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International business and strategy > Exam > Flashcards

Exam Flashcards

1
Q

What are key factors in strategy?

A
  • Industry characteristics
  • business environment, institutions
  • organisational resources and capabilities
    - financial, physical assets
    - technology, reputation, culture
    - human resources, communication, motivation
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2
Q

What are the four feautures of International Business strategy?

A
  • Assumptions about business environment, mission, and competencies must fit reality
  • strategy must be coherent
  • the strategy must be known and understood throughout the organisation
  • the strategy must be tested regularly to establish its temporal (time-limited) and geographic validity
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3
Q

What are characteristics of emerging markets?

A
  • highly heterogenuous
  • underdeveloped infrastructure
  • industrial structure is vulnerable
  • rapidly changing
  • highly uncertain
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4
Q

Name reasons for internationalisation.

A
  • market saturation, stagnant or shrinking domestic markets
  • foreign markets with higher profit opportunities and/or higher growth
  • to gain access to lower cost or more efficient factors of production
  • to better serve key customers that invested in a foreign country
  • to gain access to raw materials/supply sources
  • to gain new ideas, technology, skills, business methods and more value-added
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5
Q

Name and define the different entry modes.

A

Non-equity:
- export
- direct: achieved through intermediaries often
located in the foreign market (sales agents,
distributors, representatives)
- indirect: contracts with intermediaries normally
located in the firm’s home market (export
management companies, trading companies)
- contractual agreement
- licensing: agreement where a licensor grants a
licensee the right to use intellectual property for a
specific period in exchange for a royalty fee
- franchising: licensing where a business
model/system/process is standardised - franchisee
must do business under a prescribed manner, while
franchisor provides a range of services
- outsourcing: procurement of selected value-adding
activities from independent suppliers abroad
Equity:
- FDI
- Greenfield: investment to build facilities (wholly-
owned subsidiary) and needs significant resources
and organisational capabilities
- M&A: merger is when two firms join to form a new,
and acquisition is when a direct investment/purchase
of an existing company to take over is placed
- partial acquisition: acquisition of a specific devision
- joint venture: establishing a firm that is jointly owned
by two or more independent firms

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6
Q

What are the motives for FDI?

A
  • market-seeking: market size, purchase power, positioning
  • resource-seeking: raw materials
    • asset-seeking: knowledge and skills
  • efficiency-seeking: cheap labour, economies of scale, access to suppliers/buyers
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7
Q

What are institutions and what are their function?

A

Humanly devised constraints that structure human interaction (formally known as the rules of the game in society).

Institutions reduce uncertainty and transaction costs by constraining the range of acceptable actions, thereby bringing stability and meaning to social behaviours.

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8
Q

What types of institutions exist and what do they represent?

A

Formal institutions:

  • political systems and governance (democracy, totalitarianism, dictatorship)
  • legal systems (enactment and enforcement of laws)
  • property rights (legal rights to intellectual and economic property)
  • economic systems (economic governance, private vs. public, market vs. mixed vs. command economy)

Informal institutions:

  • values and expectations (moral dimension in social context)
  • religion (moral standard, ethnic/culturalcategory)
  • language (language-based identity)
  • social arenas (education, work, family, peer groups)
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9
Q

What is a global value chain and what is the GVC framework?

A

GVC refers to the full range of activities that firms and workers do to bring a product from its conception to its end use and beyond.

The GVC framework analyses the nature of a given value chain and how value chains are divided among multiple firms and spread across wide swaths of geographic space.

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10
Q

What are stakeholders and how are stakeholders grouped?

A

Groups that are vital to the survival and succes of the corporation - any group or individual who can affect or is affected by the achievement of the organisational objectives.

primary stakeholder group:
- those on whom the firm relies on for survival and prosperity

Secondary stakeholder groups: those that affect or are affected by the company, but are not engaged in transactions with the corporation and are not essential for its survival

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11
Q

What are the different dimensions in internationalisation?

A
  • Degree of integration of activities across different countries
  • Degree of commitment of resources in a foreign country
  • Degree of localisation of activities in a foreign country
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12
Q

What are the pre-requisites for internationalisation?

A

The company must have:

  • organisational capabilities that lead to better returns from leveraging strengths internally
  • strategic competencies to counteract relative unfamiliarity with foreign markets
  • the foreign country must offer location-specific advantages to motivate the firm to enter
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13
Q

What are the characteristics of MNEs?

A
  • substantial direct investment in foreign countries
  • active management of offshore assets
  • managing integration of operations in different locations
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14
Q

What is the resource-based view and what are the underlying tenets?

A

A model that emphasizes the importance of resources as key to superior firm performance.

An underlying tenet is that the organisation should look inwards to find sources of competitive advantage, and when a firm’s resources exhibit VRIO attributes, they will be able to sustain competitive advantage.

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15
Q

What are the pillars within the insititutional view?

A

Formal:
- Regulatory pillar: the coercive power of governments

Informal:

  • Normative pillar: how values, beliefs and actions of others influence behaviour of focal individuals and firms
  • Cognitive pillar: Internalised values and beliefs that guide individual and firm behaviour
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16
Q

What are the conflicting objectives of MNEs and host governments?

