Business Strategy 2024/2025
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Questions and Answers

Which of the following frameworks is used for comparing countries for market entry?

  • Porter's Five Forces
  • Value Chain Analysis
  • SWOT analysis
  • CAGE framework (correct)

What is one of the criteria used to assess country markets according to their competitive characteristics?

  • Cultural similarity
  • Defender’s clout (correct)
  • Institutional support
  • Consumer behavior

Which entry mode strategy involves establishing a business with a local partner?

  • Whole owned subsidiaries
  • Contractual arrangements
  • Joint ventures (correct)
  • Exporting

Which of the following is NOT included among the four entry mode strategies?

<p>Direct investment (C)</p> Signup and view all the answers

What can make an attractive industry in the home market unattractive in another country?

<p>Differences in consumer preferences (B)</p> Signup and view all the answers

What is a typical disadvantage that foreign competitors face when entering a new market?

<p>Established relationships with local suppliers (B)</p> Signup and view all the answers

Which of the following is a key driver to internationalisation?

<p>Enhanced international legal frameworks (D)</p> Signup and view all the answers

What is the term used to describe the competitive advantages that countries and regions gain from specific local conditions?

<p>Locational advantage (D)</p> Signup and view all the answers

Which of the following companies is mentioned as an example of a large traditional multinational?

<p>Nestle (A)</p> Signup and view all the answers

Which factor may serve as an unfavourable condition for internationalisation?

<p>Strong protection of local companies (B)</p> Signup and view all the answers

What is one example of a company that faced disadvantages when entering the US market?

<p>Tesco (D)</p> Signup and view all the answers

What is a characteristic of countries specializing in specific industries, as mentioned in the content?

<p>Established expertise in that sector (B)</p> Signup and view all the answers

Which organization is identified as an example of a not-for-profit that engages in international activities?

<p>Doctors without Borders (A)</p> Signup and view all the answers

What is a primary focus of the international value system for companies with significant foreign sales?

<p>Optimizing the international configuration of their value chain (A)</p> Signup and view all the answers

Which of the following is NOT an advantage of global sourcing?

<p>Creation of local market monopolies (B)</p> Signup and view all the answers

What challenge do companies face when formulating an international strategy?

<p>Balancing global integration with local responsiveness (A)</p> Signup and view all the answers

In Porter's Diamond model, local factor conditions contribute to which type of advantage?

<p>Competitive advantage (C)</p> Signup and view all the answers

What does the global-local dilemma relate to in international strategies?

<p>The balance between standardizing products and adapting to local needs (A)</p> Signup and view all the answers

Which factor allows international companies to strategically locate different elements of their value chain?

<p>Differences in skills, resources, and costs of countries (D)</p> Signup and view all the answers

What is meant by local responsiveness in international strategies?

<p>Adapting to regulations and preferences in local markets (D)</p> Signup and view all the answers

What is a key component of the global integration strategy?

<p>Coordinating global production and service delivery (C)</p> Signup and view all the answers

What is the primary focus of a transnational strategy?

<p>Balancing global integration with local responsiveness (C)</p> Signup and view all the answers

Which of the following companies is cited as an example that successfully implements a transnational strategy?

<p>ABB (B)</p> Signup and view all the answers

What is a key drawback of a global strategy?

<p>Reduced flexibility due to limited local adaptation (A)</p> Signup and view all the answers

In what scenario is a global strategy best suited?

<p>When cost efficiencies are gained from standardization (C)</p> Signup and view all the answers

What novel advantage does a transnational strategy provide?

<p>Enhanced global knowledge flow (B)</p> Signup and view all the answers

Which characteristic is common to both international and transnational strategies?

<p>Blending of different strategic approaches (C)</p> Signup and view all the answers

What is a significant challenge faced by companies implementing a transnational strategy?

<p>Balancing integration with local responsiveness (B)</p> Signup and view all the answers

What are regional strategies aiming to achieve?

<p>Economic efficiency alongside local adaptation (B)</p> Signup and view all the answers

What best describes the export strategy in international business?

<p>Centralising production in the domestic market with minimal local adaptation. (B)</p> Signup and view all the answers

Which of the following is a characteristic of a multi-domestic strategy?

