Chapter 7 Flashcards
globalization
1) increase in international exchange, including trade in goods and services as well as exchange in money, ideas, and information
2) The growing similarity of laws, rules, norms, values, and ideas across countries
Diamond of national advantage
a framework for explaining why countries foster successful multinational corporations, consisting of four factors- factor endowments; demand conditions; related and supporting industries; and firm strategy, structure, and rivalry
factor endowments (national advantage)
a nation’s position in factors of production such as land, labor, and capital. (e.g. Japanese JIT inventory management with limited warehouse space)
demand conditions (national advantage)
the nature of home market demand for the industry’s product/service- consumers who demand highly specific, sophisticated products and services force firms to create innovative, advanced products and services. (Denmark-environmentally safety pressure-leaders in water pollution control)
related and supporting industries (national advantage)
the presence, absence, and quality in the nation of supplier industries and other related industries that supply services, support, or technology to firms in the industry value chain. (Strong supplier relationships benefit by adding efficiency to downstream activities)- Italian footwear suppliers/manufacturers locally close to one another.
firm strategy, structure, and rivalry (national advantage)
the conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry
multinational firms
firms that manage operations in more than one country
arbitrage opportunities
an opportunity to profit by buying and selling the same good in different markets (buying where it’s cheap and selling where it commands a higher price)
reverse innovation
new products developed by developed country multination firms for emerging markets that have adequate functionality at a low cost
political risk
potential threat to a firms operations in a country due to ineffectiveness of the domestic political system
rule of law
a characteristic of legal systems where behavior is governed by rules that are uniformly enforced.
economic risk
potential threat to a firms operations in a country due to economic policies and conditions, including property rights laws and enforcement of those laws.
counterfeiting
selling of trademark goods without the consent of the trademark holder
currency risk
potential threat to a firm’s operations in a country due to fluctuations in the local currency’s exchange rate
management risk
potential threat to a firms operations in a country due to the problems that managers have making decisions in context of foreign markets
outsourcing
using other firms to perform value- creating activities that were previously performed in-house
offshoring
shifting of value-creating activity from a domestic location to a foreign location
international strategy
a strategy based on the firms diffusion and adaptation of the parent companies’ knowledge and expertise to foreign markets, used in industries where the pressures for both local adaptation and lowering costs are low
global strategy
a strategy based on firms’ centralization and control by the corporate office, with the primary emphasis on controlling costs, and used in industries where the pressure for local adaptation is low and the pressure for lowering costs is high
multidomestic strategy
a strategy based on firms’ differentiating their products and services to adapt to local markets, used in industries where the pressure for local adaptation is high and the pressure for lowering costs is low
transnational strategy
a strategy based on firms’ optimizing the trade-offs associated with efficiency, local adaptation, and learning, used in industries where both the pressure for local adaptation and the pressure for lowering costs is high
regionalization
increasing international exchange of goods, services, money, people, ideas, and information; and the increasing similarity of culture, laws, norms, and rules within a region such as Europe, North America, or Asia
trading blocs
groups of countries agreeing to increase trade between them by lowering trade barriers
exporting
producing goods in one country to sell to residents of another country
