IBS2018

Question 1

What are the 5 P’s in Mintzberg (1987)?

Answer 1

1. Plan
   
   1. Intended strategies.
   2. Plans made purposefully/consciously and in advance
2. Ploy
   
   1. A maneuver to outsmart a competitor
      
      1. Fx. A strategic maneuver where a corporation threatens its competitor, that it will built/expand its plant capacity to discourage a competitor from doing so.
3. Pattern
   
   1. Realized strategies
   2. A consistency in behavior becomes the strategy perceived by the outside world.
4. Position
   
   1. Small number of desirable strategies (otherwise similar to plan)
   2. A means of locating an organization in an environment.
   3. The “position” definition allows us to open up the concept of strategy to “n-persons” games (many players instead of head-to-head)
5. Perspective
   
   1. Sort of individual factors looking inside the heads of the collective strategist of the organization
   2. You position the corporation in your PERCEIVED world
   3. Perspectives are more immutable when they have been established, meaning that they get so deeply ingrained in the behavior of an organization that the associated beliefs can become subconscious in the minds of its members

Question 2

Into which 5 categories does Professor Pogrebnyakov summarize the Mintzberg (1987) text?

Answer 2

• Plan
• Pattern
• Position
• Individual
• Configuration and Learning

(Hence, you do not see “Ploy” and “Perspective” form the 5 ps)

Question 3

What is meant by Strategy as a PLAN and which theories and frameworks are linked to this view of strategy? PLAN (Mintzberg 1987)

Answer 3

Strategy as a plan

• Intended strategies.
• Plans made purposefully/consciously and in advance
• Based on a fit between internal and external capabilities (SWOT)

Theories and frameworks

• SWOT analysis
• Regional strategies (Ghermawat 2005)
• Scenario planning

Question 4

What is meant by Strategy as a POSITION and which theories and frameworks are linked to this view of strategy? POSITION (Mintzberg 1987)

Answer 4

Strategy as a position

• Similar to “plan” in most ways BUT
• Only a small number of desirable strategies

Theories and frameworks

• Generic strategies
• Five Forces (Porter 1979, 1980)
  
  • Environment/Industry affects strategy choice

Question 5

What is meant by Strategy as a PATTERN and which theories and frameworks is linked to this view of strategy? PATTERN (Mintzberg 1987)

Answer 5

Strategy as a PATTERN

• REALIZED strategies
• A consistency in behavior becomes the strategy perceived by the outside world.
• Emergent, incremental
  
  • Small actions and decisions made by many people lead to a patterned strategy, although these people do not see their actions as “strategic”

Theories and frameworks

• Internationalization process model (Mintzberg 1987, Mintzberg, Ahlstrand and Lampel 2009)

Question 6

What are deliberate and emergent strategies? (Figure 1, Mintzberg) (Mintzberg 1987)

Answer 6

Intended strategy:

• strategy as a plan

→ may end up either realized (deliberate strategy) or unrealized.

Emergent strategy:

• strategy as a pattern

→ patterns developed in the absence of intentions

Question 7

What is meant by Strategy as a CONFIGURATION AND LEARNING and which theories and frameworks is linked to this view of strategy? CONFIGURATION AND LEARNING (Mintzberg 1987)

Answer 7

Strategy as a CONFIGURATION AND LEARNING

• The role of “strategy” is to maintain stability and recognize the need for major transformation
• The company’s strengths and weaknesses should be determined IN THE CONTEXT OF A PROBLEM
  
  • It is hard to know in advance whether a competence will be a strength or a weakness for a particular strategy

Theories and frameworks

• Resource-based view
• Dynamic capabilities
• Organizational structure and strategy

Question 8

What is meant by INDIVIDUAL FACTORS in Strategy and which theories and frameworks is linked to this view? Individual factors (Mintzberg 1987)

Answer 8

Individual factors in Strategy

• Strategy is created or expressed by the leader and his/her intuition, judgment and experience
• Strategy is a guiding idea/a sense of direction
  
  • We adapt along the way as details emerge

Theories and frameworks

• Entrepreneurship
• Heuristics and biases in decision-making

Question 9

What is an MNC?

Answer 9

• An organization that “Owns and controls operations in several countries” (Pugel)
• Has “direct production and generally direct business activities abroad” (Letto-Gillies)
• “Any public company that engages in international business activities” (Cullen & Parboteeath)

Question 10

What affects company internationalization? = DEM (Hitt et al. 2016)

Answer 10

• Distance in culture and institutions between home and target country
• Experience with internationalization of the corporation
• Management or founders international experience

And… Born global companies

Question 11

What is globalization? (slide review class)

Answer 11

• Convergence of tastes
• Firms launch global products
• “The world is flat”

Question 12

What drives globalization? = TLGGP (Hitt et al. 2016)

Answer 12

1. Technology
   
   1. Reduce distance ⇒ increased use and expansion
   2. Reach customers and/or manage operations
2. Liberalization
   
   1. Trade agreements
      
      1. Trade blocks (Mercosur, SADC, NAFTA, ASEAN) and WTO
3. Global products and consumer tastes
   
   1. Enabling standardized products
4. Global competition
   
   1. Companies entering foreign markets
5. Political changes

Question 13

What opposes globalization? (Hitt et al. 2016)

Answer 13

• Technology
  
  • Increasingly different internet governance
    
    • • Privacy shields such as China
• De-liberalization of trade and resource movements
  
  • Stalled WTO Doha round
  • Increase in bilateral trade agreements
• Political changes
  
  • Brexit, Trump
    
    • The populist backlash a reminder that the rewards of globalization are not evenly distributed
  • Land, cultural or religious disputes leading to war

Question 14

What does the idea of exploitation towards exploration say? (Hitt et al. 2016)

Answer 14

We see a growing trend from exploitation of the host country towards EXPLORATION

Exploration as in search for new capabilities

• More and more R&D centers abroad
• REVERSE knowledge transfer
• Increased likelihood of full-control entry modes over share-control entry modes
  
  • Especially as managers international experience increases

Question 15

What are globalonies and who are their enemy? (Ghermawat 2017)

Answer 15

The term “Globaloney” has been given to strong believers in globalization and its benefits.

The enemy is nationalists or the populist movements seen with Brexit and Trump. These serve as a reminder that the rewards of globalization are not evenly distributed.

Question 16

What is meant by semi-globalization? (Ghermawat 2017)

Answer 16

Although FDI inflows and outflows and international trade has increased with double-digit multiples in a matter of decades, not much of it is global.

• Most is regional (EU, NAFTA, Asia)
• Fortune 500 companies account for 50 % of world trade. FEW are global. Most are regional even among the biggest MNCs.

Question 17

*What is the relationship between digitization and globalization?* (Germawat 2017)

Answer 17

Technology (ICT) does enhance globalization

BUT technology:

1. Can enhance political conflicts
   
   1. Private citizens data
   2. Political espionage
   3. Digital warfare
2. Can work against globalization
   
   1. 3D printing, E-education and robotics
3. And is INSUFFICIENT
   
   1. China’s internet shield
   2. 2005-2017 Internet traffic and e-commerce grew 45x BUT only 2-4x in international terms

Furthermore, even these already quite poor numbers (on the level of international digital traffic) are biased as it is linked to physical flows (Expats, travelers, migrants)

=

The country pairs with the largest telephone traffic also rank among the top migration routes

Question 18

What is multicountry competition?

Answer 18

• Each country market is self-contained
• Different preferences and competitive positions
• Competition is in each market independent from the other markets the MNC operates in

Example:

• Dairy products

Question 19

What is global competition?

Answer 19

• Prices and competitive positions strongly interlinked across markets
• Same competitors in many markets
• MNC’s advantages stems from worldwide operations

Examples

• SMARTPHONES; APPLE, SAMSUNG, HTC,
• Softdrinks: Coca Cola, Pepsi

Question 20

How do multicountry competition and global competition differ?

Answer 20

Question 21

What is the difference between global business and global competition? (Hamel and Prahalad 1985)

Answer 21

• Global Competition: pursuing global brand and distribution channels. You battle global companies
• Global Business: investments are made to achieve scale and cost efficiency not available in the home market.

Question 22

How do product and competitive strategies differ?

Answer 22

• Product strategies
  
  • Choices regarding a company’s product line in different geographical markets
• Competitive strategies
  
  • Analyzing sources of competitive advantage and locating parts of the value chain in markets that offer the best opportunities for the company to enhance its competitive position

Question 23

How does the classic product strategy matrix look and what is on each axis?

Answer 23

The question is between local responsiveness (tailoring to local tastes) and standardization (global integration)

• Product mix
• Product adaptation

Coca Cola not solely local responsiveness as they always have the classic Coca Cola, but they adapt with other products, fx. Diet Cherry Vanilla Cola and other soft drinks.

Question 24

If consumers have similar tastes and the markets are similar, do we have a good case for global integration? (Devinney, Midgley & Venaik 2000 on slide)

Answer 24

Not necessarily.

