according to local preferences, which can boost customer satisfaction and competitiveness.

Web-based information systems help firms track the movement of components, optimize
CHAP 7 The Strategy of International Business Localization, used by MTV, suits markets with distinct consumer preferences and minimal cost A key element in improving both cost and quality is the elimination of defects in manufacturing and the production schedules, and manage supplier relationships more effectively. A core tool in this
1. Strategy And The Firm A firm’s strategy consists of the actions taken by managers pressure. A transnational strategy, as seen in Caterpillar, is used when both pressures are high, supply chain. Many firms adopt programs such as Six Sigma, which is designed to reduce errors, enhance system is Electronic Data Interchange (EDI). EDI allows for real-time communication
to achieve the long-term goals of the organization. In international business, these goals requiring a balance between efficiency and adaptation. The international strategy, exemplified by productivity, and cut unnecessary costs. Six Sigma evolved from Total Quality Management (TQM) and between firms and their suppliers, enabling better coordination and faster decision-making. It
Microsoft’s early approach to software exports, works best when both pressures are low. The focuses on statistical techniques to achieve near-perfect production standards. Similarly, in the European also eliminates the need for physical paperwork, making the entire supply chain more efficient
typically involve increasing both profitability and profit growth. Profitability refers to lesson emphasizes that as market dynamics shift, firms may need to evolve their strategy to remain Union, companies must comply with ISO 9000 standards to access the market, reinforcing the importance and transparent. Through IT integration, companies can streamline operations, reduce
the return the firm earns on its invested capital, which can be improved by reducing costs competitive—moving, for example, from a localization strategy to a transnational one when cost of global quality benchmarks. Finally, production and logistics systems must be flexible and responsive delays, and improve responsiveness to customer needs. In today’s fast-paced global markets,
or increasing the value delivered to customers. Profit growth, on the other hand, focuses pressure increases. CHAP 8 ORGANIZATION OF IB Organizational architecture refers to the (objective). They need to accommodate local responsiveness—such as customizing products to regional effective use of technology is essential for achieving supply chain excellence. CHAP 10
on the percentage increase in net profit over time, often achieved by expanding sales totality of a firm’s organization, including formal organization structure, control systems and tastes—and be able to react quickly to shifts in demand, like sudden surges in online orders or supply GLOBAL MKT AND R&D The Globalization of Markets and Brands Theodore Levitt’s
volumes through new market entry. For example, when Phúc Long, a Vietnamese coffee incentives, processes, organizational culture, and people / To be the most profitable, firms need disruptions. In the context of global competition, the ability to reconfigure logistics routes or scale argument in the early 1980s claimed that world markets were becoming increasingly similar,
chain, opens stores in Japan, it not only gains access to a new customer base but also to be sure: The different elements of the organizational architecture are internally consistent The production capacity quickly has become a key source of strategic advantage.  In summary, production making it unnecessary for firms to adapt their marketing mix across countries. While this idea
adapts its product line to local preferences, such as offering matcha drinks. This strategic organizational architecture matches or fits the strategy of the firm The strategy and architecture and logistics are not just operational activities—they are strategic functions that must align with the firm’s sparked great debate, the current consensus is more balanced. Although globalization has
of the firm are consistent with each other, and consistent with competitive conditions Example: broader goals. Whether through cost reduction, quality improvement, or customer responsiveness, firms advanced, cultural and economic differences among nations continue to limit the extent of
move boosts profit growth by expanding the market and improves profitability by Apple’s global strategy focuses on innovation and consistency. Its organizational architecture must design and manage these systems globally to maximize value and remain competitive in international standardization. Trade barriers and national product or technical standards further restrict the
delivering greater value, thereby justifying higher prices. Thus, an effective international supports this through strong R&D processes, a culture of innovation, global talent recruitment, markets.Where to Produce Deciding where to locate production facilities is a crucial part of global global uniformity of products. For example, Apple offers similar products worldwide, but
strategy must integrate both value creation and market expansion objectives.2. Value and strict control systems—all working in harmony. Organizational Structure Vertical strategy, and it depends on three major factors: country factors, technological factors, and product differences in legal frameworks, software features, and pricing in different markets, such as
Creation Value creation lies at the core of competitive advantage in international differentiation refers to the distribution of decision-making power across the organization— factors. Country factors (economic, political and cultural conditions) refer to national conditions that the U.S. versus India, demonstrate the continued need for localization within a global brand
business. It is defined as the difference between the value (V) that customers perceive whether it is centralized at the top or decentralized to lower levels or local subsidiaries. affect manufacturing performance. These include the availability of skilled labor and supporting industries strategy. Market Segmentation involves identifying distinct groups of consumers with
and are willing to pay, and the cost (C) of producing the product. Firms can enhance Centralized decision-making allows top-level managers to ensure consistency, avoid duplication, (as seen in Germany’s engineering sector), formal and informal of trade barriers (such as USMCA differing purchasing behaviors. These groups can be defined by geography, demography,
profitability by either increasing V through product differentiation or decreasing C and lead large-scale organizational change. For example, Samsung keeps control of major enabling tariff-free exports from Mexico), and expectations about future exchange rate changes—which socio-cultural traits, or psychological profiles. Firms must consider two issues: the differences
product decisions at its headquarters in Korea to maintain global brand consistency and quality. influence firms to avoid volatile markets. Transportation costs and FDI regulations also affect; for in market segment structure across countries, and the existence of cross-border segments.
through cost leadership. Michael Porter emphasizes that firms achieving superior In contrast, decentralized decision-making allows subsidiaries to act independently, which example, India’s retail restrictions have shaped how Wal-Mart enters the market. When a market segment transcends national boundaries, a global strategy can be applied. For
profitability are those that successfully pursue one of these strategic options. A practical encourages motivation, flexibility, and better local decisions. McDonald's India exemplifies this Technological factors  The type of technology a firm uses in its manufacturing can affect location instance, Nike targets the global “urban athlete” segment with similar messaging and branding
example of value creation is Apple’s business model. Apple designs innovative products by customizing its menu to meet local preferences (e.g., McAloo Tikki), a level of responsiveness decisions. When the level of fixed costs for production facilities are high (e.g., semiconductor fabs), firms in both Europe and Asia, illustrating a standardized approach to a cross-national segment.
through extensive R&D and high-quality materials, thereby increasing perceived value. that would not be possible under strict central control. However, in practice, most firms adopt a prefer centralized production to take advantage of economies of scale. In contrast, if fixed costs are low, Product Attributes A product is essentially a bundle of attributes. If these attributes match
Simultaneously, it keeps production costs controlled by outsourcing to efficient hybrid approach, centralizing some strategic decisions while decentralizing others to balance multiple production plants become feasible. Similarly, the minimum efficient scale (MES) of a plant consumer needs, the product is more likely to succeed. However, consumer preferences vary
manufacturers like Foxconn. As a result, the firm is able to charge premium prices while efficiency and local adaptation.Horizontal differentiation refers to how the organization is matters: large MES implies centralization (e.g., petrochemicals), while small MES allows decentralization greatly depending on cultural and economic contexts. In countries like India, affordability
divided into subunits based on function, product, or geography. Firms typically start with a (e.g., food packaging). Additionally, flexible manufacturing technologies—which reduce setup times for plays a large role in consumer behavior, leading Unilever to sell Dove in smaller, low-cost
maintaining healthy margins. This dual focus on differentiation and operational functional structure, organizing by activities such as production, marketing, and R&D. This is complex equipment, increase the utilization of individual machines through better scheduling, and improve packages with different formulas, compared to the UK market. Differ (1) Cultural influences
efficiency exemplifies effective value creation and supports long-term global effective for small or less diversified firms where top management can coordinate functions quality control at all stages of the manufacturing process—allow firms to achieve mass customization such as traditions, social structure, language, religion, and education impact product
competitiveness. 3. Strategic Positioning Strategic positioning involves selecting a directly. For instance, a small tech firm might operate with just development, marketing, and which implies that a firm may be able to customize its product range to meet the demands of local markets presentation and marketing. A famous example is when Pepsi’s slogan “Come alive with the
spot on the efficiency frontier that aligns with a firm’s competitive strengths—either finance departments.As firms grow and diversify, they may adopt a product divisional structure, yet still control costs. When such technology is available, centralized production is viable; otherwise, Pepsi generation” was mistranslated in Taiwan to suggest it could resurrect one’s ancestors.
