Chapter 10: Global Strategy: Competing Around the World

Question 1

What is globalization

Answer 1

the processor closer integration and exchange between different countries and peoples world wide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transport costs.

Question 2

Define multinational enterprise

Answer 2

a company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least 2 countries.

Question 3

Define foreign direct investment

Answer 3

a firm’s investment in value chain activities abroad

Question 4

Define global strategy

Answer 4

part of a firm’s corporate strategy to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world.

Question 5

What stage of globalization are we currently in?

Answer 5

globalization 3.0

Question 6

What are the advantages of going global? (3)

Answer 6

• gain access to larger marker
• gain access to low-cost input factors
• develop new competencies.

Question 7

Define location economies

Answer 7

benefits from locating value chain activities in the world’s optimal geographies for a specific activity, wherever that may be.

Question 8

What is a polycentric innovation strategy?

Answer 8

a strategy in which MNE’s now draw on multiple, equally-important innovation hubs throughout the world.

Question 9

What are the disadvantages of going global? (3)

Answer 9

• liability of foreignness
• loss of reputation
• loss of intellectual property

Question 10

Define liability of foreignness

Answer 10

additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances.

Question 11

What is used to aid MNE’s in deciding where in the world to compete?

Answer 11

The CAGE distance framework

Question 12

Define CAGE distance framework

Answer 12

a decision framework based on the relative distance between a hone and a foreign target country along 4 dimensions: cultural distance, administrative/ political distance, geographic distance, and economic distance,

Question 13

What 2 opposing forces do MNEs face when competing around the globe?

Answer 13

cost reduction versus local responsiveness.

Question 14

Define globalization hypothesis

Answer 14

assumption that consumer needs and preferences throughout the world are converging and becoming increasingly more homogenous.

Question 15

Define local responsiveness

Answer 15

the need to tailor product and service offerings to fit local consumer preference and host-country requirements

Question 16

Define integration-responsiveness framework

Answer 16

strategy framework that juxtaposes the pressures an MNE faces for cost reductions and local responsiveness to derive 4 different strategies to gain and sustain competitive advantage when competing globally.

Question 17

What are the 4 strategic positions in the integration-responsiveness framework?

Answer 17

1. ) International
2. ) Multidomestic
3. ) Global standardization
4. ) Transnational

Question 18

Define international strategy

Answer 18

strategy that involves leveraging home-based core competencies by selling the same products or services in both domestic and foreign markets. (Harley Davidson)

Question 19

Define multidomestic strategy

Answer 19

strategy pursued by MNEs that attempts to maximize local responsiveness, with the intent that consumers will perceive them to be domestic companies. (Nestle)

Question 20

What is a disadvantage of the multi domestic strategy

Answer 20

can be costly and inefficient because it requires the duplication of key business functions across multiple countries,

Question 21

What is both a strength and a weakness of international strategy

Answer 21

limited local responsiveness- vulnerable to expropriation of intellectual property

Question 22

Define global-standardization strategy

Answer 22

strategy attempting to reap significant economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost.

Question 23

What is both an advantage and disadvantage of the global-standardization strategy?

Answer 23

obtaining the lowest cost point possible by minimizing local adaptions. Ex- MTV did not adapt to other cultures and could not attract worldwide audiences because of the language barrier of its music videos.

Question 24

Define transnational strategy

Answer 24

strategy that attempts to combine the benefits of a localization strategy (high local responsiveness) with those of a globalization strategy (lowest cost position attainable).

Question 25

Transnational strategy is usually used by MNEs that pursue this business strategy

Answer 25

blue ocean

Question 26

Benefits of transnational strategy (3)

Answer 26

economies of scale, location, and experience and learning

Question 27

Risks of transnational strategy (2)

Answer 27

• some exchange rate exposure

- higher risk of IP expropriation

Question 28

Define death-of-distance hypothesis

Answer 28

assumption that geographic location alone should not lead to firm-level competitive advantage because firms are now, more than ever, able to source inputs globally

Question 29

Define national competitive advantage

Answer 29

world leadership in specific industries

Question 30

What is Porter’s Diamond Framework used for?

Answer 30

to explain why some nations are outperforming others in specific industries

Question 31

What are the 4 interrelated factors of Porter’s Diamond Framework?

Answer 31

• factor conditions
• demand conditions
• competitive intensity in focal industry
• related and supporting industries/ complementors.

Question 32

What are factor conditions

Answer 32

A country’s endowments in terms of natural, human, an other resources.

Question 33

What are demand conditions

Answer 33

specific characteristics of demand in a firm’s domestic market. Ex- Japan is dense, urban, and hot in the summer, so there is a demand in Japanese markets for small, quiet, energy-efficient air conditioners.

Question 34

Explain how competitive intensity in a focal industry impacts global competitive advantage

Answer 34

companies that face a highly-competitive environment at home tend to outperform global competitors that lack such intense domestic competition.