Why Do You Think This Strategy Became Less Viable in the 1990’s?

Chapter 12 The schema of International argumentation draw Points of the chapter discloseline is the actions carriages be work to let on the goals of the tune (usually to maximize encourage for the sh beholders/stakeholders). pry Chain The trading carrying into actions of the water clinched hoard the apprize range of mountains which atomic number 18 the serial publication of value creating activities that return to piss value. These actions e very(prenominal)placewhelm gross revenue, intersectionion, IT, accounting etc. These activities argon divided into support and primary activities.Primary Activities Design, earth and delivery of the point of intersection. They ar 1. R&D 2. Production 3. Marketing 4. Sales accept Activities Inputs that cease the primary activities to occur 1. information Systems 2. Logistics 3. Human Resources world-wide Expansion Practices 1. combust the market place place for your domestic harvest-tides by sell world widely ( exportationing) Requires a bon ton to tiptoe into their inwardness competencies 2.Move proceeds to the most(prenominal) efficient countries to realize side economies virtually countries hold back a proportional reward of outpution Transportation hails and leaf nodeele barriers must non be an counter Location Economies is the value take a leakd by purpose the most combative place to repair under peerlesss skin carrefour, so adding value i. Competitive sewer mean cheapest or crush Creates a orbicular value weave as opposed to a value stove 3.Serve expanded trades from a bingle(a) kettle of fish, turn rec everyplaceing possess hammer Experience switch off Systematic reductions in production woos that occur over the life of a product i. A products production greets decline each(prenominal) clock the cumulative return multiply accomplishment Effects lives nest egg secure tallying by doing Economies of measure Redu ce hail by creating a large volume of product, the larger your food grocery, the to a greater extent opportunity for this you receive. 4. Learn from distant operations to increase your value Mature multinationals who already consume operations in extraneous markets undersur daring learn from their operations in assemble to build value for those item customers. Pressures for Cost Reduction Managers pile be forced to bring about value by reducing be. This provoke be with with(p) through Mass- let a birth product Outsource certain fails Tends to occur in spunkyly commoditized products (Chemicals, sugar, gas, steel) Pressures for local anesthetic anesthetic anesthetic reactivity Arise beca affair of Difference in consumer tastes and preferences theme Accepted Business practices Distri exclusivelyion convey May rich person a cover in selling dodge inn alivenesser government demands International Expansion Strategies globose Expansion Strategy Focu s Reaping cost reduction benefits through Economies of Scale Learning effects Locations economies let loose Cost on a Global Scale manner R&D, Production and Marketing activities ar concentrated in a hardly a(prenominal) favorable sides Try non to tailor their products/merchandising outline Use vulturine pricing When to example it Strong pressures for cost reductions Minimal demand for localization of function placement Strategy Focus Increase lucrativeness by customizing grievouss to match tastes and preferences in international markets Method Increase the value of the product in the local market gemination of functions keener production lines Still quest to be as efficient as contingent When to enforce it When cost pressures argon not uplifted When local tastes disaccord dramatically When you vex fewer competitors international Strategy Focus Multidirectional dislodge of spunk competencies and skills L of all timeaging subsidy skills Try to give kickoff be through kettle of fish economies, economies of collection plate and learning effects while variantiating their products for the local market. very difficult to accomplish Method Re radiation diagram products to use the aforementioned(prenominal) components and produce them in one location Use assembly plants in list markets to assemble the to a greater extent market disassociateicularised final product When to use it When customization and cost reduction pressures argon high up When managers go for to balance the divergent pressures International Strategy Focus Taking products from your local surface ara and without much customization, selling them in early(a) markets.Method Centralize product learning functions Tend to establish manufacturing and marketing functions in each major sphere or geographic region in which they do occupancy. Increases costs but there are no cost pressures so that isnt an moment May sink to do abou t minor customization of the marketing strategy When to use it Low cost pressures Low indispensableness for local antiphonaryness inter limiting products that serve universal have richly Do not have umteen competitors Chapter Questions Q2 What are the perils that Wal-Mart Faces when entering unlike retail markets?How clear the risk of exposures be mitigated? Economic riskinesss/ word-painting Likelihood that stinting mis direction get out cause drastic transfers in a countrys business surroundings that hurt the pull in and other goals of a particular business enterprise. Increase in inflation behind hurt winnings Recession Loss of confidence in the market and loans Legal Risks If Wal-Mart trys to enter a market where the legal dust fails to stomach adequate safe retains in the aspect of involve violations or to protect property rights they are opening themselves up to legal risks. Could advert the ability to participate in farsighted term contracts and roast reckons Cross cultural Literacy Risk As come acrossd in this case, Wal-Mart suffered from cross cultural illiteracy, where they were ill inform about(predicate) the practices of some other finis which ca employ them to take form bad decisions. easing Strategy Wal-Mart needs an adaptation strategy, which allows them to negotiate properly for the market, go to sleep the appropriate take over systems, set up the right brass section, etc.They sewer do this by hiring local citizens, or a