<p>Decentralised operations with autonomy for country managers. (A)</p> Signup and view all the answers

In which situation would a company most likely adopt a multi-domestic strategy?

<p>When local consumer preferences are highly varied. (C)</p> Signup and view all the answers

What is a primary disadvantage of a multi-domestic strategy?

<p>High costs due to diverse product variations. (B)</p> Signup and view all the answers

What best defines a global strategy in international business?

<p>Standardising products and services worldwide. (C)</p> Signup and view all the answers

Which of the following companies is most likely to follow a multi-domestic strategy?

<p>Frito-Lay, to cater to diverse local tastes. (D)</p> Signup and view all the answers

What is a key risk of centralising operations in an export strategy?

<p>Loss of local customer insights. (C)</p> Signup and view all the answers

What is a common focus area for companies using a global strategy?

<p>Standardising their entire product line. (D)</p> Signup and view all the answers

Flashcards

PESTEL Framework

A framework for comparing different countries for entry into new markets. It considers factors like Political, Economic, Social, Technological, Environmental, and Legal factors.

CAGE Framework

A framework for assessing the distance between two markets based on factors like Cultural, Administrative, Geographic, and Economic differences.

Market Attractiveness

The attractiveness of a country market is based on factors like its PESTEL and CAGE characteristics and the Porter's Five Forces analysis.

Exporting

An entry mode strategy for internationalization, involving selling goods directly to a foreign market.

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Licensing or Franchising

An entry mode strategy involving the transfer of knowledge or technology to local partners in exchange for royalties or fees.

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Export Strategy (International Strategy)

Companies sell products with minimal changes to foreign markets, focusing on centralized production in their home country.

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Multi-domestic Strategy

Each country gets a unique product or service tailored to its needs, making each market operate independently.

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Global Strategy

Companies focus on global integration, offering standardized products and services in a unified market.

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Global Strategy (Cont.)

This approach emphasizes economies of scale and efficient location, with control centralized at headquarters.

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Local Adaptation

It is a strategy where companies adapt their products and services to local market conditions and tastes.

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Marketing-Driven Companies

These companies prioritize market understanding and often leverage local marketing expertise.

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Value Chain Adaptation

This strategy involves adapting the value chain activities to specific local conditions.

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Global Integration

It refers to the benefits gained by integrating operations and resources across different countries.

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Internationalisation

The process of expanding business operations beyond domestic borders. Ex: A company opening branches in other countries.

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Transnational Strategy

This strategy combines global efficiency with local adaptation, aiming to satisfy local customer needs while leveraging economies of scale.

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Geographic sources of advantages

Advantages held by a company operating in a specific geographic location. These advantages can be related to factors like skilled labor, resources, or market conditions.

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International Strategy-Mix of Global and Local

Leveraging global resources for efficiency while tailoring products to local market preferences. Offers flexibility but requires balancing global integration with local needs.

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Porter's Diamond

A framework developed by Michael Porter to analyze the competitive advantages of a geographic location. It considers factors like infrastructure, skilled labor, and demand conditions.

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Regional Strategies

Focusing on a specific region, enabling companies to achieve regional cost and quality efficiencies, while adapting to the region's market demands.

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Disadvantage of a foreign entrant

A situation where a new entrant in a market faces challenges due to pre-existing local competitors having entrenched advantages like strong customer relationships and established supply chains.

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Transnational Strategy - Value Chain

A strategy where a company focuses on centralized manufacturing for efficiency, and distributes assembly and product adaptations to different locations.

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Firm-specific competitive advantages

The ability of a company to overcome local competitors' advantages through unique capabilities and strengths. It might involve superior technology, brand reputation, or efficient operations.

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Transnational Strategy - Knowledge Exchange

A strategy involving knowledge sharing and learning across units in different countries, promoting innovation from any location.

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Favourable environment for internationalisation

A positive environment where factors like lower trade barriers, better legal frameworks, and improved communication enhance the feasibility and success of international business expansion.

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Unfavourable environment for internationalisation

Obstacles that restrict international business activities. These might include trade barriers, protectionist policies, or differences in consumer preferences.

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Transnational Strategy - Challenges

A company using a transnational strategy may face challenges balancing global integration and local responsiveness, requiring complex coordination and management processes.

