1. Multinational and Participation
Strategies

2. The Firm as Value Chain
• What is the value chain?
• Using the value chain
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Configuration
Macro Cost Factors
Cluster Effects
Logistics
Digitization
Economies of Scale
Business Environment
11-2

3. Change and the Value Chain
• The configuration and coordination of value
chains respond to changes in customers,
competitors, industries, and environments.
• Caveat: The Risk of Strategy
11-3

4. Global Integration versus Local
Responsiveness
• Pressures for Global Integration
– Globalization of Markets
– Efficiency Gains of Standardization
• Pressures for Local Responsiveness
– Consumer Divergence
– Host Government Policies
11-4

5. When Pressures Interact
The Integration-Responsiveness grid helps
managers measure the global and local
pressures that influence the configuration and
coordination of their value chains.
11-5

6. Integration Responsiveness Grid
11-6

7. Types of Strategy
11-7

8. Supply Chain and Production
Network
8

9. Multinational Strategies: Dealing
with the Global-Local Dilemma
• Local-responsiveness solution: customize
to country or regional differences
• Global integration solution: conduct
business similarly throughout the world
• Global-local dilemma: choice between a
local-responsiveness or global approach
to a multinational’s strategies

10. Multidomestic Strategy
• The company attempts to offer products or
services that attract customers by closely
satisfying their cultural needs and
expectations
• Emphasizing local-responsiveness issues
- Ex.: different packages, colors
- Costs more to produce, need to charge higher
prices to recoup
- A form of the differentiation strategy
- Not limited to large multinationals

11. Transnational Strategy
• Two goals get top priority
- Seeking location advantages
- Gaining economic efficiencies from operating
worldwide

12. Transnational Strategy (cont.)
• Location advantages: dispersing valuechain activities anywhere in the world
where they can be done best or cheapest
• Global platform: country location where a
firm can better perform some of its valuechain activities

13. Transnational strategy (cont.)
• With upstream location advantages, the
transnational can:
- Locate subunits near cheap sources of high-quality
raw material
- Locate subunits near centers of research and
innovation
- Locate subunits near sources of high-quality or lowcost labor
- Seek low-cost financing anywhere in the world
- Share discoveries and innovations made in one part
of the world with operations in other parts of the world

14. Transnational Strategy (cont.)
• Comparative advantage: advantages of
nations over other nations
- No longer only available to domestic firms
• Location advantages can exist for all
activities of the value chain

15. International Strategy
• International strategy: selling global
products and using similar marketing
techniques worldwide
- A compromise approach
- Limited adjustment in product offerings and
marketing strategies
- Upstream and support activities remain
concentrated at home country

16. Regional Strategy
• Regional strategy: managing raw-material
sourcing, production, marketing, and
support activities within a particular region
- Another compromise strategy
- Attempts to gain economic advantages from
regional network
- Attempts to gain local adaptation advantages
from regional adaptation

17. Resolving the Global-Local Dilemma:
Formulating a Multinational Strategy
• Selection of strategy depends on degree
of globalization in an industry
• Globalization drivers: conditions in a
industry that favor transnational or
international strategies
• Four categories of global drivers:
markets, costs, governments, and
competition

18. Global Markets
• Are there common customer needs?
• Are there global customers?
• Can you transfer marketing?

19. Costs
• Are there global economies of scale?
• Are there global sources of low-cost raw
materials?
• Are there cheaper sources of highly skilled
labor?
• Are product-development costs high?

20. Governments
• Do the targeted countries have favorable
trade policies?
• Do the target countries have regulations
that restrict operations?

21. The Competition
• What strategies do your competitors use?
• What is the volume of imports and exports
in the industry?

22. Competitive Advantage in the
Value Chain
• Location of competitive advantage in value
chain determines choice of generic
strategy
• Upstream advantages: low-cost or highquality design
- Favor transnational strategy or an international
strategy
• Downstream advantages: marketing,
sales, service
- Favor multidomestic strategy

23. Competitive Advantage in the
Value Chain (cont.)
• Mixed conditions
- Competitive strength downstream in industry
with strong globalization drivers
- Competitive strength upstream in industries
with local adaptation pressures
• Both favor regional strategies