consultant. Transaction Exposure Risk outcome to which foreign exchange values profess the income from individual transactions. Translation Exposure Risk Impact of currency exchange place on the reported financial statements. Mitigation Strategy Lead strategy where you pucker the foreign receivables early. Lag strategy, involves delaying payables if the currency is pass judgment to appreciate. Political Risks Depending on where Wal-Mart is choosing to expand to, policy- shed forces that ould cause a drastic change in the countrys business environment could adversely affect the profit and other goals of a business enterprise. Strikes Demonstrations terrorist act Violent Conflict Enactment of untoward business laws CT 5 reread the direction focus on the phylogeny of strategy at Procter and Gamble, wherefore resolving these questions a) What strategy was P&G copy when it first entered foreign markets in the decimal point up until the early 1990s? b) why do you think this strategy became less(prenominal) viable in 1990s.In the pre-1990s era P&G effect their international expansion through the use of a localization strategy. They did become many of their products in Cincinnati, but they relied on their semi-autonomous subsidiaries to manufacture, market and customize many of their products for the local markets their served. This seat started to show signs of strain when many of the trade barriers that constituteed, specifically mingled with European countries were lifted. This created an increase in ambition, and for P&G undefended their now unnecessary duplication of assets and processes. as well the understructure of the big box retailers (such as Wal-Mart and Tesco) were ca using the competitive factors driven by purchasing power to put pressures on lowering P&Gs prices even further. Due to the increase in competition and the changing market conditions P&G closed some of their local plants and asked their subsidiaries to exploit as much economies of surpass as possible in their production lines. They as well asked their local centers to create and use planetary brands whenever possible to try and constrict marketing costs. While these cost avings were effective, they were nonetheless not enough and P&G then reorganized the company to be a pure Transnational Strategy, with to a greater extent retard occurring in the regional centers than ever beforehand and using as little local responsiveness as pos sible to reach their customers so they could compete on price as much as possible. The benefits of the international strategy include Cost reduction Reducing duplication of assets Creating global brands Manufacturing in places that have a comparative advantage in the production of that product Increase market ground do by beating your competitors pricesRisks Very difficult to mechanism & manage organisational Structures have to be very Gordian and it can subscribe to o Performance equivocalness o Confusion over corporate goals o refining issues High coordination needs that are both(prenominal) starchy and idle Chapter 13 The Organization of International Business Key Points of the Chapter Organizational Architecture the totality of a unfalterings organization, organisational burnish and large number. These terce areas must be turn to for a company to be boffo in the global market place. The architecture must match the strategy of the profligate.Organizati onal structure Formal component part of the organization, the location of the decision devising (centralize vs. decentralised) and the establishment of intergrating mechanisms to orchestrate the activities of subunits. potency Systems are metrics used to measure the answerance of subunits and wreak judgments about how well managers are running those subunits. Incentives are the divides used to reward appropriate managerial behavior. Incentrives are very closely fasten to death penalty metrics. Processes are the manner in which decisions are made and work is fulfilled inner the organization.Organizational Culture refers to the norms and values systems that the employees of an organization share. Organizations are societies of individuals who come together to perform collective tasks. pic Organizational Structure 1) tumid Differentiation location of decision making a) Centralized When the decisions are made by upper management Pros toilette accelerate coordination En sure decisions are consistent with organizational objectives Give top take aim manager the means to take on about changes ( say-so) negate duplication of activities ) Decentralized Local managers make the decisions Top management can extend overburdened when decision making authority is centralized, which can result in paltry decisions. Motivational research favors decentralization, people are to a greater extent likely to give more than to their jobs when they have a greater item of individual freedom and take over their work. much rapid response locoweed result in fall in decisions because the people with the best information are the ones making the decisions. terminate increase chequer, making the management more autonomous and so accountable. much it makes sense to centralize some decisions and to decentralize others, depending on the type of decisions and the loadeds strategy. 2) Horizontal Differentiation formal organization structure Decision is made on functions, type of business or geographical area. International Division When a single division runs all the international activities. Facilitates the international strategy. groundwide area structure World is divided into geographic areas, each division has its get value creation activities. Facilitates local responsiveness. Difficult to direct nubble competencies. ecumenic product divisional structure individually division has its own value creation activities organized around the products they produce. Headquarters take responsibility for the overall strategic development and financial secure. Gives opportunities to consolidate the value range creation of different subunits. Can aim a lack of local responsiveness. Global Matrix Structure Tries to realize the issue Bartlett and Ghoshal have argued where a company needs to be price competitive and locally responsive by creating a hyaloplasm where decisions are made by both product and regional managers.It is very difficult to pull off a global matrix structure as it creates conflict for the employees having both bosses with two different goals. In light of these problems many quicks that pursue a transnational strategy have tried to variety flexible matrix structures base on enterprisewide management intimacy networks and a shared dual culture. 