Multinational strategy

Question 1

Competitive strategy (market-level)

Answer 1

process of identifying, implementing and controlling the means to satisfy the goals of the firm

refers to actions undertaken to achieve a firm’s goals

the greater the economic value (V-C) the greater the firm’s competitive advantage

2 strategic approaches - differentiation or low-cost

Question 2

Differentiation and above-average profits

Answer 2

Charge higher price, create more value to generate more profitability

Question 3

Low-cost strategy and above-average profits

Answer 3

Low cost can cut costs and keep price same as competitor - profit

Question 4

Competitive pressures and MNE strategy

Answer 4

pressure for cost reduction: keep costs low, realizing economies of scale, standardization and global supply chain

pressure for local responsiveness: adjust to customer needs, sticking to local preferences, customization.

Question 5

What is the pressure to cut costs?

Answer 5

most businesses have to standardize to cut costs.

Question 6

What is the pressure to adapt your offering?

Answer 6

Customise to suit different markets you operate in

Question 7

Strategic choices for international business

Answer 7

Global standardization - high pressure for cost reductions, low local responsiveness

Transnational - high pressure for cost reductions, high local responsiveness

International - low local responsiveness, low pressures for cost reductions

Multidomestic/ localization - high local responsiveness, low pressure for cost reductions.

Question 8

International strategy

Answer 8

A strategy that most international firms deploy. Produces a standard product that is not customised to foreign markets. Much of the supply chain of the firm is in the home country. Works best for strong luxury brands

example - Rolex - manufactures, assembles and tests all its watches exclusively in Switzerland.

Question 9

Localization strategy

Answer 9

Focuses on increasing profitability by customizing goods, services or even business models. Good match to taste and preferences in different national markets - serve diff markets

Question 10

Localizing business models

Answer 10

Offering - value proposition
Operations - value creation, value delivery

Question 11

What else will cause a MNE to do localization in a foreign market?

Answer 11

Culture/tastes/preferences - rules and regulations - politics make MNE have to adapt - quality standards.

Wealth and affordability - make products more cheaper and more affordable for people in developing countries.

Question 12

What are the disadvantages of a localization strategy?

Answer 12

expense - lead to loss of scale economies, adapting a lot of things to suit local conditions

you cannot standardize to reduce costs

threat of brand reputation if adaptation goes wrong

Question 13

Global standardization strategy

Answer 13

standard product not customised to suit any markets. MNE leverage location economies in diff countries and spreads its value of supply chain across the world - diff to international strategy.

low local responsiveness

strong pressure for cost reductions, demands for local responsiveness are minimal

Question 14

Issues with cutting costs strategy

Answer 14

Cutting costs means firms become insensitive to local markets - you create a standard product but is that appropriate in all the countries you operate in. trade-off between low costs and market responsiveness.

Question 15

Transnational strategy

Answer 15

Achieve low costs through location economies, economies of scale and learning effects

differentiate the product offering across geographic markets to account for local differences

centralize or standardize common products or service

cost pressures are intense, pressures for local responsiveness are intense

Question 16

Which strategy is the best for MNEs?

Answer 16

Home replication - adv: leverage home country-based adv, relatively easy to implement. disadv: lack of local responsiveness, may result in foreign customer alienation.

Localisation - adv: maximises local responsiveness, disadv: high costs due to duplication of efforts in multiple countries, too much local autonomy.

Global standardisation - adv: leverages low-cost advantages, disadv: lack of local responsiveness, too much centralized control.

Transnaitonal - adv: cost efficient while locally repsonsive, engages in global learning and diffusion of innovations, disadv: organizationally complex, difficult to implement

Question 17

The best strategy?

Answer 17

depends on the industry, and state of competitiveness in the market at a particular place and time. strategic positions should evolve, strategy has to fit a context

Question 18

Choosing a multinational strategy: some questions..

Answer 18

Do customers from different countries have similar needs?
Can marketing practices and activities be transferred to other countries?
Is there a need for global economies of scale?
Are there cheaper resources in other countries?
Are there barriers to trade in other countries?
What are competitors doing?

Question 19

In summary:

Answer 19

strategy is important for an MNE - guides the company, adapt it to suit conditions, it must be flexible, strategy must be suitable for corporate needs, the industry and the host nation.