pursuing differentiation or cost leadership—and configuring internal operations to especially if they offer multiple product lines. This structure creates separate divisions for each decentralization may be better. Product factors affect location decisions. Products with a high value-to- (2) Economic development - wealthier nations ( highly developed countries ) prefer more
support that choice. According to Michael Porter, a firm must not only choose a viable product category, allowing specialized strategies and greater accountability. Unilever, for weight ratio (e.g., electronics, luxury goods) are usually manufactured in a single location and export it to advanced product features, whereas consumers in less developed countries may prioritize
strategy but also align its value chain activities and organizational structure accordingly. example, has dedicated divisions for personal care, foods, and home care, each with its own R&D, other parts of the world. Products with a low value-to-weight ratio (e.g., cement, bottled water) are better basic functionality. Ex: Samsung markets high-end Galaxy S series in the U.S. but emphasizes
marketing, and operations teams. When firms expand internationally, they often start with an produced in multiple locations to reduce shipping costs. If a product serves universal needs, local the more affordable A-series in African markets. Distribution Strategy The firm’s
In the airline industry, Vietnam Airlines represents a differentiation strategy by offering international division to manage all foreign operations. Over time, this can lead to duplication customization is not required, making centralized production more attractive.  Concentrating them in the distribution strategy determines how a product reaches customers. This choice depends
premium services and focusing on brand prestige. In contrast, Pacific Airlines adopts a or coordination issues between domestic and foreign units. Eventually, firms evolve toward either optimal location and serving the world market from there & Decentralizing them in various regional or heavily on the firm’s entry mode—local manufacturing may enable direct sales to consumers
low-cost model, minimizing services to reduce ticket prices. Bamboo Airways follows a a worldwide area structure or a worldwide product division structure, depending on their national locations that are close to major markets. The Strategic Role of Foreign Factories Foreign or retailers, while international production often involves intermediaries such as import agents
hybrid strategy, balancing reasonable prices with higher service quality. Each of these diversification level. The area structure is common among undiversified firms and focuses on factories, which are often established initially to take advantage of low cost labor can evolve into and wholesalers. Distribution systems differ across countries in four key areas.
airlines configures its operations—fleet management, customer service, pricing geographic responsiveness—like Nestlé, which gives authority to regional zones. Meanwhile, the facilities with advanced design capabilities. Improve from 2 sources  when driven by pressures to lower First, retail concentration varies—developed nations like the U.S. have concentrated systems
models—according to its strategic positioning. This alignment ensures operational product division structure facilitates global coordination of product lines and is used by costs or respond to local markets and an increase in the availability of advanced factors of production . As with dominant chains such as Walmart, while developing countries like India are fragmented,
coherence and sustainable performance in a competitive market. 4. Operations: The diversified firms like Sony. In some cases, firms adopt a global matrix structure, which such, firms increasingly view foreign factories not just as low-cost production hubs, but as globally with millions of small shops. Second, channel length reflects the number of intermediaries;
combines both product and geographic dimensions. While it allows for dual perspectives in dispersed centers of excellence. This shift supports the implementation of a transnational strategy, where short channels (e.g., Dell’s direct model) are more common in concentrated systems, while
Firm As A Value Chain A firm can be viewed as a value chain composed of various decision-making, it can lead to complexity, conflict, and slow bureaucracy. Integrating firms aim to combine cost efficiency, local responsiveness, and global learning. According to this view, fragmented markets often rely on longer channels with multiple layers ( import agent, retailer,
interlinked activities that collectively create value for the customer. These activities Mechanisms As firms expand internationally and add complexity to their structures, they require valuable knowledge and innovation can originate not just from headquarters, but also from subsidiaries. wholesaler). Third, channel exclusivity refers to how difficult it is for outsiders to enter the
include primary functions like R&D, production, marketing, and customer service, as effective integrating mechanisms to coordinate their subunits. These mechanisms ensure This philosophy leads to more stable production networks: instead of relocating whenever wage costs system—Japan is known for its highly exclusive distribution channels, making market entry
well as support functions like human resources, logistics, and information systems. The alignment across geographies, functions, and products, especially in firms pursuing global or change, firms invest in building capabilities in each site. Thus, foreign factories become integrated parts of for foreign brands difficult. Finally, channel quality—referring to the competency of
effectiveness of a firm’s value chain management significantly influences its ability to transnational strategies. At the most basic level, integration can be achieved through direct a firm's long-term competitive advantage and innovation ecosystem. Outsourcing Production: Make-or- retailers—tends to be high in developed countries, but variable in emerging markets. In Brazil,
compete internationally. For instance, Apple adds value at every stage of its value chain. contact between managers or liaison roles that bridge departments. More advanced mechanisms Buy Decisions The make-or-buy decision—whether to produce in-house or outsource component parts— for instance, P&G had to invest in training small retailers on product display and sales
include cross-functional teams and, in complex organizations, matrix structures, where both is a critical element in a firm’s global production strategy. This decision has become even more complex for techniques. Choosing a Distribution Strategy  firms must weigh the cost-benefit trade-off
Its R&D team innovates consistently, while its production is outsourced to reliable product and area managers share decision-making authority. However, such structures may lead international firms due to the additional risks of intellectual property theft, legal inconsistencies, and political of different channels. A shorter channel improves control and increases the firm’s profit
partners to control quality and cost. Its marketing emphasizes lifestyle branding, and its to conflict and bureaucratic delays. In addition to formal mechanisms, informal integrating tools uncertainty across countries. Traditionally considered a manufacturing issue, the make-or-buy choice now margin because there are fewer intermediaries taking a share. This is particularly important in
customer service through Apple Stores builds strong loyalty. Moreover, Apple supports like knowledge networks play a crucial role. These networks rely on interpersonal connections also applies to services, as firms decide which business processes (like IT support or customer service) to price-sensitive markets. However, in markets with fragmented retail structures, longer
these operations through world-class IT systems and talent management. This and shared digital systems to spread knowledge across borders. A successful knowledge network keep in-house or outsource globally. For example, a tech company might hesitate to outsource chip channels may be more efficient in terms of selling costs and market access. Moreover,
comprehensive approach to value chain optimization enables Apple to command requires widespread participation and a common set of values and norms to override conflicting production to an overseas supplier if there are concerns about losing control over proprietary technology. exclusive or prestigious products may benefit from short, selective channels that maintain their
premium prices and sustain global leadership. ( câu hỏi ) subunit goals. Integration needs vary by strategy: it is lowest in localization-focused firms but Similarly, a financial services firm may choose to handle customer data processing in-house to comply with premium image. Luxury watchmakers, for example, prefer short and exclusive channels to
Global Expansion and Profit Growth Firms that expand internationally can improve becomes essential in transnational firms where global learning and coordination are key to local privacy laws. The Advantages of Make Vertical integration, or producing component parts in-house, control brand image and pricing globally. Communication Strategy communication strategy
competitive advantage. Control Systems and Incentives Control systems and incentives guide offers several strategic advantages for international businesses. (1) lowering costs. When a firm is more involves deciding how to communicate product attributes to target consumers. This process
both profitability and profit growth by accessing new customers, reducing costs, and managerial behavior and ensure that subunit activities align with firm-wide goals. There are four efficient than external suppliers at performing a specific production activity, it can reduce unit costs by is not simply about describing a product; it is about crafting a persuasive message that
