1. Foundations of International Business Strategy Flashcards
Hypothesis: The world is round and spiky
Complex and Uneven: a VUCA World
Complexity: Characteristics
The situation has many interconnected parts and variables. Some information is available or can be predicted, but the volume or nature of it can be overwhelming to process.
Complexity: Example
You are doing business in many countries, all with unique regulatory environments, tariffs, and cultural values.
Complexity: Approach
Restructure, bring on or develop specialists, and build up resources adequate to address the complexity.
Volatility: Characteristics
The challenge is unexpected or unstable and may be of unknown duration, but it’s not necessarily hard to understand; knowledge about it is often available.
Volatility: Example
Prices fluctuate after a natural disaster takes a supplier offline.
Volatility: Approach
Build in slack and devote resources to preparedness—for instance, stockpile inventory or overbuy talent. These steps are typically expensive; your investment should match the risk.
Ambiguity: Characteristics
Causal relationships are completely unclear. No precedents exist; you face “unknown unknowns.”
Ambiguity: Example
You decide to move into immature or emerging markets or to launch products outside your core competencies.
Ambiguity: Approach
Experiment. Understanding cause and effect requires generating hypotheses and testing them. Design your experiments so that lessons learned can be broadly applied.
Uncertainty: Characteristics
Despite a lack of other information, the event’s basic cause and effect are known. Change is possible but not a given.
Uncertainty: Example
A competitor’s pending product launch muddies the future of the business and the market.
Uncertainty: Approach
Invest in information—collect, interpret, and share it. This works best in conjunction with structural changes, such as adding information analysis networks, that can reduce ongoing uncertainty.
The world is not as globalised as we think
- Law of distance
- Home bias
- Liability of foreignness
Global strategy
Strategy that a company
develops to expand into the global market.
Liability of foreignness
Inherent disadvantage foreign firms experience in host countries because of their outsider status.
Emerging economies (markets)
Fast- growing developing economies.
Global value chain
Chain of geographically dispersed and coordinated activities involved in the production of a good or service and its supply and distribution activities.
Global expansion: Advantages
- Gain access to larger markets
- Gain access to low-cost input factors and skilled workers
- Develop new competencies
Global expansion: Disadvantages
- Liability of foreignness
- Risk: Exploitation of cheaper labor markets
- Loss of intellectual property
To analyze the host environment:
PESTEL
CAGE
PESTEL stands for:
Political
Economic
Social
Technological
Environmental
Legal
CAGE stands for:
Cultural
Administrative
Economic
Geographic
CAGE: Cultural Examples
Language
Ethnicity
Religion
Work systems
Tradition
Values, social norms, and dispositions
