Chapter 8-Strategy in the Global Environment Flashcards
Michael Porter’s Framework
- Factor Endowments
- Local Demand Conditions
- Related & Supporting Industries
- Firm Strategy, Structure, and Rivalry
Factor Endowments
A nation’s position in factors of production such as skilled labor or the infrastructure necessary to compete in a given industry.
Local Demand Conditions
The nature of home demand for the industry’s product or service.
Related & Supporting Industries
The presence or absence in a nation of supplier industries and related industries that are internationally competitive.
Firm Strategy, Structure, and Rivalry
The conditions in the nation governing how companies are created, organized, and managed, and the nature of domestic rivalry.
Multinational Company
A company that does business in two or more national markets
Location Economies
The economic benefits that arise from performing a value creation activity in an optimal location.
Global Standardization Strategy
A business model based on pursuing a low-cost strategy on a global scale.
Localization Strategy
A strategy focused on increasing profitability by customizing a company’s goods or services so that they provide a favorable match to tastes and preferences in different national markets.
Transnational Strategy
A business model that simultaneously achieves low costs, differentiates the product offering across geographic markets, and fosters a flow of skills between different subsidiaries in the company’s global network of operations.
Entry Strategies
- Exporting
- Licensing
- Franchising
- Joint Ventures
- Wholly Owned Subsidiaries
Exporting
Advantages: Ability to realize location-and scale-based economies
Disadvantages: High transport costs, trade barriers, problems with local marketing agents.
Licensing
Advantages: Low development costs and risks
Disadvantages: Inability to realize location and scale-based economies, Inability to engage in global strategic coordination, Lack of control over technology
Franchising
Advantages: Low development costs and risks
Disadvantages: Inability to engage in global strategic coordination, Lack of control over quality
Joint Ventures
Advantages: Access to local partner’s knowledge, Shared development costs and risks, Political dependency
Disadvantages: Inability to engage in global strategic coordination, Inability to realize local and scale-based economies, Lack of control over technology
