Chapter 11 for Spring 2011 - Chapter11...

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International Strategies Chapter 11
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International Strategies? Last chapter covered under corporate strategy Last chapter, period Companies that operate in multiple countries are  pursuing an international strategy Could be just one or a few products Pursuing international strategies is very common  among larger corporations Many large U.S. firms earn significant revenues outside the  U.S. (see page 309) Not limited to large firms 2
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Value of International Strategies To be valuable, international strategies have to  exploit economies of scope Value comes in form of: Reduction in costs Increase in revenues 3
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Value of International Strategies Main potential sources of scope economies from  international strategies (Table 11.1) (1) Company gains access to new customers for existing  products or services (2) Company gains access to low-cost factors of production E.g., labor (3) Company develops new core competencies (4) Company leverages existing core competencies in new ways (5) Company manages corporate risk 4
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Value of International Strategies (Scope Economy #1) Gaining access to new  customers for existing products or services Maybe the most obvious scope economy 5
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Value of International Strategies Scope economies from access to new customers are  realized to the extent that nondomestic customers  are: Willing  to buy products or services Differences in preferences may mean that companies have to revise  their products/service for different geographic markets One key kind of preference difference is physical standards E.g., size of refrigerators Tastes may also differ More challenging to discern “Pepsi will bring your ancestors back from the dead” 6
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Value of International Strategies Scope economies from access to new customers is  realized to the extent that nondomestic customers  are: Able  to buy products or services Three main impediments Insufficient wealth Inadequate distribution channels Trade barriers 7
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Value of International Strategies Insufficient wealth as an impediment to purchases by  nondomestic consumers Even in developing economies where middle class is growing  rapidly (e.g., India), high-end products may be out of reach Lack of hard currency is a related impediment Hard currencies are ones that are traded in significant markets  (e.g., dollar, Euro) In country with no hard currency, payments received have no  value outside the country Makes it difficult to extract profits If no hard currency, also can’t hedge fluctuations in value of  currency 8
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This note was uploaded on 04/01/2012 for the course MGT 4893 taught by Professor Staff during the Spring '08 term at The University of Texas at San Antonio- San Antonio.

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Chapter 11 for Spring 2011 - Chapter11...

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