Chapter 10

Question 1

What is a MNE?

Answer 1

The engine behind globalization is the multinational enterprise (MNE) – a company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries

Question 2

Whats a CAGE framework and what does it consist of?

Answer 2

A decision framework based on the relative distance between home and a foreign target country along four dimensions; the bigger the distance the less probably the expansion would work:

Cultural distance – cultural disparity between an internationally expanding firm’s home country and its targeted host country. In his research, Geert Hofstede measured national culture – the collective mental and emotional “programming of the mind” that differentiates human groups.

Administrative and political – these disparities are captured in factors such as the absence or presence of shared monetary or political associations, political hostilities, and weak or strong legal and financial institution.

Geographic distance – this distance is characterized by a lack of common border, waterway access, different climate and/or time zones, …

Economic distance – this distance is characterized by different consumer incomes, costs and quality of resources, and different knowledge and information.

Question 3

What are the 4 different strategies of entering foreign markets?

Answer 3

(1) International Strategy – a strategy that involves leveraging home-based core competencies by selling the same products or services in both domestic and foreign markets.
(2) Multidomestic Strategy – a strategy pursued by MNEs that attempts to maximize local responsiveness with the intent that local consumers will perceive them to be domestic firms.
(3) Global-Standardization Strategy – a strategy attempting to reap significant economies of scale and location economies by pursuing global division of labor based on wherever best-of-class capabilities reside at lowest cost.
(4) Transnational Strategy – a strategy attempting to combine benefits of localization strategy (high local responsiveness) with those of globalization strategy (lowest-cost-position attainable).

Question 4

Whats the death of distance hypothesis?

Answer 4

The death-of-distance hypothesis refers to the assumption that geographic location alone should not lead to firmlevel competitive advantage because firms are now, more than ever, able to source inputs globally.

Question 5

What are the four factors of Porters diamond of national competitive advantage?

Answer 5

(1) Factor conditions which describe a country’s endowments in terms of natural, human or other resources (capital markets, supportive institutional framework, research universities, public infrastructure).
(2) Demand conditions which are the specific characteristics of demand in a firm’s domestic market.; home market with customers that hold firms to high standard of value creation and cost containment contributes to national competitive advantage.
(3) Competitive intensity in focal industry. Companies that face a highly competitive environment at home tend to outperform global competitors that lack such intense domestic competition.
(4) Related and supporting industries/complementors. Leadership in related and supporting industries can also foster world-class competitors in downstream industry. The availability of topnotch complementors strengthens national competitive advantage.