four basic strategies to enter and compete in the international environment: (1)
ID: 442189 • Letter: F
Question
four basic strategies to enter and compete in the international environment: (1) global standardization strategy, (2) localization strategy, (3) transnational strategy, and (4) international strategy. Each of these strategies has advantages and disadvantages. The appropriateness of each strategy varies with the extent of pressures for cost reductions and local responsiveness. A firm must balance the pressures for cost reductions with the pressures for local responsiveness. In order to customize products to respond to local demands, the firm may have to give up some of the potential cost savings. Also, the firm may not be able to fully leverage its distinctive competencies.
As part of your development as a new member of IKEA's Retail Division, you have been charged by Andres Moberg to with identifying key strategic issues facing the company in the next 10 years, and to recommend an action addressing each issue. Your list of strategic issues and proposed strategic action plans should be presented in an appropriate executive summary format and not exceed three pages in length.
Additionally, while Moberg realizes that he has had some success using their current global strategy, he is interested in conducting a "what-if" type of analysis for using alternative strategies for IKEA. Moberg feels that the best strategy is not always obvious, and thinks that the best way to fully evaluate his future strategy is to attempt to formulate a concept paragraph for each basic type of global strategy for IKEA., then to see which strategy has the best "fit." To accomplish that "what if," he wants you to prepare a concept paragraph for IKEA outlining what differences would be required for IKEA's strategy and operations to compete effectively in each of the following global strategies: global standardization strategy
localization strategy
transnational strategy
international strategy
Explanation / Answer
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:
The global standardization strategy focuses on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies. The strategic goal is to pursue a low-cost strategy on a global scale. The global standardization strategy makes sense when: there are strong pressures for cost reductions, demands for local responsiveness are minimal. The production, marketing & R&D activities of firms pursuing a global standardization are concentrated in a few favorable locations.
For Example, Nokia Corporation is a MNC that is head office in Keilaniemi, Espoo, a city neighboring Finland's capital Helsinki. Nokia With more than one lac employees in 120 countries, sales in more than 150 countries. For my own opinion, Nokia consider applying the global standardization Strategy. Nokia has sites for research and development, manufacture and sales in many countries throughout the world, but the Design Department remains in Finland. As of now , Nokia had R&D presence in 16 countries and employed more than 40000 people in research and development, representing approximately 31% of the group's total workforce. Nokia Research Center has sites in seven countries. Besides its research centers, Nokia founded INdT – Nokia Institute of Technology, a R&D institute located in Brazil. Nokia operates a total of 15 manufacturing facilities located at different countries.
The localization strategy focuses on increasing profitability by customizing the firm’s goods or services. The localization strategy makes sense when there are substantial differences across nations with regard to consumer tastes and preferences, where cost pressures are not too intense.
The transnational strategy tries to simultaneously, achieve low costs through location economies, economies of scale, and learning effects; differentiate the product offering across geographic markets to account for local differences; foster a multidirectional flow of skills between different subsidiaries in the firm’s global network of operations. The transnational strategy makes sense when: cost pressures are intense pressures for local responsiveness is intense
For example, McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving nearly 50 million customers daily. McDonald’s also consider applying transnational strategy base on the company is differentiating the product offering across geographic markets to account for local differences. In Malaysia, porridge is introducing to the local needs. While in China & Taiwan, pork is introducing in the choice of taste. McDonald's restaurants are found in 119 countries and territories around the world and serve nearly 50 million customers each day. McDonald's operates over 31,000 restaurants worldwide, employing more than 1.5 million people. The company has also expanded the McDonald's menu in recent decades to include alternative meal options, such as salads and snack wraps, in order to capitalize on growing consumer interest in health and wellness.
The international strategy involves taking products first produced for the domestic market and then selling them internationally with only minimal local customization. The international strategy makes sense when there are low cost pressures; low pressures for local responsiveness. Enterprise tends to centralize product development functions such as R&D at home country. They may undertake some local customization of product offering marketing strategy, in tends to be rather in scope.
For example, Procter & Gamble Co. (P&G) is a Fortune 500, American MNC head office in Ohio, that manufactures a wide range of consumer goods. P&G is consider applying international strategy base on the products first produced for the domestic market and selling them internationally with only minimal local customization. The company moved into other countries, both in terms of manufacturing and product sales. Procter & Gamble acquired a number of other companies that diversified its product line and significantly increased profits. Most of these brands, including Bounty, Crest, Pringles, Puffs, and Tide, are global products available in several continents. Procter & Gamble products are available in North America, Latin America, Europe, the Middle East, Africa, and Asia.
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