CH 13: Regional and global strategies of MNEs IB Flashcards
How much FDI do the largest 500 MNEs account for?
90% of world’s stock of FDI. And 50% of the worlds trade
Do most MNEs have a deep penetration of foreign markets?
No, most trade in the triad
Triad
North America, EU, Japan
What similarities do the triad share?
low macroeconomic growth. Similar technological infrastructure capital and knowledge intensive firms homogenization of demand protectionist pressure
What is the problem faced by many MNEs in terms of sales?
They sell engineered commodities. These rapidly lose their monopoly status, because technology often diffuses more rapidly to rivals than the required distribution capabilities can be build in foreign markets. It is difficult to recoup innovation costs.
global impasse
describes the problems faced by the largest companies to repeat their home triad base market share performance in the two other triad markets.
triad power
company that has equal penetration and exploitation capabilities and no blind spots in each of the triad regions.
Why is the absence of a blind spot important?
To avoid surprises, that is unexpected strategic moves by foreign rivals.
insiderization
when a company becomes an insider in a country important to its market share growth through an alliance or partnership
What should a MNE do when it wants to become triad power on its ons through wholly owned operations?
The ancho- rage perspective. A corporate center that is mentally located in equidistance from the economic and political power basis in the US, EU and Japan.
What else should MNEs do?
They should identify a fourth region, where it should be easy to earn an important market share.
For Japan Asian markets, US neighboring trading partners
Europe those countries with which much trade potential exists.
broad triad
NAFTA, expanded EU and Asia
NAFTA
North American Free Trade Agreement
Canada, Mexico, and the United States
How to overcome the impasse challenge?
Use of consortia and joint ventures to capture non-home markets
consortia
a combination of financial institutions, capitalists, etc., for carrying into effect some financial operation requiring large resources of capital.
impasse
A bargaining impasse occurs when the two sides negotiating an agreement are unable to reach an agreement and become deadlocked.
Home region oriented
at least 50% of sales in home region of triad
Bi-regional
at least 20% of sales in each of the two regions
less than 50% in any one region
Host region oriented
more than 50% sales in a triad market other than their home market
Global
at least 20% sales in each of the three parts of the triad
less than 50% in any one region of the triad
arbitrage
exploiting the differences across nations and regions
