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International Strategy in a semiglobalized world Flashcards

1
Q

What are the two types of pressure a business faces?

A

Pressure to be cost productive
Pressure to be locally responsive

Firms are trying to standardize their products - repeat the processes to make it identical

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2
Q

What are the conditions to standardize products?

A

Producing commodity type products that fill universal needs
Competitors are based in low cost locations
There is persistent excess capacity
Consumers are powerful and face low switching costs

To respond to these pressures, firms need to lower the costs of value creation

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3
Q

What does it mean to produce commodity type products that fill universal needs?

A

Water has different brands so firms want to give the lowest price

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4
Q

What does it mean when competitors are based in low cost locations?

A

Firms do not want to lose out on consumers which are price sensitive

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5
Q

What does it mean when there is persistent excess capacity?

A

Firms can lose out on profits; wasting excess resources

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6
Q

What does it mean when consumers are powerful and face low switching costs?

A

Firms want to reduce cost because that’s how they differentiate themselves

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7
Q

What are the conditions for local responsiveness?

A

CHID:
Differences in Consumer tastes and preferences
Host government demands
Differences in Infrastructure and traditional practices
Differences in Distribution channels

Firms need to differentiate their products and marketing strategies

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8
Q

What is differences in consumer tastes?

A

Firms need to adapt to the country taste

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9
Q

What is differences in traditional practices and infrastructure?

A

Firms need to change the way they operate

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10
Q

What are different distribution channels?

A

Firms need to adapt if the country is e-commerce based or shop based

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11
Q

What is host government demands?

A

Firms need to adapt to preferences

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12
Q

How do firms internationalize?

A

Expand the market for domestic product offerings
Realise location economies
Realise greater cost economies from experience effects
Leverage valuable skills developed in foreign operations

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13
Q

How does a firm internationalize by expanding the market?

A

Expand the market for domestic product offerings by selling products in international markets

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14
Q

How does a firm internationalize by looking for location economies?

A

Realise location economies where they can perform the job most efficiently and effectively

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15
Q

How does a firm internationalize by looking for greater cost economies from experience effects?

A

Firms are better at some activities than others so they reduce the cost of value creation

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16
Q

How does a firm internationalize by leveraging valuable skills?

A

Reverse knowledge flow - when the host country gives information to the home country

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17
Q

How does a firm expand the market?

A

Leverage core competencies: skills within the firm that competitors cannot easily imitate

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18
Q

What is the international strategy?

A

Low pressure to be cost reductive and locally responsive

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19
Q

How does a firm use international strategy?

A

Take products and ship it abroad

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20
Q

What is the global standardization strategy?

A

High cost reduction pressure and low pressure for locally responsive

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21
Q

How does a firm use global standardization strategy?

A

Take products and make them most efficiently - increase profits through EoS, learning the effects and the location

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22
Q

What is the localisation strategy?

A

High pressure to be locally responsive and low pressure for cost reductions

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23
Q

Why does a firm use localisation strategy?

A

Want to match local tastes and preferences

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24
Q

What is the transnational strategy?

