Business Strategies Test 3 Review

Business Strategies Test 3 Review - B usiness Strategies...

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Business Strategies Test 3 Review Many firms choose direct investment in assets (ex. Establishing new subsidiaries, making acquisitions or building joint ventures) over indirect investment because it provides better protection for their assets. Ways to enter international markets include: exporting domestic operations, licensing products or services, forming joint ventures with international partners, acquiring a foreign based firm, or establishing a new subsidiary. International diversification can extend product life cycles, provides incentives for more innovation, and produce above-average returns. These benefits are tempered by political and economic risks and the problem of managing a complex international firm with operations in multiple countries. One reason a firm may pursue an international diversification is to extend a products life cycle. Benefits of International strategy include increased market size, greater returns on major capital investments or on investments in new products and processes, greater economies of scale/scope and competitive advantage through location. o Competitive advantage through location Access to low cost labor Critical resources Customers The size of an international market affects a firm’s willingness to invest in R&D to build competitive advantages in that market. Larger markets usually offer higher potential returns and thus pose less risk for a firm’s investments. Most firms prefer to invest more heavily in those countries with scientific knowledge Firms may also be able to exploit core competencies in international markets through resource and knowledge sharing between units and network partners across country borders. This sharing generates synergy, which helps the firm produce higher-quality goods or services at lower cost.
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Firms choose to use on or both of two basic types of international strategies: business level international strategy and corporate-level international strategy. o Business level strategies Cost leadership Differentiation Focused cost leadership Focused differentiation Integrated cost leadership/differentiation o Corporate Level-strategies (utilize a core competence based on difficult-to-Imitate resources and capabilities) Multidomestic Strategic and operating decisions are decentralized to the strategic business unit in each country so as to allow that unit to tailor products to the local market. Focuses on competition within each country. Markets differ and are segmented by country boundaries. Uses a highly decentralized approach, allowing each division to focus on a geographic area, region, or country. * Low need for global integration High need for local responsiveness
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Business Strategies Test 3 Review - B usiness Strategies...

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