SME Strategy Formation

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Questions and Answers

What is a key difference in strategy formation between SMEs and LSEs?

SMEs focus on local markets, while LSEs focus on global markets

SMEs adopt deliberate approaches, while LSEs adopt entrepreneurial approaches (correct)

SMEs adopt entrepreneurial approaches, while LSEs adopt deliberate approaches

SMEs focus on economies of scope, while LSEs focus on economies of scale

What is a benefit of economies of scale in global business strategy?

Increasing fixed costs per unit

Reducing operating costs per unit and spreading fixed costs over a larger volume (correct)

Decreasing purchasing power over suppliers

Reducing market share in a specific region

What is a result of building a global presence in terms of economy of scale?

Decreasing efficiency in production

Reducing production capacity and asset base

Increasing production capacity and asset base (correct)

Maintaining the same production capacity and asset base

What is an advantage of a larger scale of operations in global business strategy?

Increased opportunity to build centres of excellence Signup and view all the answers

What is a requirement for building centres of excellence according to the text?

Critical mass of talent in one location Signup and view all the answers

What is an effect of accumulating volume in production and sales?

Decreased cost price per unit Signup and view all the answers

What is a benefit of pooling global purchasing power?

Concentrated negotiating power over suppliers Signup and view all the answers

What is a key concept related to economies of scale in global business strategy?

Experience curve effects Signup and view all the answers

What is the primary characteristic of an ethnocentric management orientation?

It sees similarities in foreign countries Signup and view all the answers

Which management orientation is most likely to lead to a 'staying at home' strategy?

Ethnocentric Signup and view all the answers

What is a characteristic of a regiocentric management orientation?

It is ethnocentric or polycentric in its view of the rest of the world Signup and view all the answers

Under which circumstance might 'staying at home' be considered the better strategic option?

With a weak position in the home market Signup and view all the answers

What is a characteristic of a geocentric management orientation?

It has a world view, seeing similarities and differences in home and host countries Signup and view all the answers

What is a consequence of an ethnocentric management orientation on international business operations?

The company is likely to stay at home Signup and view all the answers

What is a characteristic of a polycentric management orientation?

Each host country is unique Signup and view all the answers

What is a strategic option for firms besides expanding into foreign markets?

Staying at home Signup and view all the answers

What is the primary reason why global integration is considered an imperative in marketing?

To adapt to changing market conditions and customer needs Signup and view all the answers

What is a key difference between small-medium sized enterprises (SMEs) and large-scale enterprises (LSEs) in terms of strategy formation?

SMEs rely more on emergent strategy, while LSEs rely on deliberate strategy formation Signup and view all the answers

Which of the following is a characteristic that distinguishes SMEs from LSEs in terms of resources?

SMEs have more limited resources Signup and view all the answers

What is a major difference between SMEs and LSEs in terms of risk taking?

SMEs are more likely to take calculated risks Signup and view all the answers

How do SMEs and LSEs differ in terms of economies of scale and scope?

LSEs have a larger economy of scale and scope Signup and view all the answers

What is a key difference between SMEs and LSEs in terms of use of information sources?

LSEs have more advanced information systems Signup and view all the answers

Which of the following is a characteristic of global marketing?

It involves a standardized approach to marketing globally Signup and view all the answers

What is the primary difference between deliberate strategy formation and emergent strategy in the context of LSEs?

Deliberate strategy formation is more planned, while emergent strategy is more adaptive Signup and view all the answers

Study Notes

SME and LSE Strategy Formation

SMEs tend to have more deliberate approaches, while LSEs tend to have more entrepreneurial and Strategic Business Unit (SBU) approaches.
The managerial orientations in SMEs and LSEs are expected to converge in the future.

Economies of Scale

Accumulated volume in production and sales leads to lower cost price per unit due to experience curve effects and increased efficiency in production.
Building a global presence automatically expands a firm's scale of operations, giving it larger production capacity and a larger asset base.
Benefits of economies of scale include:
- Reducing operating costs per unit and spreading fixed costs over larger volume due to experience curve effects.
- Pooling global purchasing gives the opportunity to concentrate global purchasing power over suppliers.
- A larger scale gives the global player the opportunity to build centers of excellence for development of specific technologies or products.

Differences between SME and LSE

Major differences between SME and LSE include:
- Resources
- Formation of strategy/decision-making processes
- Organization
- Risk taking
- Flexibility
- Economies of scale and scope
- Use of information sources

LSE: Deliberate Strategy Formation

In reality, the observable output of an activity is often a result of the mix between the intended (planned) strategy and the emergent (not planned) strategy.

Management Orientations

Ethnocentric: Home country is superior, sees similarities in foreign countries
Polycentric: Each host country is unique, sees differences in foreign countries
Regiocentric: Sees similarities in a world region; is ethnocentric or polycentric in its view of the rest of the world
Geocentric: World view, sees similarities and differences in home and host countries

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Description

Explore the converged managerial orientations in SMEs and LSEs, with SMEs adopting more deliberate approaches and LSEs becoming more entrepreneurial.