3 - Developing Transnational Strategies Flashcards
What is efficiency and how can it be increased?
Efficiency = value of outputs/value of inputs
Efficiency can be increased by increasing the value of outputs or decreasing the cost of inputs
How do the forces for international coordination increase efficiency?
- Global integration lowers the cost of outputs
- Local responsiveness increases the value of outputs
What is multinational flexibility?
The ability to manage risks and exploit opportunities that arise from the diversity and volatility of the global environment
What are the sources of diversity and volatility in the global environment?
- Macroeconomic risks like changes in prices and exchange rates
- Political risks
- Competitive risks
- Resource risks like availability of raw material
What 3 things are needed for multinational flexbility?
- The ability to scan and respond to discontinuities in the global environment
- The ability to select the most attractive markets, sense their needs, and develop adaptive responses
- The ability to understand and manage different forms of risk
What are the 2 ways to build worldwide learning?
- Capture external diversity: use worldwide stimuli as learning opportunity
- Leverage internal variety: use existing human resources, local innovations, link capabilities of sensing, responding, and implementing
What are the 3 fundamental tools for building worldwide competitive advantage?
- National differences
- Scale economies
- Scope economies
What is meant by national differences as a tool for building competitive advantage?
- Differences in factor costs: place functions in countries that fit factor requirements best
- Differences in output markets: taking advantage of unique preferences, distribution systems, and government regulation
What is meant by scale economies as a tool for building competitive advantage?
The cost per unit of output will decrease with increasing scale so there is learning and progressive cost reduction
What is meant by scope economies as a tool for building competitive advantage?
Sharing investments and costs across value chains, markets, products
Joint use of different kinds of assets
How do national differences achieve the strategic objectives of global efficiency, managing risk through multinational flexibility, and worldwide innovation and learning?
- Achieves efficiency through differences in factor costs
- Managing risks arising from market or policy induced changes
- Learning from societal differences in organizational and managerial processes
How do scale economies achieve the strategic objectives of global efficiency, managing risk through multinational flexibility, and worldwide innovation and learning?
- Achieves efficiency by exploiting scale economies in each activity
- Manages risk by balancing scale with strategic and operational flexibility
- Learning helps to benefit from experience allowing for cost reduction and innovation
How do scope economies achieve the strategic objectives of global efficiency, managing risk through multinational flexibility, and worldwide innovation and learning?
- Achieves efficiency by sharing investments and costs across markets
- Manages risk through portfolio diversification and creation of options and side bets
- Creates opportunities for shared learning across organizational components in different markets
What are the sources of competitive advantage for international, multinational, and global strategies respectively?
- International uses home-country innovations and technological superiority to leverage the innovations
- Multinational uses differentiation
- Global uses global efficiency as a source
How are international, multinational, and global strategies each organized?
- International is headquartered in technologically advanced countries
- Multinational has assets widely dispersed and gives considerable autonomy to subsidiaries
- Global focuses on concentration of value chain activities
