The Strategy of International Business

The Strategy of
International Business
Chapter 12

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The Firm as a Value Chain
 Primary Activities:
 Those activities having to do with creating, marketing and delivering the product to customers and providing support and after-sales service.

 Support Activities:
 Provide inputs that allow primary activities to occur.

 An Efficient Infrastructure:
 helps create value and reduce the cost of creating value. © McGraw Hill Companies, Inc.,

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TheThe
Firm
Value
Chain
Firmas as aaValue
Chain
Support activities Organizational infrastructure
Information systems
Human resources
Research and development
Materials management
Manufacturing

Marketing

Primary activities
Figure 12.1

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The Role of Strategy
 Strategy:
 Actions managers take to attain the goals of the firm.  Need to identify and take action that lowers the cost of value creation and/or differentiates the firm’s product through superior design, quality, service, or functionality.

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Profiting from Global Expansion
 International firms can:
 Earn a greater return from distinctive skills or core competencies.
 Realize location economies by dispersing value creation activities to locations where they can be performed most efficiently.
 Realize greater experience curve economies, which reduces the cost of value creation.
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Location Economies

Assembly

Parts

Sales

Advertising

Pontiac LeMans
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Design

Parts
Parts

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Caveats
 When making location decisions:
 Consider trade barriers and transportation costs.
 Assess political and economic risks.

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Experience Curve Economies
 Learning Effects:
 Labor productivity increases over time as