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International Strategy - Blending Approaches

Companies rarely adopt a pure international strategy, and often blend elements, positioning themselves somewhere between the four main strategies.

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Drivers of internationalisation

Factors driving companies to internationalize, such as seeking new markets, accessing cheaper resources, or diversifying risk.

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Global Sourcing

Using the best suppliers worldwide regardless of location to reduce costs, access special skills, and capitalize on specific market conditions.

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Global-Local Dilemma

The challenge of balancing creating a single consistent product or service across all markets (global integration) with adapting to local preferences and regulations (local responsiveness).

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International Value System

The international configuration of a company's activities, where each part of the value chain is located in the most efficient and effective location.

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Local Responsiveness

The need to adapt products or services to meet unique local preferences, regulations, or cultural factors, often requiring decentralized operations.

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Local Responsiveness

The ability to respond to local conditions, such as different consumer preferences, regulations, and cultural norms, with distinct products, services, or marketing.

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Study Notes

Business Strategy (2024/2025)

  • This presentation covers international business strategy, focusing on choices for businesses operating in multiple geographic markets.
  • It differentiates traditional multinationals (e.g., Nestle, McDonald's, Toyota) from newer, internet-based startups and not-for-profit organizations (e.g., Red Cross, Doctors without Borders).

Internationalisation Drivers

  • Factors driving internationalization include lower trade and investment barriers, improved international legal frameworks, and advancements in communication technologies (e.g., cheaper air travel, internet).
  • Challenges to internationalization include remaining trade barriers, protectionism of national companies from overseas rivals, and variations in consumer needs across markets.

International Strategies

  • The core challenge of formulating international strategies is balancing global integration pressures with pressures for local responsiveness.
  • Global integration involves standardizing products and services across markets.
  • Local responsiveness involves adapting to local customer preferences, regulations, and cultural nuances.
  • The global-local dilemma concerns the extent to which products and services can be standardized or must be adapted to accommodate specific national markets.
    • Examples include TV markets (potentially standardized) and processed food markets (generally needing adaptation to local tastes).

Four International Strategies

  • Export Strategy: Companies primarily export locally produced goods with minimal adaptation to foreign markets, often centralizing production in the domestic market.
    • Pros: relative ease & minimal adaptation
    • Cons: limited global reach, prone to competition from local businesses
    • Examples: Boeing, Bugatti
  • Multi-domestic Strategy: Different product and service offerings and operations tailored to specific local market conditions and customer preferences.
    • Pros: tailored to market needs
    • Cons: potentially higher costs, management complexity and difficulties with brand consistency
    • Examples: Frito-Lay, Nestle
  • Global Strategy: Focus on global integration, approaching the world as a single market with standardized products and services to maximize economies of scale & centralized operations.
    • Pros: centralized strategy, cost efficiencies from standardization
    • Cons: inflexible, risk of missing local market preferences/needs
    • Examples: IKEA, Cemex
  • Transnational Strategy: Combines global integration and local responsiveness, aiming for balanced efficiency and adaptation to local markets.
    • Pros: efficiency, adaptability
    • Cons: coordination complexity
  • Regional Strategies: Focus on treating regions as homogenous markets to maximize efficiency and localization.
    • Example: European Union, North American Free Trade

Market Selection and Entry

  • An attractive market in one country might not be attractive in another.
  • Frameworks for comparing countries include PESTEL (political, economic, social, technological, environmental, legal) and CAGE (cultural, administrative, geographic, economic).

Competitive Characteristics

  • Country markets are assessed based on market attractiveness (PESTEL, CAGE, Porter's Five Forces), defender's reactiveness, and defender's clout.

Entry Mode Strategies

  • Common entry modes include exporting, contractual agreements (licensing, franchising), joint ventures, and wholly-owned subsidiaries.
  • Each entry mode has varying levels of resource commitment, control, risk, and speed of entry.

Appendices (Table of Entry Modes)

  • Comparison table summarizing the advantages and disadvantages of each entry mode (detailed in the pages provided).
  • A summary of potential strategies for companies planning to expand internationally. Note that this table is in slide 34.

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Description

This quiz explores the intricacies of international business strategy, examining traditional multinationals and internet-based startups. Key topics include the drivers of internationalization and the challenges businesses face when formulating their strategies across different markets.

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