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Management > Chapter 11 - Global Strategy > Flashcards

Chapter 11 - Global Strategy Flashcards

1
Q

Internalization framing tool

A

=> going global or not

  1. potential benefits for the company?
  2. have the necessary management skills?
  3. Costs outweigh benefits?
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2
Q

Motives for internationalization

A
  • talent + skills
  • resources + spaces
  • risks
  • competitive moves
  • market related
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3
Q

Talent + skills (motives for internationalization)

A
  • recruitment of young talents
  • improved career tracks
  • new management practices
  • personal interest in internationalization
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4
Q

Resources + spaces (motives for internationalization)

A
  • spatially distant rare material access

- access to clusters (like Silicon Valley)

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5
Q

Risks (motives for internationalization)

A
  • diversify business cycle risks

- diversify currency risks

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6
Q

Competitive moves (motives for internationalization)

A
  • attack competitors at home

- take-over other firms before competitor can

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7
Q

Market related (motives for internationalization)

A
  • conquer new markets
  • global market for higher growth
  • overcome domestic growth barriers
  • escape domestic regulations
  • prolong product life cycle
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8
Q

Reasons for suboptimal internationalization performance

A
  • Disregard of available data, especially on local competition and supply.
  • No adaption of pricing, sales and marketing channels to local culture and institutions.
  • No adaption of product portfolio to local preferences.
  • No delegation of responsibility to local experts.
  • Suboptimal logistics and operations on a spatial scale.
  • Rush into B-locations. Not enough time to organize access, assets and/or acquisition.
  • No adaption of branding the local language
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9
Q

The liability of foreignness

A
  • inherent disadvantage in host countries bc of non-native status
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10
Q

The liability of foreignness Major aspects for existence

A
  • differences in formal + informal institutions i. Foreign countries
  • formal + informal discrimination
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11
Q

Overcoming the liability of foreignness

A

Convincing the costumer even despite the liability of foreignness
=> deploy superior resources + capabilities creating competitive advantage

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12
Q

Entry strategy - main questions

A

1) where to enter?
2) when to enter?
3) How to enter?

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13
Q

Where to enter ?

A
  • spaces linked to strategic goals
  • geographical advantages
  • social advantages
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14
Q

Spaces linked to strategic goals type

A
  • natural resource seeking (eg. Lithium Chile)
  • market seeking (Seafood Japan)
  • efficiency seeking (Manufacturing China)
  • innovation seeking (IT Silicon Valley)
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15
Q

Spaces linked to geographical advantages

A
  • Access to ocean, fertile regions, sun
  • access to low salary/ mega cities
  • spatial concentration of economic activities
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16
Q

Spaces linked to social advantages

A
  • cultural distance: difference between 2 cultures

- institutional distance: comparing social institutions

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17
Q

Systematic multiple screening - where to enter

A
  • first row estimate
  • deepen screening only for good prospect candidates
  • final selection of interesting candidates
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18
Q

Potentially relevant aspects for structuring an estimate - where to enter

A
  • Sales + profit forecast (strategic goal: market seeking)
  • resources + incentives (strategic goal: natural resource seeking)
  • risks / subrisk
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19
Q

Market potential?

A 
1. entry conditions 
(import regulations + logistic / operative constrains)
2. Competition 
(Industry structure + key competitors)
3. Distributions channels 
((inter-company) value chain)
4. Consumer behavior
(Consumer reaction to product + brand)
5. Marketing intensity
(How is marketing + promotion done)
6. Factor cost (labor, capital, taxation...)
=> sales + profit forecast
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20
Q

screening for natural resource seeking

A
  • Resources
  • Incentives
    (- Market + competition)
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21
Q

Another angel for screening - risks + subrisks

A
  • political risks (shareholder/ employee/ operational exposure)
  • competitive risks (corruption/ cartels/ networks)
  • operational risks (infrastructure/ regulations)
  • economic risks (growth/ inflation/exchange)
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22
Q

When to enter

A
  • first mover

- late mover

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23
Q

First mover advantage (Internalization)

A
  • property, technological leadership
  • preemption of scare resources
  • establishment of entry barriers for late entrants
  • avoidance of clash with dominant firms at home
  • relationships + connections with key stakeholders
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24
Q

Later mover advantage

A
  • opportunity to free ride in first mover investments
  • resolution of technological + market uncertainty
  • first movers difficulty to adapt to market changes
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25
Q

How to enter - the scale of entry

A
  • large-scale entry

- small scale entry

26
Q

Large scale entry ( + drawback)

A

> demonstration of strategic commitment
- helps to assure local costumer + suppliers
- deters potential entrants
drawback
- limited strategic flexibility elsewhere
- potential huge losses

27
Q

Small scale entry

A
  • less costly
  • focus on accumulating experience
  • learning by doing while limiting downside risk
    > drawback
  • lack of strong commitment
  • difficulties on building market share +/ capturing first mover advantages
28
Q

Two step process (how to enter)

