Strategy of International Business

2

What drives firms to go global

– Profit Maximization & Growth

©McGraw-Hill Education.

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Strategy and the Firm 1 of 7

Learning Objective 13-1 Explain the concept of global strategy.

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

©McGraw-Hill Education.

Strategy refers to actions that managers take to attain the goals of the firm.

Profitability is a rate of return concept.

Profit growth is the percentage increase in net profits over time.

4

Figure 13.1 Determinants of enterprise value

Jump to long description in appendix

©McGraw-Hill Education.

Profit= Price- Cost

=100-95

= 5

Profitability= (Profit/Price)x100

= 5/100×100

= 5%

Total Profit= 1 Million

Profit Growth= 1 million to 2 millions

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Strategy and the Firm 2 of 7

Value Creation

Measured by the difference between a firm’s costs of production and the quality that consumers perceive in its products

The more value customers place on a firm’s products, the higher the price the firm can charge for those products.

Measured by the difference between V (value) and C (cost)

Two strategies: low cost and differentiation

©McGraw-Hill Education.

Value creation refers to performing activities that increase the value of goods or services to customers.

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Strategy and the Firm 3 of 7

Strategic Positioning

Porter

A firm should be explicit about its choice of strategic emphasis with regard to value creation (differentiation) and low cost.

A firm should configure its internal operations to

Sample Solution

se discussions were a clear window to powerful knowledge as Young (2010) conveys that such knowledge allows those who receive it to be able to think beyond their everyday experiences. To date students have most likely never felt the need to question the marketing efforts of business and instead simply accepted it as a business practice. However, by drawing on the fact that there are certain limitations to advertising and that so often the grounds of inequality, sexism, diversity are trod on as ploy for marketing, students can begin to develop understanding and have a more critical eye as to whether or not they deem such adverts as appropriate or insensitive.

Furthermore, we can suggest this is an example of powerful knowledge where individuals can have a voice and opinion on the ethics of campaigns as it stems from society wide issues. Young (2010) suggests that powerful knowledge is based on evidence but also is conceptual. From this stance it can be argued these ethical considerations obviously stem from the inappropriate perspectives, or lack of consciousness, of groups of people who publish derogatory adverts/campaigns towards a particular subsection of the demographic, either intentionally or unintentionally. For example businesses which do not question the ethics of only using a certain size or skin tone of model, or don’t understand how using a child with a darker skin tone to model clothes paying reference to their character as being like that of a monkey can easily be interpreted as being racist and cause offence. These ethical issues have action taken against them through boycotts for example, which those receiving the powerful knowledge may have taken part in without knowing or understanding the reasons why they did so.

It also allows individuals to establish an opinion on social and cultural issues. For example, is it a business’s responsibility to cure societies prejudices? Should they have a political or social agenda? This feeds into the idea that powerful knowledge is always open to challenge and that powerful knowledge isn’t always confined by the discipline it is devolved from, i.e. these ethical issues aren’t stemming from ‘business’ but are greater societal issues (Young, 2010).

Delivering ‘Powerful Knowledge’ pedagogically

Young (2013) makes it clear from his work that powerful knowledge is not something which individuals stumble upon, but rather in something which is presented to then in a way that deepens their thinking and widens their perspectives of the unfamiliar. Therefore, much attention should be given to the pedagogical approach taken by those in a position to bestow such knowledge on the leaners. In all areas of teaching planning is essential, however e

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