

Question 25

potential risks of international expansion

Answer 25

When a company expands its international operations, it does so to increase its profits or revenues. As with any other investment, however, there are also potential risks.

To help companies assess the risk of entering foreign markets, rating systems have been developed to evaluate political and economic, as well as financial and credit, risks.

Euromoney magazine publishes a semiannual “Country Risk Rating” that evaluates political, economic, and other risks that entrants potentially face

Question 26

four main types of risk associated with globalization/international expansion

Answer 26

political
economic
currency
management

Question 27

four main types of risk associated with globalization/international expansion: political risk

Answer 27

generally speaking, the business climate in the United States is favorable. However, some countries around the globe may be hazardous to the health of corporate initiatives because of political risk.

Forces such as social unrest, military turmoil, demonstrations, and violent conflict and terrorism can pose serious threats.

Consider, for example, the tension and violence in the Middle East associated with the revolutions and civil wars in Egypt, Libya, Syria, and other countries.

Such conditions increase the likelihood of destruction of property and disruption of operations as well as nonpayment for goods and services. Thus, countries seen as high risk are less attractive for most types of busines

Question 28

the rule of law

Answer 28

political risk

Another source of political risk in many countries is the absence of the rule of law. The absence of rules or the lack of uniform enforcement of existing rules leads to what might often seem to be arbitrary and inconsistent decisions by government officials. This can make it difficult for foreign firms to conduct business

Question 29

four main types of risk associated with globalization/international expansion: economic risk

Answer 29

The laws, and the enforcement of laws, associated with the protection of intellectual property rights can be a major potential economic risk when entering new countries.

Microsoft, for example, has lost billions of dollars in potential revenue through piracy of its software products in many countries, including China. Other areas of the globe, such as some eastern European nations, have piracy problems as well.

Firms rich in intellectual property have encountered financial losses as imitations of their products have grown due to a lack of law enforcement of intellectual property rights

Question 30

counterfeiting

Answer 30

economic risk

Counterfeiting, a direct form of theft of intellectual property rights, is a significant and growing problem.

The International Chamber of Commerce estimated that the value of counterfeit goods could exceed $1.9 trillion in 2022, over 2 percent of the world’s total economic output. “The whole business has just exploded,” said Jeffrey Hardy, head of the anti-counterfeiting program at ICC. “And it goes way beyond music and Gucci bags.” Counterfeiting has moved well beyond handbags and shoes to include chemicals, pharmaceuticals, and aircraft parts

Question 31

four main types of risk associated with globalization/international expansion: currency risk

Answer 31

Currency fluctuations can pose substantial risks. A company with operations in several countries must constantly monitor the exchange rate between its own currency and that of the host country to minimize currency risks.

Even a small change in the exchange rate can result in a significant difference in the cost of production or net profit when doing business overseas. When the U.S. dollar appreciates against other currencies, for example, U.S. goods can be more expensive to consumers in foreign countries.

At the same time, however, appreciation of the U.S. dollar can have negative implications for American companies that have branch operations overseas

Question 32

four main types of risk associated with globalization/international expansion: management risk

Answer 32

Management Risks - Management risks may be considered the challenges and risks that managers face when they must respond to the inevitable differences that they encounter in foreign markets.

These take a variety of forms: culture, customs, language, income levels, customer preferences, distribution systems, and so on. As we will note later in the chapter, even in the case of apparently standard products, some degree of local adaptation will become necessary

Question 33

Global dispersion of value chains: outsourcing and offshoring

Answer 33

A major trend has been the dispersion of the value chains of multinational corporations across different countries; that is, the various activities that constitute the value chain of a firm are now spread across several countries and continents. Such dispersion of value occurs mainly through increasing offshoring and outsourcing

Question 34

outsourcing

Answer 34

Outsourcing occurs when a firm decides to use other firms to perform value-creating activities that were previously performed in-house.40 It may be a new activity that the firm is perfectly capable of doing but chooses to have someone else perform for cost or quality reasons. Outsourcing can be to either a domestic or foreign firm.

Question 35

offshoring

Answer 35

Offshoring takes place when a firm decides to shift an activity that it was performing in a domestic location to a foreign location.

