Strategy is a broad scope that is persuasive and should be done continuously. It is a continuing and intellectual process that focues on critical resources. Strategy is reason for existence of an organization. strategy is a tools to face dynamic environment. It is a basis for operational management. Its a tool for optimum utilization of resources. It is a long term planning that helps to minimize uncertinity. It is necessary for all type of organization at all level.
International business strategy is a strategy carried out in two or more countries. While developing strategies, SWOT analysis must be conducted. SWOT stands for the strength, weakness, opportunities and threats. At the same time, there should be determination of target market, product line to be offered, dealing with competitors and organizingoverall the firm's activities.
An organization has to act in borderless ground.Strategy in an international business is a plan for the organization to position itself positively from its rivals and design its worth including exercises a worldwide scale. The main aim of it international business strategy is to help managers in creating an international vision, allocate resources, participate in major international markets, be competitive, and perhaps reconfigure its value chain activities given the new international opportunities.
Specific objectives of international strategy
International business success is largely determined by the degree to which the firm achieves the goals of efficiency, flexibility, and learning. The three specific objectives of international strategy are
- Efficiency: Efficiecy increasing output through the quality and helps to reduce the cost of operations and its activities. For example: Toyota
- Flexibility : Flexibility helps to tap local resources and opportunities to make the firm and its products unique. It is dynamic according to the changing situation.
- Learning : Learning add to its proprietary technology, brand name and management capabilities by internalizing knowledge gained from international ventures. It must be reflected.
Roles of strategy
Managers have to take an action to attain the goals of the organization. To maximize the value of the firm, manager must pursue strategies that increase the profitability of the firm. Manager can increase the profitability by pursuing strategies that lower the cost or by pursuing strategies that add the value of the firm's product which enables the firm to raise the prices. Manager can increase the rate at which the firm's profit grow over the time bu pursuing the strategies to sell more product s in existing market or by pursuing strategies to enter into the new market. The way of increase the profitability of a firm is to create more values.
Choosing a strategy
There are various types of international strategies that are described below:
- Localization strategy: Localization strategy is to customize the product according to the operating countries norms and values. It is the strategy that focus on increasing prifitability by customizing the firms goods or services. So that they can provide a good match to taste and preference in different international market. Managers recognize and emphasize differences among national markets. As a result, the internationalizing company allows subsidiaries to vary product and management practices by country It customize the product offerings and marketing in accordance with local responsiveness but inability to realize the location economics. It is costly structure.
- Transnational strategy: Transcational strategy is the effort to create balanced combination of all other strategies. It is the strategy that involves a simultaneous focus on reducing the costs, transferring the skills and product as well as boosting the local responsiveness. It are established to achieve low costs through the location economics, economics of scale and learning effects. It helps to exploit experience curve effect, helps to grap the global learning as well as helps to increase location economies. But there is difficult to implement due to the orgainzational problems.
- International strategy: International strategy is to create value by transferring the valuable skills and products to international market. It is strategy that takes the products first for their domestic market and then sells them internationally with only minimal local customization . It helps to exploit the location economies and helps to transfer the distinctive competencies to the international market but there is lack of local responsiveness as well as inability to relaize the location economies. It is also known as export strategy. International strategy is appropriate when there are low cost pressure and low pressure for local responsiveness.
- Global standarlization strategy: Global standarlization strategy is the strategy that focus on in them creasing profitability and profit growth by reaping the cost reductions that come from the economics of scale, learning effects and location economics. The main goal of global standarlization strategy is to pursue a low cost strategy on global scale. This strategy is also known as low cost strategy. Under this strategy, firms concentrate its production, marketing and R and D activities only in a favorable location. The main advantage of it is exploit experience curve effect but there is lack of local responsiveness.
The important of international strategies are :
- Economics of scope: Economics of scope refers to the lower the cost by adding new products to the existing , similar lines.
- Economics of scale: Economics of scale apply to lower the costs from the technical and engineering relations and from the law of large numbers.
- Global brand recognition: The benefit that derives from having a brand that is recognized throughout the world – for example, Disney..
- Global customer satisfaction: Mulitnational customers who demand the same product, service and quality at various locations around the world –
- Lowest labour and other input costs: These arise by choosing and switching manufacturers with low labour costs.
- Emergence of new markets: It helps to increase market size.