Firms face competing pressures in the marketplace–how to achieve lower costs through proven approaches to production, while looking at how to maximize their effectiveness in local markets. A firm's choice of strategy must reflect these pressures, and the firm knows that the dynamics of competition may require changes in strategy. Pressures for local responsiveness mean that a firm may not be able to realize the full benefits from economies of scale, learning effects, and location economies. Customization of products brings benefits, but it also limits the firm's ability to realize significant scale economies and location economies. Companies generally choose from four main strategic postures: a global standardization strategy, a localization strategy, a transnational strategy, or an international strategy. The appropriateness of each strategy varies given the competitive realities and the firm's core competencies.
Read the overview below and complete the activities that follow.
Use the following questions to determine the firm’s correct strategic choice given the realities of its marketplaces and its previous strategic postures. Select the correct strategy.
Your firm has been a leader in several lines of fast-moving consumer goods. The firm has been following a localization strategy. Your products have been distributed in a number of foreign markets and regions, and they are distinct enough in local markets to respond to national tastes and preferences. Competition, however, has become more intense, with many competitors using lower cost structures to undercut your prices and still satisfy your customers. The firm must decide what kind of strategy it needs to follow to meet the demands of the local markets as well as the increased competitive pressures on cost.
1. Pressures for local responsiveness may make it difficult to .
Select a response
compete effectively in more than one international market
monitor and adapt to changing customer tastes in a large number of foreign markets
leverage skills and products associated with a firm’s core competencies from one country to another
2. is the most appropriate strategy when there are substantial differences across nations with regard to consumer tastes and preferences, and where cost pressures are not too intense.
Select a response.
Localization strategy
International strategy
Transnational strategy
3. is the most appropriate strategy when the firm simultaneously faces strong pressures for both cost reductions and local responsiveness.
Select a response.
International strategy
Transnational strategy
Localization strategy
4. A firm facing low pressures for local responsiveness and few pressures to contain costs might best pursue a(n) .
Select a response
international strategy
localization strategy
transnational strategy
5. Markets are dynamic, and any firm will face competition. In time, international and localization strategies tend to become less viable, and managers need to .
Select a response.
orient their companies toward either a global standardization or transnational strategy
develop an appropriate exit strategy to withdraw profitably from markets that become too competitive
revitalize their original strategies with more intense focus to avoid spreading energies too thinly