learning from diverse markets. This process involves leveraging core competencies, types of control systems. Personal control relies on direct supervision and is common in small keeping production in-house. For instance, Tesla manufactures its own batteries to maintain consistent resonates with consumer values, expectations, and needs. The choice of communication
entering foreign markets, and integrating global operations. For example, VinFast, a or founder-led firms. Bureaucratic control, used in large firms like Toyota, enforces quality while reducing the cost per unit. This allows the firm to avoid supplier markups and to directly channel significantly affects how the message is received. For example, a brand may choose
Vietnamese electric vehicle manufacturer, has expanded into the U.S. and Europe. By performance through formal rules and budgets. Output control focuses on measurable results, manage production efficiency. (2) facilitate investments in highly specialized assets. These are assets mass advertising to reach a wide audience or personal selling to deliver a tailored message in
doing so, it not only taps into the growing demand for electric cars but also showcases its such as performance targets—FedEx, for instance, monitors KPIs like on-time delivery. Cultural whose value depends on a long-term, specific relationship (such as custom equipment or tooling for one high-involvement purchases. Firms typically have access to a variety of communication
ability to compete globally using core strengths in manufacturing and sustainability. Such control is achieved when employees internalize the firm’s values, reducing the need for constant product line). Producing internally ensures that such investments are fully protected and utilized, whereas channels, each suited to different product types and market conditions. These include direct
oversight, as seen at Google. Incentive systems complement control mechanisms by rewarding relying on external suppliers may not guarantee the same long-term commitment. (3) protection of selling, sales promotion, direct marketing, and advertising. Each channel comes with its
expansion increases profit growth through market access and enhances profitability by desired behavior. They must be tailored to different roles, encourage cooperation between units, proprietary technology. When a component involves sensitive or unique intellectual property, making it own strengths. Direct selling allows for personal interaction and relationship-building,
spreading fixed costs and gaining scale. The lesson emphasizes that global expansion can and respect cultural differences across countries. However, poorly designed incentives can lead internally helps a firm safeguard this knowledge from competitors or misuse. For example, Apple produces making it ideal for industrial or high-value products. Sales promotions can generate short-
also provide access to location economies, experience effects, and subsidiary innovations, to unintended outcomes. The effectiveness of control and incentive systems is influenced by its M-series chips in-house to retain full control over its chip architecture and avoid exposing its design to term interest and boost trial. Direct marketing enables firms to reach specific consumer
all of which contribute to long-term success. Location Economies Location economies performance ambiguity—when it’s unclear why a subunit performs poorly. This ambiguity third-party manufacturers. (4) help facilitate the scheduling of adjacent processes. Although this is a segments with personalized messages, while advertising offers broad reach and brand-
refer to the cost and value advantages firms gain by locating each value creation activity increases costs of control and is most problematic in transnational firms, while localization weaker justification, it does improve internal coordination. For example, Boeing manages production of building capabilities.
in the most suitable region. This global optimization allows firms to achieve lower costs strategies typically experience the lowest ambiguity. Processes Processes define how work is critical aircraft components internally, which allows it to align schedules across departments and ensure Ex: L’Oréal’s use of celebrity endorsements in advertising. By associating its products with
or improved differentiation depending on the location’s characteristics. For instance, done and decisions are made within an organization. In international business, processes often cut timely integration during final assembly. The Advantages of Buy Outsourcing component production, or well-known public figures, L’Oréal communicates not only the quality of the product but also
across national and functional boundaries, linking global teams and enabling coordination. the "buy" approach (1) greater flexibility. By sourcing parts from independent suppliers, a firm can shift its premium positioning in the market. This approach helps create aspirational appeal and
Nike designs products in the U.S., where innovation and consumer insight are strongest, Processes can emerge from any part of a firm’s global operations, making it vital to develop production orders based on changing conditions such as currency exchange rates, trade barriers, or natural enhances consumer trust, especially in global markets where brand recognition and emotional
but manufactures in Vietnam, where labor is inexpensive. This division enables Nike to mechanisms that facilitate their transfer and improvement. Formal mechanisms like cross-border disruptions. For instance, clothing brands often switch factories between countries depending on trade resonance are key. Barriers to International Communication International communication
balance brand quality with cost efficiency. Such a global web of activities, if managed teams, and informal ones such as shared platforms and networks, help firms capture best practices agreements or unforeseen events like floods or political unrest. This flexibility helps firms remain agile and occurs when a firm delivers a marketing message to consumers in another country. While
well, helps the firm maximize the value delivered to customers while maintaining and foster global learning. Effective processes support strategy execution by enhancing speed, responsive. (2) driving down the firm's cost structure  avoid the fixed costs and operational complexity essential to global marketing, its effectiveness can be hindered by three major barriers:
competitive prices. However, as the lesson notes, location economies must be balanced consistency, and innovation across units. Organizational Culture Organizational culture is the of vertical integration. Managing and coordinating additional internal subunits increases overhead, and cultural differences, source and country of origin effects, and high noise levels.
against risks like transportation costs and political instability, requiring firms to plan shared system of values and norms that shapes behavior within a firm. Culture arises from the internal suppliers may lack market-driven incentives to innovate or reduce costs. By contrast, independent (1) are among the most common challenges. A message that resonates in one country may be
strategically when dispersing operations. Experience Effects Experience effects are cost influence of founders, national culture, company history, and decisions that led to past success. It suppliers are more motivated by competition and performance-based contracts; helps avoid issues with misunderstood or even offensive in another due to differences in language, traditions, and
is maintained through recruitment, rewards, communication, and socialization. A strong culture transfer pricing—the internal pricing of goods or services between subsidiaries in different countries— social norms. To overcome this, firms must develop cross-cultural literacy and include local
reductions that occur as a firm gains more experience in production, primarily through can unify employees and reduce the need for bureaucratic controls. However, strength alone does which can be difficult to regulate and optimize  Using external suppliers simplifies this process; capture input when creating messages. Ex: Pepsi’s slogan showing how easily a message can be
learning effects and economies of scale. Learning effects involve increased worker not guarantee performance—if a culture becomes rigid, it may hinder innovation or adaptation. more orders from international customers, particularly when sourcing from their home countries. For misinterpreted across cultures. (2) also shape how messages are received. Source effects occur
efficiency and better management practices, while economies of scale result from Companies with adaptive cultures, which evolve in response to environmental changes, tend to example, by working with local suppliers in a foreign market, a firm may strengthen business ties and win when consumers judge a message based on the sender’s image rather than the content. To
spreading fixed costs across larger volumes. These effects allow firms to lower unit costs outperform those stuck in outdated paradigms. For example, Google’s culture of additional contracts due to goodwill or national preference. Trade-Offs When deciding between making reduce bias, firms might need to deemphasize foreign origins. Similarly, country of origin
and improve profitability over time. A firm that exemplifies this is Intel, which operates experimentation supports its innovation strategy globally. Strategy and Structure Alignment components in-house or buying them from external suppliers, firms must carefully weigh the trade-offs. The effects influence how consumers perceive product quality based on its place of manufacture.
large-scale chip fabrication facilities. By producing at high volume and refining processes An effective international firm must align its organizational architecture with its global strategy. advantages of vertical integration are most evident when(1) highly specialized assets are involved. These Ex: Japanese electronics often benefit from positive perceptions of Japanese innovation and
For a localization strategy, firms typically use a worldwide area structure, allowing local assets often require long-term usage and are tailored to a specific production process. In such cases, quality. (3) noise levels—the amount of competing messages—can weaken communication.
