The International Monetary System.docx

The International Monetary System.docx

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TheInternationalMonetarySystem

TheStrategyofInternationalBusiness

ChapterOutline

OpeningCase:

TheEvolvingStrategyofCoca-Cola

Introduction

StrategyandtheFirm

ValueCreation

StrategicPositioning

Operations:

TheFirmasaValueChain

Organization:

TheImplementationofStrategy

InSum:

StrategicFit

GlobalExpansion,PROFITABILITY,ANDPROFITGROWTH

ExpandingtheMarket:

LeveragingProductsandCompetencies

LocationEconomies

ExperienceEffects

LeveragingSubsidiarySkills

Summary

CostPRESSURESandPRESSURESFORLocalResponsiveness

PressuresforCostReductions

PressuresforLocalResponsiveness

CHOOSINGAStrategY

GlobalStandardizationStrategy

ManagementFocus:

VodafoneinJapan

LocalizationStrategy

TransnationalStrategy

InternationalStrategy

TheEvolutionofStrategy

ManagementFocus:

EvolutionofStrategyatProcter&Gamble

StrategicAlliances

TheAdvantagesofStrategicAlliances

ManagementFocus:

CiscoandFujitsu

TheDisadvantagesofStrategicAlliances

MakingAlliancesWork

SUMMARY

CRITICALTHINKINGANDDISCUSSIONQUESTIONS

ClosingCase:

IKEA–TheGlobalRetailer

LearningObjectives

1.Explaintheconceptofstrategy.

2.Understandhowfirmscanprofitbyexpandingglobally.

3.Understandhowpressuresforcostreductionsandpressuresforlocalresponsivenessinfluencestrategicchoice.

4.Befamiliarwithdifferentstrategiesforcompetinggloballyandtheirprosandcons.

5.Explaintheprosandconsofusingstrategicalliancestosupportglobalstrategies.

ChapterSummary

Thischapterfocusesonthestrategiesthatfirmsusetocompeteinforeignmarkets.Attheoutset,thechapterreviewsthereasonsthatfirmsengageininternationalcommerce,whichrangefromearningagreaterreturnfromdistinctiveskillstorealizinglocationeconomiesbydispersingparticularvaluecreationactivitiestolocationswheretheycanbeperformedmostefficiently.Amajorportionofthechapterisdedicatedtothepressuresthatinternationalfirm'sfaceforcostreductionsandlocalresponsiveness.Thesepressuresplaceconflictingdemandsonfirms.Ontheonehand,costreductionsarebestachievedthroughproductstandardizationandeconomiesofscale.Ontheotherhand,pressuresforlocalresponsivenessrequirefirmstomodifytheirproductstosuitlocaldemands.Thechapteralsodiscussesthefourbasicstrategiesthatfirmsutilizetocompeteininternationalmarkets.Thesestrategiesincludeaglobalstandardizationstrategy,alocalizationstrategy,atransnationalstrategy,andaninternationalstrategy.Theadvantagesanddisadvantagesofeachofthesestrategiesarediscussed.Thechapterconcludeswithadiscussionofinternationalstrategicalliances.

OpeningCase:

TheEvolvingStrategyofCocaCola

Summary

TheopeningcasedescribestheevolutionofCocaCola’sinternationalstrategy.WhenCocaColainitiallybeganitsinternationalexpansion,thecompanytookalocalizedapproachtomarkets.Localsubsidiariesweregivensignificantlatitudeindeterminingwhichproductsweresold,howtheyweremarketedandsoon.Inthe1980sand1990s,thecompanymovedtoamorestandardizedapproach,butthenin2000revertedbacktoamorelocalizedstrategywhichgavecountrymanagersmoreautonomy.Discussionofthecasecanrevolvearoundthefollowingquestions:

QUESTION1:

Usingtheframeworkdevelopedinthischapter,howwouldyoudescribeCocaCola’sstrategyforcompetinginternationallywhenitoriginallyexpandedinternationally?

WhydidCocaColawanttoexpandinternationally?

ANSWER1:

CocaColainitiallybeganitsinternationalexpansionin1902.Justacoupleofdecadeslater,theproductwassoldin76countries,andduringWorldWarII,CocaColamadeadealwiththeU.S.militarytosellCokewhereverthemilitarywent.CocaColawantedtocontinueitsinternationalexpansionbecauseitbelievedthattheU.S.marketwouldeventuallyreachmaturity,andthatgrowthprospectswerebetteroverseas.Formuchofitsinitialexpansion,CocaColafollowedalocalizationstrategy,allowingeachcountryunittomanageitsownoperations.

QUESTION2:

WhydidCocaColachangeitsinitialstrategy?

WhatstrategydidCocaColastarttopursuein2000?

WhatwerethebenefitsofthisstrategytoCocaCola?

Whatwerethedrawbacks?

