- Full and direct control of foreign market - Net cost of M&A must be lower than cost of FD and SA

- Cost of integrating targets underestimated - Benefits are overestimated - Synergie fail - Managerial Hubris (they can run it better than current) - Empire-building theory (managers want more power) - Entrenchment theory (key employees)

1. Global business managers - the top, strategists 2. Country managers - sense local opportunities 3. Functional managers - specialists 4. Corporate managers - overall leaders

1. The carrot - incentives 2. The stick - Internal and external monitoring

1. Impediments to Imitation 2. Early-mover advantage

1. Flight (the Isolated expat) 2. Fight (the Militant expat) 3. Follow (the assimilated expat) 4. Fit (the Cosmopolitan expat)

ISM Flashcards by Henriette Bos

Strategic Alliance

+ Share risk and costs
+ Access complimentary resources and distribution networks
- Learning race

How well did you know this?

Not at all

Perfectly

Solutions to learning race

Well defined learning area
Different physical location
Create alliance specific advantages

How well did you know this?

Not at all

Perfectly

M&A

Full and direct control of foreign market

- Net cost of M&A must be lower than cost of FD and SA

How well did you know this?

Not at all

Perfectly

Problems of M&As

Cost of integrating targets underestimated
Benefits are overestimated
Synergie fail
Managerial Hubris (they can run it better than current)
Empire-building theory (managers want more power)
Entrenchment theory (key employees)

How well did you know this?

Not at all

Perfectly

4 types of Managers

Global business managers - the top, strategists
Country managers - sense local opportunities
Functional managers - specialists
Corporate managers - overall leaders

How well did you know this?

Not at all

Perfectly

Reduce agency costs

The carrot - incentives

2. The stick - Internal and external monitoring

How well did you know this?

Not at all

Perfectly

How to create competitive advantage

Market-based ‘Outside in’

2. Resource based ‘Inside out’

How well did you know this?

Not at all

Perfectly

5 Market forces Porter

Entry
Rivalry
Substitutes
Powerful buyers
Powerful suppliers

How well did you know this?

Not at all

Perfectly

How do resources create a competitive advantage?

Valuable - generate value
Rare
Inimitable
Non-substitutable

VRIN

How well did you know this?

Not at all

Perfectly

Isolating Mechanisms

Impediments to Imitation

2. Early-mover advantage

How well did you know this?

Not at all

Perfectly

Impediments to imitation

Legal
Economies of scale
Greater access to inputs and customers
Intangible barriers

How well did you know this?

Not at all

Perfectly

Early Mover Advantage

Learning Curve
Reputation/Buyer Uncertainty
Buyer Switching Costs
Network effect

How well did you know this?

Not at all

Perfectly

Characteristics of Innovation

Type (Product, Process, Service etc)
Level (Radical vs Incremental)
Location (Architectural vs Component)
Effect (Enhancing vs Destroying)

How well did you know this?

Not at all

Perfectly

The Assignment Issue

The Multi-Domestic Organisation

Few global managers from dominant nationality

- Local personnel progress within subsidiary

How well did you know this?

Not at all

Perfectly

The Assignment Issue

The Global Design

Multi-cultural managers move around

- Managers integrate local personnel aspiring to a global career.

How well did you know this?

Not at all

Perfectly

Characteristics for Expat success

Tolerence of ambiguity
Flexibility of behaviour
Non-judgmentalness
Meta-communication skills
Goal-orientation
Empathy
Sociability

How well did you know this?

Not at all

Perfectly

Types of Expat

Flight (the Isolated expat)
Fight (the Militant expat)
Follow (the assimilated expat)
Fit (the Cosmopolitan expat)

How well did you know this?

Not at all

Perfectly

The localisation issue

The need to recruit and motivate local personnel.

Helps break the language barrier
Necessary by host government
Cost reducing

How well did you know this?

Not at all

Perfectly

Market Strategy includes…And is about…

All voluntary Economic Transactions

Porter: Positioning against 5 market forces
Barney: Aquiring/Accessing VRIN resources and capabilities

How well did you know this?

Not at all

Perfectly

Theory of non-market strategy focuses on…

Using Institutional differences

Elements of the non-market

Institutions
Issues
Interests (stake-holders)
Information

Why is a non-market strategy required?

Market is entirely voluntary actions. Non-market is partially voluntary but also involuntary. Thus, firm without a non-market strategy may be at a competitive disadvantage

How the non-market impacts firm behaviour

Fiscal (race to the bottom)
Legal (regulations)
Political (governmental politics, activists)

How business impacts the non-market

Called Corporate Political Strategy

Financial Incentives Strategy (political contributions)
Constituancy-building strategy (together with other affected firm to have more influence)
Information Strategy (lobbying)

Why has globalisation paused?

1. The financial crisis | 2. Increased Social Rejection; nationalism, inequality, war and immigration

Further challenges ahead

- AI - Climate change (1bn refugees by 2050) - Debt level

What is strategy?

An integrated and coordinated set of commitments and actions designed to exploit core competencies and gain competitive advantage.

Export Model

- Differentials in price and/or demand is exploited | - Cost of supply = transportation costs

Multi-national model

- Operations replicated abroad, saves transportation costs | - Customers pay foreign prices for domestic goods

The Global Model

- The firm splits up the supply chain to exploit differentials in price demand and costs.

Localisation advantages

1. Proximity 2. Flexibility 3. Quick response time

Causes of globalisation

- Political (free trade + deregulation) - Technological factors (travel + coms cost reduced, economies of scale) - Social (linguistics standards, cultural convergence) - Competitive standards

Advantages of internationalising

- Cost benefit - Revenue benefit - Learning benefit - Arbitrage benefit

DIsadvantages of internationalising

1. Liability of foreignness 2. Localisation Advantages 3. Location-bound advantages

Why don't all countries specialise and investment cluster

- Market distortions (taxes, regulations, tarrifs) | - Lack of perfect information

The Upsala Model

Firms first establish operations domestically. Then export to nearby countries. Only after several years abroad to they establish wholly or partially owned operations abroad. Gradually commit.

Born Global

Firms that export immediately after being established. Succeed without established home base

Elements of country attractiveness

1. Country Risk Analysis 2. Market Opportunities 3. Industry Opportunities

Country Risk Analysis

- Political risk - Economic risk (exchange rates, inflation) - Competitive risk (corruption, cartels) - Operational risk (infrastructure, regulations)

Market Opportunities

Market size, growth and quality

Industry Opportunities

- Resource Endowments | - Investment incentives.

What is CSR

Encourages firm to comply with the spirit rather than the rule of law.

The Economic side

Maximise shareholder value. Managers who do not make anti-social decisions will be replaced. Pro-social behaviour if: branding, first-mover advantage, prevents gov from interfereing.

Transaction costs

1. Search & Information costs 2. Bargaining 3. Policing and enforcement costs

Level of transaction cost depends on:

1. Asset specificity (redeployed) 2. Uncertainty/Complexity (blueprints) 3. Frequency of use

Foreign Distributors

- "Beachhead strategy" | - Low risk

Should the firm internationalise?

Are its FSA's location bound

IR strategy

1. Global 2. International 3. Transnational 4. Multi- domestic

Organisational form

1. Global Functional Model 2. Geographic Model 3. Single Matrix model 1. The Multi-business global product model 2. The Multi-business geographic model 3. The Multi-business matrix model