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Global Strategy: Competing Around the Word

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Darlene vargas

on 24 September 2016

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Transcript of Global Strategy: Competing Around the Word

Global Strategy: Competing Around the Word
Cost reduction & local responsiveness are the 2 opposing forces that MNE's face when competing around the globe.
Strategy Around the World: Cost Reductions VS. Local Responsiveness
- one of the core drivers of globalization to :
1. achieve economies of scale
2. drive down costs
To expand firm's total market
- advanced by Prof. Theodore Levitt
- states that: consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenous
"globalization hypothesis"
"Prius" - Latin: first/ original/ superior
Part II
Definition of Terms:
* local responsiveness
- the need to tailor product and service offerings to fit local customer preferences and host-country requirements
- generally entails higher cost, and sometimes even outweighs cost advantage from economies of scale and lower cost input factors
The Integration-Responsive Framework: Global Strategy Positions and Representative MNE's
Four strategies:
1. International strategy
- a strategy in which a company sells the same products or services in both domestic and foreign markets
-usually the first step companies take when beginning to conduct business abroad
- advantageous if MNE's face low pressures for both local responsiveness & cost reductions
- used by successful MNE's with relatively large domestic markets, strong reputations and brand names
2. Localization strategy
- MNE's attempt to maximize local responsiveness, hoping that local consumers will perceive them to be domestic companies
- also called "multi-domestic strategy"
- this strategy arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions
- usually used when MNE's entering host countries with large and/or idiosyncratic domestic markets (Japan/KSA)
- downside: costly and inefficient because it requires the duplication of key business functions across multiple countries
3. Global-Standardizaion strategy
- MNE's attempt to reap significant economies of scale & location economies by pursuing a global dicision of labor based on wherever best-of-class capabilities reside at the lowest cost
- arises out of the the combination of high pressure for cost reductions and lower pressure for local responsiveness
- allows MNE's to strive for the lowest cost position as possible
- cost leadership busness strategy
- PRICE: main competitive weapon
To benefit from low cost labor and to be close to its main markets in order to reduce shipping costs.
- advantages/key weaknesses: obtaining the lowest cost point possible by minimizing local adaptations
4. Transnational Strategy
- attemps to combine the benefits of a localization strategy (high-local responsiveness) with those of a global-standardization strategy (lowest cost position attainable)
- " glocalization"
- arises from the combination of high pressure for local responsiveness and high pressurefor cost reductions
- usually used by MNE's that pursuean integration strategy at the business level by attempting to reconcile product and/or service differentiation at low cost
- aims to: benefit from global learning
- implemented through: a global matrix structure (combines economies of scale along specific product divisions with economied of learning attainable in specific geographic regions.)
- difficult to implement: organizational complexities involved
- matrix ogranization: costly because it requires that key business functions are frequently duplicated in each host country
Why certain industries are more competitive in specific nations than in others?
National competitive advantage
- world leadership in some specific industries
Porter's National Competitive Advantage:
1. Factor conditions
2. Demand conditions
3. Competitive intensity in focal industry
4. Related and supporting inductries/complementor
- describe a countries' endownments in terms of natural, human and other resources
- specific characteristics of demand in a firm's domestic market
- intense domestic competition
- pharmaceauticals, health services, hospitals
Regional cluster
- a group of interconnected companies and institutions in a specific industry, located near each other geographically and otherwise linked by common characteristics
Evaluate the relationship between location in regional cluster and firm-level competitive advantage
Darlene Marie G. Vargas

Thank you!
Knowledge spillover
- positive externalities that are regionally constrained
- exchange of ideas among firms in a cluster
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