continuously, Intel benefits from both learning and scale advantages. As the lesson responsiveness with minimal need for integration. In an international strategy, firms transfer outsourcing may pose a risk because external suppliers may not commit to maintaining or developing these In developed countries, media saturation leads to high noise, making it harder for messages
suggests, firms seeking to move down the experience curve quickly may serve global core competencies from home and require moderate control and worldwide product division assets over time. (2) protecting proprietary technology is crucial. If a firm’s competitive advantage to stand out. By contrast, developing markets often have lower noise levels, improving
markets from a centralized facility, thereby achieving substantial cost savings. structures. Global standardization calls for centralized decision-making, strong cultures, and depends on intellectual property embedded in a component, it is safer to produce it in-house to prevent leaks visibility. Ex: Times Square in New York, where overwhelming advertisements reduce the
Leveraging Subsidiary Skill In a globally integrated firm, valuable innovations and product-based global structures to achieve cost efficiencies. The most complex is the or imitation by third parties. This is especially true in high-tech industries such as electronics or aerospace. impact of individual messages. Push versus Pull Strategies In international marketing, firms
skills can emerge not only from the corporate headquarters but also from local transnational strategy, which combines global efficiency, local responsiveness, and knowledge (3) when the firm can perform the activity more efficiently than any available supplier. In such cases, must carefully select between push and pull communication strategies, depending on product
subsidiaries. To capture this value, firms must build systems that recognize and reward sharing. It relies on matrix structures, high integration, and strong culture, but also suffers from the cost savings and quality control from in-house production outweigh the flexibility of outsourcing. characteristics, distribution infrastructure, and media availability. These two strategies reflect
subsidiary-level creativity and enable cross-border knowledge transfer. The example of high control costs and ambiguity. The key is ensuring that structure and systems match the Strategic Alliances with Suppliers Instead of fully integrating production or relying entirely on external fundamentally different approaches to influencing purchasing behavior. Push strategy
strategic demands of the firm. Organizational Change and Inertia Organizational change suppliers, firms can choose a middle path by forming strategic alliances with key suppliers. These alliances emphasizes personal selling and is most suitable for business-to-business (B2B) products, new
McDonald’s India illustrates this concept well. Faced with religious dietary restrictions, becomes necessary when firms shift strategies or face a new external environment. However, allow companies to enjoy some of the benefits of vertical integration—such as close coordination and long- or complex products, or situations where media resources are limited. This strategy is
the local subsidiary developed a vegetarian-only kitchen system. This innovation was change is often resisted due to inertia, which stems from existing power structures, cultural term collaboration—without the burden of managing an additional internal subunit. Such partnerships often particularly effective when distribution channels are short, allowing firms to directly influence
later adopted in other culturally sensitive markets, contributing to the firm’s global habits, managerial assumptions, and institutional constraints. Overcoming inertia requires involve information sharing, co-investment in technology, or joint quality improvement initiatives. intermediaries such as wholesalers or retailers. Because personal selling is highly targeted and
competitiveness. This shows that leveraging subsidiary skills requires not only awareness following three steps: first, unfreeze the organization through bold actions like restructuring; However, this approach comes with a limitation: it may reduce strategic flexibility. For instance, if a persuasive, it helps build trust and product understanding—especially in technical or industrial
but also organizational structures that encourage innovation and allow for its replication second, move to a new structure aligned with the new strategy; and third, refreeze by embedding supplier fails to meet performance expectations or if market conditions change, the firm may find it difficult markets. Pull strategy focuses on mass media advertising, making it ideal for business-to-
elsewhere in the firm. Cost Pressures and Local Responsiveness Firms operating in new norms and behaviors. Quick, decisive change supported by leadership and communication to switch to a new partner quickly.  while strategic alliances can support efficiency and innovation, firms consumer (B2C) goods. This strategy is effective when distribution channels are long and there
global markets often face two opposing pressures: cost reduction and local helps firms evolve successfully in a dynamic international landscape. CHAP 9 GLOBAL must carefully manage these relationships to avoid dependency or lock-in effects. Managing a Global is sufficient access to print and electronic media. The aim is to generate consumer demand at
PRODUCTION, OUTSOURCING and LOGISTICS In international business, production and Supply Chain Managing a global supply chain is a complex but essential task for international firms. the retail level by encouraging end-users to seek out the product, which in turn pulls the
responsiveness. Cost pressures push firms to lower unit costs by standardizing products logistics are two core functional areas that directly support a firm’s global strategy. Production Logistics includes all activities required to move materials from suppliers to manufacturing plants, through product through the channel. The decision between these strategies depends on three main
and operations, often through outsourcing and centralization. In contrast, responsiveness involves all activities related to creating a product—such as assembling components, testing the production process, and then to customers. The main objectives are to minimize cost while maximizing factors: (1) Product type and consumer sophistication: Firms offering consumer goods to
pressures require firms to adapt products and services to meet the specific preferences, systems, and packaging finished goods. In contrast, logistics refers to the procurement and service quality.To be competitive, firms must design supply chains that are efficient, responsive, and broad markets typically favor a pull strategy because mass media can reach and influence
infrastructure, or regulations of each local market. Dell, for example, responds to cost physical transmission of materials through the supply chain, including the management of globally integrated. This involves coordinating suppliers across countries, aligning production schedules, large audiences. In contrast, industrial products with technical specifications often require
pressures by outsourcing its manufacturing to Asia and selling directly to customers inventory, warehousing, and transportation from suppliers to end consumers. Together, these and ensuring timely delivery of finished goods. A well-managed supply chain can create a significant push strategies to convey detailed product benefits through personal selling. (2)Channel
online, minimizing operational costs. Meanwhile, Unilever responds to local functions serve as critical levers for lowering costs and enhancing value creation across borders. competitive advantage, especially when customer service—such as fast delivery or accurate order length: Longer channels make personal selling difficult and expensive. In such cases, a pull
One strategic goal for firms is to lower the cost of value creation. This can be achieved by fulfillment—is critical. The Role of Just-in-Time Inventory  is a strategy aimed at (1) reducing strategy is more efficient as it leverages advertising to stimulate demand across various
responsiveness pressures in India by customizing product sizes and pricing for rural locating production in countries where efficiency is highest—such as using low-cost skilled labor warehousing and inventory costs by having materials arrive at a manufacturing plant just in time to enter the intermediaries. Shorter channels, however, enable more control and justify the use of push,
consumers who have limited access and purchasing power. Balancing these pressures is in Vietnam or sourcing cheaper inputs from specific regions. Firms also manage global supply production process. This approach minimizes capital tied up in unused inventory and reduces storage space as the firm can directly manage relationships with fewer partners. (3)Media availability: A
a core challenge in international strategy, as efforts to reduce cost often limit a firm’s chains to balance supply with demand, ensuring smooth operations at lower costs. For example, requirements. (2) helps identify defective parts early, allowing firms to remove poor-quality inputs before pull strategy relies heavily on accessible mass media, including TV, online platforms, and
flexibility to meet diverse customer needs. Choosing a Global Strategy There are four global automakers align parts sourcing across continents to meet regional production needs they affect the production process  better overall product quality. Drawback: it eliminates buffer stock, print. In markets where these media are scarce or expensive, firms may not achieve desired
main strategies for competing internationally: global standardization, localization, without overstocking or causing delays. Another objective is to add value by better serving making the firm vulnerable to disruptions in supply. For instance, during the COVID-19 pandemic, many exposure, making push a more attractive and practical choice. A push strategy is best(
transnational, and international strategies. The best choice depends on the level of customer needs. This is often done by producing closer to key markets, allowing for faster global supply chains were halted due to the lack of inventory reserves—revealing a major risk of relying product is industrial or complex; Distribution channels are short ;Few media options are
pressure for cost reduction and local responsiveness. A global standardization strategy, delivery, local product adaptation, or improved responsiveness to demand changes. For instance, solely on JIT systems. The Role of Information Technology and the Internet Information technology available) A pull strategy is best (product is consumer-oriented ;Distribution channels are
having regional assembly centers enables firms to customize final products (IT) plays a critical role in modern global production and logistics management. long; Media access is sufficient to support advertising) Thus, firms must evaluate their
such as Intel’s, is ideal when cost pressures are high and local responsiveness is low..
approach often aligns communication methods with the realities of the target market Export Strategy To minimize risks in global trade, firms should start small—targeting one or a independently and focus on local responsiveness; thus, the cost of control is low. In an international strategy, product type, market structure, and media environment before choosing a strategy. Using
and distribution system to ensure message effectiveness and strong market performance few foreign markets. Hiring EMCs or consultants is a practical first step. Businesses should where core competencies are transferred from the home firm to subsidiaries, ambiguity is relatively low, and the wrong strategy can lead to wasted resources or weak customer engagement. The optimal.