Depends on

• MNC organizational systems and capabilities
• Ability to coordinate multinational strategies and operations
• Product characteristics; bulky and cheap vs. small and expensive

Question 25

When should one pursue global integration and when should one pursue local responsiveness?

Answer 25

Question 26

What are the 4 sources of corporate competitive advantage presented by Hamel and Prahalad (1985)?

Answer 26

SALG

• Scale-volume from internationalization
• Access to supply and distribution channels
• Location advantages
• Global brand

Question 27

Provide examples of 3 global competitive strategies, the rationales for each and how these are achieved

Answer 27

• Defend domestic position
  
  • Companies trying to defend their domestic position are often shortsighted about the strategic intentions of their competitors.
  • Rationale
    
    • Gain ability to retaliate
  • How
    
    • Attacking competitors on their offering or acquiring competitors. Having a strong home market is important to save up reserves that can be used to attack abroad = Domestic market is used as cash-cow.
• Overcome national fragmentation
  
  • Companies expand geographically to built the sales volume necessary for world-scale investment in R&D and manufacturing while gaining access to local producers and market knowledge.
  • Rationale
    
    • Rationalize R&D and production
  • How
    
    • Distribute decision-making among subsidiaries
• Build global presence
  
  • Rationale
    
    • Achieve capability to make and sell globally
  • How
    
    • Cross-subsidizing to reduce competitors margins + gain first-mover advantage
      
      • What is cross-subsidizing?: When a global company uses financial resources accumulated in one part of the world to fight a competitive battle in another market

Question 28

What are the 5 different regional strategies? (Ghermawat 2005)

Answer 28

• Home-based strategy
  
  • Keeping the entire value chain besides sales in home region
• Portfolio strategy
  
  • Setting up or acquiring operations outside home region that report directly to home-base
• Hub strategy
  
  • Building regional bases that provide shared services.
  • Spreading fixed costs across a region
  • Regional HQ is NOT enough. You need a regional strategy to be hub.
• *Platform strategy
  
  • Interregional spread of costs
  • You do not customize in the beginning of the manufacturing process. Instead, you have a platform that serves interregionally. You use the platform to customize to regions.
• *Mandate strategy
  
  • Awarding some regions with broad mandates to supply particular products or perform particular roles for the whole organization

Question 29

What is the Home-based regional strategy? (Ghermawat 2005)

Answer 29

• Home-based strategy
  
  • Keeping the entire value chain besides sales in home region
  • Work well when the economics of concentration outweigh the economics of dispersion (e.g. Zara).

Question 30

What is the Portfolio regional strategy? (Ghermawat 2005)

Answer 30

• Portfolio strategy
  
  • Setting up or acquiring operations outside home region that report directly to home-base
  • Companies that adopt a portfolio strategy often struggle to deal with rivals in non-home regions. That’s largely because portfolio strategies offer limited scope for letting regional - as opposed to local or global - considerations influence what happens on the ground at the local level.

Question 31

What is the Hub regional strategy? (Ghermawat 2005)

Answer 31

• Hub strategy
  
  • Building regional bases that provide shared services for the region
  • Spreading fixed costs across a region
  • Regional HQ is NOT enough. You need a regional strategy to be hub.
  • Companies seeking to add value at the regional level frequently begin by adopting this strategy.
  • In its purest form, a hub strategy is simply a multiregional version of the home base strategy.
  • The challenge in executing a hub strategy is achieving the right balance between customization and standardization.

Question 32

*What is the Platform regional strategy?* (Ghermawat 2005)

Answer 32

• Platform strategy
  
  • Interregional spread of costs = spread fixed costs across several regions
  • Regions add customizations
    
    • You do not customize in the beginning of the manufacturing process. Instead, you have a platform that serves interregionally. You use the platform to customize to regions.

Example: Volkswagen produces a platform (part of the car) in a location and distributes around the world where the cars are finalized.

Question 33

*What is the Mandate regional strategy?* (Ghermawat 2005)

Answer 33

• Mandate strategy
  
  • Awarding some regions with broad mandates to supply particular products or perform particular roles for the whole organization
  • Roles and products are different by region but are used throughout the organization (globally)
    
    • Unlike in “Hub”, which are used within the region
  • This cousin of the platform strategy focuses on economies of specialization as well as scale.

Potential problem with mandate strategy:

• Local interest might “hijack” firm’s strategy = Entire company can be “shut down form a single point”

Question 34

What is the difference between open and closed innovation?

Answer 34

Innovation strategies = Structuring of innovation process within an organization

• Closed ⇒ innovations made purely from internal R&D
• Open ⇒ based on input and decisions of suppliers, customers, competitors and internal R&D.

Question 35

Where does innovation strategies, product strategies and competitive strategies come into play in the value chain?

Answer 35

Question 36

What does Vahlne and Johanson’s (1977) table results show?

Answer 36

That the firms investigated almost solely move one step at a time in their internationalization (ESTABLISHMENT CHAIN), where the steps are:

n = no regular export activity

a = selling via agent

s = sales subsidiary

p = production subsidiary

Question 37

What is the definition of psychic distance? (Johanson and Vahlne 1977)

Answer 37

“Factors preventing the flow of information from and to the market”

Cross-country differences in

• Language
• Education
• Business practice
• Culture and
• Industrial / Economic development.

Question 38

What is liability of foreignness?

Answer 38

MNCs doing business abroad face costs from:

• Unfamiliarity of environment
• Cultural, political, economic differences
• Need to coordinate across geographic distances

⇒ Somewhat similar to psychic distance.

Question 39

What is institutional distance?

Answer 39

Differences between the home and host countries on institutional dimensions

• Regulative:
  
  • Selected indicators from World Bank, global competitiveness, (antitrust, political transparency, IP protection etc.)
• Normative:
  
  • Government transparency, corruption, political risk
• Cognitive-cultural
  
  • Based on Hofstede

Question 40

What is the difference between psychic distance and institutional distance?

Answer 40

Question 41

What are the state and change aspects of the model by Johanson and Vahlne (2009)?

Answer 41

Question 42

What are the STATE components of the revisited Johanson and Vahlne model (2009)?

Answer 42

• Market Knowledge
  
  • Needs
  • Capabilities
  • Strategies
  • Networks of firms
• Recognition of opportunities
  
  • Reduction of uncertainty
• Network position
  
  • Internationalization processes pursued within a network

Question 43

What are the CHANGE components of the revisited Johanson and Vahlne model (2009)?

Answer 43

• Relationship commitment decisions
  
  • May change entry mode or investment size
  • Two types of decisions
    
    • Augment existing relationships
    • Develop new relationships
• Learning
• Creation of knowledge
• Trust-building

Question 44

What is the difference between the original Uppsala model and the revisited model? (Johanson and Vahlne 2009)

Answer 44

In the revisited model, the business environment is viewed as a web of relationships, a network, rather than as a neoclassical market with many independent suppliers and customers.

• OUTSIDERSHIP in relation to the relevant network, more than psychic distance, is the root of uncertainty.

⇒ Also adding trust-building and knowledge creation to the change mechanisms of the model.

⇒ Now, our view is that successful internationalization requires a reciprocal commitment between the firm and its counterparts.

Question 45

How can you explain the model presented by Johanson and Vahlne in plain english? (2009)

Answer 45

1. Firms internationalize gradually
   
   1. First in space by entering familiar countries and later less familiar countries
   2. Secondly, in commitment - do not commit too many resources at first (agents to subsidiary to production etc.)
2. Current knowledge and relationships (STATE) affect future decisions and actions (CHANGE aspects)
3. These future decisions in turn affect future relationships (CHANGE) = loop back to STATE

Question 46

What is the psychic distance paradox? (O’Grady and Lane 1996)

Answer 46

Starting the internationalization process by entering a country psychically close to home may result in failure due to wrong assumptions of similarity.

Causes:

• Overestimation of “closeness”
• Managers overlook important differences
• Assuming that one can simply transfer and extrapolate business model to a “similar” market

Learnings:

• Treat even psychically close markets as foreign markets
• Test assumptions and perception prior to entry
• Interpret data about the market correctly
• Increase knowledge and understanding of other countries

Question 47

What are the main learnings from the psychic distance paradox:? (O’Grady and Lane 1996)

Answer 47

• Treat even psychically close markets as foreign markets
• Test assumptions and perception prior to entry
• Interpret data about the market correctly
• Increase knowledge and understanding of other countries

Question 48

What are the causes of the psychic distance paradox? (O’Grady and Lane 1996)

Answer 48

Causes:

• Overestimation of “closeness”
• Managers overlook important differences
• Assuming that one can simply transfer and extrapolate business model to a “similar” market

Question 49

What are born globals? (Hitt et al. 2016)

Answer 49

• Firms that become international (resources & sales) at or shortly after inception.

Two factors affecting early internationalization

• Most often communications technologies
• Typically small size where lack of tangible resources do not hamper international operations

Question 50

What can contribute to early internationalization? (Hitt et al. 2016)

Answer 50

• Management/Founders international experience
• Low psychic and institutional distance between home and target country
• Tech-based companies (born globals)
• Global preferences

Question 51

What is establishment chain of the Uppsala model?

