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Low cost strategy vs differentiation strategy
- can be define as the actions that a manager take to attain the goal of the firm
- LCS- driving down the overall cost structure
- DS- Increasing the value for consumers by differentiating the products , consumers more willing to pay a premium price
to maximize a firms value, managers must increase it
profitability and profit growth rate
Primary and Support activities in the value chain
- value chain- composed of a series of distinct value creation activities.
- Primary- have to do with the design , creation, and delivery of the product (R&D)
- Support- provide inputs that allows sthe primary activities to occur.(ex information systems, logistics,HR)
two types of strategies for value creation
lower cost and differentiation
Location economies 387
which are the economies that arise from performing a value creation activity in the optimal location for that activity, wherever in the world that might be
Global expansion and profitability four factors
- developing core competencies
- Achieving location economies
- Gaining experience effects
- Leveraging subsidiary skills
global companies face two types of competitive pressures
- Cost reduction
- being locally responsive
choosing a strategy ( very important from this chapter) 397
experience curve- refers to systematic reductions in production cost that have been observed to occur over the life of a product
refer to cost savings that come from learning by doing
Economies of Scale
refer to the reductions in unit cost achieved by producing a large volume of a product. Attaining economies of scale lowers a firms units cost and increase its profitability
two way to deal with cost pressures
- Pressures for cost reductions-394
- Pressures for local responsiveness-394
Pressures for local responsiveness
arise from national differences in consumer tastes and preference ,infrastructure, accepted business practice. A firm must differentiate its product and marketing strategy from country to country to accommodate these factors.
exist when taste and preference of consumers in different nations are similar if not identical (pressure for cost reductions)
Global standardization strategy
focus on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effect, and location economies: there strategic goal is to pursue a low cost strategy on a global scale
increasing profitably by customizing the firms good and services so that they provide a good match to taste and preferences in different national markets. (used when there are substantial differences across nations)
are trying to simultaneously achieve low cost through location economies , economies of scale, and learning effect: differentiate their product offering across geographic markets to account for local differences.
taking product first produced for their domestic market and selling them internationally with only minimal local customization.