Global Strategy Flashcards
Explain the 3 seminal theorires of internationalisation
Internalisation theory (WHY):
* Firm maximiase firm specific advantages , decompose into knowledge and transfer it through heirachy
* efficient than market machaniism and effective at protecting IP
**Uppsala Model (How)
*** afraid to commit due to psychic distance as they encounter liabilities of foreigness and outdsidership
* They expand incrementally commiting resources along the way and acquiring knowledge along the way to reduce risk
Regionalisation Theory (Where)
* True MNC are when revenue, assets, and employees have a max of 20% in one countries
* Rare
foreigness: extra cost
utsiderness: exclusion from known information
How do MNC effectively transfer knowledge
Simple: memorise and easily transfer
complex: experience and harder to transfer
Needs to be codified, transfered across distance and absorbed:
There are 5 requirements in order:
1. Motivation to learn?
2. Trusted relationship b/w sender and reciever?
3. Rich comms medium to transfer the complex knowledge
4. MNC have prior exp to elements of new experiential knowledge
5. Possess diversity of experience to recognise that the info is importance
Outline what is at risk (mitigated) when MNCs internationalize
- Financial capital
- Brand and reputation
- Personal stability
- IP
watch what he says about IP
How do you really tell that an MNC is truly global?
Foreign Sales ratio
Sales > 20% in each regional triad with no region > 50%
What are the different ways of internalization in healthcare?
Internationalisation of manufacturers of medical equipment
* Internationalisation of manufacturers of pharmaceuticals
* Transfer of medical knowledge across borders
* Globalisation of medical standards
* Internationalisation of medical education
* International student mobility and exchanges
* Emigration of medical practitioners across borders
* Medical tourism
* Internationalisation of healthcare facilities
* Telemedicine across borders
* Telesurgery across borders
what comprises business globalisation
Trade
* Shipment/distribution of goods/services which tend to be understated
* Imports and exports
Internationalisation (FDI)
* production/sales operations in host countries
* hard due to psychic distance factors
Explain different ways of FDI capital flows?
* Stock
* flow
Capital flows:
* direct investment: M&A, greenfield, retention of profit
* where ownership in subsidiary > 10% suggesting influence
FDI flow depends on current year
FDI stock: accumulated FDI flows over time
* inbound: from MNC into home
*
explain the waves of globalisation
Wave 1: 1860> Industrial Revolutionàsteamship, underwater cables, Suez canal
Wave 2: 1956> standardised containers of goods accelerated goods flow
Wave 3: 1990> value-chain fragments, componentisation, offshoring, China catchup, optimising supply chains
Wave 4: 2020> state-driven strategic economic/technology bifurcation; digital redesign, supply chain resilience
Explain the nuances of the GDP of other countries (over time and type of goods)
China has recovered ever since entering the World Trade Org
Manufacturing has shifted from G7 to low cost countries
China dual circulation strategy (reduce dependency)
Services growing and goods just recovering
Lesson 2
What are the visible and non-visible elements of culture
Visible (can see and touch and hear)
* food
* dress
* language
* artifacts
**Non Visible **(unconscious and impliocityle learned)
* Values
* Myths
* Cognition
* beliefs
Lesson 2: Culture
what do you take with you when you encounter a foreign culture
You take your own previous ethnocentric biased values with us
Need to work against it
Rational
what is the rational theory and what does it require
individuals make rational calculations and take all the variables to make the best decision that aligns with their best objectives
“Ceteris paribus”
Need:
* all possible information
* probability of all things happening
* all time neccessary
Failures of rational theory
Why are executives bounded rationally
I am conflicted, so can only make the most ‘satisficing’ decison… …selecting the first option that sufficient information can be found; within the constraint of time; that is acceptable enough as a negotiated compromise among many stakeholders
Explain the Executive Knowledge Window
Failure occurs when you think you’re sure but ur very unaware
explain self serving biases and it’s pervasiveness
Biases occuring when you need to enhance or maintain your self esteem
Very common among CEOs , attiribute success to them and failure to any other factors
lesson 2
Explain the other biases (not self serving) that goes against rational theory
Outline the potential results
DISTORTION
* Overoptimism
* Loss aversion
* Overconfidence
DECEPTION
* Misaligned time horizons
* Misaligned risk aversion profiles
* Champion bias
* Sunflower management
Cognition: holistic
Social orientation: interdependent
outline the ways in which cognitve orientation differ between east and west
East: Holistic and interdependent
West: Independent and analytical
6
what are the cultural dimensions according to hofstede
Long term orientation
Individualism
Masculitinity
Uncertainty avoidance
Power Distance
Indulgence
How do cultural dimensions differ across cultures
USA: low power distance and high individualism
China: high power distance and low individualism
LOOK AT THE HOFSTEDE for the countries involved
How do you need to adjust yuor perceptions of other countries to make sure it works
Good practice to assess cultural tendencies of your client, boss, members of your team and prepare yourself accordingly.
