SW 6: Strategy & Organization at ZHAW - Zürcher Hochschule Für Angewandte Wissenschaften | Flashcards & Summaries

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Lernmaterialien für SW 6: Strategy & Organization an der ZHAW - Zürcher Hochschule für Angewandte Wissenschaften

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Summary: Strategy

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  • Strategy makes the best use of the firm’s resources, core competencies and market opportunities in order to gain a competitive advantage.
  • When expanding internationally a company can increase profitability and profit growth based on leveraging competencies in new markets, realization of localization and cost economies, transfer of knowledge in the global web of operations.
  • A globally competitive firm must simultaneously seek three key strategic objectives – efficiency, flexibility, and learning.
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Basic Strategic Question

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What am I good at or even excellent in? (Unique competencies)

=> Resource-Based View


Where (market, industry) can I be successful? (Industry attractiveness)
=> Market-Based View


Home Market Competitive Strategy ? (Cost Leadership, Differentiation, Focus)

Target Market Competitive Strategy? (Cost Leadership, Differentiation, Focus) 


  1. What products to offer?
  2. How to compete against rivals?
  3. Where to source from?
  4. Mode of entry: Export? Contractual? Intermediate? Hierarchical?
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Competitive Pressures in International Business

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Standardization

=> Pressure for global integration and cost reduction


Differentiation
=> Pressure for local responsiveness

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Sources of Pressure for Global Integration & Cost Reduction

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Pressures for global integration and cost reductions are greatest…

  1. … in industries producing commodity type products that fill universal needs where price is the main competitive weapon (universal needs);
  2. … when major competitors are based in low cost locations;
  3. … where there is persistent excess capacity and price pressures;
  4. … where consumers are powerful and face low switching costs.


Example

  • easyJet structural cost advantage relative to other airlines allows it to offer customers more affordable fares. This cost advantage is created through a combination of factors.
  • Smartphones / TV
  • Toilet paper
  • Water
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Sources of Pressure for Local Responsiveness

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Pressures for local responsiveness arise from…

  1.  … differences in consumer tastes and preferences;
  2.  … differences in traditional practices and infrastructure;
  3.  … differences in distribution channels;
  4.  … host-government demands.

=>  in what degree the company needs to adapt the product for the local market


Examples

  • Watches 
  • Cars
  • Food


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International (Home Replication) Strategy

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Low Responsiveness / Low Cost Pressure


Treatment of Foreign Markets

  • Take products produced for the domestic market and sell them internationally with only minimal local customization;
  • Markets with low competition, more homogenous and similar customer needs, niche markets;
  • Foreign markets are often similar to the domestic one (low psychic distance).

Traditional MNC Cultural Orientation

Ethnocentric: focus on values, processes and resources of the
domestic company and replicate.

 Value Chain

  • Critical elements of value chain stay centralized at home (R&D, procurement, production), local marketing and sales but under tight control from headquarters;
  • Generally no adaptation to foreign markets, products are marketed through intermediaries.

Rationale

Transferring core competencies of the company (products/services) to locations where local competitors lack them.


Examples:

  • Zara
  • Victorinox 
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Localization (Multidomestic) Strategy 

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High Responsiveness / Low Cost Pressure


Treatment of Foreign Markets

  • Increase profitability by customizing goods or services so that they match tastes and conditions in local markets (world as a grid of national markets);
  • In local industries;
  • Autonomous subsidiaries pursue local responsiveness and localized strategy.

Traditional MNC Cultural Orientation

Polycentric: focus on values and interests of the local culture in the served markets.

Value Chain

  • Value Chain is flexibly organized according to needs of different national markets;
  • Critical elements are positioned in the local market (R&D, production, procurement, marketing), decentralized and with authority to adapt to local market conditions.

Rationale

  • Minimizing political and exchange rate risks;
  • Greater prestige through local/customized elements.


Example: Nestlé

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Global (Standardization) Strategy 

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Low Responsiveness / High Cost Pressure


Treatment of Foreign Markets

  • World is seen as single integrated market
  • No or minimal differences in consumer preferences from country to country (“Why not make the same thing, the same way, everywhere?”)

Traditional MNC Cultural Orientation

Geocentric: focus on global values and universal needs

Value Chain

  • Concentration of critical value chain activities (R&D, production and marketing) in headquarters or in the few most favorable key locations, central control over operations.
  • No or minimum customization applied.

Rationale

Increase profitability through minimum repetition, maximum efficiency and integration worldwide, improved quality through standardization.


