Home replication strategy 1.1.

Concept

Home replication strategy is the international replication of home based competencies such as production scales, distribution and brand power. The company centralizes product development functions in its home country. After product differentiations are finished in home country, innovations will be transferred to apply in local market in order to capture and extend additional value. Customization or modification to products are often neglected and distracted due to the distinctiveness of the products. When a firm pursues a home replication strategy, it simply duplicates competencies that it enjoys in the home-country in its expansion into foreign markets. This lends itself to strengths in the area of cost reduction because R&D costs would be low as the firm makes little attempt to localize the product. It is also easy to implement as it usually takes the form of exporting, franchising, or licensing. The firm views international business as separate from, and secondary to, its domestic business. Such a firm may view international business as an opportunity to generate incremental sales for domestic product lines. Products are designed with domestic customers in mind, and international business is sought as a way of extending the product lifecycle and replicating its home market success. The firm expects little knowledge flows from foreign operations. 1.2. Advantages and disadvantages of strategy a. Advantages Company could cut the production cost down in the first stage of investment due to the centralization of production and R&D. Due to its low cost and easy implementation, firms often engage in the home replication strategy as it initially expands into foreign markets. In local market, the company does not need to implement manufacturing but importing finished goods and apply marketing model similar to that in home market. For business, this can be a competitive strength for new comers whose own products distinctiveness over other competitors in local market. This strategy can leverage home country-based advantages.

b. Disadvantages Within the home replication strategy, a firm most often adjusts its structure to include an international division. This international division is separate from all other divisions and oversees activities such as exporting, franchising and licensing. This structure often leads to critical problems. The primary drawbacks of this strategy is its low dedication to local responsiveness, which often results in alienation of foreign customers who may not have the same values or needs as customers in the home-country. Foreign subsidiary managers do not have sufficient voice with managers of domestic divisions. This is partly due to the fact that an immediate response to an issue raised by a subsidiary manager is not possible because the responsibilities of decisive powers are always at the national headquartering level, causing delayed and disconnected communication. Thus, the actions of the international division are often disjointed from the rest of the firm. Sometimes t may result foreign customer alienation. 1.3. Example of Home replication strategy. a. Overview of Mercedes-Benz Mercedes-Benz is a multinational division of the German manufacturer Daimler AG and the brand is used for automobiles, buses, coaches, and trucks. Mercedes-Benz is a German company that is renowned for creating innovative and stunning designed vehicles. From their inception in 1886 they have created ground-breaking vehicles that have utilized expertly designed engines and technology. Although the company had the first patent on a petrol engine, which was used in stage coaches, it was not until 1901 that their first production automobile was released and it was not until 1928 that the company became known as Mercedes-Benz. Since that time Mercedes-Benz has become synonymous with advanced design, technology and safety features which have made their vehicles some of the most renowned vehicles in the world. Mercedes-Benz products appear all over the world.

b. The home replication strategy of Mercedes-Benz Some companies directly transfer their main competitive advantages from their home market to a foreign market. This strategy is called home replication strategy. Mercedes-Benz is a perfect example of taking an entirely different approach to how the brand is promoted. Where, with its previous supplier, it was faced with a selection of catalog promotional items also offered to other companies. Nobody buys a Mercedes-Benz because they need a car, they buy one because they want one and pay premium for it. By creating a range of products that people actually wanted. Mercedes-Benz relies on its will-known brand name and its reputation for building for this market segment that Mercedes-Benz has chosen to exploit internationally, despite the fact that only very few countries have both the high income level and the high speed limit appropriate for its products. But consumers in Asia, the rest of Europe and the Americas are nevertheless attracted by the cars mystique. By the identical technology applied for all of the manufacturer and assembly in the world, Mercedes-Benz create very famous brand.