Chapter 10 Flashcards
Internationalisation drivers
(i) Market drivers Standardisation of market characteristics.
(ii)* Cost drivers* Increasing the volume beyond national markets might further exploit economies of scale. Or move some activities to other countries to exploit cheaper labour for example.
(iii) Government drivers Reduction of barriers to trade and investment, EU for example. Technological standardisation.
(iiii) Competitive drivers In order to compete with globalised competitors who easily can cross-subsidise, one must become a globalised competitors aswell.
Locational Advantage: Porters diamond.
Porters diamond suggests that locational advantages may stem from local factor conditions; local demand conditions, local related and supporting industries; and from local firm strategy structure and rivalry.
Factor conditions: Raw materials, land and labour.
Home demand conditions: Dealing with sophisticated and demanding customers at hom helps train a company to be effective overseas.
Relating and supporting industries: Local ´clusters´ of related and mutually supporting industries can be a important source of competitive advantage.
Industry structure: can drive efficiences and improvements which make a company be strong internationally
International value system
Global sourcing => purchasing services and components from the most appropriate suppliers around the world, regardless of their location. Cost advantages + unique local capabilities.
International Strategies
Export strategy: Leverages home country capabilities, innovations and products in different foreign countries.
Multi-domestic strategy: Independent subsidiaries or SBUs that offer different services or products tailored after local demand. Loosely coordinated internationally.
Global strategy: Maximises global integration, standardisation, international value-chain.
Transnational strategy: Unites key advantages of multi-domestic and global strategies.
CAGE-framework
Emphasises the importance of cultural, administrative, geographical and economic distance between the firm and the country.
Cultural distance The distance relation here relates to differences in language, ethnicity, religion and social norms.
Administrative and political distance The distance in terms of incompatible administrative, political or legal traditions.
Geographical distance Not only amount of km separating countries but involves other geographical characteristics such as size, sea access and the quality of communications infrastructure.
Economic refers to wealth distances and differences in cost and quality of various inputs and infrastructure.
Factors to consider when entering markets abroad
Defenders reactiveness: A defender will be more reactive if the markets are important to it and it has the managerial capabilities to coordinate its response..
Defenders clout: The power the defender is able to muster in order to fight back. Clout is typically a function of share in the particular market, but might be influenced by connections to other powerful local players, such as retailers or government.
These factors are important to consider when deciding what country to enter. Game theory can also extensively be used in these situations.
Entry mode strategies
(i) Export
(ii) Licensing or franchising
(iii) Joint ventures
(iiii) Wholly owned subsidiaries