Global Advertising can be both standardized and customized, each with its advantages commit management time and build strong relationships with foreign distributors and even local so are control costs. For global standardization, ambiguity is higher because of the need to coordinate Why is it important to integrate R&D, marketing, and production functions in
employees. For example, hiring local staff helps companies better understand the culture and globally for economies of scale and experience curves, increasing the need for control and integration international firms? Integrating R&D, marketing, and production functions is crucial for
and limitations. Standardized advertising is effective when it provides economic enhance customer relationships. In some cases, setting up local production may reduce tariffs, mechanisms. Transnational strategy has the highest level of performance ambiguity, due to its simultaneous successful new product development, especially in global firms. This integration ensures that
advantages, especially in situations where creative talent is scarce, and when brand names improve logistics, and boost local appeal. Export and Import Financing International trade pursuit of global efficiency, local responsiveness, and knowledge sharing; therefore, it also faces the highest customer needs identified by marketing directly inform R&D priorities, leading to innovations
are global. In contrast, standardized campaigns may not work well when there are often involves a lack of trust, as businesses must rely on foreign partners. To solve this, trusted cost of control, requiring strong formal and informal integrating mechanisms as well as a strong that are more likely to succeed commercially. It also facilitates designing products that are
significant cultural differences among nations or different advertising regulations across third parties—usually reputable banks—are involved to ensure security and trust in transactions. organizational culture. (2) Apple’s global success is partially due to the alignment of its strategy and easier and more cost-effective to manufacture, which is critical for maintaining global
countries. To balance these challenges, firms often standardize some features of the Lack of Trust Due to geographic and legal distances, many exporters and importers do not trust organizational architecture. Explain how this alignment works and why it is important. Answer: competitiveness. Additionally, close collaboration shortens the time-to-market, allowing firms
campaign while customizing others to local markets. each other. Reputable banks act as intermediaries, making the transaction process more reliable Apple’s global strategy emphasizes innovation, consistency, and premium branding. Its organizational to respond quickly to market trends and stay ahead of rivals. Given the high failure rate of new
Example: Coca-Cola keeps the same brand theme globally but modifies language and and secure for both parties  Letter of Credit (L/C) is issued by a bank on behalf of an importer architecture is designed to support these goals through centralized decision-making, a strong R&D culture, products, cross-functional integration reduces risk by aligning product features, production
and guarantees payment to the exporter upon presentation of required documents. This instrument global talent recruitment, and strict control systems. For example, R&D is tightly integrated with marketing feasibility, and market demands from the outset. Therefore, international firms benefit from
visuals to suit local preferences. Pricing Strategy Price discrimination refers to adds credibility to transactions, especially when trust is limited. Example: A Vietnamese garment and manufacturing, ensuring product design aligns with customer expectations and cost efficiency. Apple’s structured collaboration across departments, often using cross-functional teams to break silos
charging different prices for the same product in different countries, with the goal of exporter receives an L/C from a U.S. bank, ensuring they will be paid after delivering goods. strong organizational culture promotes consistency and excellence, allowing the company to deliver high- and ensure cohesive product strategies CHAP 11 (1) How do Export Management
increasing profitability. This strategy is only effective if national markets can be kept Draft (Bill of Exchange) is a written order used for payment between exporters and importers. quality products globally. This internal alignment ensures that every part of the organization contributes to Companies (EMCs) support small firms in global expansion, and what are the risks of
separate and if different price elasticities of demand exist. Price elasticity measures how There are two main types: Sight draft: payable on presentation. Time draft: payable after a delay the same strategic objectives, which is essential in a competitive international environment. (3) Why do relying too much on them? Export Management Companies (EMCs) serve as outsourced
demand responds to price changes. Typically, elasticity is higher in lower-income (e.g., 30, 60, 90 days), allowing for credit terms. Bill of Lading This is issued by the shipping firms pursuing a transnational strategy experience the highest performance ambiguity, and what international departments for firms that lack the resources or knowledge to manage export
countries with many competitors, and lower in high-income markets with fewer options. carrier and serves three purposes: Receipt for the goods. Contract between exporter and carrier. organizational architecture features are necessary to manage this complexity? Illustrate with a real- operations themselves. EMCs help businesses identify foreign market opportunities, navigate
Firms can benefit from adjusting prices based on these differences in consumer Document of title, allowing the holder to claim ownership and receive the shipment. A Typical world example. Firms that pursue a transnational strategy aim to simultaneously achieve global efficiency, complex customs procedures, and connect with overseas buyers. For small and medium
International Trade Transaction A standard trade transaction involves: Buyer requests an L/C local responsiveness, and worldwide learning. This triple objective creates high interdependence among enterprises (SMEs), this is often the most practical way to enter global markets without heavy
sensitivity. Strategic Pricing Strategic pricing includes three key approaches: Predatory , Exporter ships goods, Drafts and documents are exchanged, Payment is processed through the subunits, making it difficult to determine which unit contributes to performance outcomes—leading to the upfront investment. EMCs also assist with logistics, documentation, and compliance, which
pricing: A firm uses profits from one market to support aggressive pricing in another bank → This system minimizes financial risk and ensures smooth delivery. This diagram explains highest level of performance ambiguity among all international strategies. As ambiguity increases, so does reduces costly errors. However, overreliance on EMCs can prevent firms from developing in-
market to drive competitors out. Once successful, the firm will raise prices to recoup an international trade transaction using a letter of credit. Diagram: A French importer orders goods the cost of control, since simple coordination mechanisms are no longer sufficient. To manage this house export capabilities. This limits long-term self-sufficiency and strategic learning. A
losses. Multi-point pricing: Pricing strategy in one market can affect a rival's strategy in from an American exporter and asks their bank (Bank of Paris) to issue a letter of credit. This complexity, firms must adopt a matching organizational architecture. This includes a global matrix structure balanced approach, where the firm initially works with an EMC and gradually builds internal
another. Firms must centrally monitor pricing to manage competitive responses across guarantees that the exporter will be paid. The letter is sent to the exporter’s bank (Bank of New that allows for dual decision-making authority across product divisions and geographic areas. Furthermore, capacity, is ideal. For instance, a U.S. startup may contract an EMC to begin exporting tech
multiple markets. Example: If Samsung cuts prices in Brazil, Apple may retaliate in York), which informs the exporter. After shipping the goods, the exporter submits shipping the firm needs to implement strong integrating mechanisms, both formal (e.g., cross-functional teams) and accessories to Japan and, after gaining experience, establish its own export division. (2) What
documents and a payment draft to their bank. These documents are passed to the French bank, informal (e.g., knowledge networks), as well as a strong organizational culture that aligns diverse subunit are the main advantages and disadvantages of countertrade, and when is it most likely
South Korea. Experience curve pricing: Firms with more experience have cost which notifies the importer. The importer pays the bank to receive the goods. Finally, the bank in goals. EX: a global tech company like Sony, operating in electronics, gaming, and entertainment across to be used? Ans: Countertrade refers to a set of trade practices where goods and services are
advantages. They may price low worldwide, accept short-term losses, and expect future France pays the U.S. bank, and the exporter receives the money. This process helps reduce risk multiple regions, must coordinate global R&D with local market responsiveness. Sony uses a hybrid exchanged for other goods and services, rather than cash. This form of trade is most commonly
cost savings and profits. Example: Tesla accepted losses on early Model 3 units to reduce for both buyer and seller. Export Assistance Governments often support exporters through: structure that balances centralized product divisions with local autonomy. It also relies on shared values and used when currency exchange is difficult, foreign reserves are limited, or political sanctions
battery costs through higher production volume. Configuring the Marketing Mix Export financing: Provided by institutions like the Export-Import Bank. Export credit internal networks to enable learning across borders—characteristics essential for managing the high restrict monetary payments. One major advantage is that countertrade enables deals that would
Choosing between standardization and customization is not a strict either/or decision. insurance: Protects against non-payment risks. Export-Import Bank (Eximbank) An ambiguity of a transnational strategy. (4) Why is it important for a firm's organizational architecture to otherwise be impossible, especially in developing or sanctioned markets. For example, in the
Most firms choose to standardize some elements of the marketing mix while customizing independent U.S. government agency that offers: Loans and guarantees to support exports. & match its strategy and external environment? Support your answer with an example. Answer: 1980s, many Soviet Bloc countries engaged in countertrade due to non-convertible currencies.
