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  • The Strategy of IB: International Business - Chapter 13

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    Yến Ngô Hoàng
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    The chapter discusses International Business strategies. It explains that global expansion allows firms to benefit from location economies by performing value-creating activities in optimal locations to lower costs or differentiate products. Clear Vision, an eyewear company, faced threats from low-cost imports. Instead of lowering costs, it invested in high-quality factories abroad and differentiated its "designer" products. Experience curves show that production costs decline as cumulative output increases due to learning effects and economies of scale. Firms face the greatest pressure to reduce costs in commodity industries, when major competitors have low costs, during excess capacity, and when consumers have power and low switching costs.

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    The chapter discusses International Business strategies. It explains that global expansion allows firms to benefit from location economies by performing value-creating activities in optimal locations to lower costs or differentiate products. Clear Vision, an eyewear company, faced threats from low-cost imports. Instead of lowering costs, it invested in high-quality factories abroad and differentiated its "designer" products. Experience curves show that production costs decline as cumulative output increases due to learning effects and economies of scale. Firms face the greatest pressure to reduce costs in commodity industries, when major competitors have low costs, during excess capacity, and when consumers have power and low switching costs.

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    © All Rights Reserved
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    32 views20 pages

    The Strategy of IB: International Business - Chapter 13

    Uploaded by

    Yến Ngô Hoàng
    The chapter discusses International Business strategies. It explains that global expansion allows firms to benefit from location economies by performing value-creating activities in optimal locations to lower costs or differentiate products. Clear Vision, an eyewear company, faced threats from low-cost imports. Instead of lowering costs, it invested in high-quality factories abroad and differentiated its "designer" products. Experience curves show that production costs decline as cumulative output increases due to learning effects and economies of scale. Firms face the greatest pressure to reduce costs in commodity industries, when major competitors have low costs, during excess capacity, and when consumers have power and low switching costs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    of 20

    Chapter 13

    The strategy of IB

    International Business - Chapter 13


    4.Global expansion

    International Business - Chapter 13


    International Business - Chapter 13
    International Business - Chapter 13
    International Business - Chapter 13
    International Business - Chapter 13
    Part 2. Location Economies
    • Definition: economies that arise from performing a value creation
    activity in the optional location
    • Why? It can lower the cost of value creation and help the firm achieve a low-
    cost position, and/or it can enable a firm to differentiate its products offering
    those of competitors
    • Kinh te dia diem: là đặt những nơi tạo ra kinh tế ở nhiều địa điểm

    International Business - Chapter 13


    International Business - Chapter 13
    Case: Clear Vision page.372
    • What is the typical team that play Clear Vision faced? how did it handle?
    • Low-priced imports were taking an ever-larger share of the U.S.
    • a threat from foreign competition
    • growing labour shortage had pushed up wage rates because industrialization in HK
    -> low-cost location no longer
    • Describe the changes and their strategies throughout the case:
    • Changes:
    • Its objective was not to reduce production costs but to launch a line of high-quality
    differentiated, “designer” eyewear.
    • ClearVision invested its capital in factories in Japan, France, and Italy.
    • Strategies:
    • intended to lower its cost structure (lower C) -> to increase the perceived value of its product.

    International Business - Chapter 13


    Figure 13.5 illustrates this experience curve relationship between unit production costs and cumulative
    output
    International Business - Chapter 13
    Experience Effect
    • Learning Effects: • Economies of Scale
    • Labor productivity increases over • reductions in unit cost achieved by
    time as individuals learn the most producing a large volume of a
    efficient ways to perform product.
    particular tasks. • The more rapidly that cumulative
    • Production costs decline due to sales volume is built up, the more
    increasing labour productivity and rapidly fixed costs can be
    management efficiency, which amortized over a large production
    increases the firm’s profitability. volume, and the more rapidly unit
    • learning effects typically costs will fall.
    • disappear after a while.

    International Business - Chapter 13


    International Business - Chapter 13
    What is implied in the case? Page.376
    • Faced with slow growth -> its local franchisees have begun to
    experiment not only with the menu, but also with the layout and
    theme of restaurants.
    • Half of the 1,200 or so outlets in France have been upgraded to an
    incredible level
    => After that, the Sale increased annually up to 3.4%
    • The company must reward people for successes and not sanction
    them unnecessarily for taking risks that did not pan out.

    International Business - Chapter 13


    International Business - Chapter 13
    International Business - Chapter 13
    When are pressures for cost reductions
    greatest?
    • Presures for cost reductions are greatest?
    1. In industries producing commodity type products that fill universisal needs
    ( needs that exist when the tastes and preferences of consumers in
    different nations are similar if not identical) where price is the main
    competitive weapon
    2. When major competitors are based in low-cost locations
    3. Where there is persistent excess capacity
    4. Where consumer are powerful and face low switching costs

    International Business - Chapter 13


    International Business - Chapter 13
    International Business - Chapter 13
    International Business - Chapter 13

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