E2, Ch 10: Global Strategy Flashcards
globalization
intensified flow and integration of goods, services, technology, culture, etc. worldwide
globalization is made possible by… (3)
- falling trade and investment barriers
- advance in telecommunications
- reductions in transportation costs
trade barriers, such as.. (3)
- tariffs (tax on imports)
- quotas, embargos
- political alliances
global strategy
part of firm’s corporate strategy to gain/sustain competitive advantage and compete in the global marketplace
foreign direct investment
investments in value chain activities abroad
multinational enterprise
deploys resources and capabilities in 2+ countries
globalization 1.0, 1900-1941
- sales, operations, some procurement
- strategy flowed from domestic headquarters to international sites
globalization 2.0, 1945-2000 (4)
- reconstruct from war
- focus on European countries, Japan, and Australia
- greater local responsiveness
- headquarters set goals and international sites influenced tactics
globalization 3.0, 21st century
- business function location is based on costs, capabilities, and PESTEL
- companies can operate 24/7, 365
the world now is only ___-______, and there is a possibility for __________ in the future with a rise in nationalism
semi-globalized (10-25%)
retrenchment
refer to slides for further details
advantages of international expansion (2)
- access new markets and lower-cost inputs
- develop new competencies
disadvantages of international expansion (3)
- liability of foreignness
- loss of reputation
- loss of intellectual property
explain the advantage of gaining access to larger markets (3)
- helps multinational enterprises with economies of scope and scale through participating in a larger market
- opportunity to outcompete local rivals
- helps firms in smaller economies grow
pursuing low-cost inputs helps multi-national enterprises…
pursue a low-cost leadership strategy (lumber, iron, ore, oil, coal)
low labor costs are the main focus now…
- India provides well-educated, English-speaking young people
- China provides low labor costs and efficient infrastructure
explain the advantage of developing new competencies (3)
- communities of learning
- location economies
- locating value chain activities in optimal geographies
explain the disadvantage of liability of foreignness (3)
- unfamiliar cultural and economic environment
- coordinating across geographic distances
- can result in additional costs
______ is one of the most valuable resources. _____ dimensions include (3)
reputation
reputation
1. innovation
2. customer service
3. brand reputation
loss of ______ can diminish competitiveness; for example… (3)
reputation
- loss of wages, long hours, poor conditions
- local govt can be corrupt
- unenforceable safety standards
In terms of loss of intellectual property, it can be difficult to…
and some countries are known for….
…protect IP in foreign markets (software, movies, etc.)
…initial partnerships, then reverse-engineering
CAGE Framework is used in evaluating entering foreign markets. CAGE stands for…
Cultural,
Administrative/political,
Geographic,
Economic factors
CAGE ultimately calculates a “_____;” if this is greater, the market will be harder to enter
(cultural) distance
administrative and political distance factors include (4)
- democracy?
- hostility
- financial institutions
- trade barriers
geographic distance includes (3)
- similar in size?
- topography
- access to waterways
economic distance factors includes (2)
- GDP similar to ours?
- wealthy nations tend to engage more in cross-border trade, and trade with other wealthy nations
entry modes to foreign investment
contract-based –>
strategic alliance –>
wholly owned subsidiary
contract-based entry modes include… (1)
exporting
exporting (4)
- using domestic plants as a production base for exporting to foreign markets
- great INITIAL strategy for pursuing international sales
- minimizes risk and capital requirement
- BUT tariffs and transportation costs are high
strategic alliances include… (3)
- long-term contracts: franchising and licensing
- equity alliances
- joint ventures
franchising and licensing is often used when a firm has ________ _______, like a (1) or (2) but does not wish to commit their own _______ to enter foreign markets.
valuable resources (business model, patented product)
resources
advantage and disadvantage of franchising and licensing
- avoids risk of committing resources to unfamiliar markets
- risk of providing know-how to foreign firms and losing control over its use