For example, both Microsoft and Intel now have R&D facilities in India, employing a large number of Indian scientists and engineers. Often, offshoring and outsourcing go together; that is, a firm may outsource an activity to a foreign supplier, thereby causing the work to be offshored as well

Question 36

hidden costs of offshoring

Answer 36

1. total wage costs
   > Labor cost per hour may be significantly lower in developing markets, but this may not translate into lower overall costs. If workers in these markets are less productive or less skilled, firms end up with a higher number of hours needed to produce the same quantity of product
2. indirect costs
   >In addition to higher labor costs, there are also a number of indirect costs that pop up. If there are problems with the skill level of workers, the firm will find the need for more training and supervision of workers, more raw material and greater scrap due to the lower skill level, and greater rework to fix quality problems.
3. increased inventory
4. reduced market responsiveness
   > The long supply lines from low-cost countries may leave firms less responsive to shifts in customer demands. This may damage their brand image and also increase product obsolescence costs, as they may have to scrap or sell at a steep discount products that fail to meet quickly changing technology standards or customer tastes.
5. coordination costs
   > coordinating product development and manufacturing can be difficult with operations undertaking different tasks in different countries. This may hamper innovation. It may also trigger unexpected costs, such as paying overtime in some markets so that staff across multiple time zones can meet to coordinate their activities.
6. intellectual property rights
7. wage inflation

Question 37

four basic types of international strategies

Answer 37

international,
global,
multidomestic,
transnational.

Question 38

Two Opposing Pressures: Reducing Costs and Adapting to Local Markets - Theodore Levitt

Answer 38

Many years ago, the famed marketing strategist Theodore Levitt advocated strategies that favored global products and brands. He suggested firms should standardize all of their products and services for all their worldwide markets. Such an approach would help a firm lower overall costs by spreading its investments over as large a market as possible.

Question 39

Two Opposing Pressures: Reducing Costs and Adapting to Local Markets:

Levitt’s approach rested on three key assumptions

Answer 39

1. Customer needs and interests are becoming increasingly homogeneous worldwide.
2. People around the world are willing to sacrifice preferences in product features, functions, design, and the like for lower prices at high quality.
3. Substantial economies of scale in production and marketing can be achieved through supplying global markets

Question 41

Two Opposing Pressures: Reducing Costs and Adapting to Local Markets:

Levitt’s approach rested on three key assumptions…

First assumption

Answer 41

he increasing worldwide homogeneity of customer needs and interests—consider the number of product markets, ranging from watches and handbags to soft drinks and fast foods. Companies have identified global customer segments and developed global products and brands targeted to those segments. Also, many other companies adapt lines to idiosyncratic country preferences and develop local brands targeted to local market segments”

“For example, Nestlé’s line of pizzas marketed in the United Kingdom includes cheese with ham and pineapple topping on a French bread crust. Similarly, Coca-Cola in Japan markets Georgia (a tonic drink) as well as Classic Coke and Hi-C.”

Question 42

Two Opposing Pressures: Reducing Costs and Adapting to Local Markets:

Levitt’s approach rested on three key assumptions…

Second assumption

Answer 42

Consider the second assumption—the sacrifice of product attributes for lower prices. While there is invariably a price-sensitive segment in many product markets, there is no indication this is increasing.

In contrast, in many product and service markets—ranging from watches, personal computers, and household appliances to banking and insurance—there is a growing interest in multiple product features, product quality, and service

Question 43

Two Opposing Pressures: Reducing Costs and Adapting to Local Markets:

Levitt’s approach rested on three key assumptions…

Third assumption

Answer 43

Finally, the third assumption is that significant economies of scale in production and marketing could be achieved for global products and services. Although standardization may lower manufacturing costs, such a perspective does not consider three critical and interrelated points.

First, as we discussed in Chapter 5, technological developments in flexible factory automation enable economies of scale to be attained at lower levels of output and do not require production of a single standardized product.

Second, the cost of production is only one component, and often not the critical one, in determining the total cost of a product.

Third, a firm’s strategy should not be product-driven. It should also consider other activities in the firm’s value chain, such as marketing, sales, and distribution

Question 44

The opposing pressures that managers face place conflicting demands on firms as they strive to be competitive. On the one hand, competitive pressures require that firms do what they can to

Answer 44

lower unit costs

so that consumers will not perceive their product and service offerings as too expensive. This may lead them to consider locating manufacturing facilities where labor costs are low and developing products that are highly standardized across multiple countries.

Question 45

In addition to responding to pressures to lower costs, managers must strive to be

Answer 45

responsive to local pressures in order to tailor their products to the demand of the local market in which they do business.

