MGMT1101 Lecture Notes - Lecture 3: Switching Barriers, Experience Curve Effects, Cumulative Learning
Week 3: The strategy of international business
1. Explain the concept of strategy
Strategy: the actions managers take to attain the goals of the firm i.e. maximise value of a firm
Two key strategies to attain this goal:
1. Increase profitability of the enterprise: rate of return made on invested capital
2. Increase its rate of profit growth over time: % increase in net profits over time
Elements of strategy:
In order to maximise its long-term return on invested capital, a firm must:
1. Strategic positioning: pick a position on the efficiency frontier that is viable i.e. there is
enough demand to support that choice
2. Value chain: configure internal operations to support that position
• Value chain is a series of distinct value-creation activities, including production,
marketing materials management, R&D, HR, IS and firm infrastructure.
• Can be categorised as primary or support activities
o Primary activities: to do with creating product, marketing and delivering product
to buyers, then providing support and after-sale service i.e. R&D, production,
marketing + sales + customer service (Toyota)
o Support activities: activities providing inputs to allow primary activities of
production and marketing to occur i.e. IS, logistics, HR (Dell)
3. Organisation architecture: ensure firm has correct organisation structure in place to execute
its strategy
• Includes formal org structure, control systems and incentives, org culture + processes
and people
• Organisation structure:
o Formal division of organisation into sub-units
o Location of decision-making responsibilities within that structure
o Establishment of integrating mechanisms to coordinate activities of sub-units
incl. cross-functional teams an/or pan-regional committees
• A fir’s orgaisatio a e see as a ay of ipleetig firm strategy. Key aspects
for firm performance include:
o Controls: metrics used to measure performance of sub-units and make
judgements about how well managers are running those sub-units
o Incentives: devices used to reward appropriate managerial behaviour
o Processes: manner in which decisions are made and work is performed within
the organisation
• Organisational culture:
o Refers to norms and value systems shared among people of an organisation
o People are ot just eployees of orgaisatio, ut also refers to the strategy
used to recruit, compensate and retain those people and the type of people
they are in terms of skills, values and orientation.
In summary, operations strategy, organisation architecture must support the strategy and fit with
the market conditions for superior performance.
2. Understand how firms can profit from global expansion
Firms can increase value from global expansion by expanding sales in new markets, and/or
enhancing their profit margins.
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Document Summary
Week 3: the strategy of international business: explain the concept of strategy. Strategy: the actions managers take to attain the goals of the firm i. e. maximise value of a firm. Increase profitability of the enterprise: rate of return made on invested capital. Increase its rate of profit growth over time: % increase in net profits over time. Key aspects for firm performance include: controls: metrics used to measure performance of sub-units and make judgements about how well managers are running those sub-units. In summary, operations strategy, organisation architecture must support the strategy and fit with the market conditions for superior performance: understand how firms can profit from global expansion. Firms can increase value from global expansion by expanding sales in new markets, and/or enhancing their profit margins. Leveraging products: increase growth rate by selling goods and services developed at home internationally. Leveraging competencies: to reduce costs of value creation and/or create perceived value for premium pricing.