A

MNEs:
- maximise profits while minimising cost
Host government:
- Miximise economic growth and employment opportunities of the nation.

MNEs:
- maximise global competitiveness
Host government:
- maximise the benefit of local supplier linkages

MNEs:
- configure value chains and integrate operations globally
Host governments:
- Retain power to ensure economic return

MNEs:
- Retain flexibility to handle inputs/outputs freely and internationally
Host governments:
- Holds legislative power to regulate foreign MNEs

17
Q

Why is a GVC analysis important and what do you need to consider?

A
  • The analysis provides systematic competitiveness
  • firm-level efficiency in production is not enough
  • entry into international markets requires an understanding of dynamic factors within the whole value chain
  • it is important to focus on firm structure as analysis will be different for different companies

suppliers (backward linkages, upstream) –> firm –> customer (forward linkages, downstream)

18
Q

What are the four dimensions of a GVC analysis?

A

Input- and output structure:

  • identifying the main segments/activities in the GV
  • identifying the dynamic and structure of companies under each segment/activity in the GVC

Geographic scope:

  • identify lead firm in each segment of the GVC to determine country-level position
  • determine contribution from each country

Governance:
- understanding of how a chain is controlled and coordinated
- there are five governance structures:
- market governance (simple transactions)
- modular governance (complex transactions)
- relational governance (complex information)
- captive governance (buyers wield power)
- hierarchical governance (vertical integration and
managerial control

Institutional context:
- identifies how local, national and international conditions and policies shape the globalisation of each step in the GVC

19
Q

What type of stakeholders exist?

A
  • government: regulatory compliance
  • suppliers: fair purchase prices, honouring contracts
  • communities: labour standards, environment, sustainability
  • employees: fair salaries, good working conditions, work-life balance
  • customers: safe and reliable products/service, value for money
  • shareholders: profit maximisation, transparency
  • media
20
Q

Describe the internationalisation process model (Uppsala).

A

The model of the firm suggests:

  • incremental nature of firm’s internationalisation
  • gradual commitment to a foreign market

The model is build on experimental learning (imitative learning) with the following relationship:
experimental learning –> + tacit knowledge –> - perceived uncertainty –> + incremental behaviour

reasons for step-by-step approach:

  • the uncertainty/uneasiness in cross-border transactions
  • lack of knowledge about foreign markets
  • the host market is unstable or the market potential is uncertain
  • psychic distance
21
Q

What is psychic distance?

A

The subjectively perceived distance bewteen two countries

cultural and geographic distance between countries increase perceived psychic distance.

22
Q

What is meant by flow of FDI?

A

The flow of FDI is the amount of FDI undertaken in a given period of time.

Outflows of FDI are the flows of FDI from a country

Inflows of FDI are the flows of FDI to a country.

23
Q

Describe the VRIO model.

A

A model that determines the sustainability of capabilities and resources as competitive advantages.

Value: has to add value
Rare: valuable and rare –> temporary advantage
Inimitability:
- tangible resources are easier to imitate
- development over long time is hard to imitate quickly
- difficult to identify causal determinants
Organisation: how is the firm organised to develop and leverage the full potential of resources and capabilities

24
Q

What are critiques of the resource-based view?

A
  • RVB is normally used to analyze a firm-specific resource, which may have a limited consideration of industry-specific determinants of performance
  • the model is tautological (holds true in all scenarios)
  • the role of product markets is underdeveloped in the argument
  • the assumption that key resources just exist –> does not look into how they are acquired
25
Q

What are institutional voids?

A

Absence of specialised intermediaries, regulatory systems and contract-enforcing mechanisms in emerging markets –> reduces efficiency of markets and raises transaction costs

26
Q

What should firms consider when entering emerging markets?

A

Entry strategies for new emerging markets need to be designed very carefully considering local context, but also self-evaluate commitment level, entry mode and firm intent.

There are high-context cultures (china, korea, arab) and low-context cultures (germany, canada).

27
Q

What is liability of foreignness and how can foreignness be an asset?

A

The inherent disadvantage that foreign firms experience in host countries because of their non-native status –> caused by the differences in formal and informal institutions.
There may be a country of origin effect concerning LOF such as discrimination.

Foreignness can be an asset because governments may incentivise FDI or a certain country may have a good reputation

28
Q

What is institutional distance?

A

The extent of dissimilarity between host and home institutions - large distance means conflicting demands for external legitimacy and internal consistency.

29
Q

What is GVC upgrading, what types of upgrades can be made, and what are the obstacles for upgrading?

A

Upgrading is to make better products, make them more efficiently, and/or move into more skilled and value-adding activities and to develop cross-border linkages between firms in global production and distribution systems.

Four forms of upgrading:

  • process upgrading –> increase volume
  • product upgrading –> increase value
  • functional upgrading –> original equipment manufacturer –> own design manufacturer –> own brad manufacturer
  • chain (or inter-sectoral) upgrading

obstacles:

  • key technologies/functions at the 1st tier in GVC tend to be dominated by large MNEs
  • MNEs often control and own lower tiers
30
Q

How is accelerated internationalisation process achieved and what is a born-global firm?

