Chapter 12 – The Strategy of International Business

Key Points of the chapter

Strategy – is the actions managers take to attain the goals of the business (usually to maximize value for the shareholders/stakeholders).

Value Chain – The operations of the firm compose the value chain which are the series of value creating activities that occur to create value. These actions include sales, production, IT, accounting etc. These activities are divided into support and primary activities.

Primary Activities – Design, creation and delivery of the product. They are: 1. R&D 2. Production 3. Marketing 4. Sales Support Activities – Inputs that allow the primary activities to occur 1. Information Systems 2. Logistics 3. Human Resources

Global Expansion Practices 1. Expand the market for your domestic products by selling internationally (Export) • Requires a company to tap into their core competencies

2. Move production to the most efficient countries to realize location economies • Some countries have a comparative advantage of production • Transportation costs and trade barriers must not be an issue • Location Economies is the value created by finding the most competitive place to produce product, therefore adding value i. Competitive can mean cheapest or best • Creates a global value web as opposed to a value chain

3. Serve expanded markets from a single location, while recovering experience effects • Experience curve: Systematic reductions in production costs that occur over the life of a product i. A products production costs decline each time the cumulative output doubles • Learning Effects – Costs savings through learning by doing • Economies of Scale – Reduce costs by creating