others, depending on the costs and benefits in each market. Assistance in financing international deals and projects. Export Credit Insurance Offered in the A firm’s performance depends on the fit between its strategy, architecture, and environment. If a firm’s It also offers a competitive edge when rivals insist on cash-only terms. However, countertrade
U.S. by the Foreign Credit Insurance Association (FICA), this insurance protects exporters architecture does not support its strategic goals or fails to adapt to changing external conditions (e.g., comes with risks, including receiving low-quality or hard-to-resell goods, and requiring
Example: IKEA sells the same furniture globally (standardized) but adapts assembly from commercial and political risks if buyers default. For instance, this helps mitigate losses if a competitive pressure, regulation), it risks inefficiency and failure. Example: Apple’s global innovation significant internal barter and trading expertise. Thus, it is best suited for large multinationals
instructions and measurements locally (customized). New Product Development buyer in a politically unstable country refuses or is unable to pay. Countertrade When cash strategy is supported by a tightly controlled architecture—centralized R&D, a culture of innovation, global with global resale networks. A modern example is when Boeing agreed to buy components
Global competition is increasingly driven by technological innovation. Product life payments are not possible or practical, countertrade is used. It involves exchanging goods or talent sourcing, and strict quality control. This alignment allows Apple to consistently launch successful from Indian suppliers as part of a broader defense aircraft deal, fulfilling offset obligations
cycles are short, so new innovations can make old products obsolete and open up new services without using money, particularly in countries facing currency shortages or sanctions. products worldwide, even in highly competitive markets. (5) Why are integrating mechanisms important tied to a large export contract (3): Why is poor market analysis a common cause of export
opportunities. As a result, innovation should be a strategic priority, requiring close For example, a country under sanctions might exchange oil for machinery instead of paying cash. in international business, and how do their roles differ depending on the firm’s global strategy? failure, and how can firms avoid this pitfall? Poor market analysis is one of the most
coordination between R&D, marketing, and manufacturing. Barter is the simplest form—a direct exchange of goods or services without using money. It is Integrating mechanisms are crucial for coordinating subunits in international firms, especially as common causes of export failure. Many firms make the mistake of assuming that products
Example: Apple launches new iPhone models annually to stay ahead of competitors. The typically used in one-off deals, especially with partners who are not creditworthy or trustworthy. operations span across diverse countries and business functions. Their importance varies by strategy: firms which succeed in their home markets will also perform well abroad. This results in costly
For instance, a company may trade industrial machinery in exchange for agricultural products using a localization strategy have the lowest need for integration because local units operate independently. errors when products fail to align with local tastes, cultural norms, or consumption habits. For
Location of R&D The rate of new product development is influenced by where R&D from a country facing currency restrictions. Counterpurchase In a counterpurchase, a firm sells However, firms pursuing a transnational strategy face high complexity and ambiguity, requiring extensive instance, a U.S. breakfast cereal company failed in India because the product did not match
activities are located. Development is faster in countries where More money is spent on goods to a country and agrees to buy back certain goods later. For example, a European electronics integration to balance global efficiency with local responsiveness. Integrating mechanisms include direct local eating preferences. To avoid such pitfalls, firms must invest in detailed market research,
R&D, Demand is strong, Consumers are affluent, Competition is intense  generate company may sell computers to a government and, in return, commit to buying a specified amount contact, liaison roles, cross-functional teams, and matrix structures. For instance, temporary teams including consumer behavior studies, local competitor analysis, and distribution assessments.
more product ideas and innovate more rapidly. Integrating R&D, Marketing, and of textiles from that country in a separate transaction. Offset is similar to counterpurchase, but may work on coordinating marketing and R&D across regions. In matrix structures, decision-making is Consulting local experts and using export assistance agencies can also provide critical insights.
Production Due to the high failure rate in new product development, firms must ensure offers more flexibility. Instead of buying back from the same customer, the seller can buy from shared between product divisions and geographic areas, which helps align goals but can also lead to conflict. Ultimately, success in global markets requires understanding not just what to sell, but how,
close integration between R&D, marketing, and production. This integration any firm in the buyer’s country. For instance, an aerospace firm might sell aircraft to a government Moreover, informal tools like a knowledge network—relying on personal relationships and shared values— where, and to whom to sell it. (4) What role do instruments like the Bill of Lading and
and fulfill the offset obligation by buying parts from a local auto supplier. enhance integration without bureaucracy. This is especially effective when performance ambiguity is high, Drafts play in securing international transactions? The Bill of Lading and Drafts are
guarantees: Customer needs drive product design, Products are easy to manufacture, Compensation/Buyback This occurs when a firm builds a plant or supplies equipment and and cultural coordination is needed. Example: A multinational like Nestlé, operating with a worldwide area essential instruments in international trade that provide legal and financial protection to both
Costs are well managed, Time to market is minimized => reducing risk and improving services, then receives a portion of the output as payment. For example, a company that builds a structure, uses informal networks and regular team meetings across countries to maintain coherence between exporters and importers. The Bill of Lading acts as a receipt, a contract of carriage, and a
success rates for new products. Cross-Functional Teams Firms use cross-functional chemical plant in a developing country might accept part of the plant's chemical production as headquarters and local subsidiaries. CHAP 9 (1) How does the Just-in-Time (JIT) system enhance document of title, enabling the exporter to retain control over the goods until payment terms
product development teams to improve collaboration and reduce miscommunication. compensation. Switch trading, a firm that receives counterpurchase credits (promises to buy production efficiency, and what are its risks in global supply chains? The Just-in-Time (JIT) system are met. Drafts, whether sight or time drafts, represent a formal demand for payment from the
Effective teams: led by high-status project managers, include members from all important goods) sells those credits to a third-party trading house, which then finds another buyer who can improves production efficiency by reducing inventory holding costs and identifying defective inputs early importer. A sight draft requires immediate payment upon presentation, while a time draft
department, Work in proximity, Set clear goals, Resolve conflicts effectively Building use them. This method helps companies handle goods they don’t need or cannot resell efficiently. in the process. By receiving materials only as they are needed, firms minimize waste and streamline allows for delayed payment, providing flexibility. These tools are particularly useful when
Global R&D Capabilities To successfully commercialize new technologies, firms must Pros and Cons of Countertrade +Enables trade when money or credit is unavailable +Gives operations. JIT also enhances quality control, as problems in the supply chain are detected and resolved dealing with unfamiliar trading partners. Together, they help reduce uncertainty and streamline
firms a competitive edge in difficult markets.+Sometimes required by governments. - May quickly. However, JIT systems are highly sensitive to disruptions. Without buffer inventory, firms face the movement of goods and money across borders. CHAP 7 (1) How can firms leverage skills
integrate R&D and marketing globally. This often means setting up multiple R&D centers involve receiving low-quality or unwanted goods. - Requires trading and resale expertise. - Best serious risks when unexpected events—such as natural disasters, strikes, or pandemics—interrupt supply developed in foreign subsidiaries to benefit the entire organization? Firms can enhance
in regions like North America, Asia, and Europe. These centers must stay connected with suited for large firms with global distribution networks. ESSAY QUESTIONS CHAP 7 (1) Sony chains. A prominent example is the COVID-19 pandemic, which caused severe component shortages for global performance by recognizing and transferring valuable skills developed in foreign
marketing and manufacturing via formal and informal communication mechanisms, initially followed an international strategy, selling the same electronic products globally with automakers like Toyota, exposing the vulnerability of JIT systems to global supply shocks. (2) How does subsidiaries. Managers must create incentive systems to encourage local innovation, set up
allowing faster and more coordinated product launches. CHAP 11 minimal change. However, as global competition intensified (e.g., from Samsung and LG), technology, such as EDI and web-based systems, improve global supply chain management? processes to identify new capabilities, and disseminate them across the network. For instance,
EX/IM/COUNTERTRADE The Promise and Pitfalls of Exporting (1) Exporting Sony began localizing products and cutting costs. Analyze this strategic shift. Why was it Technology plays a crucial role in modern supply chain management by enabling real-time communication, McDonald’s India developed a vegetarian-only kitchen model due to cultural sensitivities.