Allows you to know that other people will respond differently to same stimuli
draw the power distance/uncertainty avoidance risk
West: top left corner
US: bottom left corner
China and East: bottom right corner
ethnocentric…etc
explain the ways in which managers can adapt to cultural changes
Ethnocentric to ethnorelative
How do you acquire cross cultural knowledge?
In ascending order of efficiency:
* lectures
* case studies
* senstivie training
* role play
* EXPERIENCE
Outline the cultural Intelligence circular steps
Drive
Action
Knowledge
Strategy
starts at DRIVE
Lesson 3
Outline the eight dimensions of topology of distance
Geographic -Demographic landscape
Economic maturity
Market Economies
Intermediaries
Business System
Institutional capital
Nation states
People (cog orientation and cultutral tendencies)
what was the foundation of the Liberal market economy
Washington consensus
* est property rights
* maintain low govt borrowing
* etc
liberals think it should be spread everywhere
when you classsify GDP per capita , what index must you consider?
Gini index
However think of happiness index
Lecture 3
Explain the CAGE framework
it only classify differences for market entry, not a good framework for distance
Cultural
Administrative
Geographic
Economic
CAGE framework: explain unilateral and bilateral measures
Bilateral: relative to your home country
Unilateral: relative to any country
Market Economies
what are the differences between liberal and coordinated Market Economies?
Liberal Market Economies
* short-term orientation
* risk-taking innovation
* Anglo-Saxon countries
Coordianted
* longer-term orientation
* patient capital investment
* incremental improvement
* European countries
Nation states: lecture 3
Define the 4 broad categories of nation states?
Predatory:
* family who monopolise power and very corrupt
* e.g North korea, Myanmar, Cambodia maybe big corp now
* resources to exploit
Developmental
* state led or co-governed
* flawed democratic planning and direction of economy to promote long term interest
* fueled by threats to sovereignty
* singapore, Korea
Regulatory
* assumed to be best at allocating resources
* reg agencies enforce behaviour to protect public against market failures
* High corp ownership, e.g USA, UK, HongKong
Welfare
* governs through consensus with stakeholders to protect public
* emphasis on social wellbeing with allocation of resources and employers investing in worker skill development
* japan, Europe, New Zealand
Topology of distance
What are the 4 main institutional capital?
Capital Protection
* Judicial
* Enforcement
* Taxation
* Media
Social Capital
* Relational trust and Institutional confidence
* differ as china has higher trust in institutions than west
Financial Capital
* state funded
* banks
* stocks
* family
Labour Capital (Employment relations)
* Knowledge formation
* skill formation
* employment
Business systems:
what are the main categories of business systems
How businesses are owned
Ownership and governance
* Type of ownership
* Controlling power
* Investment protection index(china low)
Administrative structures
* Decision-making structure (topdown,etc)
* Extent of delegation
* Main basis of pay/promotion
Interfirm Relations
* Presence of business groups
* Noteworthy other networks
Intermediaries
What are the main categories of intermediaries?
