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• 1 Lecture 4

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• The Theory of Integration Responsiveness

  Together, these benefits (cost, timing, learning, arbitrage) allow the global firm to achieve economies of scale, and ultimately an ability to out-compete local competitors.

• Flexibility (benefit localisation) is:

  The local firm can adapt to customer demands in the various dimensions of the marketing mix: product/service design, distribution, branding, pricing, services. Ultimately, this leads to customisation. 
  
  The local firm has advantages in customisation. It knows the market, and can tailor products as necessary. Only a local Dutch firm would consider supplying pre-fabricated floating houses

• Proximity (benefit localisation) is:

  This is the capability to be close to the market, to understand the customers. That is, it is the firms ability to anticipate demand.
  
  What’s good in one market may not work in another. Local firms have the advantage of proximity to supply market niches

• Quick Response Time (benefit localisation) is:

  This is the ability of the of the firm to respond to the customers demands. That is, it is the firms ability to supply the market. 
  
  Observing market niches – due to increased flexibility and / or proximity – the local firm can supply the market more quickly. Local firms have less ‘paper work’ to do. And fewer complimentary issues to worry about

• Pressures for Global Integration (theory of integration responsiveness):

  
  Economies of Scale = few locations, centralisation
  Convergent Consumer Trends = global products (Coca-Cola)
  Uniform Services = Central services are easier to standardise
  Global Sourcing of Raw Materials, Components, Energy and Labour
  Global Competition = Global perspecitve is necessary to monitor.
  Availability of media that reaches customers in multiple markets.

• Result of Global integration (theory of integration responsiveness

  A centralised system, in which firms coordinate their value-chain activities across many countries, in order to maximise efficiency, effectiveness, flexibility and learning.
  A system which promotes learning, and cross-fertilisation, as well as reduction of wasteful duplication across the firms operation.

• Pressures for Local Responsiveness  (theory of integration responsiveness)

  
  Diversity of Local Needs = local adaptation
  Differences in Distribution Channels = Japan versus Europe
  Local Competition = Greater pressure to compete locally
  Cultural Differences = Local level adaption (eg. books) and marketing
  Host Government requirements and regulations.

• Result of Local Responsiveness (theory of integration responsiveness)

  A multi-domestic firm, with some degree of local responsiveness, wherein the firm attempts to meet the specific needs of buyers in individual markets, as well as to adapt to the local competitive and regulatory environment.

• Depending on the forces that dominate, the Integration-Responsiveness theory suggests four strategic responses:

  global strategy (high cost pressure, low local responsiveness)
  transnational strategy (high cost pressure, high local responsiveness)
  international strategy (low cost pressure, low local responsiveness)
  multidomestic strategy (low cost pressure, high local responsiveness)

• Three models of a single business unit:

  • Global Function Model (Global forces, Apple)
  • Geographic Model (Local forces,
  • Single Matrix Model (Both forces,