2- Understanding the International Context

Question 1

What are the 3 external demands?

Answer 1

1. Need for global integration
2. National responsiveness
3. Worldwide innovation and learning

Question 2

What are some of the major forces for global integration and coordination?

Answer 2

1. Taking advantage of economies of scale and scope
2. Exploiting differences in factor costs like labour and raw materials
3. Benefiting from a liberalized trade environment with many free trade agreements

Question 3

What are some of the effects of the intensifying war for talent?

Answer 3

1. Reduces diversity
2. Less opportunity to learn how to navigate across cultures and different social norms
3. Fewer knowledge spillovers

Question 4

How does deglobalization make for more complicated corporate finances?

Answer 4

1. Adds complexity to raising capital and returning profits to shareholders
2. Creates a web of independent processes and regulations in different jurisdictions

Question 5

How can multinational enterprises change the context to foster global integration?

Answer 5

1. By changing national tastes and behaviour as Starbucks is trying to do in China by moving them from tea to coffee
2. By standardizing product formations like P&G does globally
3. By playing global chess and cross-subsidizing markets

Question 6

What are the forces for local differentiation and responsiveness?

Answer 6

1. Cultural differences such as consumer preferences and consumption patterns
2. Differences in national infrastructure like technical standards and distribution channels
3. Government demands such as laws passed regarding social media
4. Success of local competitors
5. Economic indicators like GDP, disposable income, and inflation

Question 7

What is political risk?

Answer 7

The probability that a political action will significantly affect the organization’s business positively or negatively

Question 8

What are the forces behind political risk?

Answer 8

1. Politics are much more crowded and uncertain
2. Supply chains are now longer spreading across multiple countries and companies are trying to be lean so they don’t invest much in protecting them
3. Technology has lowered the cost of collective political action and increased spread of information

Question 9

What are the 4 core competencies under the political risk framework?

Answer 9

1. Understanding risks
2. Analyzing risks
3. Mitigating risks
4. Responding to crises

Question 10

What are the 3 key questions to ask in order to understand risk under the political risk framework?

Answer 10

1. What is the organization’s political risk appetite? How much risk can we effectively manage?
2. Is there a shared understanding of the risk appetite? Ensure political risk is a concern for everyone in the organization
3. How can we reduce blindspots? Avoid groupthink and foster creative thinking

Question 11

What are the 3 things that are needed in analyzing risks under the political risk framework?

Answer 11

1. Good information
2. Rigorous analysis to determine what assets are most vulnerable, performing simulations to see what might happen
3. Integration of political risk analysis into business decisions

Question 12

What are the 3 key questions to ask in order to mitigate risk under the political risk framework?

Answer 12

1. How can we reduce exposure to identified political risk? Disperse critical assets, create surge capacity and slack in the supply chain
2. Do we have a good system and team in place for timely warning and action? Set up warning systems and establish protocols
3. How can we limit the damage when something bad happens? Build relationships with external stakeholders

Question 13

What are some of the main techniques MNEs use to manage country political risk?

Answer 13

1. Recruiting local partners
2. Limiting R&D in nations with bad IP protection
3. Purchasing insurance against political risk
4. Diversifying FDI across different countries

Question 14

What 2 things are required for a business to respond to crises under the political risk framework?

Answer 14

1. Good crisis management: don’t fan the flames, create a response team, assess the situation
2. Continuous learning: assessments of what to keep doing, what to stop, and what to start, motivate everyone to join

Question 15

What is driving the need for rapid and coordinated worldwide innovation?

Answer 15

1. Shortening product life cycles
2. Increased cost of R&D
3. Emergence of global technology standards
4. Competitors’ ability to develop and diffuse innovation globally

Question 16

What are global industries?

Answer 16

Those that are shaped primarily by economic forces for globalization like consumer electronics

Question 17

What are global strategies?

Answer 17

Those capitalizing on highly centralized manufacturing and R&D operations and then leveraging them through worldwide exports of standardized products

Question 18

What are multinational industries?

Answer 18

Those shaped primarily by national, cultural, social, and political forces of localization like branded packaged goods that are changed between countries

Question 19

What are multinational strategies?

Answer 19

Those building strong national subsidiaries sensitive to local needs and able to develop product and strategies to local needs, opportunities, and demands

Question 20

What are international industries?

Answer 20

Those shaped primarily by technological forces for developing and diffusing innovation like telecoms

Question 21

What are international strategies?

Answer 21

Those exploiting technological forces by creating new products in one’s home market and then adapting and diffusing them to foreign affiliates

Question 22

What are transnational strategies?

Answer 22

Responding to all 3 competing sets of forces: global integration, national responsiveness, and worldwide learning