3) compound Mechanism mechanisms for coordinating subunits The need for combine mechanisms changes with the strategy, the company is using Lowest mend strategyHighest Global and Transnational Very serious in firms essay to transfer pith competencies between units Very important in firms trying to recover economies of scale and learning hold with a web like value chain Questions CT2 reason the statement An understanding of the causes and consequences of public institution ambiguity is central to issue of organizational frame in multinational firms. Performance ambiguity exists when the causes of a subunits light performan ce are not clear.This is not uncommon when a subunits performance is partly dependent on the performance of other subunits when there is high interdependence between different subunits. In firms not pursuing a localization strategy, certain degrees of performance ambiguity are going to exist. In an international strategy, consolidation is needd to facilitate the transfer of core competencies and skills. The success of a foreign operation is partly dependent on the lineament of the competencies transferred from the home country, therefore these firms must design an organizational strategy with enough consolidation mechanisms to achieve this.In firms pursuing a global standardization strategy they need to recover location and experience curve economies, making many of the firms processes interdependent. This get out hire even greater controls and integrating mechanisms and make the decisions more complex and the decision tradeoffs more firm (i. e. save cash on this product or spend bills to make it easy to sell the product). blottos with the highest level of performance ambiguity are transnational firms. The multidirectional transfer of competencies requires significant interdependence and heaps of join decision making, making the performance ambiguity very high.This means the control costs are going to be highest in transnational firms and that many of the costs recovered by the transnational strategy are lost to creating the expensive control systems that must exist to facilitate the strategy. some other byproduct of this strategy is that global and transnational firms need to do more than use only output controls of objective performance metrics such as profits, productiveness and market share in give to control their subsidiaries.These firms must seem into cultural controls, encouraging managers to want to assume he norms and value systems and use those values to solve problems between the interdependent units and vitiate fingers breadth poin ting ground on the output results. CT5 If a firm is changing its strategy from an international to a transnational strategy what are the most important challenges it is likely to face in implementing this change? How can the firm overcome these challenges?While becoming a multinational firm does not require a strategy change, in swan to compete in the global parsimony and be the best at what you do, organizational change may become a requirement. root the company must decide their strategy and then they must develop an appropriate organizational structure to musical accompaniment those goals. A transnational strategy focuses on the simultaneous attainment of location and experience curve economies, local responsiveness and global learning.This firm may want to look into a matrix structure where managers from regional and product areas come together to make decisions that impart benefit both points of view. They need to implement control systems that volition allow them to wo rk with their globally dispersed value chain and to transfer core competencies and therefore will likely be more culturally driven then output driven. Decisions should be made at both a centralized and decentralized level depending on what the company needs to transfer between units and what specifically about the product needs to be locally responsive (e. . branding/marketing). in that location needs to be a mix of informal and formal integrating mechanisms which can be build in the decision matrix and via informal networking tools (e. g. Twitter). Finally there needs to be toughened culture cultivation to keep all the units on the same page which can be accomplished by a strong leadership with in effect(p) vision and a willingness to participate in the dissemination of that vision. According to the text the three basic principals for performing organizational change include 1) Unfreeze the corporation through shock therapy Incremental changes are not necessarily enough good deal can easily reject or vacate incremental change In this case the announcement of a dramatically different structural organization to facilitate the immature goals Senior managers must lead the office in the changes and the unfreezing process 2) Move the org to a new state through proactive change in the architecture Reassigning the responsibilities in the new organization Changing the control systems to be less output based and more culturally based let people go who are loth to change The changes must be do speedily Involving the employees from the beginning will get their buy in and will makes the changes better received. 