Question

Briefly discuss the most appropriate international business strategy to be used for the following products in Malaysia. Justify your choice from the perspective of cost reduction and localization requirements.                                

Answer 1

COMPETITIVE PRESSURES.

The competition in the market place is not easy for the firms. Firms in the market place usually face two types of pressures.

1. PRESSURES FROM COST REDUCTION.

One type of pressure is the one they receive due to pressures for cost reductions. In response to this companies try to lower the costs of their value production. Ways a firm may do this could include mass producing standardized products in a location where it is most optimal to do so and realize economies of scale and location and/or outsourcing certain functions of the job to foreign suppliers that cost less so as to reduce costs. Most companies face difficulties distinguishing commodities since differentiating non-price factors is complex.

2 PRESSURES FROM LOCAL RESPONSIVENESS.

The second pressure they face is that from local responsiveness. Such pressures arise from varying differences in traditional practices, infrastructure and customer’s preferences and tastes. To respond to this, firms need to differentiate their products in each country to take into account all these factors.

CHOOSING A STRATEGY.

Differences in the strength of pressures for cost reductions versus those for local responsiveness affect the firm’s choice of strategy. Firms typical choose among four main strategic positions when competing internationally. These can be characterized as a global standardization strategy, a localization strategy, a transnational strategy, and an international strategy. The appropriateness of each strategy varies given the extent of pressures for cost reductions and local responsiveness.

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