ANSWER2:

Inthe1980s,CocaColachangeditsstrategyfromalocalizationapproachwhereindividualcountryunitsessentiallyrantheirownoperations,toamorecentralizedapproachwherekeymanagementandmarketingactivitiestookplaceatthecompanyheadquartersinAtlanta.Thecompanyextendedthisstrategytoincludeforeignbottlers.Bytakingequitystakesinthebottlers,CocaColawasabletoexertgreatercontroloverthem.CocaColamadetheshifttotheglobalstandardizationstrategybecauseitbelievedthatbydoingso,thecompanycouldgainsignificanteconomiesofscale.However,by2000,thecompanywasreadytochangeitsstrategyonceagain.CocaColawaslosingmarketsharetocompaniesthatusedamorelocalizedstrategy,andundertheguidanceofitsnewCEO,CocaColabeganonceagaintogivelocalmanagersmoredecisionmakingpower.Thistimehowever,whilegivingcountrymanagerstheautonomytotailorproductdevelopment,pricing,andmarketingtolocalmarkets,thecompanymaintainedsomecontrolattheheadquarters.MoststudentswillprobablyrecognizethatCocaCola’snewstrategyisatransnationalapproach.Thisstrategyallowsthecompanytocombinethebenefitsofbothalocalizationstrategyandaglobalstandardizationstrategy,andatthesametimeleveragegoodideasacrosscountryunits.

TeachingTip:

ToclearlygetafeelforthedifferencesandsimilaritiesinCocaCola’sstrategyinvariousmarkets,studentsshouldgoto{http:

//www.coca-andclickonitssitesaroundtheworld.

ChapterOutlinewithLectureNotes,VideoNotes,andTeachingTips

Introduction

A）Theprimaryconcernsofarinthisbookhasbeenwithaspectsofthelargerenvironmentinwhichinternationalbusinessescompete.Now,ourfocusshiftsfromtheenvironmenttothefirmitselfand,inparticular,totheactionsmanagerscantaketocompetemoreeffectivelyasaninternationalbusiness.

StrategyandtheFirm

A）Afirm’sstrategycanbedefinedastheactionsthatmanagerstaketoattainthegoalsofthefirm.Profitabilitycanbedefinedastherateofreturnthefirmmakesonitsinvestedcapital.Profitgrowthisthepercentageincreaseinnetprofitsovertime.

ValueCreation

B）Thewaytoincreaseprofitabilityistocreatemorevalue.Ingeneral,themorevaluecustomersplaceonthefirm’sproducts,thehigherthepricethefirmcanchargeforthoseproducts.

C）ThevaluecreatedbyafirmismeasuredbythedifferencebetweenV（thepricethatthefirmcanchargeforaproductgivencompetitivepressures）andC（thecostsofproducingtheproduct）.

D）firmscanincreasetheirprofitsintwoways:

byaddingvaluetoaproductsothatcustomersarewillingtopaymoreforitorbyloweringthecosts.Thus,therearetwobasicstrategiesforimprovingafirm’sprofitability-adifferentiationstrategyandalowcoststrategy.

StrategicPositioning

E）MichaelPorternotesthatitisimportantforafirmtobeexplicitaboutitschoiceofstrategicemphasiswithregardtovaluecreationandlowcost,andtoconfigureitsinternaloperationstosupportthatstrategicemphasis.

F）Acentraltenetofthebasicstrategyparadigmisthatinordertomaximizeitslongrunreturnoninvestedcapital,afirmmustdothreethings:

（a）pickapositionontheefficiencyfrontierthatisviableinthesensethatthereisenoughdemandtosupportthatchoice;（b）configureitsinternaloperationssothattheysupportthatposition;and（c）makesurethatthefirmhastherightorganizationstructureinplacetoexecuteitsstrategy.

Operations:

TheFirmasaValueChain

G）Itisusefultothinkofthefirmasavaluechaincomposedofaseriesofdistinctvaluecreationactivities,includingproduction,marketing,materialsmanagement,R&D,humanresources,informationsystems,andthefirminfrastructure.Wecancategorizethesevaluecreationactivitiesasprimaryactivitiesandsupportactivities（seeFigure11.4inthetext）.

LectureNote:

Buildingaproductiveglobalteamisachallengeformanyorganizations.Toextendthisdiscussionconsider{

PrimaryActivities

H）Theprimaryactivitiesofafirmhavetodowithcreatingtheproduct,marketinganddeliveringtheproducttobuyers,andprovidingsupportandafter-saleservicetothebuyersoftheproduct.

SupportActivities

I）Supportactivitiesprovidetheinputsthatallowtheprimaryactivitiesofproductionandmarketingtooccur.Thelogisticsfunctioncontrolsthetransmissionofphysicalmaterialsthroughthevaluechain-fromprocurementthroughproductionandintodistribution.Theefficiencywithwhichthisiscarriedoutcansignificantlyreducethecostofcreatingvalue.

Organization:

TheImplementationofStrategy

J）Thestrategyofafirmisimplementedthroughitsorganization.Thetermorganizationarchitecturecanbeusedtorefertothetotalityofafirm’sorganization,includingformalorganizationalstructure,controlsystemsandincentives,organizationalculture,processes,andpeople（seeFigure11.5inthetext）.

K）Organizationalstructuremeansthreethings.First,theformaldivisionoftheorganizationintosubunits;second,thelocationofdecision-makingresponsibilitieswithinthatstructure;andthird,theestablishmentofintegratingmechanismstocoordinatetheactivitiesofsubunitsincludingcrossfuncti