Chapter 7

Question 1

Why do firms consider foreign expansion?

Answer 1

Gain access to new customers and meet current market needs. (Puma getting a foreign runner to wear their shoes 100 years ago)

To achieve lower costs through economies of scale, experience, and increased purchasing power.

To further exploit core competencies.

To gain access to resources and capabilities located in foreign markets.

To gain access to lower-cost inputs of production.

Question 2

What are the cons of alliances?

Answer 2

Outdated knowledge and expertise of local partners

Cultural and language barriers

Costs of establishing the working arrangement

Conflicting objectives and strategies or deep differences of opinion about joint control
Differences in corporate values and ethical standards

Loss of legal protection of proprietary technology or competitive advantage

Overdependence on foreign partners for essential expertise and competitive capabilities

Question 3

What is global strategies? (think global act global)

Answer 3

is one in which a firm employs the same basic competitive approach in all countries where it operates, sells much the same products everywhere, strives to build global brands, and coordinates its actions worldwide with strong headquarters control. It represents a think-global, act-global approach.

Advantages
Has lower costs due to scale and scope economies
Can lead to greater efficiencies due to the ability to transfer best practices across markets
Increases innovation from knowledge sharing and capability transfer
Offers the benefit of a global brand and reputation

Disadvantages
Cannot address local needs precisely
Is less responsive to changes in local market conditions
Involves higher transportation costs and tariffs
Has higher coordination and integration costs

Question 4

What is Multi domestic strategies? (think locally act locally)

Answer 4

is one in which a firm varies its product offering and competitive approach from country to country in an effort to be responsive to differing buyer preferences and market conditions. It is a think-local, act-local type of international strategy, facilitated by decision making decentralized to the local level.

Advantages
Can meet the specific needs of each market more precisely
Can respond more swiftly to localized changes in demand
Can target reactions to the moves of local rivals
Can respond more quickly to local opportunities and threats

Disadvantages
Hinders resource and capability sharing or cross-market transfers
Has higher production and distribution costs
Is not conducive to a worldwide competitive advantage

Question 5

What is transnational strategies? (think global act local)

Answer 5

is a think-global, act-local approach that incorporates elements of both multidomestic and global strategies.

Advantages:
Offers the benefits of both local responsiveness and global integration
Enables the transfer and sharing of resources and capabilities across borders
Provides the benefits of flexible coordination

Disadvantages:
Is more complex and harder to implement
Entails conflicting goals, which may be difficult to reconcile and require trade-offs
Involves more costly and time-consuming implementation