Answer 51

As sales grow, companies replace their agents with their own sales organization, and as growth continues they begin manufacturing in the foreign market to overcome the trade barriers.

Question 52

What is psychic distance in the Uppsala model?

Answer 52

The pattern that internationalization frequently started in foreign markets that were close to the domestic market in terms of psychic distance; defined as factors that make it difficult to understand foreign environments.

Question 53

What are the pillars of Porter’s 5 Forces and why is the model relevant to us?

Answer 53

The 5 forces can be used to determine the level of rivalry between MNCs.

Useful in competitor analysis and questions about the likelihood of attacks and responses.

Question 54

What creates rivalry (despite the 5 forces):

Answer 54

• Several equally strong players (McD, BurgerKing)
• Low growth in the market or no growth
• High fixed costs
• Excess production capacities (container shipping now)
• Little opportunities for differentiation
• High Strategic stakes
• Major barriers to exit

Question 55

What is multipoint competition? (Chen 1996)

Answer 55

Situations where firms compete against each other simultaneously in several markets.

Question 56

What is the unit of analysis in Chen vs. Porter’s 5 forces?

Answer 56

• Chen = The FIRM
• Porter = The INDUSTRY

Chen finds that two firms in the same industry are not necessarily competitors.

Fx. Coca Cola see Pepsi as the biggest competitor in Denmark and do not consider Harboe much, while Harboe considers Coca Cola.

Question 57

What is competitive asymmetry and what is its effect? (Chen 1996)

Answer 57

The notion that a given pair of firms may not pose an equal threat to each other.

Each firm will define competitors differently. Competition is not transitive, i.e. if A is a major competitor of B, and B is a major competitor of C, it does not necessarily follow that A is a major competitor of C.

For example, Harboe might consider Coca Cola/Carlsberg as a main competitor while Coca Cola/Carlsberg don’t think about Harboe

Question 58

What is Market commonality (Chen 1996)?

Answer 58

Market commonality is firm specific, and it is considered from a focal firm’s point of view.

Market commonality is defined as “the degree of presence that a competitor manifests in the markets it overlaps with the focal firm”,

Question 59

What is a market? (Chen 1996)

Answer 59

Geography-based, customer-based OR product-based: Geographical market, customer segment, brand (p. 107)

Question 60

What are Resource similarity (Chen 1996)

Answer 60

Resource similarity is defined as “the extent to which a given competitor possesses strategic endowments comparable”, in terms of both type and amount, “to those of the focal firm”.

Similar resources = most often also similar competitive advantages and competitive vulnerabilities.

Question 61

What is an Attack? (Chen 1996)

Answer 61

“A competitive move that lead to firm acquiring its rival’s market shares or reducing their anticipated returns” (p 109).

E.g. introducing a new product or entering a new market (customer-based, product-based or geography-based)

Question 62

What is a response? (Chen 1996)

Answer 62

“A specific countermove, prompted by a rival’s attack, that a firm takes to defend or improve its share of profit position in the industry” (p. 109).

Question 63

Why do high market commonality and high resource similarity a) reduce the likelihood of an attack and b) increase the likelihood of a response? (question in class) (Yu & Cannella 2007)

Answer 63

• High market commonality results in competitors being aware and motivated to respond
• High resource similarity makes them capable of responding

1. Reduce the likelihood of attack
   
   1. As direct rivals put themselves at huge risk when attacking their direct competitor. It is bad for margins of both player
      
      1. = Mutual forbearance hypothesis
   2. if you expect a response, you are less likely to attack in the first place.
2. Increase the likelihood of a response
   
   1. If you have been attacked, one is almost forced to respond promptly.

Question 64

Which 3 concepts did Yu & Canella (2007) present in relation to MNC rivalry?

Answer 64

Competitors will respond to an action ONLY IF they are aware of it and have the motivation and capability to respond.

• AWARE of the action and the host country where the attack took place
• MOTIVATED to respond to the action and to defend or expand their global presence
• CAPABLE of deploying resources to respond in host countries

Question 65

Do we have fierce competitors in quadrant II?

Answer 65

If the resource strong firm attacks the other firm, the other firm will not be able to respond, because it does not have the resources.

=

Hence, not fierce competition even though they target same market.

Question 66

Why is market commonality influencing likelihood to respond more than resource similarity?

Answer 66

One reason is

• If company A is a global competitor,company A will have other markets to play in
• Versus company B that is highly reliant on operating domestically

Fx Coca Cola versus Harboe. If Harboe is squeezed out of the Danish market, they will have no business (therefore, they will likely have high motivation to respond), whereas if Coca Cola is squeezed out of the Danish market, they will just have the other markets.

Question 67

What is Cross-border competitive engagement defined as? (Chen and Stucker 1997)

Answer 67

A firm’s execution of competitive moves coordinated across various national markets against rivals.

1. Initiating competitive actions coordinated across national markets
2. Retaliating in national markets other than the one under attack
3. Offering responses coordinated across multiple national markets

Question 68

*What factors, other than resource and market commonality, increases the likelihood of cross-border competitive engagement?* (Chen & Stucker 1997)

Answer 68

WIGSFELL

• Wholly-owned subsidiaries
  
  • Rather than licensing, franchising etc. as you have better control of activities and can control incentives for managers more
• International experience of managers
  
  • Better knowledge of foreign markets
• Global rather than multi-domestic MNC
  
  • When whole world is the competitive arena, it is easier to coordinate activities (diversification benefits and cross-subsidization)
• Size of organization
  
  • Small firms are quick, flexible and innovative
• First- and Second-mover advantages
  
  • First = Above average returns until response + establishing market share and loyal customer base
  • Second = Learn from mistakes (customer reactions)
• Entry barriers are low
• Little cultural differences
  
  1. Between firm and competitor (similarity or resource endowments)
  2. Between HQ and subsidiaries (better and faster inter-organizational coordination)
• Low diversity among local markets (“Global market” argument)

Question 69

What are some examples of fast- and slow cycle markets and what are the time periods (rule of thumb) a company can expect to live off their competitive advantage?

Answer 69

Fast-moving cycles (3-5 years)

• FMCG
• Fashion
• Software products

Slow-moving cycles (10 years)

• Pharmaceuticals

Question 70

What is response speed?

Answer 70

• The time (days, months) between attack and response
• A slow response results in larger loss of market share or lost profit opportunities

In multi-market rivalry responses may occur in the initiating country or in a different country .

Question 71

What determines response speed? (Yu & Canella 2007) = GS-HHS

Answer 71

• Geographic distance
  
  • The farther away, the harder to recognize (awareness)
  • Takes time to transfer knowledge and resources
• Subsidiary control
  
  • The more control, the faster the response normally will be in the host country
• Host government constraints
  
  • Regulations and taxes ⇒ The environment might slow you down
• Home government constraints
  
  • Often help you as it makes it easier to make a response when you are the domestic player (period of protection)
• Speed in host country
  
  • Faster if the initiating country is of strategic importance (motivation)
  • Faster if host country is the initiating country (faster response within-country)
  • Faster in multi-market rivalry situations (Chen’s basic argument = higher market commonality)

Question 72

How does companies obtain sustainable competitive advantages? (Barney 1991)

Answer 72

Firms obtain sustained competitive advantages by implementing strategies that exploit their internal strengths, through responding to environmental opportunities, while neutralizing external threats and avoiding internal weaknesses.

Question 73

How does Barney (1991) define “resources”?

Answer 73

All assets, capabilities, organizational processes, firm attributes, information, knowledge etc. controlled by a firm THAT ENABLE (= some may prevent or be neutral) the firm to conceive of and implement strategies that improve its efficiency and effectiveness (Draft 1983)

⇒ Need to be value-creating

Question 74

What are the 3 types of resources? = PHO (like the Vietnamese noodle dish) (Barney 1991)

Answer 74

• Physical capital resources (VERY TANGIBLE)
  
  • Technology, Plants, equipment, geographic location, access to raw materials etc.
• Human capital resources
  
  • Training, experience, judgment, intelligence
  • Relationships and insights etc. of individual managers and workers.
• Organizational capital resources (MUCH MORE INTANGIBLE)
  
  • Reporting structures, planning, controlling, and coordinating systems
  • Informal relations among groups within a firm and between the firm and its environment

Question 75

What is the difference between a competitive advantage and a SUSTAINED one? (Barney 1991)

Answer 75

Competitive advantage

• A strategy not implemented by a current or potential competitor

Sustained competitive advantage

• A strategy not implemented by a current or potential competitor
• That CANNOT be implemented by a competitor (nobody can duplicate the benefits)
• NOT time-based (focused on the possibility of duplication)
• Might be upended by structural changes in the industry when VRIN attributes of resources change.

Question 76

What are the three key concepts in Barney’s (1991) perspective?