A
  1. equity vs. non-equity mode

2. precise form of mode

29
Q

Non-equity modes (1. step decision)

A

Exports + contractual agreements

  • > reflect relatively small-scales commitments
  • > don’t require the establishment of independent organizations
30
Q

Equity modes (1. step decisions)

A

Joint ventures + wholly owned subsidiaries

  • > reflect relatively large-scaled + less reversible commitments
  • > call for establishment of independent organizations
31
Q

Step 2 precise form - types

A 
> non equity modes
- exports
- contractual agreements 
> Equity/ FDI modes
- joint ventures
- wholly owned subsidiaries
32
Q

Exports

A
  • direct exports

- indirect exports with intermediary firms

33
Q

Direct exports advantages

A
  • direct contact with the foreign market
  • economies of scale in production concentrated in home country
  • better control over distribution
34
Q

Direct exports disadvantages

A
  • transportation costs
  • distance to costumers
  • trade barriers
  • protectionism
35
Q

Indirect exports disadvantages

A
  • less control over distribution

- curbed learning opportunities for operation in foreign market

36
Q

Indirect exports advantages

A
  • intermediary firms provide knowledge + networks
  • economies of scale in production concentrated in home country
  • overcome information asymmetries i. foreign markets
37
Q

Contractual agreements

A
  • licensing
  • franchising
  • turnkey projects
  • R+D contracts
  • Co-marketing
38
Q

Licensing

A 
Licensor permits licensee to use assets for royalty fee
Licensor provides combination of:
1. Intellectual assets
2. Supporting assets 
Licensee compensate licensor
39
Q

Franchising

A

Specialized form of licensing
Franchiser sells intangible asset to a franchisee for a royalty fee
Franchisee agreed to abide strictly rules

40
Q

Licensing/ franchising pro + cons

A

+ low development cost
+ low risks

  • little control over technology + marketing
  • curbed global coordination
  • may create competitors
41
Q

Turnkey projects pro + cons

A

+ profits in countries where FDI is restricted

  • lack of long term presence
  • may create efficient competitors (trained personnel)
42
Q

R+D contracts pro + cons

A

+ access innovation hubs/ sources at low costs

  • difficult to negotiate + enforce contracts
  • may lead to loss of core innovation capabilities
  • may create innovative competitors
43
Q

Co- marketing pros + cons

A

+ higher customer reach

  • limited coordination
44
Q

Joint ventures

A
  • entity owned by two/ more patent companies

- each party has equity + take risks

45
Q

Wholly owned subsidiary (WOS)

A

=> entry mode with highest resource commitment + control

- establish own value chain activities in foreign market

46
Q

WOS variations

A
  • miniature replica of headquarters
  • R+D-, sales-, purchasing-subsidiary
  • Production subsidiary => entourage production //assembly process
47
Q

WOS modes

A
  • Greenfield

- Acquisition

48
Q

JV pros + cons

A

+ sharing costs + risks (but also profits)
+ access (knowledge + assets)
+ politely acceptable

  • divergent interest of partner
  • Limited operational control
  • coordination complexity
49
Q

Greenfield pros + cons

A

+ complete equity + operational control
+ protection of know-how
+ ability to coordinate globally

  • politically less acceptable
  • planning costs
  • adds capacity to industry
  • slow entry speed
50
Q

Acquisition pros + cons

A

+ same as greenfield
+ industry capacity stays fixed
+ fast entry speed

  • politically less acceptable
  • post.-acquisition integration costs
51
Q

Global strategic sets of pressure for MNEs

Two major sets of pressure

A

1) cost reduction => calls for global integration
2) local responsiveness = pressure to react to local preferences
=> opposing forces => trade-off problems

52
Q

Global strategic configuration types

A
  • home replication
  • localization
  • global standardization
  • transnational
53
Q

Home replication pros + cons

A

+ use of home country based advantages
+ easy implementation

  • lack of local responsiveness
  • foreign costumer alienation
54
Q

Localizations pros + cons

A

+ maximal local responsiveness

  • high costs due to multiplication of tasks
  • lack of global coherence
55
Q

Global standardization pros + cons

A

+ use of low-cost advantages
+ strong global coherence

  • lack of responsiveness
56
Q

Transnational pros + cons

A

+ partially cost efficient
+ partially locally responsive
+ global learnings + diffusion of innovation

  • organizational complex
  • difficulty of implementation
57
Q

Global standardization strategy

A

standardized products sold throughout the world

high pressure for low cost
low pressure for local responsiveness

58
Q

Transnational strategy

A

combination of transnational integration (low cost) + benefits of being local responsive

high pressure for low cost and for local responsiveness

59
Q

Home replication (export)

A

replicated domestic business model + core competencies to enter international market

low pressure for low cost and for local responsiveness

60
Q

Localization strategy

A

operating separate subsidiaries that develop specific products meeting local market demand

low pressure for low cost
high pressure for local responsiveness

Management (11 decks)

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