This requires differentiating their offerings and strategies from country to country to reflect consumer tastes and preferences and making changes to reflect differences in distribution channels, human resource practices, and governmental regulations.

Question 46

“The two opposing pressures result in four different basic strategies that companies can use to compete in the global marketplace:

Answer 46

pressures:
1. to lower costs
2. for local adaptation

international, global, multidomestic, and transnational.

The strategy that a firm selects depends on the degree of pressure that it is facing for cost reductions and the importance of adapting to local market

Question 47

The two opposing pressures result in four different basic strategies that companies can use to compete in the global marketplace:

high pressure to lower costs
low pressure for local adaptation

Answer 47

global strategy

Question 48

The two opposing pressures result in four different basic strategies that companies can use to compete in the global marketplace:

high pressure to lower costs
high pressure for local adaptation

Answer 48

transnational strategy

Question 49

The two opposing pressures result in four different basic strategies that companies can use to compete in the global marketplace:

low pressure to lower costs
low pressure for local adaptation

Answer 49

international strategy

Question 50

The two opposing pressures result in four different basic strategies that companies can use to compete in the global marketplace:

low pressure to lower costs
high pressure for local adaptation

Answer 50

multidomestic strategy

Question 51

international strategy

(Identify the advantages and disadvantages associated with each of the four basic strategies: international, global, multidomestic, and transnational)

Answer 51

An international strategy is based on diffusion and adaptation of the parent company’s knowledge and expertise to foreign markets. Country units are allowed to make some minor adaptations to products and ideas coming from the head office, but they have far less independence and autonomy compared to multidomestic companies.

The primary goal of the strategy is worldwide exploitation of the parent firm’s knowledge and capabilities. All sources of core competencies are centralize

risks:
1. Different activities in the value chain typically have different optimal locations
2. The lack of local responsiveness may result in the alienation of local customers

Question 52

Strengths and limitations of international strategies in the global marketplace

Answer 52

strengths
- leverage and diffusion of a parent firm’s knowledge and core competencies
- lower costs because of less need to tailor products and services

limitations
- limited ability to adapt to local markets
- inability to take advantage of new ideas and innovations occurring in local markets

Question 53

global strategy

(Identify the advantages and disadvantages associated with each of the four basic strategies: international, global, multidomestic, and transnational)

Answer 53

As indicated in Exhibit 7.3, a firm whose emphasis is on lowering costs tends to follow a global strategy. Competitive strategy is centralized and controlled to a large extent by the corporate office. Since the primary emphasis is on controlling costs, the corporate office strives to achieve a strong level of coordination and integration across the various businesses.

Firms following a global strategy strive to offer standardized products and services as well as to locate manufacturing, R&D, and marketing activities in only a few locations.

A global strategy emphasizes economies of scale due to the standardization of products and services and the centralization of operations in a few locations. As such, one advantage may be that innovations that come about through efforts of either a business unit or the corporate office can be transferred more easily to other locations. Although costs may be lower, the firm following a global strategy may, in general, have to forgo opportunities for revenue growth since it does not invest extensive resources in adapting product offerings from one market to another

A global strategy is most appropriate when there are strong pressures for reducing costs and comparatively weak pressures for adaptation to local markets. Economies of scale become an important consideration. Advantages to increased volume may come from larger production plants or runs as well as from more efficient logistics and distribution networks.

risks:
- A firm can enjoy scale economies only by concentrating scale-sensitive resources and activities in one or few locations.
- The geographic concentration of any activity may also tend to isolate that activity from the targeted markets.
- Concentrating an activity in a single location also makes the rest of the firm dependent on that location.

Question 54

strengths and limitations of global strategies

Answer 54

strengths
- strong integration occurs across various businesses
- standardization leads to higher economies of scale, which lower costs
- creation of uniform standards of quality throughout the world is facilitated

limitations
- limited ability exists to adapt to local markets
- concentration of activities may increase dependence on a single facility
- single locations may head to higher tariffs and transportation costs

Question 55

multidomestic strategy

(Identify the advantages and disadvantages associated with each of the four basic strategies: international, global, multidomestic, and transnational)

Answer 55

According to Exhibit 7.3, a firm whose emphasis is on differentiating its product and service offerings to adapt to local markets follows a multidomestic strategy. Decisions evolving from a multidomestic strategy tend to be decentralized to permit the firm to tailor its products and respond rapidly to changes in demand. This enables a firm to expand its market and to charge different prices in different markets.

