Chapter 6

Question 1

Strategic planning

Answer 1

-the process of developing a particular international strategy

Question 2

Strategy

Answer 2

-the framework that managers apply to determine the competitive moves and
business approaches that run the company. Requires intentional, informed, and integrated choices

Question 3

Strategic management process

Answer 3

-the “Full set of commitments, decisions, and actions
required for a firm to achieve strategic competitiveness and earn above average returns.

Question 4

Developing strategy

Answer 4

1. Examine the firm’s strengths and weaknesses
2. Deciding how best to contend with competitors

Question 5

Reactive reasons for going international

Answer 5

-globalization of competitors, trade barriers,
regulations and restrictions, customer demands

Question 6

Proactive reasons for going international

Answer 6

-economies of scales, growth opportunities, resources access and cost savings, incentives (example-Poland lured many international businesses to Poland using incentives)

Question 7

Restrictive trade barriers

Answer 7

-encourage globalization by encouraging firms to switch from exporting to overseas manufacturing.

Question 8

Import quotas

Answer 8

-encourage companies like Toyota to have manufacturing plants in the US
to circumvent to import quotas.

Question 9

Liability of foreignness

Answer 9

-all additional costs a firm operating in a market overseas incurs that a local firm would not incur. Four primary liability of foreignness costs

Question 10

Spatial costs

Answer 10

-the additional costs associated with operating geographic distance

Question 11

Unfamiliarity
costs

Answer 11

-being a stranger in a strange land-unfamiliar with local customers and stakeholder
and local business practices

Question 12

Host country costs

Answer 12

-reflect the discriminatory treatment incurred by foreign firms (restrictions on ownership for foreign firms, impenetrable
distribution channels, and unwillingness to purchase products of foreign firms.

Question 13

Home country costs

Answer 13

are regulations in the firm’s home that make it difficult to compete or operate in the host country

Question 14

Strategic planning process

Answer 14

1. Define/clarify mission and objectives, 2. Assess
   environment for threats, opportunities, 3. Assess internal strengths and weaknesses, 4.
   Consider alternative strategies using competitive analysis, choose strategy

Question 15

Strategic implementation process

Answer 15

1. Implement strategy through complementary
   structure, systems and operational processes, 2. Set up control and evaluation systems to ensure success, feedback to planning

Question 16

Global corporate objectives

Answer 16

marketing (e.g. coordination of regional markets for
economies of scale), production (e.g. Quality and cost control), finance (e.g. effective
financing of overseas subsidiaries), profitability, research & development. Exhibit 6-2,
pg. 197

Question 17

Organizational mission

Answer 17

charts the direction of the company and provides a basis for strategic decision making

Question 18

Mission statement

Answer 18

clarifies the organization’s purpose, values, and direction.

Question 19

Objectives

Answer 19

become more precise at the level of individual departments

Question 20

Environmental scanning

Answer 20

includes the process of gathering information and forecasting relevant trends, competitive actions, and circumstances that will affect operations in geographic areas of potential interest.

Question 21

Environmental assessment

Answer 21

includes environmental scanning and continuous monitoring to keep abreast of variables around the world that are pertinent to the firm.

Question 22

CAGE model-cultural distance

Answer 22

CAGE model-cultural distance (differences in values, languages, religion, trust),
administrative distance (lack of common trading bloc or currency, difference in
regulations and/or enforcement of laws, political hostility, nonmarket or closed
economy)

Question 23

geographic distance

Answer 23

(physical remoteness, time differences, communication
links, and transportation links between countries).,

Question 24

economic distance

Answer 24

(differences in
levels of development and per capita income, natural or human resources, infrastructure, information or knowledge) model. Pg. 206 Strategy can’t be decided either on a country- by-country basis or on a one-size-fits-all-countries basis but, rather that both the differences and the similarities between countries must be taken into account

Question 25

Transnational strategy-

Answer 25

combines the benefits of global scale efficiencies and local responsiveness

Question 26

SWOT analysis

Answer 26

looks at a firm’s capabilities (strengths, weaknesses, opportunities, threats) relative to those of its competitors.

