BUSİNESS MANAGEMENT - Deneme Sınavı - 1

Economies of scale, which refers to decreases in average costs per unit of production as output increases, have important effects on lowering costs. The main reasons for decreasing costs while increasing production output are (1) spreading fixed, advertising, selling, and distributing costs over more units; (2) having specialized employees and systems and equipment like 3-D printers and manufacturing robots, which lead to higher efficiency; and (3) providing discounts on bulk purchases of raw material inputs and component.

Global integrationlocal responsiveness framework indicates that cost pressure often require global integration and local responsiveness press companies to adapt locally. In both domestic and international competition, pressures for cost reductions are almost universal. What is unique in international competition is the pressure for local responsiveness, which is reflected in different consumer preferences and host country demands. Consumer preferences vary extremely around the world.

A home replication strategy includes selling the same products in both domestic and foreign markets. It enables companies to leverage their home-based core competencies in foreign markets. A home replication strategy is either the first step companies take when beginning to conduct business abroad, or adopted by companies which own luxury brands.

A localization strategy requires maximizing local responsiveness hoping that local consumers will perceive the products as local ones. A localization strategy results from the combination of high pressure for local responsiveness and low pressure for cost reductions.

A global-standardization strategy is composed of achieving significant economies of scale and low cost inputs by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost. This strategy results from the combination of high pressure for cost reductions and low pressure for local responsiveness.

A transnational strategy combines the benefits of a localization strategy (high local responsiveness) with those of a global-standardization strategy (lowest-cost position attainable). This strategy is generally used by companies that adopt an integration strategy at the business level by attempting to reconcile product differentiations at low cost. Moreover, global learning and diffusion of innovations (from home country to host countries and vice versa) are important elements of a transnational strategy.