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Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Part Five
Global Strategy, Structure, and
Implementation
CHAPTER ELEVEN
THE STRATEGY OF INTERNATIONAL BUSINESS
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Chapter Objectives

 To examine the idea of industry structure, firm

strategy, and value creation
 To profile the features and functions of the value
chain framework
 To appreciate how managers configure and
coordinate a value chain
 To identify the dimensions that shape how
managers develop strategy
 To profile the types of strategies firms use in
international business

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Industry, Strategy, And Firm
Performance

 Managers, as agents of their firms, devise strategies to engage

international markets in ways that sustain the company’s boost
its profitability and growth
 Strategy is defined as the efforts of managers to build and
strengthen the company’s competitive position within its
industry in order to create superior value

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Industry, Strategy, And Firm
Performance

 Firm performance is influenced by both the structure of the

company’s industry and the insight of managers’ strategic
decision making
 Estimates vary on the degree of influence for both factors
 Managers need to be familiar with industry- and firm-level
conditions in making strategy

Copyright © 2009 Pearson Education, Inc. publishing as Prentice

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The Five Forces Model

 Managers typically anchor analysis of industry

structure by modeling the strength and
importance of the so-called “five fundamental
forces.”:
 the moves of rivals battling for market share
 the entry of new rivals seeking market share
 the efforts of other companies outside the industry to
convince buyers to switch to their own substitute
products
 the push by input suppliers to charge more for their
inputs
 the push by output buyers to pay less for products

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Events that can change industry
structure

 Competitors’ moves.
 Government policies.
 Changes in economics.
 Shifting buyer preferences.
 Technological developments.
 Rate of market growth.

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Strategy and Value

 Strategy is defined as the efforts of managers to build and

strengthen the company’s competitive position within its
industry in order to create superior value
 Value is the measure of a firm’s ability to sell what it makes
for more than the cost it incurred to make it

Copyright © 2009 Pearson Education, Inc. publishing as Prentice

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Creating Value

 Firms create value either through a low-cost leadership

strategy or a differentiation strategy

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The Firm As Value Chain

 Interpreting the firm within the context of the value chain

provides a strong tool to improve the accuracy of strategic
analyses and decisions

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What Is a Value Chain?

 The value chain lets managers deconstruct the general idea of

“create value” into a series of discrete activities
 The function of the value chain is shaped by how managers opt
to configure and then coordinate discrete value activities

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Dimensions of The Value Chain

 Primary activities that create and deliver the

product.
 Support activities that aid the individuals and
groups engaged in primary activities.
 Profit margin reports the difference between the
total revenue generated by sales and the total cost
of the activities that led to those sales.
 Orientation—namely, whether the particular
activity takes place upstream or downstream.

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Using the Value Chain

 Configuration is the way that managers arrange the

activities of the value chain.
 Coordination is the way that managers connect the
activities of the value chain.
 Firms pay close attention to location economics
when configuring their value chain
 Devising a way to coordinate value chain activities
must be in ways that leverage a firm’s core
competencies

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Pressures for Global Integration

 Companies that operate internationally face the asymmetric

pressures of global integration versus local responsiveness
 Change, whether in managers, competencies, industries, or
environments, often spurs companies to rethink and reset their
value activities

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Types Of Strategy

 The firm entering and competing in foreign markets can adopt

either an:
 international
 multidomestic
 global
 transnational strategy
 Often, firms use a mix of these four types due to company,
industry, and environmental situations

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Hall