Answer 76

• Firm resources
  
  • All assets, capabilities, organizational processes, firm attributes, information, knowledge etc. controlled by a firm THAT ENABLE (= some may prevent or be neutral) for the firm to conceive of and implement strategies that improve its efficiency and effectiveness (Draft 1983)
  • Types:
    
    • Physical
    • Human, and
    • Organizational resources
• Competitive advantage
  
  • When it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors.
• Sustained competitive advantage
  
  • When it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors AND when these other firms are unable to duplicate the benefits of this strategy. (hence NOT time-based)

Question 77

How is rarity defined? (Barney 1991)

Answer 77

“A resource currently controlled by only a small number of competing firms”

• Essentially If fewer firms possess a valuable resource than the number of firms needed for perfect competition in an industry, then that resource is considered rare.

Question 78

How can a company acquire more rare resources?

Answer 78

• Recruitment of talent
• Investments in R&D / Innovation
• Acquisitions of companies possessing rare resources

Question 79

What does it mean when a resource cannot be imitated? (Barney 1991)

Answer 79

Competitors cannot duplicate the benefits of the resource = They cannot imitate that resource.

Question 80

For what reasons might a competitor not be able to imitate your valuable resources? (Barney 1991)

Answer 80

1. Historical reasons
   
   1. Path dependence
      
      1. A firm that locates its facilities on what turns out to be a much more valuable location than was anticipated when the location was chosen possesses an imperfectly imitable physical capital resource
   2. First-mover advantages
2. Causally ambiguous
   
   1. Competitors don’t know if a resource leads to advantage = the competitors have a hard time realizing which resource is leading to the competitive advantage you have ⇒ so they don’t know the actions they should take in order to duplicate the strategies of firms with a sustained competitive advantage
   2. Hence, it is also required that the firm itself does not understand what leads to this SCA ⇒ if a firm with a competitive advantage understands the link between resources it controls and its advantages, the other firms can also learn about that link, acquiring the necessary resources (if they are not imperfectly imitable for other reasons), and implement the relevant strategies, although it may take some time.
3. Socially complex
   
   1. The resource generating a firm’s advantage is socially complex = based on resources interpersonal relationships, trust, culture etc. that are costly to imitate in the short term
   2. Examples include the interpersonal relations among managers in a firm, a firm’s culture, a firm’s reputation among suppliers and customers.
   3. Complex physical technology is not a part of this, as if one firm can acquire it, another can also do so. However, if one firm possesses social relations, culture, traditions etc. to fully exploit these technologies in implementing strategies, they may have a imperfectly imitable resource.
4. It is too expensive
5. Legal reasons (copyrights / IP)

Question 81

When is a resource substituable and what are the two types of substituability (Barney 1991)?

Answer 81

A resource is substitutable WHEN other resources can be used for the same purpose

From paper: two valuable firm resources (or two bundles of firm resources) are strategically equivalent when they each can be exploited separately to implement the same strategies.

Substitutability can either be done through

1. SIMILAR resources that enables a competing firm to implement the same strategy
   
   1. Though it may not be possible for a firm to imitate another firm’s resources exactly, it may be able to substitute a similar resource that enables it to conceive of and implement the strategies.
      
      1. E.g. top management team of one company → exact team cannot be copied, but can develop own unique management team
2. VERY DIFFERENT firm resources can also be strategic substitutes.
   1. E.g. managers in one firm may have a very clear vision of the future of their company because of a charismatic leader in their firm.
   2. Managers in competing firms may also have a very clear vision of the future of their company, but this common vision may reflect these firm’s systematic, company-wide strategic planning process.
   3. Both are strategically equivalent, so if more firms are capable of coming up with this common vision through a systematic company-wide strategic planning process, then the company with a charismatic leader does not have a sustained competitive advantage, even though the firm resource of a charismatic leader is probably rare and imperfectly imitable.

Question 82

Which 4 attributes must a firm’s resource have to lead to a sustained competitive advantage? (Barney 1991)

Answer 82

1. VALUABLE
   
   • It must be valuable in the sense that it exploit opportunities and/or neutralizes threats in a firm’s environment
2. RARE
   
   • It must be rare among firm’s current and potential competition
3. IMPERFECTLY IMITABLE
   
   • It must be imperfectly imitable = firms’ that do not already possess these resources cannot obtain them
4. NON-SUBSTITUTABLE
   
   • There cannot be strategically equivalent substitutes for this resource that are valuable but neither rare or imperfectly imitable = Non-substitutable

Question 83

When is it a competitive disadvantage, a competitive parity, a temporary competitive advantage and a sustained competitive advantage? (Barney 1991)

Answer 83

Question 84

What is a sustained competitive advantage? (Barney 1991)

Answer 84

It is based on a resource that is both valuable, rare, imperfectly imitable and non-substitutable = VRIN.

Question 85

What are dynamic capabilities? (Teece, Pisano and Shuen 1997)

Answer 85

• The firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments.
• Dynamic capabilities thus reflect and organization’s ability to achieve new and innovative forms of competitive advantage given path dependencies and market positions.

Question 86

What does “dynamic” and “capability” mean in dynamic capabilities? (Teece, Pisano and Shuen 1997)

Answer 86

Dynamic:

• Capacity to renew competences so as to achieve congruence with the changing business environment
  
  • From paper: “Capacity to renew competences so as to achieve congruence with the changing business environment; certain innovative responses are required when time-to-market and timing are critical, the rate of technological change is rapid, and the nature of future competition and market difficult to determine”.

Capability:

• A demonstrated and potential ability of an organization to perform against the opposition of circumstances or competition, whatever it sets out to do
  
  • From paper: “The key role of strategic management in appropriately adapting, integrating, and reconfiguring internal and external organizational skills, resources, and functional competencies to match the requirements of a changing environment.”

Question 87

How does five forces framework, game-theoretic models, and the RVB differ from each other?

Answer 87

• Five forces:
  
  • See the strategic problem in terms of industry structure, entry deterrence, and positioning
• Game theoretical models:
  
  • See the strategic problem as one of interaction between rivals with certain expectations about how each other will behave
• Resource-based view:
  
  • See the strategic problems in terms of focus in the exploitation of firm-specific assets

Question 88

What is required to have “dynamic capabilities”? (Teece, Pisano and Shuen 1997)

Answer 88

• It requires continual redeployment of resources that reflect the changing conditions of the market (e.g. rapid technological changes)

Question 89

What does the competence of a firm’s dynamic capability depend on? / How do you measure the ability of a company in being a dynamic capability firm? (Teece, Pisano and Shuen 1997)

Answer 89

Competence depends on

• Speed or Intensity with which a firm is able to profit from changes in the market

Question 90

What is ‘to be strategic’ according to Teece, Pisano and Shuen 1997?

Answer 90

• A capability must be honed to a user need
• Unique
• Difficult to replicate

Question 91

What is the difference between processes, positions, and paths leading to competitive advantage? (Teece, Pisano and Shuen 1997)

Answer 91

• Organizational and managerial processes:
  
  • The way things are done in the firm (routines, patterns)
  • Or what might be referred to as its routines, or patterns, of current practice and learning
• Positions:
  
  • Its current specific endowment of technology, intellectual property, complementary assets, customer base and its external relations with suppliers and complementors
• Paths:
  
  • The strategic alternatives available to the firm, and the presence or absence of increasing returns and attendant path dependencies

Question 92

What are organizational and managerial processes leading to a competitive advantage? (Teece, Pisano and Shuen 1997)

Answer 92

Organizational and managerial processes: The way things are done in the firm (routines, patterns), or what might be referred to as its routines, or patterns, of current practice and learning.

Organizational processes have 3 roles:

1. Coordination/integration (a static concept)
2. Learning (a dynamic concept)
3. Reconfiguration (transformational concept)

Question 93

What are positions leading to a competitive advantage? (Teece, Pisano and Shuen 1997)

Answer 93

Positions: Its current specific endowment of technology, intellectual property, complementary assets, customer base and its external relations with suppliers and complementors

There are eight specific kinds of assets:

1. Technological assets
2. Complementary assets
3. Financial assets
4. Reputational assets
5. Structural assets
6. Institutional assets
7. Market (structure assets)
8. Organizational boundaries

Question 94

What is the difference between ordinary and dynamic capabilities? (Teece, Pisano and Shuen 1997)

Answer 94

• Ordinary capabilities:’
  
  • Supports the MNEs “technical fitness” by adopting best practices
• Dynamic capabilities:
  
  • Display technological and market agility helping the organization stay fit and relevant

Question 95

*What is the difference between replication and imitation?* (Teece, Pisano and Shuen 1997, Barney 1991)

Answer 95

Imitation is simply replication performed by a competitor.

Replication = Redeployment of resources from one concrete economic setting to another.

Note that it is said that if self-replication is difficult, imitation is likely to be harder.

The ease of imitation determines the sustainability of competitive advantages.

Question 96

What are paths leading to a competitive advantage? (Teece, Pisano and Shuen 1997)

Answer 96

• Path dependencies
• Technological opportunities

Question 97

What is replication and what makes it difficult? (Teece, Pisano and Shuen 1997)

Answer 97

Replication = Redeployment of resources from one concrete economic setting to another.

Difficult due to:

• From tacit to explicit knowledge
• Location or non-location bound resources
• Learning (trial and error)

If self-replication is difficult, imitation is likely to be even harder.

Question 98

What are path dependencies? (Teece, Pisano and Shuen 1997)

Answer 98

The idea that where a firm can go from here is a function of its current position and the paths ahead. = HISTORY MATTERS.

Question 99

Why is it difficult to be a “dynamic” firm? (Teece, Pisano and Shuen 1997)

Answer 99

• You constantly have to be aware of changes and react to those changes (relation to Yu and Canella = Awareness, Motivation, Capability)
• Some assets & competencies are not tradable = you have you build them yourself
  
  • Values
  • Culture
• Firms are to some degree stuck with what they have now and live with their history
  
  • Path dependencies take time to form

Question 100

What is a core competency? (Prahalad and Hamel 1990)

Answer 100

Core competence = skills, knowledge etc. THAT….

1. Is hard to imitate
2. Can be deployed in many markets or products now or in the future
3. Provides significant PERCEIVED consumer benefits

Leads to durable competitive advantage.

Typically a few (max 5) core competencies

Question 101

What makes a company’s competitiveness in the short and long-term according to Hamel and Prahalad 1990?

Answer 101

• Short-term
  
  • Price/performance attributes of current product
• Long-term
  
  • An ability to build at lower cost and more speedily than competitors
  • New and better products
  • Management’s ability to consolidate corporatewide technologies and production skills into competencies that empower individual businesses to adapt quickly to changing opportunities = Relation to dynamic capability

Question 102

How do you build core competencies? (Hamel and Prahalad 1990)

Answer 102

• Smart R&D
• Form alliances
  
  • Learn from others
• Identify next generation competencies
  
  • Allows sensible internal distribution of resources
• TIME (10 years+)

Question 103

Which 3 tests/questions can be applied to identify core competencies? (Hamel and Prahalad 1990)

Answer 103

1. Does it provide potential access to a wide variety of markets?
2. Does it make a significant contribution to the perceived customer benefits of the end product?
3. Is it difficult for competitors to imitate?

Question 104

What is said to be the three different planes on which battles of global leadership are waged in Hamel and Prahalad (1990)?

Answer 104

• Core competence = Class of product functionality
• Core products = Embodiment of core competencies
• End products = Extensions of core products

A corporation has to know whether they are winning or losing on each plane (determining if you are winning or losing is more difficult)

Question 105

What is the difference between A) VRIN resources, B) Core Competencies and C) Dynamic Capabilities

Answer 105

and… Dynamic capabilities are needed to respond to technological changes while resources that can lead to SCA can be destroyed by such changes

Question 106

Where lies the strategic value of technology?

Answer 106

• Operational
  
  • Reduce costs
  • Reduce time
• Strategic
  
  • Confer competitive advantage (Barney 1991)
  • Early adopters may gain competitive advantage (but does not last indefinitely as competitors will invest and catch up sooner or later)
    
    • At best, technologies provide TEMPORARY competitive advantages to the early adopters

Question 107

What is the concept of autonomous organizations about?

Answer 107

A company that runs on the blockchain in a DECENTRALIZED way in which different individuals around the world contribute with their code to make the contracts happen.

What you do not get it the branding, marketing etc.

Fx. ride hailing on the blockchain

• Contract 1:
  
  • Find a car closest to me that can take me to my destination
• Contract 2: Pay the driver based on distance traveled
• Last… driver & rider ratings recorded on the blockchain

Question 108

How can blockchain increase strategic value?

Answer 108

• Speed up and increase transparency of supply chains
• Enhance trust between parties
• Speed up some organization processes through smart contracts

Question 109

How does AI work? the three levels

Answer 109

1. Supervised learning
   
   1. A human is providing the labels ⇒ Telling the computer whether something is a car or not (if that is what it should determine)
      
      1. Can be used for credit risk evaluation and image labeling
2. Unsupervised learning
   
   1. You feed data and the computer generates some output ⇒ Fx. when Netflix or Amazon provide you recommendations “people who liked X also liked Y”, “people who bought X, also bought Y”
      
      1. Can be sued for recommendation systems and machine translation
3. Reinforcement learning
   
   1. Can be used for process control and cool robots

Question 110

What is HIPPO?

Answer 110

Highest-paid person’s opinion

Classical issue in corporations ⇒ It destroys value

Question 111

What are the three main ways in which you can structure a MNC?

Answer 111

1. Centralization
   
   • Advantages
     
     • Economies of scale
     • Easier to control
   • Two types:
     
     • UN Model
       
       • All subsidiaries are treated the same
     • Hierarchy
       
       • Key decisions are centralized
2. Decentralization
   
   • Some subsidiaries report to and cooperate with both alliance partners, the HQ as well as other subsidiaries.
3. Differentiation (Nohria and Ghoshal 1997)

• Subsidiaries differ in size, age, resources, responsibilities and autonomy
• Subsidiaries establish different relationships

Question 112

How does value chain relate to the power of subsidiaries?

Answer 112

• The more/higher upstream activities the subsidiary undertake activities in, the more power it has.
  
  • I.e. if a subsidiary has a production unit, it is likely more powerful than one who only has sales and marketing (which the subsidiary with production likely also has)

Question 113

What has been the historical path of organizing multinationals?

Answer 113

• HQ Centric ( 1900-1960s)
  
  • Home country innovates
  • Clear separation
  • Rest of the world sells
• Key markets (1970s-1980s)
  
  • R&D sites in multiple regions (scanning but hard to transfer knowledge to HQ)
  • Empirically, we saw that growth was limited to a few key markets
• Democracy (1990s-2010s)
  
  • New ideas can emerge anywhere in the world
    
    • In units close to customers, suppliers etc.
  • Local responsiveness and adaptation as a result of growing emerging markets and location-specific demands/preferences

Question 114

What are the 4 roles for subsidiaries? (Bartlett and Ghoshal 1986)

Answer 114

1. Strategic leader
   
   1. Highly competent national subsidiary + strategically important market
   2. Serves as a partner of headquarters in implementing and developing strategies → Not only implement, but also develop corporate strategy
2. The black hole
   
   1. Important market
   2. Small/undeveloped subsidiary; local rivals are better
3. Contributor
   
   1. Has distinctive capabilities + strategically unimportant/small market
   2. → Use the subsidiary’s skills company-wide
4. Implementer
   
   1. A national organization in a less strategically important market that still has enough competence to maintain its local operation
   2. → Focus on earning money in the market: milking, milking, milking

Question 115

What is the role of the strategic leader subsidiary? (Bartlett and Ghoshal 1986)

Answer 115

• Highly competent national subsidiary
• Strategically important market
• Serves as a partner of headquarters in implementing and developing strategies
  
  • → Not only implement, but also develop corporate strategy

(Similar to Birkinshaw and Morrison’s (1995) “World Mandate” (not asked for in body of knowledge))

Question 116

What is the role of the Black Hole subsidiary? (Bartlett and Ghoshal 1986)

Answer 116

• Important market
• Small / undeveloped subsidiary where local rivals are better
  
  • → “Spy” on competitors to develop a full-fledged business
• Markets in which a strong presence is needed in order to maintain the company’s global position ⇒ Often a large, sophisticated and competitive market like US or Japan

Question 117

What is the role of the Contributor subsidiary? (Bartlett and Ghoshal 1986)

Answer 117

• Strategically unimportant/small market
• Has distinctive capabilities
  
  • → Use the subsidiary’s skills company-wide

(Similar to Birkinshaw and Morrison’s (1995) “Specialized Contributor” (not asked for in body of knowledge))

Question 118

What is the role of the Implementer subsidiary? (Bartlett and Ghoshal 1986)

Answer 118

A national organization in a less strategically important market that still has enough competence to maintain its local operation

→ Focus on earning money in the market: milking, milking, milking

(Similar to Birkinshaw and Morrison’s (1995) “Local Implementer” (not asked for in body of knowledge))

Question 119

What is the difference between Hierarchy and Heterarchy? (Birkinshaw & Morrison 1995)

Answer 119

Question 120

Are up- or downstream activities most valuable and transferable?

Answer 120

• UPSTREAM
  
  • Often more “universal” and thus transferable
  • More valuable
  • Examples:
    
    • R&D
    • Manufacturing
• DOWNSTREAM
  
  • Often highly contextualized = local-for-local
  • Less valuable
  • Examples
    
    • Marketing
    • Sales

Question 121

What is the definition of subsidiary autonomy (Brooke 1984, Birkinshaw and Morrison 1995)

Answer 121

The ability of units and subunits “to take decisions for themselves on issues that are reserved to a higher level in comparable organizations” (Brooke 1984)

It is the thus the degree to which the foreign subsidiary of the MNC has strategic and operational decision-making authority (O’Donnell 2000)

Question 122

What are some of the potential downsides of high subsidiary autonomy?

