Chapter 13 ‒ The Strategy of International Business
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Learning objectives
• Explain the concept of global
by expanding globally.
• Understand how pressures for cost
• Identify and choose the different
global strategies for competing in
In this chapter the focus shifts from the
environment to the firm itself and, in particular, to
the actions managers can take to compete more
foreign markets, the different strategies that firms
pursue when competing internationally, and the
various factors that affect a firm’s choice of
established here to discuss a variety of topics
including the design of organization structures
and control systems for international businesses,
and financial strategies that international
businesses pursue.
The opening case describes Sony’s strategy in
global markets. As a leader in electronics,
semiconductors, computers, video games and
globally. Following disappointing sales during its
expansion into the United States in the 1980s,
IKEA found international success by localizing its
store designs and product offerings.
Chapter 13 ‒ The Strategy of International Business
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OUTLINE OF CHAPTER 13: THE STRATEGY OF INTERNATIONAL
Strategic Positioning
The Firm as a Value Chain
Global Expansion, Profitability, and Profit Growth
Expanding the Market: Leveraging Products and Competencies
Location Economies
Pressures for Cost Reductions
Pressures for Local Responsiveness
Management Focus: Viacom International Media Networks
Choosing a Strategy
Global Standardization Strategy
Chapter Summary
Critical Thinking and Discussion Questions
Closing Case: IKEA’s Global Strategy
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CLASSROOM DISCUSSION POINT
Pick a few well-known international companies, such as McDonalds, Apple, or MTV.
Then, ask students to think about the strategies each of the firms use.
Next, ask students to identify the type of industry each firm is operating in, and jot their
response on the board. Try to organize the responses using the framework presented in
the text.
Then, ask students to outline the basic strategies each firm uses, and organize their
responses using the framework on the board.
Finally, try to get students to recognize how each industry influences the type of strategy
each firm followed.
OPENING CASE: Sony’s Global Strategy
Summary
The opening case describes Sony’s global strategy. Sony, the Japanese company that has
been at the forefront of electronics, semiconductors, computers, video games, and
telecommunications equipment since 1946, is organized into 12 distinct core segments.
Integrating these segments is the vision to use the company’s “passion for technology,
content and services to deliver groundbreaking new excitement and entertainment.”
Discussion of the case can begin with the following questions:
QUESTION 1: How would you describe Sony’s strategy? What give the company an
edge over its rivals?
ANSWER 1: Sony is organized into 12 distinct global business segments. While the
focus of each segment is separate, the company leverages its core competencies across
QUESTION 2: Sony has organized itself into 12 distinct core business segments. How
does the company integrate these segments to create a meaningful overall strategy? What
is the advantage of incorporating an integrating mechanism instead of letting the core
businesses remain independent of each other?
ANSWER 2: Most students will probably respond to this question with some sort of 2 +
Chapter 13 ‒ The Strategy of International Business
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curiosity of the customer. To that end, Sony leverages the company to capitalize on
globally integrated activities including R&D, production, marketing, and customer
service.
QUESTION 3: Sony is currently exploring opportunities in a variety of new areas
including Life Space UX, Sports Entertainment, and Sony Computer Science
Laboratories. Discuss the importance of being a leader in innovation and why Sony
pursues these new strategic initiatives.
ANSWER 3: Most students will probably respond that technology on the market today is
LECTURE OUTLINE
This lecture outline follows the Power Point Presentation (PPT) provided along with this
clicking on “view,” then on “notes.” The following provides a brief overview of each
Power Point slide along with teaching tips and additional perspectives.
Slide 13-3 Introduction
How can firms compete more effectively internationally?
Slides 13-4 – 13- 12 Strategy and the Firm
A firm’s strategy can be defined as the actions that managers take to attain the goals of
the firm.
Profitability refers to the rate of return (ROI) that the firm makes on its invested capital,
which is calculated by dividing the net profits of the firm by total invested capital. Profit
growth is measured by the percentage increase in net profits over time. In general, higher
profitability and a higher rate of profit growth will increase the value of an enterprise and
thus the returns garnered by its owners, the shareholders.
Value Creation
If consumers perceive the value of a good to be much higher than the actual cost of
producing that good, profit margins will be higher. Porter emphasizes two basic strategies
to create value and attain competitive advantage: low-cost strategy and differentiation
strategy.
Chapter 13 ‒ The Strategy of International Business
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Strategic Positioning
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Operations and Value Creation
A firm’s operations are like a value chain composed of a series of value-creation
activities. Activities include primary activities (production, research and development,
marketing and sales, and customer service) and support activities (information systems,
The success of firms that expand internationally depends on the goods or services they
sell, and on their core competencies (skills within the firm that competitors cannot easily
match or imitate).
Location Economies
Location economies are the economies that arise from performing a value creation
determining this are learning effects and economies of scale.
• Learning effects are the costs savings that come from learning by doing.
• Economies of scale are the reductions in unit cost achieved by producing a large
volume of a product.
Leveraging Subsidiary Skills
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Managers need to keep in mind the complex relationship between profitability and profit
• pressures to be locally responsive
Pressures for Cost Reduction
International businesses often face pressures for cost reductions because of the
competitive global market.
Pressures for Local Responsiveness
There are four basic strategies to compete in the international environment:
• global standardization
• localization
• transnational
• international
national markets.
The transnational strategy tries to simultaneously:
• Achieve low costs through location economies, economies of scale, and learning
effects.
• Differentiate the product offering across geographic markets to account for local