3) Refreeze the org in its new state This spirit can take longer It requires culture establishment while the old one is dismantled Re-socialization of employee behaviors Hiring policies must change Control systems must be tested and be consistent with the new culture and contract the old one The upper management must be diligent and not a llow the old pressure to quail up Chapter 14 debut Strategy and Strategic Alliances Key Chapter Points Two major(ip) Ideas 1) The decision of which foreign markets to enter, when to enter them and on what scale 2) The choice of admission humor Which Market (Recap of chapter 2) The attractiveness of a country as a strength market depends on balancing the benefits, costs and risks associated with doing business in that country Long rifle economic benefits of a function of surface of the market, present richesiness, likelihood of future wealth Future economic growth, which is a function of a free market system and the countrys capacity for wealth. Riskier in policy-makingly and economically unstable countries What soft of value the firm can create for consumers in that market Timing of Entry Early doorway when a firm enters a foreign market before others do First movers advantage Pre-empt rivals have market share Establish a strong brand Creating switching costs t o tie your buyers to you Set the price so you can cut prices when competitors arrive First movers disadvantage Pioneering costs, from the foreign business system being so different that time and expense must be sacrificed to learn the ropes Business failure if the firm makes mistakes based on bad knowledge packaging of a new product or idea Late Entry When a firm enters a foreign market after other firms do Can watch what your competitors do, and learn from their mistakes Can get on the coattails of their marketing and promotion Dont need to educate your customers Scale of entry Large scale Requires significant imaging commitment which can lead to strategy commitments, where you cant get out of the deal without suffering significant consequences o It does create a presence and instills tenet that you are committed to your product and customers Small Scale o Allows a firm to learn the market without exposing the firm to risks o Way to gather information o Lack of commit ment may make it harder to attract customers Entry Modes exportation Advantages Avoids substantial costs of establish manufacturing operations in another(prenominal) country May jock the firm achieve experience curve, location economies and economies of scale Disadvantages It may be cheaper to produce abroad High transportation costs on shipping could make it inefficient to export Tariff barriers may revoke your exporting, making it uneconomical, and the threat of tariff barriers can make it angry Delegates of the company that perform the sales, marketing, attend may work for other competitors and therefore will not have your best cares in mind prison guard Projects The contractor agrees to cargo area every dot of the project for a foreign clients, including the instruct of operational personnel. At the end the client is handed the key to a fully functional plant. Typically in complex production businesses. Advantages The know how is a blue-chip asset and you can ea rn returns on that knowledge Useful when FDI is limited Can be less risky than conventional FDI Disadvantages No long term interest in that country May create a competitor out of the reason of your factory Could be selling your comparative advantage Licensing The licensor grants the rights to intangible property to another entity for a specified period, and in return, he licensor receives a royalty fee from the licensee. Advantages Licensee puts up most of the capital of the United States close for firms miss capital Prohibited from direct enthronization in a foreign market Disadvantages (3 serious ones) Does not give tight control over manufacturing, marketing, strategy, etc. that si required for realizing the experience curve and location economies. Limits a firms ability to share wealth amongst various divisions, and therefore limits a interrelated international strategy Giving apart your comparative advantage Franchising a specialise form of licensing in wh ich the franchiser sells the IP, but also the franchisee needs to follow those specific rules the franchisor sets out. Advantages Firm is relieved of many of the costs and risks Good for firms lacking capital Good when you are prohibited from FDI in that country Allows you to build a global presence quickly Disadvantage Great for services, but maybe not manufacturing Limits a firms ability to share wealth amongst various divisions, and therefore limits a coordinated international strategy There are different definitions of quality, safety, etc. in different places making it difficult to cite your image across other countries crossroads Ventures Establishing a firm that is reeferly have by two or more otherwise independent firms, its democratic mode of entry into foreign markets. Advantages take aim to benefit from the local firms knowledge of the host country culture, norms, language, political situation, etc. Provide the local knowhow to a new country Share the risks with another company Sometime political factors make it unacceptable not to partner with a local firm Disadvantages Risking giving away your comparative advantage to a potential competitor The firm doesnt have tight control over local operations, making it difficult for companies needing to transfer a culture Shared ownership can lead to conflicts between the two corporations, which can be exacerbated by the fact that the two firms are from different nations. completely owned Subsidiary The firm owns 100% of the stock in the project. Can be buste through a Greenfield venture, where you build a factory from scratch or via scholarship of an existing enterprise. Advantages Protect your knowledge beggarly control Required to gain experience and locations economies Can engage in global strategic behaviors Disadvantages High costs and risks Culture transfer can be difficult, oddly in footing of an acquisition Chapter Questions Tesco Q2 How does Tesco create value in its international operations? Tesco creates value by offering something that the market is lacking a well run competitive grocery store. They enter rising markets with growth potential and few competitors. They then acquire or partner with ongoing enterprises in that country in prescribe to ensure that the value they are creating will work for that particular consumer.Tesco researches their potential partners carefully, and they survival a solid chain with some stores and they build off of that known base. They bring to the table their core competencies, but they dont remove the local managers who have the knowledge of the customer. Finally they have the capital and the retailing know-how to bring their moderately no-hit firms into a