For firms following this strategy, differences in language, culture, income levels, customer preferences, and distribution systems are only a few of the many factors that must be considered. Even in the case of relatively standardized products, at least some level of local adaptation is often necessary.

Consider, for example, the Oreo cookie. Kraft Heinz has tailored the iconic cookie to better meet the tastes and preferences in different markets. For example, Kraft Heinz has created green tea Oreos in China, chocolate and peanut butter Oreos for Indonesia, and banana and dulce de leche Oreos for Argentina

risks:
- Typically, local adaptation of products and services will increase a company’s cost structure.
- At times, local adaptations, even when well intentioned, may backfire (The optimal degree of local adaptation evolves over time.)

Question 56

strengths and limitations of multi-domestic strategies

Answer 56

strengths
- ability to adapt products and services to local market conditions
- ability to detect potential opportunities for attractive niches in a given market enhancing revenue

limitations
- decreased ability to realize cost savings through scale economies
- greater difficulty in transferring knowledge across countries
- possibility of leading to “over adaptation” as conditions change

Question 57

transnational strategy

(Identify the advantages and disadvantages associated with each of the four basic strategies: international, global, multidomestic, and transnational)

Answer 57

A transnational strategy strives to optimize the trade-offs associated with efficiency, local adaptation, and learning. It seeks efficiency not for its own sake but as a means to achieve global competitiveness. It recognizes the importance of local responsiveness as a tool for flexibility in international operations. Innovations are regarded as an outcome of a larger process of organizational learning that includes the contributions of everyone in the firm

Also, a core tenet of the transnational model is that a firm’s assets and capabilities are dispersed according to the most beneficial location for each activity. Thus, managers avoid the tendency to either concentrate activities in a central location (a global strategy) or disperse them across many locations to enhance adaptation (a multi-domestic strategy)

risks
- The choice of a seemingly optimal location cannot guarantee that the quality and cost of factor inputs (i.e., labor, materials) will be optimal.
-Although knowledge transfer can be a key source of competitive advantage, it does not take place automatically

Question 58

transnational strategy and primary activities

Answer 58

The Nestlé example illustrates a common approach in determining whether or not to centralize or decentralize a value-chain activity.

Typically, primary activities that are downstream (e.g., marketing and sales, and service), or closer to the customer, tend to require more decentralization in order to adapt to local market conditions.

On the other hand, primary activities that are upstream (e.g., logistics and operations), or further away from the customer, tend to be centralized. This is because there is less need for adapting these activities to local markets and the firm can benefit from economies of scale. Additionally, many support activities, such as information systems and procurement, tend to be centralized in order to increase the potential for economies of scale.

Question 59

BRICS Countries Video

Answer 59

Market globalization
Half world’s output comes from emerging markets

Brazil, Russia, India, China, South Africa

Operates by consensus
Economic cooperation and trade development
New chair every year
Divided over expansion
Brazil skeptical; India undecided
Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the United Arab Emirates added into BRICS in 2024

One of the challenges with globalization is determining how to meet the needs of customers at very different income levels
Less competition in impoverished countries because companies don’t know how to make a product to make a profit in these countries

Question 60

Porter’s diamond model video

Answer 60

Competitive internationally
Michael porter
Based on location advantages

Firm strategy, Structure and rivalry
Dynamics of industry and country influence

Demand conditions
A clearer or earlier picture of emerging buyer needs
Early warning indicators
Spread of the tastes

Factor conditions
Basic
Natural resources
Advanced
Human resources and research capabilities
Highly specialized to industry’s needs

Related and supporting industries
Industrial production does not take place in isolation
Suppliers, component manufacturers, distributors

Government and chance
government
Stimulating early demand, infrastructure, education system, promoting domestic rivalry

Chance
Natural disasters and war

Question 61

China and Home depot video

Answer 61

You can own homes now
Home depot tried to have store in China

Failed because..
Everything that worked for US consumers did not work for Chinese consumers
Lifestyle and mentality towards manual labor

1. Locations were in the suburbs but in China wealthier residents are in the city
2. Product and prices missed Chinese middle-class
3. DIY isn’t impressive there.. You can’t afford to have someone do it for you?

Question 62

Tesco video

Answer 62

Recession hit and economy in US cities ruined things for them
Locations in the west
Affected most by recession
Arizona, california and nevada
Consumers spent less

Wrong side of the highway
Grocery shoppers in US shop in bulk, but Tescos are small