Examples:

  • Zara
  • H&M
  • intel
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TESTE DEIN WISSEN

Transnational Strategy

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TESTE DEIN WISSEN

High Responsiveness / High Cost Pressure


Treatment of Foreign Markets

  • Coordination approach: World is seen as a portfolio of regionally integrated markets, standardization-localization mix differs from region to region.
  • Aggregation on regional level: consumer preferences from region to region

Traditional MNC Cultural Orientation

  • Regiocentric: Focus on integration in geographic markets and building a global network of operations.
  • Facilitate global learning and knowledge transfer.

Value Chain

  • Scale economies through sourcing from reduced number of global suppliers, concentrate manufacturing in few key locations. 
  • Dispersed, subject to minimum efficiency standards, to meet local
    preferences.

Rationale

Benefiting from both global integration and local responsiveness and leveraging global competencies: “standardize where feasible; adapt where appropriate”. Coordinate global competitive moves.

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TESTE DEIN WISSEN

Organizational Considerations of an International Firm

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Vertical Differentiation

  • Centralization
  • Decentralization


Horizontal Differentiation

  • International Division
  • Area Division
  • Worldwide Product Division
  • Global Matrix
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Summary: Motivation for Global Integration

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  • Standardize products and processes to maximize scale, experience, and learning effects
  • Maximize productivity of resources, capabilities, and competencies
  • Exploit location effects
  • Capitalize on converging consumer preferences and universal needs
  • Provide uniform service to all customers
  • Accelerate consumer’s quest to maximize purchasing power parity
  • Directly engage global competitors
  • Build global image with universal message
  • Leverage expanding cross-national technological connectivity
  • Respond to the progressive, ongoing globalization of markets
Lösung ausblenden
TESTE DEIN WISSEN

Summary: Motivation for Local Responsiveness

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  • Customize products and process to local customer preferences to optimize scale, experience, and learning effects
  • Satisfy host governments requirements and regulations
  • Tap local resources, capabilities, and competencies
  • Promote a local profile to placate national stakeholders
  • Directly engage local competitors
  • Adjust to local political, economic and cultural circumstances
  • Increase sensitivity to new product and process options
  • Tailor marketing message to local ideals
  • Build local goodwill by supporting national agenda
  • Accommodate differences in distribution channels and service systems
  • Respond to historical or geographic imperatives
  • Adjust products and processes to the digital divide
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Q:

Summary: Strategy

A:
  • Strategy makes the best use of the firm’s resources, core competencies and market opportunities in order to gain a competitive advantage.
  • When expanding internationally a company can increase profitability and profit growth based on leveraging competencies in new markets, realization of localization and cost economies, transfer of knowledge in the global web of operations.
  • A globally competitive firm must simultaneously seek three key strategic objectives – efficiency, flexibility, and learning.
Q:

Basic Strategic Question

A:

What am I good at or even excellent in? (Unique competencies)

=> Resource-Based View


Where (market, industry) can I be successful? (Industry attractiveness)
=> Market-Based View


Home Market Competitive Strategy ? (Cost Leadership, Differentiation, Focus)

Target Market Competitive Strategy? (Cost Leadership, Differentiation, Focus) 


  1. What products to offer?
  2. How to compete against rivals?
  3. Where to source from?
  4. Mode of entry: Export? Contractual? Intermediate? Hierarchical?
Q:

Competitive Pressures in International Business

A:

Standardization

=> Pressure for global integration and cost reduction


Differentiation
=> Pressure for local responsiveness

Q:

Sources of Pressure for Global Integration & Cost Reduction

A:

Pressures for global integration and cost reductions are greatest…

  1. … in industries producing commodity type products that fill universal needs where price is the main competitive weapon (universal needs);
  2. … when major competitors are based in low cost locations;
  3. … where there is persistent excess capacity and price pressures;
  4. … where consumers are powerful and face low switching costs.


Example

  • easyJet structural cost advantage relative to other airlines allows it to offer customers more affordable fares. This cost advantage is created through a combination of factors.
  • Smartphones / TV
  • Toilet paper
  • Water
Q:

Sources of Pressure for Local Responsiveness

A:

Pressures for local responsiveness arise from…

  1.  … differences in consumer tastes and preferences;
  2.  … differences in traditional practices and infrastructure;
  3.  … differences in distribution channels;
  4.  … host-government demands.