Question 27

Internal analysis

Answer 27

focuses on the company’s resources and operations and determines which areas of a firm’s operations represent strengths or weaknesses (currently or potentially) compared to competitors

Question 28

Strategy diamond-

Answer 28

on way to formulate strategy- the 5 elements are 1) arenas- answer the broadly defined question “In what businesses will we compete?” Where, what markets, what products, what customers, core technologies 2) vehicles “How will we get there?” alliances, joint ventures or organic growth. 3)differentiators- How will we succeed? Superior product designs or customer service for example. 4) economic logic How the firm will generate profits. Premium prices for unmatched service or product quality and 5) staging- the pace and sequence of major strategic moves of a firm.

Question 29

Multidomestic strategy (regionalization strategy)

Answer 29

a strategy in which a firm increases profitability by customizing the firm’s goods and services to local markets in order to provide a good with the customer tastes and preferences in different national market or regions.

Question 30

Born global

Answer 30

companies that start out with a global reach, typically by their Internet capabilities and hiring people with international experience and contacts around the world

Question 31

Core competencies

Answer 31

difficult for competitors to imitate and represent a major focus for strategic development at the corporate level

Question 32

Financial ratios

Answer 32

may reveal an inefficient use of assets that restricts profitability

Question 33

Exporting

Answer 33

(low risk way for a company to begin international expansion).

Question 34

Licensing

Answer 34

(a contractual entry mode that grants the rights to a firm in the host country to either produce or sell a product or both (intellectual property); suitable when competition is intense and profit margins are declining, can avoid tariffs and quotas usually imposed on exports). Ex. Walt Disney allowing German manufactures of kid’s pajamas to use Mickey Mouse embroidered on the clothing in return for percentage of the sales or royalty payments.

Question 35

Franchising

Answer 35

an ideal strategy for small businesses because outlets require little investment in capital or human resources. Requires ongoing assistance from the franchiser

Question 36

Contract manufacturing (outsourcing)

Answer 36

outsourcing cheaper labor overseas. Contracting for the production of finished goods or component parts. These good or components are then imported the home country or other countries for assembly or sale.

Question 37

Offshoring

Answer 37

when a company moves one or all of its factories from the home country to another country. Provides access to foreign markets while avoiding trade barriers. Ex. Nissan factories in the US.

Question 38

Reshoring/nearshoring

Answer 38

companies in developed economies have reconsidered their outsourcing strategies and started to relocate some productive facilities to newly preferred location or to home (reshoring) or at least closer to home and to major markets (nearshoring).

Question 39

Service sector outsourcing

Answer 39

utilizing inexpensive professional or skilled overseas labor.

Question 40

Turnkey operations

Answer 40

a company designing and constructing a facility abroad, training, local personnel and then transferring ownership over to local management

Question 41

Management contracts

Answer 41

Gives a foreign company the rights to manage the daily operations of a business but not to make decisions regarding ownership, financing, or strategic and policy changes. relatively low risk entry strategy but is likely to be short term and provide limited income to the company. Often done along with IJVs.

Question 42

International joint ventures (IJVs)

Answer 42

International joint ventures (IJVs)-involves sharing ownership with a local partner, through agreed on proportions of equity

Question 43

Fully/wholly owned subsidiaries

Answer 43

an MNC wishing total control of its operations can start its own product or service business from scratch or it may acquire an existing firm in the host country. Realizes all revenues and control but vulnerable to risks from attitudes of locals, political instability, currency instability, expropriation and nationalism

Question 44

Globalization

Answer 44

the establishment of worldwide operations and the development of standardized products and marketing.

Question 45

Clustering

Answer 45

used when contract manufacturing, offshoring or service-sector outsourcing to increase efficiencies. Ex. Appliance cluster in Monterey, Mexico, servicing the north American market and firms both global and local and including around 200 suppliers. Service center clusters in India and manufacturing clusters in China

Question 46

Internal factors

Answer 46

affecting choice of international entry mode-global experience of firm and managers, distinctive competencies

Question 47

External factors

Answer 47

affecting choice of international entry mode- industry growth rate, cultural distance