• Increase the size of potential markets for a firms products and services.
• Take advantage of arbitrage (buying something where it's cheap and selling it for a higher price) opportunities
• Optimizing the physical location for every activity in its value chain

Performance enhancement

Cost reduction

Risk reduction

Both this and performance enhancement benefits parrallel the business-level strategies of differentiation and overall cost leadership.

Ex: Nike's decisions to manufacture athletic shoes from Asian countries such as China, Vietnam and Indonesia.

These operations can affect the cost structure in terms of local manpower and other resources, transportation and logistics and gov't incentives

Ways for rivals to manage currency risks has been to spread the high-cost elements of their manufacturing operations across a few selet and carefully chosen locations around the world

Political and economic risk

currency risk

management risk

Political risk - potential threat to a firm's operations in a country due to ineffectiveness of the domestic political system (e.g. military turmoil, demonstrations and even violent conflict and terrorism)

Economic risk - potential threat to a firm's operations in a country due to conomic policies and conditions, including property rights laws and enforcement of those laws. (e.g. Microsoft has lost billions of dollars in potential revenue through piracy of its software products in many countries, including China)

1. Cost reductions

2. Local responsiveness

Managers must strive to be responsive to local pressures in order to tailor their products to the demand of the local market in which they do business.

Differentiating their offerings and strategies from country to country to reflect consumer tastes and preferences and making changes to reflect differences in distribution channels, HR practices and gov't regulations

Global strategy

Transnational strategy

International strategy

Multidomestic strategy

Goal is worldwide exploitation of parent company's knowledge and capabilities. Local adaption and pressures to lower costs are low!

• Lack of local responsiveness may result in the alienation of local customers.
• Lower costs becuase of less need to tailor products and services.
• e.g. Nike designs its shoes in the US, but all the manufacturing is done in countries like China or Thailand.

A strategy based on a firms' centralization and control by the corporate office, with the primary emphasis on controlling costs, and used in industries where the pressure for local adaption is low and the pressure for lowering costs is high.

• LOWERING COSTS
• Offers products and services as well as to locate manufacturing, R&D and marketing activities in only a few locations near one another.
• Risks - If a co. has all manufacturing facilities in one location, exporting to far locations may create a double-edged sword.
• e.g. Boeing, pharmaceuticals, jet aircraft

Transnational strategy "Glocalization"

Hybridization

A strategy based on firms' optimizing the trade-offs associated with efficiency, local adaption and learning.

Pressures for local adaption and lowering costs are high

e.g. Nestle

Strengths - ability to attain economies of scale, ability to adapt to local markets,

Limitations - Challanges in determing optimal lcoations of activities to ensure cost and quality, managerial challenges in fostering knowledge transfer.

A firm whose emphasis is on differentiating its product and service offerings to adapt to local markets

E.g. Honda

local adaption of products and services will increase a co. cost structure.

Entry Modes of International Expansion

Hint: "ELFS JV W"

From low degree of ownership and extent of investment and risk:

Exporting, Licensing, Franchising, Strategic Alliance, Joint Venture, Wholly Owned Subsidary

Producing goods in one country and selling them to another.

Licensing - enables a company to recieve a royalty or fee in exchange for the right to use its trademark, patent, trade secret or other valuable item of intellecutal property.

Franchising - contracts generally include a broader range of factors in an operation and have a longer time period during which the agreement is in effect.

Strategic Alliances - generally focus on initiatives that are smaller in scope than joint ventures.

Joint Ventures - entail the creation of a third party legal entity.