International diversification

Question 1

Wat zijn de motieven voor internationale diversificatie?

Answer 1

Motivations for international diversification

• Increased market power
• The use of excess resources and intangible assets - Spreading risks
• Reducing transaction costs
• Achieving economies of scope and scale
• Managerial hubris

 International environment presents managers with supplementary opportunities, but the diversification logic remains the same

Question 2

Benoem de 2 motivaties voor international diversification die gebaseerd zijn op fundamentele mechanismes

Answer 2

1) Exploiting differences in sourcing/market potential across countries

 A firm might gain cost advantage by configuring its value chain and placing each activity in the country that represents the least cost for the most intensively used factors (zware arbeids bijv. In lage loon landen azie)

2) Exploiting synergies through economies of scale and scope

 Firms that developed highly differentiated products or assets for their home markets can choose to go abroad by leveraging their products and assets to expand their markets and benefit from economies of scale  Economies of scope exist when it is less costly to serve two or more businesses or market together (countries) than it is to serve them separately.

Question 3

Benoem de 6 brede motivaties voor internationale diversificatie

Answer 3

1) Resource seeking motives; secure key supplies / the objective of reducing transaction costs - Exploit factor cost differences and access low cost factors of production
2) Market seeking motives; important for firms that have some intrinsic advantage, such as technology – based patent or strong brand image
3) Worldwide scanning and learning capability: informational advantage that could encourage it to relocate sources more efficiently or develop more advanced product and process technologies
4) Competitive positioning: Cross subsidization of markets / market power advantages - Managerial motives; quickly increase the size of the firm. International diversification discount

5 scale and scope economies

6 National differences

Question 4

Choice between related and unrelated international diversification; depends on 3 sets of factors. Welke zijn deze?

Answer 4

Environmental, internal (resource based) and managerial

Question 5

Benoem de Forces for global integration and coordination

Answer 5

External - Technological forces; industrial development / improved transportation / improved information management which decrease the cost of global integration - Social forces: rising levels of income / increasing demand for global products - Political and legal forces: reducing barriers for international trade - Competition: free market forces, global markets

Internal - Worldwide learning - Multinational flexibility - Global efficiency by increasing value of output (higher revenue) and lowering input (costs) Managerial forces for global integration - Agency theory & managerial opportunism.

Question 6

Benoem de Forces for local differentiation and responsiveness

Answer 6

External - Government demands - National, social, economic and political characteristics of the host countries - Cultural differences / local needs

Internal - Transportation & coordination costs (scheduling worldwide) - New flexible technologies

Managerial - Senior management may have strong beliefs for local differentiation

Question 7

Er zijn 4 worldwide corporate level strategies. Benoem deze

Answer 7

International strategy

Multinational strategy

Global strategy

Transnational strategy

Question 8

Wat is International strategy?

Answer 8

International strategy = overseas operations that support the domestic parent. Selling abroad and transferring it to the overseas operators.

 Deficiencies in both efficiency and flexibility because they do not benefit from either centralized/high scale operations or from high degree of local responsiveness

 key knowledge and skills move from HQ to foreign subsidiaries

 Transferring knowledge and skills between countries leads to a corporate advantage only if the similarities between countries meet 3 conditions

o Activities are similar enough that sharing expertise is meaningful

o Transferring knowledge and skills pertains to activities important to a competitive advantage

o The knowledge and skills transferred represent a significant source of competitive advantage for the receiving national subsidiary

 Equivalent van Porters ; transferring skills’

Question 9

Wat is Multinational strategy?

Answer 9

Multinational strategy = modifying their products, strategies and management practices country by country.

 Rely on multiple, nationally responsive, business level strategies that have been developed and implemented by a portfolio of local subsidiaries

 Focus primarily on national differences to develop a corporate advantage

 Focus on revenue side

 Response to national differences and customer preferences / industry/ government

 Local autonomy, inefficient in exploiting knowledge of other national units

 Equivalent van Porters ‘portfolio management’

 Mergers & acquisitions rather than internal development

Question 10

Wat is Global strategy ?

Answer 10

Global strategy = global operating environment, with improved transportation and communication infrastructure and falling trade barriers, firms may benefit from creating products for a world market and manufacture them on a global scale in a few highly efficient plants.

 Standardized products for an adequate cost

 Requires central coordination and control

 Depend on their global efficiency / best quality and cost positioning.

 High sourcing risks because of the concentration (usually centralization)

 A strong corporate culture is necessary to keep the national subsidiaries together and to achieve synergies  Often lacks responsiveness to local markets

 Emphasizes economies of scale

 Equivalent van Porters ‘sharing activities’

Question 11

Wat is Transnational strategy?

Answer 11

Transnational strategy =best of both. A transnational company focuses on exploiting each and every goal – means combination to develop layers of corporate advantage and exploit efficiency, flexibility and learning.

 Responsive to local needs but also capture the benefits of global efficiency

 Which resources should be centralized and which decentralized, either because of flexibility or the potential of economies of scale

 Combines the four corporate strategies identified by Porter

 Great risk of getting stuck in the middle, because global integration and local responsiveness ofter require different skills and capabilities