International Business

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International Business

• Global Corporate Strategy
• Porters theory of national competitive
  advantagein industries

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Global Corporate Strategy

• The key issues
• What are the big decisions in international
  business?
• How do we make them wisely for our firms?

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Value Creation

• The way to increase profitability is to create
  more value
• The amount of value a firm creates is measured by
  the difference between its costs and the value
  that consumers perceive in its products
• Michael Porter states that there are two basic
  strategies for creating value
• Low-cost strategy suggests that a firm has high
  profits when it creates more value for its
  customers and does so at a lower cost
• Differentiation strategy focuses primarily on
  increasing the attractiveness of a product
  (getting customers to think its different and
  better than competitors)

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But to create value, you must think about who
youll work with

• Porters study of national competitive advantage
  provides the business context for the big
  decisions

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Porter says industries succeed when they can

• innovate,
• upgrade,
• constantly offering more and better to customers

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Therefore, industries succeed where 4 factors are
favorable
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Factor conditions

• Not the factors economists used to care about
  (Labor, land, capital, etc.)
• Specialized factors that people create
• Labor with specialized skills
• Unique resources (phone systems built for
  Strategic Air Command in Omaha, Neb.)
• Innovations to cope with a weakness can produce
  long-term strength
• Dutch bringing flowers indoors to cope with bad
  weather

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Demand conditions (at home)

• Demanding customers in the home market lead to
  competitive industries
• If local customers need innovations, you can
  often sell those innovations in the world market
• Germans need washing machines with powerful spin
  cycles due to damp weather
• They sell them elsewhere

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Related and supporting industries

• Good local suppliers repeatedly help you innovate

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Firm strategy, structure, and rivalry

• Strategy Ambitious firms become world leaders
• Structure Industries succeed where local norms
  are in tune with industry needs
• Italian shoe makers benefit from preference for
  family firms in Italy
• German appliance firms gain from preference for
  big, disciplined organizations

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• Rivalry To succeed internationally, you need
  strong local competition
• When local competitors do better than you, you
  get mad
• Pressure on firms in the local environment
  contributes to success

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The 4 elements in the diamond work together as a
system
Each element can contribute to making the other
elements strong
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