allows firms to significantly expand their market size, as global markets are often much necessary, and what does it reveal about the evolution of international strategies? ANS: reducing paperwork, and improving scheduling. Electronic Data Interchange (EDI) allows firms to track This innovation was later shared with other subsidiaries facing similar market demands. By
Sony’s shift reflects the limitations of the international strategy when faced with rising pressures inventory, update suppliers instantly, and plan production based on accurate demand forecasts. Web-based leveraging such local solutions globally, firms improve adaptability, enhance efficiency, and
larger than domestic ones. Ex: Samsung does not limit itself to selling electronics only for both cost reductions and local responsiveness. Initially, Sony could rely on innovation and systems also help synchronize activities across countries, ensuring smoother logistics and faster responses maintain competitiveness across diverse markets. (2) What is strategic positioning, and how
in Korea but leverages international markets to scale revenue.(2) Large firms often take brand recognition to sell standardized products globally. But as competitors like Samsung and LG to market changes. For example, Zara uses real-time data from its stores to adjust production and restock should firms configure their operations to support it? Strategic positioning involves
a proactive approach in seeking out new export opportunities, utilizing their resources to entered the market with lower costs and locally tailored products, Sony could no longer sustain popular items quickly. These systems reduce inefficiencies, shorten delivery times, and provide firms with choosing a point on the efficiency frontier—either focusing on low cost or differentiation—
build strategic global presence. In contrast, (3) many smaller firms remain reactive, high margins with minimal adaptation. To stay competitive, Sony had to evolve toward a a competitive advantage through better customer service and supply chain visibility. (3) Why did Unilever and aligning internal operations to support that position. Firms must ensure that their
waiting for foreign buyers to approach them, which leads them to miss potential markets. transnational strategy, balancing global efficiency (e.g., central R&D, shared platforms) with local decentralize certain product development activities to its Indian subsidiary, and how does this support organizational structure, production systems, and marketing efforts are consistent with their
However, exporting is not without challenges.(4) Small firms are often discouraged by responsiveness (e.g., adapting features to regional preferences). This case demonstrates that a transnational strategy? Unilever’s decision to allow its Indian subsidiary to develop products like single- chosen strategy. For example, Vietnam Airlines positions itself as a premium airline
its complexity and face numerous common pitfalls. Pitfalls include poor market analysis international strategy may work temporarily, but firms must be flexible and proactive to adjust as use shampoo sachets exemplifies the firm’s transnational strategy. Initially, India served as a low-cost (differentiation), focusing on service quality, while Pacific Airlines operates as a low-cost
global competition and local demands change. (2) Unilever customizes shampoo in small production base, but over time, its strategic role expanded as the local team gained market knowledge and carrier. Bamboo Airways adopts a hybrid strategy, offering good service at reasonable prices.
(e.g., a U.S. cereal brand fails in India due to taste differences), weak understanding of sachets at very low prices for rural Indian consumers. → What strategic pressures is innovation capabilities. The development of sachets responded to local consumer needs—affordable Each airline must structure its cost, HR, and marketing activities to match its strategic position
local competition, lack of product customization (as seen when McDonald's changes its Unilever responding to? How does this relate to the concept of local responsiveness? packaging for price-sensitive customers—and became a global success. These products were later exported to achieve long-term profitability. (3) What are the pressures for cost reduction and local
menu in India to exclude beef), inefficient distribution strategies, and ineffective Answer: Unilever is responding to strong pressures for local responsiveness, particularly due to to other developing markets, showing how local responsiveness and global learning can coexist. This case responsiveness, and how do they affect international strategy?Firms face two opposing
promotional campaigns (e.g., advertising on the wrong media platform). In addition, income levels, consumer preferences, and distribution challenges in rural India. In such markets, supports the idea that foreign factories can evolve into global centers of excellence and contribute to firm- pressures in international markets. Cost reduction pressures arise in industries with
firms may struggle to secure financing and underestimate the expertise and paperwork consumers prefer smaller, affordable packaging due to lower daily income. Additionally, wide innovation, a key feature of transnational strategies. (4) How does Zara use information technology standardized products, global competition, and powerful buyers. In response, firms centralize
required to enter foreign markets. What Exporting Firms Need to Succeed To compete distribution infrastructure may not support large-scale retail. By adapting both the product format to enhance its global supply chain responsiveness? Zara’s success in global fashion retail is heavily tied operations and seek efficiency. Local responsiveness pressures arise from differing
effectively in global markets, exporting firms must navigate several critical tasks that (small sachets) and pricing, Unilever aligns with the localization strategy, tailoring offerings to to its use of information technology, especially in supply chain management. Through a web-based system, consumer preferences, infrastructure, regulations, and distribution systems, requiring product
local needs while still maintaining brand presence. This reflects the firm's ability to respond to store managers update headquarters on sales data and customer preferences daily. This real-time data flows and process adaptation. For example, Dell addresses cost pressures by outsourcing to Asia and
determine their success abroad. (1) to identify market opportunities by researching differences in market conditions and consumer behavior, even at the cost of higher per-unit back to production and logistics, enabling the company to restock popular items within days, not weeks. selling online, while Unilever adapts packaging and pricing for rural India due to local
where their products are in demand. This involves understanding consumer preferences, production expense. (3) Tesla builds Gigafactories in Germany, China, and the U.S. instead Zara also uses EDI systems to coordinate with suppliers and track shipments, reducing paperwork and distribution challenges. Balancing these pressures is crucial, often requiring hybrid strategies
income levels, and market gaps. Ex, a Vietnamese coffee brand may discover rising of exporting from a single location. → Which strategic concepts explain this approach, and increasing responsiveness. The firm’s IT-driven model illustrates how digital systems can support fast- like the transnational approach. (4) Why is it important for firms to evolve their
demand for specialty coffee in Germany, making it an ideal target market. (2) exporters what benefits is Tesla aiming to capture? Answer: Tesla’s approach demonstrates the fashion strategies, reduce inventory risk, and maintain competitive advantage by aligning supply closely international strategies over time? As global markets evolve, firms must adapt their
must manage foreign exchange risk, as fluctuations in currency values can significantly application of location economies and local responsiveness within a transnational strategy. By with changing consumer demand. (5) How did Apple's decision to vertically integrate chip production strategies to remain competitive. An international strategy may work initially, but rising
affect profitability. For instance, a U.S. firm exporting to Europe may see its revenues setting up production facilities in key regions like China and Europe, Tesla reduces logistics costs, reflect a "make" strategy, and what were the strategic benefits? Apple’s decision to design and produce competition and cost pressures may demand a shift toward global standardization or
avoids tariffs, and responds more rapidly to local market regulations and customer expectations. its own M-series chips illustrates a clear example of the "make" strategy in international production. By transnational strategies. Similarly, a localization strategy may provide short-term
decline if the USD depreciates against the euro after contracts have been signed. (3) to It also benefits from learning effects and economies of scale as each Gigafactory gains production vertically integrating chip manufacturing, Apple gains tighter control over performance, security, and advantages, but over time, cost constraints may force integration of cost-saving measures.
navigate import and export financing. Exporters need to secure reliable payment experience. This global footprint allows Tesla to lower the cost of value creation while still innovation cycles. This move allows Apple to avoid dependence on external suppliers and better protect Strategic flexibility is critical. For example, Sony initially used an international strategy but
mechanisms and manage cross-border credit risks. This includes working with banks, tailoring operations to regional conditions, improving both profitability and market penetration. proprietary technology, especially in a competitive industry where chip design is a key differentiator. later adopted a transnational approach to compete with low-cost, locally responsive rivals like
using letters of credit, and understanding terms of trade to protect against non-payment. (4) Amazon entered Southeast Asia but faced strong competition from local firms like Additionally, internal chip production facilitates closer coordination between hardware and software Samsung and LG. Firms that fail to evolve may lose relevance in dynamic global markets.