=>  in what degree the company needs to adapt the product for the local market


Examples

  • Watches 
  • Cars
  • Food


Mehr Karteikarten anzeigen
Q:

International (Home Replication) Strategy

A:

Low Responsiveness / Low Cost Pressure


Treatment of Foreign Markets

  • Take products produced for the domestic market and sell them internationally with only minimal local customization;
  • Markets with low competition, more homogenous and similar customer needs, niche markets;
  • Foreign markets are often similar to the domestic one (low psychic distance).

Traditional MNC Cultural Orientation

Ethnocentric: focus on values, processes and resources of the
domestic company and replicate.

 Value Chain

  • Critical elements of value chain stay centralized at home (R&D, procurement, production), local marketing and sales but under tight control from headquarters;
  • Generally no adaptation to foreign markets, products are marketed through intermediaries.

Rationale

Transferring core competencies of the company (products/services) to locations where local competitors lack them.


Examples:

  • Zara
  • Victorinox 
Q:

Localization (Multidomestic) Strategy 

A:

High Responsiveness / Low Cost Pressure


Treatment of Foreign Markets

  • Increase profitability by customizing goods or services so that they match tastes and conditions in local markets (world as a grid of national markets);
  • In local industries;
  • Autonomous subsidiaries pursue local responsiveness and localized strategy.

Traditional MNC Cultural Orientation

Polycentric: focus on values and interests of the local culture in the served markets.

Value Chain

  • Value Chain is flexibly organized according to needs of different national markets;
  • Critical elements are positioned in the local market (R&D, production, procurement, marketing), decentralized and with authority to adapt to local market conditions.

Rationale

  • Minimizing political and exchange rate risks;
  • Greater prestige through local/customized elements.


Example: Nestlé

Q:

Global (Standardization) Strategy 

A:

Low Responsiveness / High Cost Pressure


Treatment of Foreign Markets

  • World is seen as single integrated market
  • No or minimal differences in consumer preferences from country to country (“Why not make the same thing, the same way, everywhere?”)

Traditional MNC Cultural Orientation

Geocentric: focus on global values and universal needs

Value Chain

  • Concentration of critical value chain activities (R&D, production and marketing) in headquarters or in the few most favorable key locations, central control over operations.
  • No or minimum customization applied.

Rationale

Increase profitability through minimum repetition, maximum efficiency and integration worldwide, improved quality through standardization.


Examples:

  • Zara
  • H&M
  • intel
Q:

Transnational Strategy

A:

High Responsiveness / High Cost Pressure


Treatment of Foreign Markets

  • Coordination approach: World is seen as a portfolio of regionally integrated markets, standardization-localization mix differs from region to region.
  • Aggregation on regional level: consumer preferences from region to region

Traditional MNC Cultural Orientation

  • Regiocentric: Focus on integration in geographic markets and building a global network of operations.
  • Facilitate global learning and knowledge transfer.

Value Chain

  • Scale economies through sourcing from reduced number of global suppliers, concentrate manufacturing in few key locations. 
  • Dispersed, subject to minimum efficiency standards, to meet local
    preferences.

Rationale

Benefiting from both global integration and local responsiveness and leveraging global competencies: “standardize where feasible; adapt where appropriate”. Coordinate global competitive moves.

Q:

Organizational Considerations of an International Firm

A:

Vertical Differentiation

  • Centralization
  • Decentralization


Horizontal Differentiation

  • International Division
  • Area Division
  • Worldwide Product Division
  • Global Matrix
Q:

Summary: Motivation for Global Integration

A:
  • Standardize products and processes to maximize scale, experience, and learning effects
  • Maximize productivity of resources, capabilities, and competencies
  • Exploit location effects
  • Capitalize on converging consumer preferences and universal needs
  • Provide uniform service to all customers
  • Accelerate consumer’s quest to maximize purchasing power parity
  • Directly engage global competitors
  • Build global image with universal message
  • Leverage expanding cross-national technological connectivity
  • Respond to the progressive, ongoing globalization of markets
Q:

Summary: Motivation for Local Responsiveness

A:
  • Customize products and process to local customer preferences to optimize scale, experience, and learning effects
  • Satisfy host governments requirements and regulations
  • Tap local resources, capabilities, and competencies
  • Promote a local profile to placate national stakeholders
  • Directly engage local competitors
  • Adjust to local political, economic and cultural circumstances
  • Increase sensitivity to new product and process options
  • Tailor marketing message to local ideals
  • Build local goodwill by supporting national agenda
  • Accommodate differences in distribution channels and service systems
  • Respond to historical or geographic imperatives
  • Adjust products and processes to the digital divide
SW 6: Strategy & Organization

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