1. Profitability- the rate of return the firm makes on its invested capital
2. Profit growth- the percentage increase in net profits over time.

1. Add Value and Increase Prices
2. Lower cost
3. Sell more in existing markets
4. Expand internationally

The value of a product to the customer minus the price per unit. 

The greater the consumer surplus, the greater the value for the money the consumer gets.

1. Differentiation strategy-add value so ppl will pay more.

2. Low Cost Strategy- lower the cost.

1.Expand to sell in international markets
 

2.create value in places where it is most efficient
 

3.serve the global market from one location
 

4.Take skills from other countries and use them throughout the firm

1. know that valuable skills can arise anywhere in the firms global network

2. Design something to encourages employees to learn new skills.

3.Have a process for knowing when new skills have been created.

4. Act as facilitators to transfer skills withing the firm.

1. Pressures for cost reductions
Force the firm to lower unit cost

2. Pressures to be locally responsive

Require the firm to adapt its product to meet local demands.

1. In places where commodity type products are made where price is the main competitive weapon

2. When local competitors are based in low cost locations

3. Where there is persistent low cost capacity.

4. Where consumers are powerful and face low switching costs.

1. Consumer tastes and preferences differ between countries

2. Differences in traditional practice and/or infrastructure.

3. Difference in distribution channels

4. Host government demands.

1. Global Standardization

2. Localization

3. Transnational

4. International

Increase profitability and profit growth by reaping the cost reductions from economies of scale, learning effects, and location economies.

-Goal is to pursue a low cost market on a global scale.

Increase profitibility by customizing goods or services so that they match tastes and preferences in different markets.

-Adjust to the people

The totality of a firm's organization including:

1. Organizational Structure

2. Control Systems and incentives

3. Processes, Organizational Culture, and People

• Formal division of the organization into subuinits
• Location of decision making strategies in that structure.
• establish mechanisms to coordinate the activities of the subunits.

Control Systems-metrics used to measure preformance in subunits

Incentives-devices for rewarding managerial behavior

1. The organizational architecture must be internally consistant.

2. The organizational architecture must fit the strategy.

3. The strategy and architecture must be consistant with competitive conditions.

1. Vertical Differentiation

2. Horizontal Differentiation

3. Integrating Mechanisms

Determines where decision making power is concentrated

Centralized

Decentralized

-facilitates coordination

-ensures decisions are consistant with objectives

-allows managers to make changes happen

-avoids duplication of activites

-releaves the burden of centralized decision making

-has been shown to motivate individuals

-permits greater flexability

-can result in better decisions

-can increase control

1. Personal Controls

2. Bureaucratic Controls

3. Output Controls

4. Cultural Controls

personal contact with subordinates

Mostly used in small firms

Bureaucratic Controls

1. Hiring and promotional practices

2. Reward strategies

3. Socialization processes

4. Communication strategies

1. Which market to enter

2. When to enter them and on what scale

3.Which entry mode to use.

transportation costs

trade barriers

political risks

economic risks

costs

firm strategy

Attractive-when the product in question is not widley available and satisfies an unmet need

Undesirable-politically unstable, mixed or command economies, excessive borrowing

1. Early- the firm enters a foreign market before other foreign firms

2. Late- the firm enters the market after firms have already established themselves in the market

The first mover advantage

-have a strong brand name

-build sales volume ahead of rivals

-creat switching costs to tie customers into products

First mover DISadvantages

Pioneering costs-when the foreign market is so different than home that it takes a long time and money to learn it.

1. Exporting

2. Turnkey Projects

3. Licensing

4. Franchising

5. Joint Ventures with host country

6. Wholly owned subsidiary

Exporting

advantage, disadvantage

A) avoid cost of establishing local manuf. operations, help firm achieve experience curve and location economies

B) many other cheaper locations, transport cost and tarrifs, agents in foreign country may not act in your best interest

Turnkey

define, advant, disadv.

1. contractor handles everything for the foreign client like training and operating. Hand a key over to a fully operating firm

2. earn returns from the know how, less risky than the FDI.

3.firm has no long term interest in the country, may create a competitor, giving away competitive advantage.

Licensing

define, adv, disadv

1. patens, inventions, designs, copyrights

2. avoid develop costs, avoid barriers to investment

3. No tight control for experience curve and location economies, limited strategic moves across countries, assest could be lost

Franchising

define, adv, disadv

1. not only sells intangibles, but insists they agree to strict guidelines (service firms)

2. avoid risk of opening in foreign market, quickly build global presence

3. Can't take profits from one branch to help another, too far to detect poor quality.

Joint Ventures

define, adv, disadv

1. Firm is jointly owned by two or more independant firms

2. benefit from partner's knowledge, costs and risks shared

3. give control to tech to their partner, conflict or battles if goals change.

Wholly Owned Subsidiary

define, adv, disadv

1. the firm owns 100% of the stock

2. lower risk of losing control over core competencies, gives them tight control in diff countries

3. firms bears the full cost or setting up

1. Partnet Selection

2. Alliance Structure

3. The manner in which the alliance is managed

1. Ethnocentric

2. Polycentric

3. Geocentric

Why choose ethnocentric

adv and disadv

+ Overcomes lack of qualified managers in host nation, unified culture, transfer core competencies.

-Produces resentment in host country, can lead to cultural myopia.

Why choose polycentric?

adv and disadv

+Alleviates cultrual myopia, inexpensive

-Limits career mobility, isolates HQ from foreign subsidiaries

Why choose geocentric?

Adv and disadv

+ uses HR efficiently. helps build strong culture and informal mgt networks

- National immigration policies may limit implementations, expensive

Citizen from one country sent to another to work.

-Used in firms who use ethnocentric or geocentric strategy.

-Their spouse cannot adapt

-Their inability to adjust

-Family related reasons

-Their personal or emotional maturity

-Cannot cope with large overseas responsibilities

1. Self orientation-their self esteem and self confidence

2. Others orientation- ability to interact with host country ppl

3. Perceptual Ability- understand why people of other countries behave the way they do.

4. Cultural toughness- ability to adjust to the posting

1. Culture training- appreciation for the host country

2. Language training- Learn other languages

3. Practical training- help ease life for expatriate and family in the host country