Chapter 8 Flashcards
What is the global market
Companies of different nations trading goods and services, increasing intensity of competition
What is the globalization of production
Lowers barriers to international trade and investment to disperse important important function of their production process around the world
How are companies taking advantage of the lower barriers
Exploit national differences in cost and quality of factors of production to lower cost structure
What do companies have been able to exploit
Land, capital, labour
What is the globalization of markets
World economy
What are important implications for competitions
- Boundaries don’t stop at national borders
- Intensified competitive rivalry in many industry, resulting to global industries battling each other
- Increased threat of entry and intensity of rivalry
What is a national competitive advantage
Nations possess based on factors available to them
What are the global competitiveness of companies located within a nation based off of Michael Porter
- Factor Endowments
- Local Demand Conditions
- Related and Supporting Industries
- Firm Strategy, structure and rivalry
What is a factor endowment
Labour, capital, raw materials, technological know how, management experience and entrepreneurship
What are local demand conditions
Nations gain competitive advantage if their customers are demanding to meet high standards of product quality and produce innovative products
What are the characteristics of home demand
Important in shaping attributes to create pressures for innovation and quality
What are the competitiveness of related and supporting industries
Local companies are in the presence of internationally competitive suppliers or related industry
What are the benefits of spill over
Businesses can spill over into a given industry and help achieve a strong competitive position internationally n
What is intensity of rivalry
Different nations have different management ideologies which can help or not help them to build national competitive advantage
What does Michael Porter say about the Intensity of Rivalry
- Different nations have different management ideologies which can help or not help them to build national competitive advantage
- Strong association between domestic rivalry and the creation and persistence of competitive advantage of an industry
What is the domestic rivalry
Creates the pressure to innovate, improve quality, reduce costs and invest in upgrading factors
What is a world class competitor
When rivalry compels companies to look for ways to improve efficiency, innovate, improve quality and reduce costs
How do companies expand globally
- Market their domestic goods in the international market
- Realize location economies by spreading activities to locations they can be efficient
- Realize greater cost economies from experience effects by serving from a central location
- Earn a greater return to leverage valuable skills developed in foreign operations and transfer them to other operations
What are the two competitive pressures
- Cost reductions
- Locally responsive
How do companies minimize unit of costs
- Have a favorable low cost location
- Offer standardized product in the global marketplace
- Outsource certain function to low cost foreign suppliers