Skills within the firm that competitors cannot easily match or imitate are referred to as:

Refers to the actions that managers take to attain the goals of a firm

Goal is to maximise profit : profit = (price-cost) x qty sold

Firms must pursue strategies that increase profitability and profit growth

Profitability - the rate of return the firm’s Makes on its invested capital - the (p-c) part of the equation

Reduce costs, add value and raise prices

Profit growth - the percentage increase in net profits over time - “qty sold “

Sell more in existing markets and enter new markets

Firms must increase value to raise profits

Difference between v (price they can charge given comp pressures ) and C (costs of producing the product )

Will make the most profit when creating more value for a lower cost

Michael porter argues that firms need to choose either differentiation or low cost

and then configure internal operations to support the choice

To maximise long run return on invested capital, firms must :
-pick a viable position on the efficiency frontier
-configure internal operations to support that position
- have the right organisation structure in place to execute the strategy

1) Expand their market
(sell in international markets)

2) Realise location economies
(focusing on locations where they can be performed most efficiently and effectively)

3) Realise greater cost economies from experience effects

(Serve an expanded global market from a central market)

4) Earn a greater return

(Leverage skills developed in foreign operations and transfer them elsewhere )

Economies that arise from performing a value creation activity in the optimal location for that activity, wherever in the world that might be

By achieving location economies, firms can :
-lower the cost of value creation and achieve a low cost position
- differentiate their product offering

Firms that take advantage of location economies in different parts of the world create a GLOBAL WEB OF VALUE CREATION ACTIVITIES
-different stages done in the optimal location for each activity

Eg Lenovo - US design,South Korean screen and memory, Malaysian wires, chinese assembly

Experience curve refers to systematic reductions in production costs that occur over the life of the product :
- moving down the curve reduces the cost of creating value
- to move down fast firms can use a single plant to serve global markets

Cost savings that come from learning by doing

When labour productivity increases :
-individuals learn the most efficient ways to perform particular tasks;
- managers learn how to manage the new operation more efficiently

The reductions is unit cost achieved by producing a large volume of a product

Sources :
-spreading fixed costs over a large volume
-utilising production facilities more intensively
-increasing bargaining power with suppliers

Markets differ in what the minimum efficient scale is

It increases profitability and profit growth by reaping the cost reduction from economies of scale,learning effects, and location economies

Goal is to pursue low cost strategy on a global scale

This strategy makes sense when there are strong pressures for cost reductions and demands for local responsiveness are minimal

It increases profitability by customising goods or services so that they match tastes and preferences in different national markets

This strategy Makes sense when there are SUBSTANTIAL DIFFERENCES across nations with regard to consumer tastes and preferences and cost pressures are not too intense

Tries to simultaneously achieve low cost (through location economies, Econ of scale and learning effects ) and local responsiveness (differentiate products across geographical markets to account for local differences )

Firms also attempt to foster a multidirectional flow of skills between different subsidiaries in the firms global network of operations

This strategy makes sense when both cost pressures and pressures for local responsiveness are intense

Takes products first produced for the domestic market and sells them internationally with only minimal local customisation

This strategy makes sense when there are low cost pressures and low pressures for local responsiveness

An international strategy may not be viable in the long term

To survive firms may need to shift to a global standardisation strategy or a transnational strategy in advance if competitors

Localisation may give a firm competitive edge, but if the firm is simultaneously facing aggressive competitors, the company will also have to reduce its cost structures

Would require a shift toward a transnational strategy

What best describes the skills within the firm that competitors Cannot easily match or imitate?

Which of the following is the two competing pressures that affect the ability of multinationals to compete in the global marketplace?

When the tastes and preferences of consumers in different countries are similar this indicates the existence of?

What are the two types of competitive pressures that firms competing in the global marketplace face?