E2, Ch 10 Cont. Flashcards
joint ventures and equity alliances with foreign companies are a way to _____ _ ______ _____, or strengthen a firm’s ____________ in world markets.
enter a foreign market
competitiveness
advantage and disadvantage of joint ventures or equity alliances
- fills technical expertise gaps
- potential for different motives/conflicting objectives
wholly owned subsidiary/greenfield
form of FDI; company est. operations elsewhere by constructing new facilities from scratch
advantages to wholly owned subsidiaries (2)
- complete operational and strategic control
- especially useful with proprietary technology
disadvantages to wholly owned subsidiaries (2)
- slow, expensive, complicated
- may experience political/regulatory pressure
2 opposing forces in global competition:
- cost reductions (key competitive weapon)
- local responsiveness (tailoring to specific preferences)
globalization hypothesis
consumer needs and preferences are converging
integration responsiveness framework
used to classify global strategies into 4 types:
1. global-standardization
2. transnational
3. international
4. multi-domestic
international global strategy
sells the same products/services in both domestic and foreign markets
(ex. Harley Davidson)
multi-domestic global strategy
tries to maximize local responsiveness; hopes local customers will perceive their products as local ones
includes duplication of key business functions across countries
(ex. wasabi kitkat)
global-standardization strategy
attempts to reap economies of scale through global division of labor where capabilities are at lowest cost
(ex. Apple selling standardized products around the world)
transnational global strategy
combines high local responsiveness and low-cost positioning
“think globally but act locally”
(ex. Unilever produces marmite in Australia but mayonnaise in the US)
Porter’s Diamond Framework
helps explain why some nations outperform others in certain industries based on 4 factors:
1. factor conditions
2. related/supporting industries
3. demand conditions
4. rivalry
Porter’s Diamond Framework: Factor Conditions
a country’s natural, human, other resources
Porter’s Diamond Framework: Demand Conditions
nature of home-market demand for industry’s product
Porter’s Diamond Framework: Competitive Intensity
highly competitive environments stimulate firms to outperform others
(ex. German car companies)
Porter’s Diamond Framework: Related and Supporting Industries
strong leadership fosters world-class competitors in downstream industry
(ex. Switzerland’s strong chemicals industry makes it a hub for pharmaceuticals)
benefits of International Strategy (3)
- leverage home-based core competencies
- utilize economies of scale
- low cost implementation through exporting/franchising/licensing
risks of International Strategy (3)
- limited local responsiveness
- exchange rates
- IP can be expropriated
benefits of Multi-Domestic Strategy (2)
- highest possible local responsiveness
- reduced exchange rate exposure
risks of Multi-Domestic Strategy (3)
- duplication of units is expensive
- little economies of scale
- little learning across regions
benefits of Global-Standardization Strategy (3)
- reduced labor cost
- economies of scale
- standardized operations
risks of Global-Standardization Strategy (3)
- no local responsiveness
- exchange rate exposure
- risk of wage changes
benefits of Transnational Strategy (3)
- reduced labor costs
- economies of scale
- learning
risk of Transnational Strategy (3)
- global matrix structure is costly and difficult to imitate – high failure rate
- exchange rate exposuree
