BUS5 187 Lecture 11: chapter 13: The strategy of international business
What is strategy:
•A firm’s strategy refers to the actions that managers take to attain the goals of the firm
•Firms need to pursue strategies that increase profitability and profit growth
–Profitability is the rate of return the firm makes on its invested capital
–Profit growth is the percentage increase in net profits over time
•To increase profitability and profit growth, firms can
–add value
–lower costs
–sell more in existing markets
–expand internationally
How is value created:
•To increase profitability, a firm needs to create more value
•The firm’s value creation is the difference between V (the price that the firm can charge
find more resources at oneclass.com
find more resources at oneclass.com
for a product given competitive pressures) and C (the costs of producing that product)
–a firm has high profits when it creates more value for its customers and does so at
a lower cost
•Profits can be increased by
1. Using a differentiation strategy
–adding value to a product so that customers are willing to pay more for it
2. Using a low cost strategy
–lowering costs
How can firms increase profits through international expansions:
•International firms can
1. Expand their market
–sell in international markets
2. Realize location economies
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
What is strategy: a firm"s strategy refers to the actions that managers take to attain the goals of the firm, firms need to pursue strategies that increase profitability and profit growth. Profitability is the rate of return the firm makes on its invested capital. Profit growth is the percentage increase in net profits over time: to increase profitability and profit growth, firms can. A firm has high profits when it creates more value for its customers and does so at a lower cost: profits can be increased by. Adding value to a product so that customers are willing to pay more for it. How can firms increase profits through international expansions: international firms can. Disperse value creation activities to locations where they can be performed most efficiently and effectively. Serve an expanded global market from a central location. Leverage skills developed in foreign operations and transfer them elsewhere in the firm. How can firms leverage their products and competencies:
