Global Strategy and Global Value Chains

Question 1

What are the patterns if internationalisation?

(1. what is on the axes?
2. What are the categorise?
3. What’s an example of each?)

Answer 1

Question 2

What are the implications of internationalisation for the industry analysis?

(has internationalisation increased or decreased competition and profitability?)

Answer 2

Industry structure –> Competition –> Profitability

Industry structure:

1) Lower entry barriers into national markets
2) Increased industry rivalry
- Lower seller concentration
- Greater diversity of competitors
3) Increased buyer power
- Buyers have more potential suppliers to choose from

–> Increased competition

–> decreased profitability (Other things remaining equal, internationalization tends to reduce an industry’s margins and rate of return on capita)

Question 3

What are the three areas that impact the Competitive Advantage within an International Context?

(The Basic Framework)

Answer 3

Question 4

Explain when a country has an advantage

(National Influences on Competitiveness: The Theory of Comparative Advantage)

Answer 4

• A country has a relative efficiency advantage in those products that use resources that are abundant within that country
  
  • Philippines relatively more efficient in the production of footwear, apparel, and assembled electronic products than in the production of chemicals and automobiles
  • U.S. is relatively more efficient in the production of semiconductors and pharmaceuticals than shoes or shirts
• When exchange rates are well-behaved, comparative advantage might translate into competitive advantage

Question 5

How can you calculate comparative advantage=

Answer 5

(exports-imports)/(exports+imports)

Question 6

What does comparative advantage look at?

Answer 6

Relative efficiencies in a specific set of activities based on:

– Resource endowments

– Labor supply

– Capital stock

– Knowledge

– Complementary assets for commercialization

– Localized scale economies

Question 7

What are the four factors in Porters National Diamond Framework?

Answer 7

Question 8

Explain Factor conditions

(in Porters National Diamond Framework)

Answer 8

“Home grown” resources/capabilities more important than natural endowments (e.g. Holliwood)

Question 9

Explain Related and supporting industries

(in Porters National Diamond Framework)

Answer 9

Key role of “industry clusters” (e.g. Sylicon Valley)

Question 10

Explain Demand conditions

(in Porters National Diamond Framework)

Answer 10

Discerning domestic customers drive quality improvement and innovation (E.g. Photography in Japan; German cars)

Question 11

explain Strategy, structure and rivalry

(in Porters National Diamond Framework)

Answer 11

e.g. domestic rivalry drives upgrading (Japan internal competition vs. Europe National Champions in consumer electronics)

Question 12

Why do firms internationalise?

Answer 12

Mainly for two reasons

1) To access resources and capabilities
2) To access foreign markets

But also:

• For prestige
• For strategic purposes (retaliation and positioning)

Question 13

What are the factors that international production location decisions need to take into account?

Answer 13

1. National resource conditions: What are the major resources which the product requires? Where are these available at low cost?
2. Firm-specific advantages: To what extent is the company’s competitive advantage based upon firm-specific resources and capabilities, and are these transferable? –> replication
3. Tradability issues: Can the product be transported at economic cost? If not, or if trade restrictions exist, then production must be close to the market.

Question 14

How do a company determine the optimal location of value chain activities?

Answer 14

Question 15

What are the Alternative Modes of Overseas Market Entry

Answer 15

Question 16

What are the criteria to decide the mode of overseas market entry?

Answer 16

1. Is the firm’s competitive advantage based on firm-specific or country-specific resources?
2. Is the product tradable and what are the barriers to trade?
3. Does the firm possess the full range of resources and capabilities for establishing a competitive advantage in the overseas market?
4. Can the firm directly appropriate the returns to its resources?
5. What transaction costs are involved?

Question 17

What is the framework to assess country differences?

Answer 17

CAGE framework

Question 18

What are the dimensions of the CAGE framework?

Answer 18

Cultural distance

Administrative and political distance

Geographical distance

Economic distance

Question 19

Distance between two countries increases with ( cultural differences)?

Answer 19

Different languages, ethnicities, religions, social norms

Lack of connective ethnic or social networks

Question 20

Distance between two countries increases with ( administrative and political differences)?

Answer 20

Adsence of shared political or monetary association.

Political hostility

Weak legal and financial institutions

Question 21

Distance between two countries increases with (geographical differences)?

Answer 21

Lack of common border, water-way access, adequate transportation or communication links.
Physical remoteness

Question 22

Distance between two countries increases with (Economic differences)?

Answer 22

Different consumer incomes

Different costs and quality of natural, financial and human ressources

Different information or knowledge

Question 23

What is global strategy?

Answer 23

Global Strategy

- At simplest level: Treating the world as a single market: standard products, distributed & marketed worldwide (e.g. YKK and Honda during 1970s and 1980s)

• At a more sophisticated level: Strategy that recognizes and exploits linkages between countries (e.g. exploits global scale, national resource differences, strategic competition)

Question 24

Can Global Integration and National Differentiation be reconciled?

Answer 24

yes… The Transnational Corporation

• The Transnational: an integrated network of distributed, interdependent resources and capabilities.
  
  • Each national unit a source of ideas and capabilities that can benefit the whole corporation.
  • Each national unit becomes world source for a specific product, component, or activity.
  • Corporate center orchestrates collaboration through creating the right organizational context.