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quiz 3 sheet - CHAPTER 6 I. Reasons For Going International...

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CHAPTER 6 I. Reasons For Going International A. Companies “go international” for different reasons, some reactive (or defensive) and some proactive (or aggressive). Note: The threat of their own decreased competitiveness is the overriding reason many large companies adopt a strategy of aggressive globalization. 1. Reactive Reasons (Defensive) a. Global competition b. Trade barriers c. Customer demands 2. Proactive Reasons (Offensive) a. Economies of Scale: One pressing reason for many large firms to expand overseas is to seek economies of scale. These are achieved when higher levels of output result in spreading fixed costs over more units, thus lowering the per-unit cost. Note: R&D is a major cost to consider. For a more powerful analysis the length of your product life cycle should be considered with R&D costs. b. Growth Opportunities: A mature product or service with restricted growth in its domestic market often has new life in another country where it will be in an earlier stage of its life cycle. 3. Resource access and Cost savings: The prospect of shifting production overseas improves competitiveness at home. 4. Incentives: Governments in countries seeking new infusions of capital and technological know-how often provide incentives to attract multinational corporations. II. Strategic Formulation Process A. The strategy formulation planning is necessary both at the headquarters of a corporation and at each of its subsidiaries. B. Global strategic planning is more complex than domestic strategic planning because of the incidence of more complex variables, such as difficulty in gaining timely information, diversity of geographic locations, and differences in environmental factors (political, legal, cultural, market, and financial processes). Strategic Management Process 1. The first phase of the strategic management process—the planning phase—starts with the company establishing (or clarifying) its mission and the overall objectives of the firm. 2. The second part of the strategic management process is the implementation phase. III.Steps In Developing International Strategy A.Mission and Objectives 1. The mission of an organization is its overall function it performs in society. This mission charts the direction of the company and provides a basis for strategic decision- making. 2. A firm’s global objectives usually fall into the areas of marketing, profitability, finance, production, and research and development 3. Goals for market volume and profitability are usually set higher for international than for domestic operations because of the allowance for greater risk involved. In addition, financial objectives must consider different tax regulations in other countries and exchange rate fluctuations. B. Environmental Assessment
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quiz 3 sheet - CHAPTER 6 I. Reasons For Going International...

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