Assignment

Submitted To: Miss Saira Anam

Submitted by:
Asma Maqbool (1410393)
Sabeen Naveed (1410406)
Sania Maqsood (1410411)

Class: B.com (VIII)

Subject: International Business

Department: Commerce

Govt. Post Graduate Islamia College for Women Cooper Road,

Lahore
 The Strategy of International Business

Strategy:

“Actions that managers take to attain the goals of a firm.”

Firms need to pursue strategies that need to increase “Profitability” and “Profit Growth”,

 Profitability: Rate of return the firms makes on invested capital

 Profit Growth: Percentage increase in profits over time

To increase profitability and profit growth firms can,

 Add value
 Lower cost
 Sell more in existing markets
 Expand internationally

Lower Cost

Profitability

Add Value

Enterprise

Valuation

Sell more in Existing

Markets

Profit Growth

Expand Internationally
Strategic Positioning:

Firms need to choose either differentiation or low cost, and the configure internal operations to
support the choice. So, to maximize long run return on invested capital, firms must

 Pick a viable position on efficiency frontier

 Configure internal operations to support position

Configured Operations:

Firm’s operations are like a value chain composed of a series of distinct value creation
activities. Such as:

 Production
 Marketing
 Materials Management
 Research & Development
 Human Resources
 Information Systems

All of these activities must be managed effectively and be consistent with the firm’s strategy.

Competitive existence in Global Marketplace:

Firms that compete in the global marketplace face two conflicting types of competitive
pressures, which are as follows:

 Pressures for Cost Reduction – Force the firm to lower unit cost
 Pressures for Local Responsiveness – Require the firm to adapt its product to meet
local demands

Pressures for Cost Reduction:

This requires a firm to try to lower the costs of value creation by mass producing a standardized
product at the optimal location in the world to try to realize location and experience curve
economies. Pressures for cost reductions can be particularly intense in industries producing
commodity products where meaningful differentiation on nonprice factors is difficult and price
is the main competitive weapon.

Pressures for Local Responsiveness:

It requires that a firm differentiate its product offering and marketing strategy from country to
country in an attempt to accommodate the diverse demands that arise from national differences
in consumer tastes and preferences, business practices, distribution channels, competitive
conditions, and government policies.

 Consumer Taste and Preferences - Strong pressures for local responsiveness emerge
when consumer tastes and preferences differ significantly between countries--as they
may for historic or cultural reasons. In such cases, product and/or marketing messages
have to be customized to appeal to the tastes and preferences of local consumers.

 Business Practices – Pressures for local responsiveness emerge when there are
differences in infrastructure and/or traditional practices between countries. In such
circumstances, customizing the product to the distinctive infra-structure and practices
of different nations may necessitate delegating manufacturing and production functions
to foreign subsidiaries.

 Distribution Channels – A firm's marketing strategies may have to be responsive to

differences in distribution channels between countries. This may necessitate the
delegation of marketing functions to national subsidiaries.

 Government Policies – Economic and political demands imposed by host-country

governments may necessitate local responsiveness. For example, the politics of health
care around the world requires that pharmaceutical firms manufacture in multiple
locations.
Strategic Choices:

There are four basic strategies to compete in international markets. The appropriateness of each
strategy depends on the pressures for cost and local responsiveness in the industry. These
strategies are as follows:

 Global Standardization – It increases profitability and profit growth by reaping the

cost reduction form economies of scale, learning effects (cost savings that come from
learning) and location economies (arise from performing a value creation activity in the
optimal location). Its goal is to pursue low cost strategy on a global scale.

 Localization – It increases profitability by customizing goods and services so that they

can match the tastes and preferences in different national markets.

 Transnational – It tries to simultaneously achieve low cost through location

economies, economies of scale and learning effects. Firms differentiate their products
across geographic markets to account for local differences and multidirectional flow of
skills between different subsidiaries in the firm’s global network of operations.

 International – It take product first produced for the domestic market and sell them
internationally with only minimal local customization.