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Chapter 10 (strat)
Terms in this set (29)
is a 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.
Multinational Enterprise (MNE)
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.
enables MNE's to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world.
Globalization 1.0 (1900-WWII)
In that period, basically all the important business functions were located in the home country. Typically, only sales and distribution operations took place overseas—essentially exporting goods to other markets.
Globalization 2.0 (1945-1999)
MNEs began to create smaller, self-contained copies of themselves, with all business functions intact, in a few key countries (notably, Western European countries, Japan, and Australia).
Globalization 3.0 (current)
Such companies now freely locate business functions any-where in the world based on an optimal mix of costs, capabilities, and PESTEL factors. Huge investments in fiber-optic cable networks around the world have effectively reduced communication distances, enabling companies to operate 24/7, 365 days a year.
advantages of expanding internationally
gain access to a larger market, gain access to low-cost input factors, develop new competencies
benefits from locating value chain activities in optimal geographies for a specific activity, wherever that may be.
liability of foreigness
This liability consists of the additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances.
disadvantages of expanding internationally
liability of foreignness, loss of reputation (sweat shops), loss of intellectual property (pirated movies in china)
is an acronym for Cultural, Administrative and political, Geographic, and Economic distance.
the collective mental and emotional "programming of the mind" that differentiates human groups.
the cultural disparity between the internationally expanding firm's home country and its targeted host country.
administrative and political distances
these distances are captured in factors such as the absence or presence of shared monetary or political associations, political hostilities, and weak legal and financial institutions.
how far two countries are from each other, country's physical size (Canada versus Singapore), whether the countries are contiguous to one another, have access to waterways to the ocean, the within-country distances
The wealth and per capita income of consumers
-rich countries trade with rich and poor countries also tend to trade with rich
CAGE distance framework
helps determine the attractive-ness of foreign target markets in a more fine-grained manner based on relative differences
—producing goods in one country to sell in another—is one of the oldest forms of internationalization
which states that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenous.
the need to tailor product and service offerings to fit local consumer preferences and host-country requirements.
-generally entails higher cost, and sometimes even outweighs cost advantages from economies of scale and lower-cost input factors.
This framework juxtaposes the opposing pressures for cost reductions and local responsiveness to derive four different strategies to gain and sustain competitive advantage when competing globally.
1) International strategy
2) Multi-domestic strategy
3) Global-standardization strategy
4) Transnational strategy
is essentially a strategy in which a company sells the same products or services in both domestic and foreign markets. It enables MNEs to leverage their home-based core competencies in foreign markets.
-(ex. harley davidson)
attempt to maximize local responsiveness, hop-ing that local consumers will perceive them to be domestic companies.
-common in consumers products and food industries
attempt 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 lowest cost.
-ex. To benefit from low-cost labor and to be close to its main markets in order to reduce shipping costs, Lenovo's manufacturing facilities are in Mexico, India, and China.
attempt to combine the benefits of a 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.
Porter's diamond framework
a framework to explain national competitive advantage—why are some nations outperforming others in specific industries.
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