Give as much info but main categories first
Credibility enhancers
* 3rd party certifcation
* audit, food cert,
Information analysers
* collects and analyse information on producers and consumers
* market research firms, e.g credit rating agency, financial analyst, driver rating
Aggregators and distributors
* Provide low cost or value added services through expertise or economies of scale
* e.g banks, private equity funds, trading companies
Transaction facilitators
* provide platform for exchange of services
* e.g brokerage houses, credit card issuers, recuriting agencies
Lecture 4
Outline the dispostion of Home regulators towards the MNC
Adverse to perceived risks
Relative to foreign markets
* Insufficient knowledge contributes to uncertainty
* Uncertainty contributes to perception of risk
With respect to distant Host Countries:
- Overoptimistic international business cases
- Investment in growth depresses S-T returns
- Growing apprehension in timing of returns
Outline the different organisation structure through whihc MNCs can evolve
Best if Global matrix and the logistics are difficult
they evolve from iinternational towards global
what are the primary rule, key objectives and roles of CHQ
Primary rule: DO NO Harm
Key Obj:
* Manage enterprise as a whole within riks appetite
* Create values by sustaining profitability
Roles
* Governance and compliance (do you accept bribes)
* Exploit synergies from being an MNC
* Parenting
Outline the broad principles of how CHQ create or destroy value
Create
* Funding and optimising tax
* Strategy developement, etc
Destroy:
* poor undesrtanding of business in regions
* complicated beauracratic processes, etc
Explain the overall concept of governance
Board and Corp Management Team:
* ensure MNC is a going concern
* defines mission, values, etc
* establish risk appetite
* approves appointment of key personel
* involves, legal, accounting, tax, etc
* activities are predictable
Explain the concepts of how MNC exploits synergies
CXOs within CHQ define the corp policies that subsidiaries should follow
Using shared service to find aggregation of common proceses such as finanicing and EoS
Shared services should:
* treat subs as clients
* adheres to performacne
* be cognisant they serve different segments of clients and not favour larger subs over smaller ones
Outline the different Parenting activities for both adding and destroying value
Top down(subs don’t like this):
* Strategic guidance and support
* central resources and services
* downsides such as too much involvement and overhead cost
Horizontal
* sales and managerial synergies (mutual forbearances)
* operating and investment synergies (EoS)
* downsides such as internal power struggle and resource shortage
CHQ parenting:
how do you map out whether CHQ capabilities fit the opportunity:
Capabilities:
* mental maps
* structure, systmes
* Nature, exp of managers
* shared understanding of implicit decentralisation contract
All have to fit with key success factors, ability to spot it and right expertise
Hartland matrix
outline the key terms:
* Region Management mandate
* Regional Office
* Regional HQ
RMM:
* the mandate given by CHQ to monitor distant markets and exploit subsidiary op skills
Office:
* helps for coordianting and supporting subsidairy in place for CHQ
* No heriachy and NO accountability
RHQ:
* accountable for growth and performance of region and subs within it
* HAS ACCOUNTABILITY
4 by 4 matrix
Explore how roles of RO/RHQ evolve over time among governance, bridging, standardisation, leveraging network
starts from defensive then progress to transnational
what are the conditions to make a good location for RHQ
- Market access
- Tax/Operating Cost
- Infrastructure
- Availability of talent
- Living environment
- Political stability
What are the roles, key objective and roles of subsidiaries
DON’T MESS UP
obj:
* preserve global brand
* be profitable
Roles:
* exploit MNC FSA in host
* enhance MNC differentiated network
* Be a good corp citizen in Host country
outline how product live cycle can be applied to subsidiaries
what are the specific roles different subsidiaries can have within an MNC
Revenue genreation
Product manufacturer
Component manufacturer
Centre of expertise for multiple subs (data analysis)
Shared services of fucntions/processes
what are the tradeoffs for subsidiary market entry/operationalisation
firm capital against Firm IP
M/A: firm capital most at risk
Licensing: firm IP most at risk
Outline and explain the chasms of different perceptions across CHQs and subsidiaries
CHQ has pressures from shareholders to realise quarterly earnings and they seek to exert control
SUB:
seek to be independent
pressure from CHQ to meet targets
Pressure from host countries employees, customers etc, e.g look at singapore company act and UK act (have duality)
Outline the principal -Agent challenge
The Principal (CHQ) is subject to bounded rationality with respect to Host Countries
* The Principal (CHQ) delegates authority and relinquishes control to an Agent (subsidiary)
* Agents are rational and opportunistic utility maximisers pursing ‘self-interest with guile’ (cunning)
* There exists both uncertainty and information asymmetry between the Home and Host Country as the Agent can hide information and actions from the Principal
what are some of the tools CHQ uses to exert control
Formal authority
Normative values
Structure
Standardised processes, systems, reporting
Internal and external audit and compliance
Relocation of resources
whar are the factors influencing subsidiary power relative to CHQ
Distance factors (higher diatnat subs have less power)
Reputation of subs leadership
Revenue generation
Subs position/embeddedness in differntiated network
Uniqueness of Subs capability relative to CHQ and other subs