Answer 122

• Empire building → subsidiary management acts:
  
  • For the benefit of their host country
  • For their own benefit
• May happen due to:
  
  • Host country laws
  • Customers requirements
  • When the subsidiary has specific resources and capabilities

(principal-agent problem that can destroy value for the MNC)

Question 123

What is the difference between strategic and operational autonomy? (Birkinshaw and Morrison 1995)

Answer 123

Operational autonomy = Implementation

Strategic Autonomy = Strategy-development + Implemenation

Question 124

What is strategic autonomy? (Birkinshaw and Morrison 1995)

Answer 124

Strategic autonomy = Autonomy of the foreign subsidiary to part-take in strategy development on behalf of the organization.

= Strategy-development + Implementation

The more important the foreign subsidiary is, the more strategic autonomy it was found to have = World mandate.

Question 125

What is operational autonomy? (Birkinshaw and Morrison 1995)

Answer 125

Operational autonomy = Autonomy of the foreign subsidiary to take decisions necessary to conduct business and run operations in that particular market.

= Implementation

Question 126

Why was operational autonomy not significantly different between subsidiary types?

Answer 126

Because any subsidiary needs operational autonomy to conduct their work = the explanation offered by Birkinshaw and Morrison (1995)

Question 127

What are the main results of Birkinshaw and Morrison’s research (1995)?

Answer 127

• Strategic autonomy does in fact differ between subsidiary role
  
  • World mandate with highest
  • Local implementer with lowest as would be expected
• Purchases and sales from and to other corporate affiliates within the organization was substantially lower for world mandates indicating less dependence on the MNC
• Local implementers had a significantly lower level of international configuration for downstream activities (distribution, sales, service, advertising) (see graph)
• World-mandate → most heterarchy like for subsidiary-parent relationship by virtue of its higher level of strategic autonomy + result of higher independence.

Question 128

What is the TRADITIONAL view of the MNC and its environment?

Answer 128

Traditional view

• Dyadic HQ to subsidiary analysis
• Clear separation between organization and its environment; suppliers, regulators etc.
  
  • Environment is exogenous

Question 129

What is the NETWORK view of the MNC and its environment?

Answer 129

Network view of MNC

• Geographically dispersed organizations with HQ and national subsidiaries
• Management of a network of subsidiaries with diverse goals
• They are embedded in an external network of other organizations, customers, suppliers, market institutions and so forth. (Enmeshed)
  
  • The company depends on the environment for its survival
  • MNC’s structure and configuration of resources is affected by the environment

= The MNC gains competitive advantages from scope advantage of the network.

Question 130

What is the relationship between the company and its environment in the two different views? (traditional and network)

Answer 130

Traditional view

• Dyadic HQ to subsidiary analysis
• Clear separation between organization and its environment; suppliers, regulators etc.
  
  • Environment is exogenous

Network view of MNC

• Geographically dispersed organizations with HQ and national subsidiaries
• Management of a network of subsidiaries with diverse goals
• They are embedded in an external network of other organizations, customers, suppliers, market institutions and so forth. (Enmeshed)

Question 131

*What is the idea of a DIFFERENTIATED network? and how do you distribute your supply chain in such a view? * (Nohria and Ghoshal 1997)

Answer 131

• Subsidiaries differ in size, age, resources, responsibilities and autonomy
• Subsidiaries establish different relationships

1. LOCAL-FOR-LOCAL
   
   1. Marketing
2. Spread across DIFFERENT COUNTRIES
   
   1. Raw materials
   2. Talent pool
3. Concentrated in LEAD MARKETS
   
   1. R&D

This DIFFERENTIATED network approach to foreign subsidiaries thus opposes the UN model assumption of all subsidiaries being treated in a uniform matter.

= Differentiated approach leads us back to Implementer, Contributor, Black Hole and Strategic Leader.

Question 132

How is resource-dependency defined? (Luo 2003)

Answer 132

When “subsidiaries rely on locally-owned resources that cannot be sourced from elsewhere”.

Question 133

What can the MNC do to lessen resource dependency? (Luo 2003)

Answer 133

Invest in better relationships/links between MNE and subsidiary, thereby limiting risk/dependence on the local possessors.

Ways to achieve better links/relationships:

• Allow for local responsiveness
  
  • This makes local managers able to respond to the unique environment and its preferences
• Allow control flexibility
  
  • This makes local managers able to alter decisions to cope with emerging conditions in the local market

= More freedom both enhances local managers flexibility, enhances motivation and improves parent-to-subsidiary relationship.

Question 134

Both resource-dependency and dynamic capability are concerned about “intra-corporate links” but for which reasons?

Answer 134

• Resource-dependency:
  
  • Explains the importance of intra-corporate links i_n reducing external dependence_
• Dynamic capability
  
  • Explains the importance of intra-corporate links in bolstering a subsidiary’s strategic adaptation to the host country environment

Question 135

What are the 4 parent-to-subsidiary links presented by Luo (2003)?

Answer 135

1. Resource commitment
2. Intra-network information flow
   
   1. The extent to which the subsidiary shares information with the rest of the MNE (HQ and other subsidiaries)
      
      1. Important for gaining information and interpreting that information for both local managers and HQ
3. Local Responsiveness
   
   1. The more understandable HQ is, the more freedom local managers have to make adaptations to the local market
4. Control flexibility
   
   1. Concerns the extent of HQ control over subsidiary in budgeting, output and bureaucratic control mechanisms

Question 136

*How do environments modify the parent company-to-subsidiary relationship?* (Luo 2003)

Answer 136

The more unique the local environment and market is, the more freedom must be given to the local manager to succeed.

Hence, the local environment will affect the company-to-subsidiary relationship in terms of:

• Market opportunities = The more market opportunities
  
  • The more resource commitment likely will be given
  • The more important information flow and learnings will be
  • The more local responsiveness will likely be allowed to succeed in the market
  • The more control flexibility will likely be given to pursue the emerging opportunities (budgeting, output and less bureaucratic control)
    
    • POSITIVE correlation between 4 links and subsidiary performance
• Regulatory interference = The stricter and the more complex local regulations are towards foreign businesses
  
  • Resource commitment may be restricted to a certain minimum or maximum
    
    • NEGATIVE correlation between 4 links and subsidiary performance
• Structural uncertainty = The higher the volatility of the local industry in local market
  
  • • POSITIVE correlation between 4 links and subsidiary performance

Question 137

What are structural holes? (Granovetter 1983)

Answer 137

Structural holes are the links between two groups of people who would benefit from exchanging information/engaging.

Question 138

Which roles do strong ties usually play and what roles do weak ties play? (Granovetter 1983)

Answer 138

• Strong ties
  
  • Decision-making is highly influenced by strong ties
  • Often Social ties
• Weak ties
  
  • The bridges over which innovations cross boundaries of social groups
  • Often business-professional ties

Question 139

What is strategic about strategic networks of firms? (Jarillo 1998)

Answer 139

“Networks are conceptualized as a mode of organization that can be used by managers or entrepreneurs to position their firms in a stronger competitive stance. That is why the term ‘strategic’ has been added to the ‘networks’”

• The networks should provide more benefits than the input put in.
• An arrangement where activities are farmed out to the most efficient supplier while only keeping the activity in which one has a comparative advantage + lower transaction cost (TC)
  
  • Specialization is good for all suppliers as total cost is lowered

Question 140

Why would a company join a network? How do networks benefit an individual company? (Jarillo 1998)

Answer 140

• To sustain their competitive advantage
  
  • = The network lets you focus on your competitive advantage and producing what you are specialized in and buy the rest
  • When you are in a network, your TCs are lower. Hence, you will specialize further and buy things in the market.
• To reach more people easily + knowledge
• Inputting less into the network than you gain in output from the network.

Question 141

What are the three different network structures? (Jarillo 1988)

Answer 141

1. Hierarchical
   
   1. Fully structured approach to organization building. Two-way communication through chains.
2. Mix
   
   1. Partly structured organizational building
   2. Sometimes skipping links in the organizational chain-structure
3. Mesh
   
   1. Much less structured and more dynamic
   2. The individual or individual department is in direct contact with whomever they need to be in contact with without using intermediary links

Question 142

What are the 4 forms of organizing economic activity? (Jarillo 1986)

Answer 142

• Classic Market
  
  • an organizational arrangement where many players interact on a spot basis
• Bureaucracy
  
  • the antagonistic labor-management relationship
  • a hierarchical organization but many of its characteristics-particularly those referring to transactions costs are those of an open market.
• Strategic network
  
  • An arrangement where activities are farmed out to the most efficient supplier while only keeping the activity in which one has a comparative advantage + lower transaction cost (TC)
    
    • Specialization is good for all suppliers as total cost is lowered
  • A strategic network is superior BUT hard to achieve.
• Clan
  
  • long-term relationships, carried out through non- specified contracts within the formal environment of an organization.

