2 - FGM OLI and patterns Flashcards
Explain the FGP - Flying geese paradigm
the model explains how countries in south-east asia (Kambodscha, Taiwan, Southkorea, Thailand) industrialize in a sequence with more advanced countries leading while less developed countries follow by adopting industries that the leaders have outgrown. The underdeveloped nations are “aligned successively behind the advanced ones”
top-down model
The Flying Geese model describes how developed countries lead industrial innovation, which is then adopted by developing countries as industries shift globally.
Can you name the members of the model?
1) Japan als OECD Member
2) Taiwan, Southkorea, Hong Kong, Singapore
3) Thailand, Malaysia, Indonesia, Philippines as the ASEAN four
4) Vietnam and China as the socialist states in transition
what is the main driver in this model?
increasing labor costs and the comparative advantages shifting it further and further away from labor-intensive production to capital-intensive and shedding the low-productivity production to nations further down the hierarchy
what are the 3 individual components of the OLI framework?
ownership, location and internalization advantage
further explain every component of the OLI framework
ownership adavantage: refers to the competetive advantages of the enterprise allowing to succeed in foreign markets
location advantage: examines the advantages offered by specific countries or regions (such as resources, labor costs, market size)
Internalization advantages:addresses the decision-making process regarding whether to manage operation internally or to outsource them. (companies may prefer internalization to maintain control over resources and processes especially when dealing with proprietary technology and sensitive information)
Name the 3 entry-mode strategies and give 1-3 examples to each
contractual, so non-equity-based through Exporting, Licensing or Franchising
non-equity or equity-based, through strategic alliance so scontractual agreements or cross-shareholding
equity-based through FDI in Joint Ventures, Greenfield investments or acquisitions
Greenfield and Acquisition as wholly owned subsidiary
Pattern of FDI - what is common for firms in the same industry?
- they have similar strategic behavior and undertake FDI around the same time
- they direct the investment activities towards certain locations at certain stages in the life cycle
what is a multipoint competition?
2 or more enterprises encounter each other in different regional markets, national markets or industries.
more specific->describes a situation where firms compete simultaneously across multiple products or markets and competetive actions taken in one market trigger reactions in other markets
what are the 2 main patterns of FDI?
1) strategic behavior
2) product life cycle
pattern of strategic behavior in 1 sentence
what means oligopolistic
FDI flows reflect strategic rivarly/competition between firms in oligopolistic industries - but can also be extended to multipoint competition
oligopolistic: limited number of large firms
explain the theory of the product life cycle
invented by Vernon, 1966
new products are developed and produced in high-income, innovation-driven countries.
As the product matures and becomes standardized, the production shifts to lower-cost countries, which eventually export the product back to the original country
The lower cost countries become net exporters
in summary: theory explains how technological innovation and cost changes drive shifts in global production over time
