Question

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

Answer 1

1. Pressures for local responsiveness may make it difficult to leverage skills and products associated with a firm’s core competencies from one country to another

Multinational firms deal with many cultures mainly face two kinds of pressures while operating - Pressure from cost reduction and pressures from local responsiveness. So inorder to respond to differences in customer preferences across boundaries, MNCs need to differentiate their product each country accoding to customer tastes and cultural preferences.

2. Localization strategy 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.

Localization strategy focusses on customising the product or service and strategy according the needs of a particular nation. This strategy is taken to deal with the purchasing habits, consumer behaviour, cultural and traditional differences in each country it operates.

3. Transnational strategy is the most appropriate strategy when the firm simultaneously faces strong pressures for both cost reductions and local responsiveness.

In transnational strategy,a firm's strategiy is standardised across all the subsidaries and regions in order to maintain efficiency and economies of scale. These firms also differentiate their product offering across geographic markets in order to adjust to local differences in different countries.

4. A firm facing low pressures for local responsiveness and few pressures to contain costs might best pursue a(n) International strategy.

It is the strategy by which a firm sell its products or services outside its domestic market.

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 orient their companies toward either a global standardization or transnational strategy .

Transnational strategy is highly appropriate in this competitive era as it offers advantages of both international and localization strategies. It addresses both global efficiency and local responsiveness.