Question 143

What benefits justify the existence of networks? (Jarillo 1988)

Answer 143

All companies, in the long-term, takes out a larger value than they put into the network

Networks makes it possible to transact with lower transaction costs.

= Saved time, better deals, more partnerships, larger revenues, more knowledge etc.

Question 144

What does embeddedness mean and what are the 4 types? (Beugelsdijk & Hospers 2005)

Answer 144

Embeddedness = things happen in a context

• Cognitive
  
  • When rational economic action is limited by uncertainty, complexity, and costs of information
• Political
  
  • The political context the economic action is carried out within
• Structural
  
  • The social networks and relationships economic exchanges takes place within
• Cultural
  
  • Economic assumptions, rules and rationality are limited and shaped by the cultural context; culture, norms

Question 145

What are the pros and cons of embeddedness? (Beugelsdijk and Hospers)

Answer 145

• Pros
  
  • Networks and embeddedness makes it possible to transact with lower TC
• Cons
  
  • Free-riding
  • Reciprocity ⇒ Obligations
  • Limit individual actions ⇒ You sort of have to adhere to the social pressure and the norms of that network ⇒ You might lose some adaptive capacity / lock-in effects

Question 146

What can be said about “degree” of embeddedness and firm’s economic success? (Beugelsdijk and Hospers)

Answer 146

There is some optimal level of embeddedness found in the middle. Hence, there is not only decreasing benefits of the degree of embeddedness, it also turns negative = it can become over-embedded.

Question 147

What are some important differences between market and hierarchy forms of structure concerning “buying and producing”?

Answer 147

Question 148

What are the three characteristics of transaction issues? (Rindfleisch & Heide 1997)

Answer 148

1. Bounded rationality
   
   1. The idea that one cannot have complete information
2. Asset specificity
   
   1. That assets are specific to a particular company AND
   2. Assets produce the highest return when they are used together and for the original purpose
3. Opportunism
   
   1. Self-interested behavior, even at the expense of others

Question 149

What is bounded rationality? (Rindfleisch & Heide 1997)

Answer 149

The idea that one cannot have complete information

• Seller often know more than the buyer (market for “lemons”)
• Unknown unknowns = sometimes we don’t even know, that we are missing information
• EVEN IF we have perfect information, it might not be enough as we might not have time to analyze it + sense-making of data can cause issues and biased interpretation

Question 150

What is asset specificity? (Rindfleisch & Heide 1997)

Answer 150

That assets are

1. Specific to a particular company
2. Assets produce the highest return when they are used together and for the original purpose
   
   1. Might be hard to use for other purposes​
      
      • Site specific assets ⇒ things that cannot me moved or are only available in certain locations
      • Physical asset specificity ⇒ designed for a single purpose and thus hard to repurpose
      • Human asset specificity = specialized human skills. Hard to transfer between individuals
      • Time specificity = value depends on when the asset reaches the consumer

Question 151

What are the 4 types of asset specificity? (Rindfleisch & Heide 1997)

Answer 151

• Site specific assets ⇒ things that cannot me moved or are only available in certain locations
• Physical asset specificity ⇒ designed for a single purpose and thus hard to repurpose
• Human asset specificity = specialized human skills. Hard to transfer between individuals
• Time specificity = value depends on when the asset reaches the consumer

Question 152

What is opportunism? (Rindfleisch & Heide 1997)

Answer 152

Opportunism is self-interested behavior, even at the expense of others

• Violating agreements or shared norms
  
  • Safeguarding against opportunism requires contracts, which are costly

Question 153

What are the implications of ICT for transaction costs?

Answer 153

• Reduce the time of communicating information
• Reduces the cost of communicating information

Hence

• It increases the number of alternatives to be considered, I.e. the number of potential suppliers to choose from.
• Possibly increases the quality of the selected alternative
• Decreases the costs of search and selection

= Lower TC leads to more firms going to the market rather than hierarchy (internal production)

Question 154

What are the implications of ICT systems for producers and buyers?

Answer 154

• Producers
  
  • Need to convince buyers to keep purchasing instead of submitting orders to the open market
  • Lock-ins can be an option to solve the issue
• Buyers
  
  • Buyers get a higher number of alternatives to choose from (for example Made-in-china.com)
    
    • and IT helps choosing / filtering the suppliers

Question 155

(What is safeguarding problems?) (Jarillo 1986)

Answer 155

A safeguarding problem arises when a firm deploys specific assets and fears that its partner may opportunistically exploit these investments.

Opportunism + Asset specificity.

Question 156

(What is an adaptation problem?) (Jarillo 1986)

Answer 156

An adaptation problem is created when a firm whose decision makers are limited by bounded rationality has difficulty modifying contractual agreements to changes in the external environment.

Bounded rationality

Question 157

(What is a performance evaluation problem?) (Jarillo 1986)

Answer 157

A performance evaluation problem arises when a firm whose decision makers are limited by bounded rationality has difficulty assessing the contractual compliance of its exchange partners.

Bounded rationality

Question 158

What are institutions? (institutional theory) (North, 1990 and Scott, 1995)

Answer 158

• Structures and activities that provide stability and meaning to social behavior (Scott, 1995)
• The rules of game in a society (North, 1990)

Question 159

What are the pillars of institutions within organizational & political institutional theory/new institutionalism? (DiMaggio & Powell; Scott + Busenitz, Gómez & Spencer 2000)

Answer 159

• Regulative:
  
  • Rules and regulations ‘that promote certain types of behavior and restrict others’ (mechanism in place to enforce in order to conform)
• Normative:
  
  • Social norms, values, beliefs and attitudes that are socially shared and carried out by individuals (“correct” way of doing things; moral support)
• Cognitive-cultural:
  
  • Generally shared perceptions of what is typical or taken for granted (Imitation; cultural support)

Question 160

What are regulative institutions? (Scott 1995; Busenitz, Gomez and Spencer 2000; Trevino, Thomas & Cullen 2008)

Answer 160

• Regulative:
  
  • Rules and regulations ‘that promote certain types of behavior and restrict others’ (mechanism in place to enforce in order to conform)
    
    • Laws
    • Regulations
      
      • e.g. intergovernmental agreements, traffic laws
    • Policies
      
      • e.g. confidentiality policies

Question 161

What are normative institutions? (Scott 1995; Busenitz, Gomez and Spencer 2000; Trevino, Thomas & Cullen 2008)

Answer 161

• Normative:
  
  • Social norms, values, beliefs and attitudes that are socially shared and carried out by individuals (“correct” way of doing things; moral support)
    
    • Social norms
    • Values
      
      • e.g. environmental attitudes
    • Beliefs
    • Assumptions

How it works?

• Enforcement
• Coercion

Question 162

What are cognitive-cultural institutions? (Scott 1995; Busenitz, Gomez and Spencer 2000; Trevino, Thomas & Cullen 2008)

Answer 162

• Cognitive-cultural:
  
  • Generally shared perceptions of what is typical or taken for granted (Imitation; cultural support)
    
    • Cognitions
    • Schemas
    • Frames
    • Shared knowledge

Question 163

What is the difference between normative and cognitive institutions?

Answer 163

• Normative pillar: can be rationally explained
• Cognitive: can’t be explained rationally

→ can sometimes be combined if you don’t have sufficient data when doing research (you just distinguish between regulative and others/non-regulative)

Question 164

Name 5 measures for the regulative institutional pillar = TAAPE (Scott 1995; Busenitz, Gomez and Spencer 2000; Trevino, Thomas & Cullen 2008)

Answer 164

• Trade-related and FDI
  
  • Trade & Tax reforms
  • Account liberalization = Financial account liberalization = Net increases and decreases in ownership of a country’s assets
• World Bank’s World Governance indicators, World Economic Forum’s Global Competitiveness Report, IMDs World Competitiveness Yearbook
  
  • Antitrust regulation
  • Property right protection (IP)
  • Ease of doing business index

Question 165

Name 5 measures for the normative institutional pillar = (Scott 1995; Busenitz, Gomez and Spencer 2000; Trevino, Thomas & Cullen 2008)

Answer 165

​CEPPI

• Corruption
• Education level
• Political risk/uncertainty
• Privatization level
• Investment treaties

Question 166

Name 3 measures for the cognitive-cultural institutional pillar = HDD (Scott 1995; Busenitz, Gomez and Spencer 2000; Trevino, Thomas & Cullen 2008)

Answer 166

• Hofstede’s dimensions
• Differences in languages
• Differences in religions

Question 167

What are the five different levels of institutions?

Answer 167

1. World
   
   1. UN → security council, agreements etc.
2. Country / Society
   
   1. Laws (regulative)
   2. Culture / Tradition
3. Industry / organizational field
   
   1. Negotiation rules (normative)
   2. Charters - industry organizations (normative)
   3. Gender prefs (cognitive)
   4. Production safety regulations (regulative)
4. Organization
   
   1. Payment policies (regulatory)
   2. Organizational culture (cognitive)
   3. CSR (normative)
5. Organizational department / subsystem
   
   1. Power distribution (normative)
   2. Organizational chart (regulative)

Question 168

What does isomorphism mean?

