Documente Academic
Documente Profesional
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External
Opportunities
Threats
Maximise
Minimise
CAGE Distance Framework: Country-level analysis (there are still important differences
betw countries despite globalisation)
Cultural: Language, race, social norms, values
Administrative: Political & institutional differences (e.g. lack colonial ties, different legal system)
Geographical: Physical distance
Economic: Consumer incomes, infrastructure, human talent
Notes:
1) PESTEL Analysis feeds into Opportunities & Threats of SWEOT (external environment)
2) Difference betw PESTEL & CAGE: CAGE looks at the difference betw firm & country
(distance)
Ghemawats AAA model (3 types of business models)
Aggregation overcome differences, create economies of scale using grouping devices & intragroup
coordination mechanisms
- e.g. Product standardisation, regional hubs, shared service centres (geographical
aggregation)
Adaptation Adjust to differences, offer diff products, tailor policies, positioning, advertising & pricing
(can be expensive)
Ideas: - Focus on activities/products that require less adaptation across markets
- Externalize costs of adaptation by working w local partners
- Design basic product such that flexibility of final product is increased
- Organize innovation processes with effectiveness of variation in mind
Arbitrage Exploits differences betw national or regional markets by locating diff parts of supply chain
in diff places
- Find location with lower labour costs, lower resource or assembly costs, cheaper capital, tax
advantages
4 international business strategies based on AAA model
1) International (home replication) strategy
Conditions: Low cost reduction pressures, low local responsiveness pressures
- Replicate internationally home country-based competencies (e.g. brand) and products/services
- Take products produced for domestic market and sell internationally with minimal local
customisation
- Disadvantage - Not viable in long-run
Ghemawats model: None
2) Localisation (multi-domestic) strategy
Conditions: Low cost reduction pressures, high local responsiveness pressures
- Each country/region as a stand-alone market worthy of significant adaptation & attention
- Increase profitability by customising goods/services to match tastes & preferences in different
national markets
Ghemawats model: Adaptation
3) Global standardisation strategy
Conditions: High cost reduction pressures, low local responsiveness pressures
- Develop and distribute standardised products/services worldwide to reap economies of scale &
shared product development
- Increase profitability & profit growth by reaping cost reductions from EOS, experience curve
effect & location economies
Ghemawats model: Aggregation
4) Transnational strategy
Conditions: High cost reduction pressures, high local responsiveness pressures
- Differentiate product offering across geographic markets, foster multidirectional flow of skills
betw diff subsidiaries in companys network of operations
- Simultaneously achieve low costs through EOS, experience curve effect & location economies
Ghemewats model: Aggregation & Adaptation
Conditions:
Pressures for cost reductions greatest:
- In industries producing products that meet universal needs, where price is main competitive
weapon
- When major competitors are based in low-cost locations
- Where there is persistent excess capacity
- When consumers are powerful and face low switching costs
Factors for pressures for local responsiveness:
- Differences in consumer tastes & preferences
- Differences in traditional practise and infrastructure
- Differences in distribution channels
- Host government demands (e.g. economic/political demands)
Chapter 8: competitive strategy for international business
Porters five forces
-to identify an industrys structure
1. Rivalry between competitors
- direct competitor