Universitas Bakrie

FEIS
 MANAGING INTERNATIONAL BUSINESS

 WEEK 8
 Global Strategy:
 Strategy, Industry Structure and value
 Entry Strategy
 Objectives
 To evaluate industry structure, firm strategy, and value creation
 To assess how managers configure and coordinate a value chain
 To explain global integration and local responsiveness
 To introduce the ideas of export and import
 To comprehend why and how companies make foreign direct investments
 To define the major types of collaborative arrangements
Strategy, Industry Structure, And Value
 A planned set of actions that managers take to
make best use of the firm’s resources and core
competences to gain a competitive advantage
 Managers develop international strategies to:
 Allocate scarce resources and configure value-adding activities
on a worldwide scale
 Participate in major markets
 Implement valuable partnerships abroad
 Engage in competitive moves in response to foreign rivals

 When developing strategies, what do

managers examine and decide?
Levels of Company Strategy
 Leading Strategy Perspectives
 What is Industry
 a distinct group of productive or profit-making
enterprises;
 Measuring the standard of Success
 Industry Structure and Change (determine performance
 How companies achieve greatness
 Building Commitment
 Short to long
 Two Prominent strategies
1) Industry Organization Paradigm (structure of the industry)
 Assumptions
 perfect competition --- interesting -- profit
 Many buyers and many sellers---
 Perfect information for both producers and consumers
 Perfect knowledge among firms and buyers
 In reality The fact that competition is not necessarily perfect
2) Great By Choice
 Why one company out perform others.... innovatiness
 Creative manager --- creative value.
 Creating Value
 Value can be defined in a variety of ways
 (economic value, market value, pro forma value, etc.)
and
 can be defined from a number of perspectives (such as
those of customers, employees, stakeholders, or
shareholders).
 central question
 Value proposition (why consumers buy the company’s
product)

 Firms create value either through

 a low-cost leadership strategy
 Cost leaders are well positioned to withstand price wars in
the industry
 a differentiation strategy
 This strategy requires the development of products that
offer unique attributes that are highly valued by customers
and demand a price premium.
 ?????
The Value Chain Framework
systems and solutions
 Using the Value Chain
 Value chain analysis serves to guide managers’ efforts to
build expertise in those value activities that are critical to
reducing costs or improving differentiation.
 Managing the value chain
1. Configuration (concentrated Vs. Disperse)
 Factors that influence the configuration
 The business environment
 Resource cost factor
 Logistics
 Digitization
 Scale economies
1. Coordination (linking the value chain activities)
 identify core competencies, unique skills and/or knowledge
that are better than those of its competitors, and link these
through different parts of the value chain
 Factors that influence coordination
 Operational Obstacles
 Core competence (product development, productivity,
manufacturing expertise, marketing, executive leadership)
 Subsidiary network
 Concerns (national cultures, learning curve, operational
obstacles, subsidiary networks
 Tools: The Five Forces Model of
Industry Structure
SUPPLIER POWER
• Supplier concentration
• Relative bargaining
power

THREAT OF ENTRY INDUSTRY RIVALRY SUBSTITUTE

•Capital requirements •Concentration COMPETITION
•Economies of scale •Diversity of
•Absolute cost advantage competitors • Buyers’ propensity
to substitute
•Product differentiation •Product differentiation
• Relative prices &
•Access to distribution •Excess capacity &
channels exit barriers performance of
substitutes
•Legal/ regulatory barriers •Cost conditions
•Retaliation

BUYER POWER
• Buyers’ price sensitivity
• Relative bargaining
power
 Drivers for Global Integration and
Local Responsiveness
 Drivers for global integration
 The globalization of markets
 Technology helps standardize consumer preferences
 Global products have become popular
 allows for standardization of product design
 The efficiency gains of standardization
 Location, scale, and learning effects
 WTO supports global standards

 Pressures for local responsiveness

 Consumer divergence
 cultural predisposition
 historical legacy
 nationalism
 Host government policies
 fiscal, monetary, and business regulation
Types of Strategy: Integration-Responsiveness (IR)
Grid (II):
4 Generic Strategies
 GLOBAL
 make standardized products
that are marketed with little
adaptation to local conditions
 exploit location economies and
capture scale economies
 The strategy works well when
 the MNE is the cost leader
 low pressure for local
responsiveness
 high pressure for global
integration
INTERNATIONAL
 leverage a company’s core
competencies into Frgn markets
 critical elements of the value
chain centralized headquarters
 The strategy works well when
 the firm has core competencies
that foreign rivals lack
 low pressure for glo integration
 low pressure for local
responsiveness
TRANSNATIONAL
 simultaneously leverages core
competencies worldwide, reduces
costs by exploiting location
economics, and adapts to local
conditions
 The strategy works well when
 global learning and knowledge
flows are emphasized
 high pressure for local
responsiveness
 high pressure for glo integration
MULTI-DOMESTIC
 emphasizes responsiveness to the
unique circumstances that prevail in a
country’s market
 value added activities are adapted to
local markets
 The strategy works well when
 high pressure for local
responsiveness
 low pressure for global integration
When Pressures Interact
Integration/Responsiveness (I/R) Grid