Answer 168

In sociology, an isomorphism is a similarity of the processes or structure of one organization to those of another, be it the result of imitation or independent development under similar constraints (Wikipedia, 2018)

Question 169

*What is legitimacy in institutional theory?*

Answer 169

Businesses need legitimacy and credibility to survive and thrive.

Legitimacy is gained from acceptance by conforming to rules and norms.

Hence, legitimacy is gained through isomorphism (= becoming similar to the environment)

• Organizational structures are similar
• Organizations behave similarly

Question 170

What are the three types of isomorphism?

Answer 170

• Coercive isomorphism
  
  • Businesses must conform to the regulations in place (regulative pillar)
• Normative isomorphism
  
  • Businesses must adapt to the local environment/market and act appropriately (Normative pillar)
• Mimetic isomorphism
  
  • Businesses must mimic/Imitate the host country in terms of its cognitive-cultural characteristics (Cognitive-cultural pillar).

Question 171

What is coercive isomorphism, which institutional pillar does it relate and what are some examples of coercive isomorphism?

Answer 171

= Isomorphism concerning the regulative pillar of institutions

Businesses must conform to the regulations in place.

Examples - CONFORMING to:

• Retail regulations: Pricing, store opening hours
• Property rights
• Contract enforcement

Question 172

What is normative isomorphism, which institutional pillar does it relate and what are some examples of normative isomorphism?

Answer 172

= Isomorphism concerning the normative pillar of institutions

Business must adapt to the local environment/market and act appropriately.

Examples: ADAPTING to:

• Beliefs and moral obligations
• Customer preferences and expectations
• Accepted industry practices

Implications

• Internationalization (Relates to Psychic distance) - Greater likelihood of entry if similar
• Product adaption

Question 173

What is mimetic isomorphism, which institutional pillar does it relate and what are some examples of mimetic isomorphism?

Answer 173

= Isomorphism concerning the cognitive-cultural pillar of institutions

Businesses must mimic/Imitate the host country in terms of its cognitive-cultural characteristics.

Isomorphic pressures on firms:

• Uncertainty
• Habits and inertia

Examples:

• Must make sure that the product or practice is culturally suitable
  
  • McD beef burgers in India = No good
• Habits of the locals. Siesta at lunch time in Spain = well that’s how we do it then.
  
  • (Habits can be linked to path dependence)

Question 174

*What are the differences between normative and mimetic isomorphism?*

Answer 174

They easily become quite close as with the normative and cognitive-cultural institutional pillars. The major difference is ADAPT vs. IMITATING.

Question 175

*What are the two types of imitation and how do they differ?*

Answer 175

Imitator = late-movers who assume that risks and costs have been absorbed by the first-movers.

There are two types of MIMETICING/IMITATION by these late-movers:

1. Frequency-based imitation
   
   1. “Follow the crowd”
2. Trait-based imitation
   
   1. “Follow the successful”

Implications for:

• Entry mode
• Locations
• Practices

Creates legitimacy

• The more profit → The more legitimate

Question 176

(What is vendor-managed inventory and what are the benefits of such?)

Answer 176

You give your vendors access to information about how much inventory you have left.

Fx. a retailers lets its suppliers know about its inventory.

When the inventory is low, the suppliers will know and always make sure the retailer has sufficient supply/inventory of goods.

Benefits?

• Reduces the overhead costs of vendors/retailers
• Provides producers/suppliers with valuable sales information that reduces dependability on forecasts

Question 177

(What is the solution to the bullwhip effect?)

Answer 177

• Share information
• Reduce batch sizes
• Stabilize prices
• Minimize excessive orders

Question 178

(What are the advantages and disadvantages of sharing knowledge?) = (sharing information is enabling just-in-time manufacturing).

Answer 178

Advantages:

• Knowledge flow makes the supply chain more transparent and provide a better understanding of customer needs and value propositions
• Broader knowledge about the full value chain result in better understanding of market trends and thus result in better planning and product development

Disadvantages:

• Knowledge might be leaked to competitors
• Supply chain partners compete about margins
  
  • Wanting partners to win, but not at own expense

Question 179

*What is just-in-time manufacturing and what are the benefits?* (Gunasekaran, Lai and Cheng 2008)

Answer 179

Just-in-time manufacturing

• Suppliers deliver products directly to the customer’s manufacturing facility
• Delivers based on customer demands = PULL inventory flow
• With just-in-time manufacturing, the manufacturer must be able to quickly react to changing customer demands = AGILITY is needed

Benefits:

1. Lower inventory costs
2. Lower waste
3. Quick detection of quality issues before large inventories build up
4. Units are produced as they are needed

Question 180

(How can you go beyond knowledge sharing?)

Answer 180

Joint sense making

• Create “Common Understanding” of supply chain information that affects several firms
• Both operational and strategic issues
• Cross-company teams
• Significant face-to-face communication (e.g. periodic meetings of logistics managers)

Knowledge integration

• Frequent information-driven readjustments of aspects of the supply chain relationship (e.g. formal contracts, technology used, user needs)

Question 181

*What are the risks of international supply chains and just-in-time manufacturing and how can they be mitigated?*

Answer 181

HIP = High dependency, International transport, Products sould-out

• High dependency due to specialization
  
  • Fx. Kureha Corporation account for 70 % of the market for polymers, which are used for for example Ipod batteries
    
    • If a disaster hits that supplier, production will stop
  • Risk mitigation
    
    • Have multiple suppliers although you have to pay a slight price premium for the parts = This is a trade-off
• International transport time
  
  • Downtime / delays from international suppliers can become extra costly due to long transport time
  • Risk Mitigation
    
    • Move suppliers close to production
• Products being sold-out/unavailable due to Just-in-Time and agile manufacturing
  
  • Risk mitigation
    
    • Just-in-CASE buffer systems = This is again a trade-off

Question 182

What are the considerations one take in figuring out where to locate production facilities? = CROP

Answer 182

1. Country factors
   
   • Resource availability
   • Costs (labor etc.)
   • Infrastructure:
     
     • Electricity, water etc.
     • Services for employees (Healthcare, housing, education)
   • Country of origin effects (“Made in ..”)
2. Regulation (Government policies)
   
   • Political stability (elections, corruption etc.)
   • Trade policies (tariffs, trade barriers)
   • Investment incentives (lower taxes, land offers, job training)
   • Foreign trade zones (trade partners by geography + tariffs on import/export
3. Organizational issues
   
   • Firm’s business strategy
     
     1. Cost leadership vs. quality vs. differentiation
   • Organizational structure:
     
     1. Centralized vs. decentralized
4. Product factors
   
   • Value-to-weight ratio
     
     • Transportation costs - heavy vs. light products
   • Required production technology
   • Customer feedback: Is it important to obtain and incorporate into production quickly

Question 183

(What are the three distinct qualities of top-performing supply chains?)

Answer 183

1. Agility: They are agile to react to sudden changes in demand
2. Adaptability: They adapt as environment and market changes over time
3. Alignment: They align interests of all members

Question 184

(What are the three heuristics presented by Kahneman and Tversky) (1974)?

Answer 184

1. Representativeness
   
   1. Judging the likelihood of an outcome based on a) Prior outcomes; b) Predictability; C) Sample size
2. Availability
   
   1. Deciding based on the ease of recalling instances/occurrences
3. Adjustments and anchoring
   
   1. Deciding by starting with an initial anchor point value and adjusting from there

Question 185

(What are the difference between system 1 and 2?)

Answer 185

System 1

• Intuition
  
  • Usually flawed (include biases) or does not work
• Automatic, unconscious, evolutionary ancient
• Improved by “just living life” and experience

System 2

• Complex computations; “Agency, choices, concentration”
• Slow, conscious
• Improved by skill acquisitions

Question 186

What does Worldwide cost efficiency mean? (Hamel and Prahalad 1985)

Answer 186

The minimum world market share a company must capture to underwrite the approåriate manufacturing-scale and product-development effort needed for global brand building.

Question 187

What does retaliation mean? (Hamel and Prahalad 1985)

Answer 187

The minimum market share the company needs in a particular country to be able to influence the behavior of key global competitors. For example, with only 2-3 % market share of the foreign market, a company may be too weak to influence the pricing behavior of its foreign rivals.

Question 188

What does Home country vulnerability mean? (Hamel and Prahalad 1985)

Answer 188

​The competitive risks of having a national market share leadership - if that national leadership position is not accompanied by international distribution.

Market leadership at home can create a false sense of security.

= If a company uses its national market share leadership to support high price level, foreign competitors will enter the market and compete away the market leader’s profitability by offering lower prices.

(These entrants must be confident that the local company has little freedom for retaliation)

Question 189

Why would one go for first-mover and why second-mover advantages?

Answer 189

• First-mover
  
  • Above-average returns until response
  • Customer loyalty
  • Established market share
• Second-mover advantage
  
  • Learn from mistakes: e.g. customer raction