1.2 What is an international firm?

Question 1

DOI

Answer 1

Degree of internationalization

How international is a company

Question 2

What is an international firm?

Answer 2

• involved in foreign activities to a substantial exten

- cross-border transactions on a regular basis

Question 3

What the the quantitative and qualitative approaches when looking at an international firm?

Answer 3

Quantiative absolute approach:
- Stock variables
- Flow variables
Quantitative relative approach:
- Foreign ratio
- Internationalization profile
Qualitative approach:
- Perlutters model
Bertlett/Ghoshals

Question 4

What is a stock variable

Answer 4

• quantitative absolute approach
• Ex number of countries, foreign subsidaries, employers abroad etc
• Fixed date measurement
• Makes more sence in relation to something (ratio)

Question 5

Flow variables

Answer 5

• quantitative absolute approach
• Ex. profit abroad, salaries abroad, production etc
• Reporting period
• Makes more sence in relation to something (ratio)

Question 6

International profile

Answer 6

• Ratio of internationalization
• Ex employees, salse etc
• Percentage of FTO ration (foreign employees/totoal employees)

Question 7

FTO ratio

Answer 7

• Foreign to total ratio
• The ratio can be different for different things such as sales, employees
• Comparing internationality with FTO ratio can be hard since companies can have different ratios for different units

Question 8

The 4 different archetypes of Perlmutters model

Answer 8

• Ethnocentric
• Polycentric
• Regiocentric
• Geocentric

Question 9

Ethnocentric orientation

Answer 9

• „This works at home; therefore, it must work in your country
• HQ power over subsidaries (makes decision)
• Management techniqes transfered to subsidiaries
• Manager expatriation (manager from HQ)

Question 10

Polycentric orientation

Answer 10

• We want to be a good local firm with host country orientation
• Ok with cultural differnces between subsidaries
• decentralized decision
• Local senior mangers

Question 11

Geocentric orientation

Answer 11

• „world oriented orientation“: the firm is seen as a worldwide unit
• Subsidiary equal rights and worldwide network
• joint decision making (lots of communication)
• subsidiaries can have specializations
• Managers are worldwide best people

Question 12

Regiocentric orientation

Answer 12

• Polycentric and geocentric orientation
• Ex. Europa as one homogenous area
• Build regional blocks with regional HQ
• Groups of regions instead of local markets

Question 13

What is integration

Answer 13

• Integration of several subsidiaries

- coordinating subsidiaries regarding management systems, technologies, strategies and production

Question 14

What is responsiveness

Answer 14

• Differnet products in different countries
• Different prices
• Different designs

Question 15

Draw the Bartlett/Ghoshal I/R model

Answer 15

• Y axel : forces for global integration
• X-axel : Forces for local differentiation
• International organization, multinational organization, global, transnational

Question 16

International firm

Answer 16

• Strategies formed HQ and assigned to subsidaries
• HQ makes decision
• Launch prod in home country first
• Initial stage of internationalization (ex export)
• Ex Cement
  PRO
• Core competences
• Ec of Scale
• Low cost implementation (exporting, licencing, franshising)
  NEG
• no/low local responsiveness
• effected by exchange rate fluctiation
• IP easily expropriated

Question 17

Multinational firm

Answer 17

• Subsidaries seen as local firms (Live a portfolio of several national firms)
• Strong local presence
• Decentralized decision making
• Local responsiveness
• Ex food, publishing
  PRO
• highest possible local responsiveness
• less exchange rate exposure
  NEG
• duplication of business functions (costly)
• no ec of scale
• No learning across regions

Question 18

Global firm

Answer 18

• World market with high efficenty -> global efficiency
• Activites centralized few localtion ->cost intensive
• „Building cost advantages through centralized global-scale operations“
• No local responsiveness
• Ex. Aircraft, construction
  PRO
• Ec of scale
• Location economies (find where global advantages are
  CON
• no local responsiveness
• little product differentiation
• exchange rate exposure

Question 19

Transnational firm

Answer 19

• Combine advantages from multinational and global firms
• local responsiveness and integration adv. ex. partial standardization like car assembly
• Subsidiaries globally responsible for prod/func
• Ex. Defense, telecommunication
  PRO
• combine benefits of localization and standardization
• Ec of scale, location and learning
  CON
• Costly and difficult
• high complexity
• exchange rate exposure