A

Most profitable
High pressure for cost reduction and locally responsive

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25
How does a firm use a transnational strategy?
Location economies, EoS, adapt and learning effects REVERSE KNOWLEDGE and MULTIDIRECTIONAL FLOW OF SKILLS
26
Why does a firm need to keep changing strategies?
Strategy changes over time Competition increases International and localisation strategies are the most common ways to start
27
How do you read a global matrix structure?
If product is above area - cost reduction is prioritized If area is above product - locally responsive
28
What do firms think about when choosing a mode of entry?
Control and resources
29
How do you read a diagram?
1. Look for shading - distribution of resources - where the firm's priorities lie 2. Solid/dotted line - solid is tight control and dotted is loose control Anything not standardized costs money
30
What are the basic entry decisions?
Internationalize? Why (strategic resource-seeking)? Where (CAGE distance)? When (timing)? What size (scale)? How (mode of entry)?
31
What do firms think about when they think of the "where?"?
Needs to be profitable The country needs to have a stable market economy The business needs to be suitable The business can satisfy unmet market needs
32
What are the proactive motivations to go abroad?
Firm is choosing to go abroad i.e. profits, unique products, tax benefits, EoS + learning effect
33
What are the reactive motivations to go abroad?
Firm is forced to go abroad i.e. overproduction, declining sales, excess capacity, competitive pressures, proximity to customers and ports
34
What is a core competency?
Resource, asset or capability that your firm has and is not easy to imitate
35
Why does a firm want to reduce the psychological distance?
To overcome the CAGE distance Learn taste+preference and create brand recognition
36
Why is the timing of entry important for firms?
First-mover advantages and disadvantages
37
What are advantages for first-movers?
Preempt rivals and capture demand Build sales volume Switching costs - tangible + intangible costs - people don't switch from another company to yours
38
What are the disadvantages for first-movers?
Pioneering costs - costs that early entrant needs to bear Innovation > regulations - you cannot regulate innovation that someone hasn't come up with yet; you have no idea what regulation is going to be put up
39
Why is the size of the firm important?
Large scale and small scale
40
Why is large scale entry important for firms?
+ may cause rivals to rethink market entry >< strategic commitments - anything that has a long-term impact that is difficult to reverse - may lead to domestic competition
41
Why is a small scale entry important for a firm?
+ time to learn about the market + reduces exposure risk - do not get as much market presence/experience
42
What are the different non-FDI entry modes?
Less control: Exporting Licensing - franchising
43
What are the different FDI entry modes?
More control: JAW GT Joint venture Acquisitions Wholly-owned subsidiary Greenfield investments Turnkey projects
44
What is exporting?
Often first method firms use to enter foreign market
45
What are advantages of exporting?
+ Low cost + Curve economies - more time you do something, the easier is it - firm can master the process easily
46
What are disadvantages of exporting?
- Lower-cost manufacturing locations may exist - High transportation costs - Tariff barriers - trade relationships change - Foreign agents may fail to act in the exporter's best interest
47
What is licensing?
Granting right to another entity for some time and receives royalty i.e. patents, copyrights, formulas, etc.
48
What are advantages of licensing?
+ No capital investment required + Exploits R&D + Avoids host-country regulations and cultural problems + Allows a company to test the market
49
What are disadvantages of licensing?
- Limited form of foreign market participation - Company could create its own future competitor
50
What is franchising?
Granting right by parent company to independent entity to do business in a prescribed manner
51
What are advantages of franchising?
+ Avoid costs and risks of opening foreign market operations
52
What are disadvantages of franchising?
- May inhibit firm's ability to take out profits - Geographic distance makes it hard to do QC
53
What is strategic alliance?
Two companies working together i.e. informal, JV, equity alliance
54
What are advantages of strategic alliance?
+ Facilitate entry into foreign market + Allows firm to share FC and risks of developing new products + Bring together complementary skills and assets that neither can do on their own + Help establish standards for industry
55
What are disadvantages of strategic alliance?
- Give competitors low-cost routes to new tech - Can give away more in strategic alliance than it receives
56
What is wholly-owned subsidiary?
100% ownership
57
What are advantages of wholly-owned subsidiary?
+ Control
58
What are disadvantages of wholly-owned subsidiary?
- Firms bear all costs
59
What is greenfield + aquisition?
Wholly-owned
60
What are advantages of greenfield and acquisitions?
Greenfield: + Allow firm to develop "tailor-made" subsidiary Acquisition: + Quick + Preempt their competitors + Less risky
61
What are disadvantages of greenfield and acquisitions?
Greenfield: - Slow - Risky - Problematic if competitor enters Acquisition: - Clash in culture - Inadequate pre-acquisition screening
62
What is turnkey project?
Somebody else does everything - you just turn the key
63
What are advantages of turnkey project?
+ Firms can earn great economic returns from the know-how required to assemble + Less risky
64
What are disadvantages of turnkey project?
- Firm can create competitor - No long-term interest in country - Tech is competitive advantage
65
What are types of transnational modes of entry?
Wholly-owned subsidiary M&A/Greenfield JV
66
What are types of international modes of entry?
Licensing Export
67
What are types of localisation modes of entry?
Turnkey
68
What are types of global standardization modes of entry?
Franchising
69
What is HRM?
Activities an organization carrier out to utilize its HR effectively - recruitment and retention of workforce - increase effectiveness of workforce
70
What is the staffing policy?
It is concerned with the selection of employees for a job - select people right skills for the job - involved developing and promoting corporate culture
71
What are the 3 different staffing policies?
Ethnocentric - international Polycentric - localisation Geocentric - global standardisation and transnational
72
What is ethnocentric?
Key management positions filled by parent-country nationals
73
What is polycentric?
Host country nationals recruited to manage subsidiaries, while parent country nationals occupy key positions at corporate headquaters
74
What is geocentric?
Best people sought for key jobs throughout the organization, regardless of nationality
75
What are advantages and disadvantages of ethnocentric?
+ unified cultures + overcomes lack of qualified managers - cultural narrow-mindedness - the people may think there is way to go up the company
76
What are advantages and disadvantages of polycentric?
+ reduce cultural narrow-mindedness + less expensive - gap between the home and host country
77
What are advantages and disadvantages of geocentric?
+ strong culture + informal - costly - difficult with immigration laws
78
What are advantages of expatriates?
- Knows the company's products and culture - Relates easily and efficiently to corporate headquarters - Business skills not available locally - **Who can you trust?** - Does not put the country ahead of the company - Fits the goals - international portfolio
79
What are disadvantages of expatriates?
- High costs - High failure rates - Long start-up times - Re-entry problems - Finding experiences managers to move is hard
80
What is expatriate failure?
Premature return of an expatriate manager Main reason - inability to adjust
81
How can firms reduce expatriate failure?
Better selection and training process Selection - self-orientation, others orientation, perceptual ability, cultural toughness, global mindset Training - cultural training, language training, practical local training
82
What is the criteria for selecting managers for overseas?
Competence, adaptability, personal characteristics
83
What are alternatives to long-term expats?
- Short-term - International commuter - Global expats
84
How can you be an expat?
Do your homework - know yourself - know your environment - find the gap and your specific needs Build relationships from diversified sources Ongoing assessment of the person-network fit and misfit
85
What are the benefits of being an expat?
- financial benefits - better quality of life - cultural and learning - travel - career development - family international exposure
86
What are challenges of being an expat?
- missing friends and family - language barriers - adapting to culture - social life - loss of identity and lack of stability
87
What is the balance sheet approach?
Most common approach to expat pay - equalize purchasing power so employees have same standard of living 5 components: FAT BB 1. Foreign service premium 2. Allowances of various types 3. Tax differentials 4. Benefits 5. Base salary
88
What are non-salary allowances?
- Relocation allowance - Mobility allowance - Travel - Education allowance - Medical

INTB 1203 (4 decks)

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