globally back force. This value is created out of successfully leveraging the joint venture strategy, where both firms bring something reclaimable to the table and both are given over the opportunity to be successful with their knowledge. mart stor es are part service and part goods firms.Tescos strengths exist in both, but they are leveraging their service and management know-how transfer through the use of the joint venture. We know that value creation is calculated by the difference between the converted inputs that create the cost of a product and how much the consumer is willing to pay for that product. More specifically in this case it is the measure consumers are willing to pay for the goods inside of the Tesco subsidiary. Porter states that it is important for the firm to decide where it wants to be strategically positioned in terms of cost effectiveness, and differentiation. Tesco wants to be a low cost provider of all the goods a consumer would purchase at a grocery store.They compete through their value chain by gaining purchasing power through expansion, and by leveraging their values skills in foreign markets. CT 5 A small Canadian firm that has essential some valuable new medical exam checkup products using its unique biotechnology know-how is trying to decide how best to serve the EU. Establishing a manufacturing firm distant of Canada is not outside of the firms reach, but it will be a stretch. Which of the following options would you root on and why? a) Manufacture the product at home and let foreign sales agents handle the marketing. b) Manufacture the product at home and set up totally own subsidiaries in Europe to handle marketing c) Enter into an confederacy with a large European pharmaceutical firm.The product would be manuf in Europe y the 50/50 joint venture and marketed by the European firm. As state in the text, if the firms core ability is the based on control over proprietary technological know-how, it should avoid licensing and joint-venture arrangements if possible to minimize the risks of losing control over that technology (option C). While the strategic alliance will allow for entry into the foreign market, I dont go through that the EU is such a different ty pe of market that it would be impossible to give away someone in the US who they could hire to help them understand that market. The coalition can give competitors low cost access to the new technology and markets.Wholly owned subsidiaries for marketing would allow for the marketing to be owned by the firm and therefore reduce the risks associated with using the local sales agents that may serve their own interests in lieu of the firms. However, I suggest that the core competency of the firm is not their marketing skills, but or else their technological know-how. This means that they would be choosing to take on major risks and expenses in order to transfer a non core competency and therefore find themselves at risk of failure. Going back to the Lincoln galvanic case, we saw how selecting a mode of entry strategy on something other than your comparative can lead to significant issues.Exporting (option a) allows for the firm to realize location economies, experience curve economi es while suffering from high transport costs, trade barriers and problems with local marketing agents. In this instance, the cost of shipping medical instruments is typically quite low, and the trade barriers between Canada and EU are nonexistent. However, they may find the local sales agents to be at odds with other competitors making it difficult to distribute the product. Despite this drawback however, I impression that the financial risks associated with option b and the dangers of losing their core competency in option c I would use the less risky option a. Chapter 15 Exporting, Importing and return Trade Key Chapter Points Chapter Questions CT3 An alternative to using earn of citation is export recognition insurance.What are the advantages and disadvantages of using the credit insurance rather than a letter of credit for exporting a) A luxury racing yacht from California to Canada b) Machine tools from New York to the Ukraine A letter of credit, abbreviated as L/C is Issued by the chamfer at the request of the importer States the swan will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents Charge a character to the importer as a fee for the service May require the importer to do some type of deposit It is a financial contract Allows for the banks to determine the creditworthiness of your trade partner, so no relationship must exist for the trade to take place Export Credit Insurance Sometimes exporters who require a letter of credit from an importer will lose their business to another exporter who doesnt require all the additional work Thus when the importer is in a strong bargaining position and able to bet competing suppliers against each other, an exporter may have to waive a letter of credit. This exposes the exporter to risk The exporter can protect themselves against that risk through the us of exporter insurance The FCIA provides coverage against commercia l and political risks. Losses due to commercial risk result from the buyers insolvency or payment default. a) Because the competition for selling this product is somewhat high I would expect the buyer to have more power than the trafficker and therefore I could see them asking the vender to forgo the letter of credit. If that is the case export credit insurance will be the likely route to manage the trade.However, if the seller can get the buyer to coincide the letter of credit between the well-thought-of Canadian bank and the US bank will be a good asset to leverage if possible. b) Because of the nature of the transaction, the letter of credit may be the best solution. This way the seller can hatch that the buyer is credit worthy and the bank will take care of the relationship needs so the buyer and seller do not have to create a relationship. My only concern would be that of the Ukrainian bank and whether you can blaspheme their banking system. It may be more responsible to use the exporter insurance again to guard against the ever present political and economic risks in that country. Structure Incentives & controls Processes Culture People