Chapter 10: Global Strategy: Competing Around the World Flashcards
What is globalization
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.
Define multinational enterprise
a company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least 2 countries.
Define foreign direct investment
a firm’s investment in value chain activities abroad
Define global strategy
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.
What stage of globalization are we currently in?
globalization 3.0
What are the advantages of going global? (3)
- gain access to larger marker
- gain access to low-cost input factors
- develop new competencies.
Define location economies
benefits from locating value chain activities in the world’s optimal geographies for a specific activity, wherever that may be.
What is a polycentric innovation strategy?
a strategy in which MNE’s now draw on multiple, equally-important innovation hubs throughout the world.
What are the disadvantages of going global? (3)
- liability of foreignness
- loss of reputation
- loss of intellectual property
Define liability of foreignness
additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances.
What is used to aid MNE’s in deciding where in the world to compete?
The CAGE distance framework
Define CAGE distance framework
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,
What 2 opposing forces do MNEs face when competing around the globe?
cost reduction versus local responsiveness.
Define globalization hypothesis
assumption that consumer needs and preferences throughout the world are converging and becoming increasingly more homogenous.
Define local responsiveness
the need to tailor product and service offerings to fit local consumer preference and host-country requirements
Define integration-responsiveness framework
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.
What are the 4 strategic positions in the integration-responsiveness framework?
- ) International
- ) Multidomestic
- ) Global standardization
- ) Transnational
Define international strategy
strategy that involves leveraging home-based core competencies by selling the same products or services in both domestic and foreign markets. (Harley Davidson)
Define multidomestic strategy
strategy pursued by MNEs that attempts to maximize local responsiveness, with the intent that consumers will perceive them to be domestic companies. (Nestle)
What is a disadvantage of the multi domestic strategy
can be costly and inefficient because it requires the duplication of key business functions across multiple countries,
What is both a strength and a weakness of international strategy
limited local responsiveness- vulnerable to expropriation of intellectual property
Define global-standardization strategy
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.
What is both an advantage and disadvantage of the global-standardization strategy?
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.
Define transnational strategy
strategy that attempts to combine the benefits of a localization strategy (high local responsiveness) with those of a globalization strategy (lowest cost position attainable).
Transnational strategy is usually used by MNEs that pursue this business strategy
blue ocean
Benefits of transnational strategy (3)
economies of scale, location, and experience and learning
Risks of transnational strategy (2)
- some exchange rate exposure
- higher risk of IP expropriation
Define death-of-distance hypothesis
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
Define national competitive advantage
world leadership in specific industries
What is Porter’s Diamond Framework used for?
to explain why some nations are outperforming others in specific industries
What are the 4 interrelated factors of Porter’s Diamond Framework?
- factor conditions
- demand conditions
- competitive intensity in focal industry
- related and supporting industries/ complementors.
What are factor conditions
A country’s endowments in terms of natural, human, an other resources.
What are demand conditions
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.
Explain how competitive intensity in a focal industry impacts global competitive advantage
companies that face a highly-competitive environment at home tend to outperform global competitors that lack such intense domestic competition.
