multinational business reading respond
WRITTEN RESPONSE #4 MGNT 4670
1) What are the two types of pressures that firms competing in the global marketplace typically face? Pressures for cost reductions and Pressures to be locally responsive Under what types of conditions do these pressures arise?
Pressures for cost reduction:
Intense in industries of standardized, commodity type product that serve universal needs
Meaningful differentiation on non-price factors is difficult
Major competitors are based in low-cost locations
Consumers are powerful and face low switching costs
Liberalization of world trade and investment environment
Pressures for local responsiveness:
Differences in consumer tastes and preferences
Differences in infrastructure and traditional practices
Differences in distribution channels
Host-government demands
2) What are the four main strategies firms may follow to face these pressures? Describe the basic approach of each of these strategies, specifically in terms of its response to the two basic pressures.
A International strategy- “Here it is”
Create value by transferring valuable core competencies to foreign markets that indigenous competitors lack
Centralize product development functions at home
Establish manufacturing and marketing functions in local country but head office exercises tight control over it
Limit customization of product offering and market strategy B Localization strategy-”Act local”
Main aim is maximum local responsiveness
Customize product offering, market strategy (including production and R&D) according to national conditions; compete through localization of products, no standardization
Generally unable to realize value from experience curve effects and location economies
Possess high cost structure due to decentralization C Global standardization strategy- “Be cost-effective”:
Focus is on increasing profitability through a low cost strategy: maximize cost reductions that come from
1) What are the two types of pressures that firms competing in the global marketplace typically face? Pressures for cost reductions and Pressures to be locally responsive Under what types of conditions do these pressures arise?
Pressures for cost reduction:
Intense in industries of standardized, commodity type product that serve universal needs
Meaningful differentiation on non-price factors is difficult
Major competitors are based in low-cost locations
Consumers are powerful and face low switching costs
Liberalization of world trade and investment environment
Pressures for local responsiveness:
Differences in consumer tastes and preferences
Differences in infrastructure and traditional practices
Differences in distribution channels
Host-government demands
2) What are the four main strategies firms may follow to face these pressures? Describe the basic approach of each of these strategies, specifically in terms of its response to the two basic pressures.
A International strategy- “Here it is”
Create value by transferring valuable core competencies to foreign markets that indigenous competitors lack
Centralize product development functions at home
Establish manufacturing and marketing functions in local country but head office exercises tight control over it
Limit customization of product offering and market strategy B Localization strategy-”Act local”
Main aim is maximum local responsiveness
Customize product offering, market strategy (including production and R&D) according to national conditions; compete through localization of products, no standardization
Generally unable to realize value from experience curve effects and location economies
Possess high cost structure due to decentralization C Global standardization strategy- “Be cost-effective”:
Focus is on increasing profitability through a low cost strategy: maximize cost reductions that come from