(4) understand the challenges of doing business in a foreign market. These challenges Shopee and Lazada. What challenges does Amazon face in this region, and which strategy development, which enhances product quality and user experience. The strategy also minimizes the risk of CHAP 9 (1) What is mass customization, and how does flexible manufacturing
can be cultural, legal, or logistical. Without knowledge of local customs regulations, would best suit this market? Answer: Amazon faces high pressures for local responsiveness in supply chain disruptions caused by external partners. This approach aligns with the benefits of vertical technology support it? Mass customization is the ability to produce tailored products at near
consumer behavior, or delivery infrastructure, companies risk costly missteps and failed Southeast Asia due to language diversity, payment systems, consumer preferences, and logistics integration discussed in make-or-buy decisions, where control, efficiency, and asset specificity outweigh mass production efficiency. Flexible manufacturing technologies, such as lean production and
infrastructure. Simply applying its global standardization model is ineffective. To succeed, outsourcing flexibility. CHAP 10 (1) Why did Samsung promote high-end models in developed markets flexible machine cells, enable firms to quickly switch between product variations, reduce setup
market entries. Improving Export Performance To overcome these challenges, firms Amazon must adopt a localization or transnational strategy — adapting user interfaces, offering and basic smartphones in emerging economies? Samsung’s marketing strategy illustrates how economic times, and improve quality control. This allows companies to adapt to diverse customer
must improve their access to foreign market information. This involves using trade local payment options (e.g., cash on delivery), and building regional fulfillment centers. development influences product attribute decisions. In high-income markets like the United States and South preferences without significantly increasing costs. As a result, firms can offer localized or
databases, embassy resources, or specialized consultants to gather insights. Some Competing against firms like Shopee, which already understand local nuances, requires Amazon Korea, Samsung promotes its flagship models, such as the Galaxy S series, which include cutting-edge customized products while still benefiting from scale economies, making them more
governments offer dedicated export support systems—Japan, for example, has highly to go beyond efficiency and invest in market-specific adaptation, especially in mobile-first and features like advanced cameras and foldable screens. In contrast, in lower-income markets such as parts of competitive globally. (2) What is the strategic significance of foreign factories in a
effective institutions to assist exporters. Moreover, companies can hire Export price-sensitive environments (5) You are the strategy lead for a Vietnamese startup in fintech Africa or South Asia, Samsung focuses on the A-series, which are more affordable and include only essential transnational strategy? In a transnational strategy, foreign factories are not merely cost-
Management Companies (EMCs), which provide expertise in logistics, customs, and planning to expand into Southeast Asia. Outline a basic international strategy you would features. This strategy aligns with the idea that consumers in developed countries tend to seek additional saving tools but strategic assets that contribute to global learning and innovation. Initially set
buyer relations to reduce failure risks and streamline the export process. International recommend.Answer: Given regional differences in consumer preferences, regulations, and performance attributes, while those in developing nations prefer basic, value-for-money products. It shows up for low-cost production, they can evolve into centers of excellence with design and R&D
infrastructure, a localization strategy would be appropriate. The startup should adapt its platform how firms adapt their product offerings based on income levels and price elasticity of demand. (2) How capabilities. This transformation is driven by local market pressures and advancements in
Comparison One of the biggest barriers to exporting is a lack of knowledge about global to local languages, comply with financial regulations in each country, and offer payment features does Unilever manage distribution in countries with fragmented retail systems? Unilever’s distribution factor conditions. Recognizing the knowledge potential of foreign subsidiaries, firms avoid
opportunities, especially for smaller businesses. While Germany and Japan provide tailored to each market. However, it can standardize its backend technology to reduce costs. Over strategy is a clear response to the retail fragmentation seen in emerging markets like India or parts of Africa. shifting production solely based on wage changes, instead using these locations to gain
strong institutional support—such as Japan’s large trading companies (sogo shosha)— time, it may evolve toward a transnational strategy by sharing insights between markets and In these countries, the retail environment consists of millions of small stores, known as kiranas or kiosks, competitive advantage through innovation and responsiveness. (3) When are strategic
U.S. firms often face challenges due to the absence of centralized export assistance. centralizing R&D. Building partnerships with local banks or telecom providers would enhance rather than large supermarket chains. Instead of relying on direct-to-retail models, Unilever uses a long alliances with suppliers more beneficial than full vertical integration? Strategic alliances
Information Sources  The U.S. Department of Commerce remains the most market penetration and responsiveness. (6) Why are core competencies critical to the success distribution channel that includes multiple intermediaries—distributors, wholesalers, and local retailers—to with suppliers are beneficial when a firm wants to retain access to supplier expertise and
comprehensive source of export-related information. Agencies such as the International of firms in international markets?  Core competencies are unique strengths that competitors reach consumers efficiently. The firm also invests in training small retailers to improve channel quality and flexibility without the burdens of full ownership. They allow for long-term collaboration and
Trade Administration and Foreign Commercial Service offer market lists and organize cannot easily imitate, and they give firms a sustainable advantage in global markets. These visibility for its products. This approach fits well with the theory that long distribution channels are suitable investment sharing while avoiding the coordination and control issues associated with vertical
competencies allow firms to create perceived value and/or lower costs, both of which support for fragmented systems, where reaching each consumer directly would be inefficient and costly. (3) How integration. However, these alliances can limit flexibility if the supplier underperforms or
trade events to connect U.S. firms with foreign partners. Additional support is available profitability. For instance, IKEA’s core competency lies in flat-pack furniture design and supply did Tesla apply experience curve pricing in its global strategy? Tesla’s global pricing strategy offers a market conditions change. Therefore, they are ideal when trust and performance are high, and
through the Small Business Administration (SBA) and local governments. Utilizing chain efficiency. This enables it to offer low prices while maintaining acceptable quality textbook example of experience curve pricing. When Tesla introduced the Model 3, it priced the car when the firm wants to balance control with strategic adaptability. CHAP 10 Why is it
Export Management Companies (EMCs outsourced export departments for firms and worldwide. When expanding globally, firms like IKEA transfer and adapt their core competencies aggressively lower than previous models, even though it incurred early losses. The rationale was to quickly difficult to apply a fully standardized global marketing strategy across all countries?
can either: Help firms begin exporting and then transfer responsibility, or Continuously to maintain competitive advantage across diverse markets. CHAP 8 (1) Explain how build global sales volume, reduce per-unit costs through scale, and gain experience in battery production While globalization has led to certain similarities across markets, fully standardizing a global
manage a company’s exports.  A good EMC assists in market identification, buyer performance ambiguity and cost of control differ across the four international strategies: and vehicle assembly. Over time, as production became more efficient, costs dropped, and Tesla improved marketing strategy is difficult due to persistent cultural, economic, regulatory, and consumer
engagement, logistics, and paperwork. For example, a Vietnamese textile manufacturer localization, international, global standardization, and transnational. ANS: Performance its profit margins. This reflects the core idea of experience curve pricing, where firms accept short-term behavior differences. For instance, Levitt’s vision of global markets overlooked the fact that
ambiguity refers to situations where the causes of a subunit’s poor performance are unclear. This losses in exchange for long-term global competitiveness through cost leadership and operational learning. consumers in different countries have distinct traditions, languages, levels of economic
may rely on an EMC to handle shipping and customs for European buyers. However, ambiguity affects how easily firms can monitor and control international operations, which in turn development, and expectations from products. Trade barriers and differing technical standards
over-reliance on EMCs may prevent firms from developing their own export capabilities influences control costs. In a localization strategy, ambiguity is lowest because subunits operate also require product and marketing adaptation. As a result, companies like Apple may offer
in the long run.
similar core products globally, but must adjust pricing, software, and even accessories to meet
local laws and customer needs.
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