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BUSMHR 4490 Ch. 10
Terms in this set (20)
the process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs.
Also allows companies to source supplies at a lower cost and to further differentiate products.
a company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries.
Foreign Direct Investment
a firm's investments in value chain activities abroad
Can help a company to avoid unnecessary avoid voluntary import restrictions, to take advantage of business-friendly conditions such as lower taxes, labor costs, and cost of living, as well as other incentives.
part of a firm's corporate strategy to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world.
benefits from locating value chain activities in the world's optimal geographies for a specific activity, wherever that may be.
Liability of Foreignness
additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances
Advantages to Globalization
1. Gain Access to a Larger Market
2. Gain Access to Low-Cost Input Factors
3. Develop New Competencies
Disadvantages to Globalization
1. The Liability of Foreignness
2. Loss of Reputation
3. Loss of Intellectual Property
CAGE Distance Framework
a decision framework based on the relative distance between home and a foreign target country along four dimensions: cultural distance, administrative and political distance, geographic distance, and economic distance
the collective mental and emotional "programming of the mind" that differentiates human groups
cultural disparity between an internationally expanding firm's home country and its targeted host country
assumption that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenous.
The strategic foundations of the globalization hypothesis are based primarily on cost reduction.
the need to tailor product and service offerings to fit local consumer preferences and host-country requirements; generally entails higher costs.
strategy framework that juxtaposes the pressures an MNE faces for cost reductions and local responsiveness to derive four different strategies to gain and sustain competitive advantage when competing globally:
global-standardization strategy, and
strategy that involves leveraging home-based core competencies by selling the same products or services in both domestic and foreign markets; advantageous when the MNE faces low pressures for both local responsiveness and cost reductions.
strategy pursued by MNEs that attempts to maximize local responsiveness, with the intent that local consumers will perceive them to be domestic companies; the strategy arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions.
strategy attempting to reap significant economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lower cost.
strategy that attempts to combine the benefits of localization strategy (high local responsiveness) with those of a global-standardization strategy (lowest cost position attainable).
assumption that geographic location alone should not lead to firm-level competitive advantage because firms are now, more than ever, able to source inputs globally.
National Competitive Advantage
world leadership in specific industries
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