A

accelerated internationalisation:

  • building an entrepreneurial team with international ecperience
  • learning from importing and inward foreign investors
  • learning from others operating the foreign country
  • acquiring resouces in the foreign country

Born global firm: young entrepreneurial company that undertakes early and substantial internationalisation despite the scarce resources typical of most small business –> they tend to be:

  • SMEs
  • self-financed
  • high-tech firms

Firms invest abroad without possessing substantial market knowledge if the perceived risk of investing abroad is lower than the perceived risk of not investing

31
Q

What are determinants for FDI locations?

A
  • market attractiveness (buyer power, population size, potential market growth)
  • human resource factors (scale level, cheap labour)
  • infrastructure (supply chains, marketing channels)
  • profit retention factors
  • legal and regulatory environment
  • political system/governmental structure
32
Q

What are First/late-mover advantages, and what are other success factors of entry?

A

First-mover advantages:

  • build up sales volume and gain technological leadership
  • capture demand by establishing a strong brand name and preempt rivals
  • relationship and connections with key stakeholders
  • create switching costs
  • establish entry barriers

late-mover advantages:

  • opportunity to free-ride on first-mover investments
  • resolution of technological and market uncertainty
  • first-movers find it hard to adapt to market changes
  • pioneering costs: business system is so different from that of the home market that they need to devote considerable expense, time and effort to learn

successful entry depends on:

  • timing of entry
  • speed
  • complexity related to inter-firm relationships and global value chains
33
Q

What is the eclectic OLI paradigm and what is its main tenets?

A

A holistic framework to identify and evaluate the significance of factors influencing FDI.

Main tenets:

  • the firm must have some strategic advantage to compete effectively with local firms in foreign countries
  • must select countries with favourable environments for investments
  • must have managerial ability to coordinate operations in foreign countries at a cost that is less than the benefot received

O: ownership advantages that include knowledge, skills, capabilities, relationships, or physical assets that form the basis of the firms competitive advantage.

L: leadership advantages arise from using resource endowments or assets that are tied to a particular location, and that the firm finds valuable to combine with its own unique assets (market size, demand, human capital, natural resources, industrial clusters)

I: Internalisation advantages refer to advantages of hierarchical control derived from gaining the maximum economic rent from the O advantages (asset specificity, information asymmetri, dissemination risk)

All three points are necessary for a succesfull FDI, you need O and I for export and you need O for contractual resource transfers

34
Q

What types of policies exist for inward FDI?

A

entry:

  • government screening of investment proposals
  • exclusions of foreign firms from certain sectors
  • restrictions on the degree of foreign ownership

operations:

  • locational restrictions on foreign investment
  • requirements related to foreign firms’ activities, exports and management

finance:

  • restrictions on the remittance of profits abroad
  • level of taxing profits of foreign firms

incentives:
- direct encouragement of FDI

35
Q

What are positive and negative sanctions and what topic do they relate to?

A

Sanctions are covered in GVC analysis.

Positive sanctions:

  • long-term relationship
  • prime-supplier status

negative sanctions:
- fines lowering a purchase price, de-listing a supplier, compulsary closure –> loss of linkages

36
Q

List the different forms governance of GVC.

A

Legislative governance:

  • within a GVC: Setting standards for suppliers (on-time deliveries, product quality)
  • external actors: environmental standards, hygiene standards

judicial governance:

  • within a GVC: monitoring suppliers’ fulfillment of standards
  • external actors: monitoring conformance to ISO standards

executive governance:

  • within a GVC: assisting suppliers to meet these standards
  • external actors: business associations, industrial policy
37
Q

What are advantages and disadvantages for each entry mode?

A

advantages:

  • export: ability to realise scale economies, low risk
  • license/franchise: low development costs and risks, low entry barriers
  • joint venture: access to local partners’ knowledge, sharing costs and risk
  • greenfield: protection of technology, ability to engage in global strategic coordination
  • acquisition: quick execution, obtain established brand, reduce competition

disadvantages:

  • export: transportation costs, trade barriers, low control, lack of learning
  • license/franchise: lack of control over technology/quality, no global strategic coordination, protection of IPR issues, creating competition from licensee
  • joint venture: limited control over technology, divergent goals and interests, difficulty to coordinate globally
  • greenfield: high costs and high risk, time consuming, lack of initial knowledge
    acquisition: potential overpayment, culture clash between firms, political sensitivity
38
Q

What are critiques of the eclectic OLI paradigm?

A
  • conceptual ambiguity of L from O
  • theoretical redundancey of O because of similarity to I
  • unable to explain process of change of international production
  • the OLI framework may not be applicable to small/family businesses and firms from emerging markets
39
Q

What is the transaction cost analysis?

A

TCA argues that the boundaries of the firm is a result of the trade off between the cost associated with the use of the market and the cost associated with an additional layer of hierarchy

International business and strategy (1 decks)

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