[SOUND] In our previous sessions, we explored how the global economy operates, what the origins of this global economy are, and the evolution of some of the most important emerging markets in the global economy. What we're going to do now is try to understand how firms operate in this global economy. And to find ways to determine what type of strategy a firm should follow when engaging in operations internationally. [MUSIC] When operating globally, firms face two types of pressures. The first one is what we call cost reduction pressures and the second one is what is known as responsiveness pressures. Let's talk a bit about the cost reduction pressures. These are the pressures faced by firms that are selling goods that do not need much adaptation in different markets. We can talk about stuff like oil or coal or wheat. I mean, you sell it in the same way no matter where you go. Responsiveness pressures are the ones faced by corporations, that are selling or offering services or goods that require an adaptation to different markets and these are the patient, as we will explore later, might be the result of differences in terms of culture, religion, climate, geography, political systems, etc. So these type of elements might generate new pressures for firms that are operating at the global level and have to adapt to the different places where they operate. Determining pressures, the type of pressures that a firm faces, unfortunately sometimes it's not as straightforward as I just mentioned. Take firms like Unilever and Procter & Gamble. For a long time, these firms offered a similar range of products, but followed different interpretations of what pressures they were facing. For instance, Procter & Gamble, for awhile, believed that they were selling products in which they were facing cost reduction pressures. They believed that they were offering very generic goods, like detergent, or soap, or the like, and therefore these goods did not need adaptation to the firm markets. Unilever, the Dutch British company on the contrary, had a very different perception of what they were doing. For decades, until the 1980s, they were considered that their goods that they were selling, again, soap, detergent, chocolate and the like, needed to be adapted to different markets because of different perceptions people had of these different markets. So this led to very different strategies for each firm. Unilever, focusing on individual markets, Procter & Gamble, focusing on the global market as a single unit. So this is what we're going to explore here in this session. As you guys might remember from previous sessions, before we talked about the type of advantages, a firm was going to exploit when going abroad, we talked about ownership advantages, location advantages, and internalization advantages. These advantages, as we mentioned in a previous class, helped us to determine whether it makes sense for our firm to become multinational or not. But now, if you decide that it makes sense for a firm to become a multinational corporation, we're going to explore the strategies followed by firms. Taking into account the pressures that I just mentioned, the cost reduction pressures and responsiveness pressures. [MUSIC]
