KEYWORDS Flashcards
Home country advantages
Country-specific advantages that a firm has by virtue of the fact that it was founded in a specific country
Host country location advantages
The advantages from operating in the host country
Market seeking
Search for new customers and new markets
Resource seeking
Search for new resources such as physical or Human Resources, in the host country
Efficiency seeking
Search for efficiency, from scope or scale economies, technology or regulation
Strategic asset seeking
Search for assets such as core technology, up- or downstream knowledge, or reputations resources
Uppsala
Describes entry as a process
Born global
Firms can directly enter even very distant markets almost immediately without having to build a domestic base
Generic country attractiveness framework
Identifies risks and opportunities at the country, market and industry level
Country risk analysis
- Political risks
- Economic risks
- Operational risks
- Cultural risks
The point? To understand that there is no place like home
Market opportunities
- Market size
- Market growth
- Market quality
Industry opportunities
- Industry competitive structure
- Resource endowment
- Investment incentives grated by government
CAGE model
Firms from developed countries have less difficulty entering developed countries
Cultural distance
Administrative and political distance
Geographic distance
Economic distance
Closer countries are more attractive
Alliances
More favorable in the face of high environmental uncertainty and knowledge dispersion because collaborations increase strategic flexibility and rapid learning
Acquisitions
Better in situations with less need for strategic flexibility and when the transaction aims to utilize sustaining economies of scale and scope efficiently
Business strategy
Concerned with HOW a firm competes with a particular market
Corporate strategy
Concerned with WHERE a firm competes i.e. the scope of its activities
Dimensions of scope;
- vertical scope
- geographical scope
- product scope
Transaction cost economics
Dedicated to answering the question of where a transaction should take place; internally or externally
Types of transaction costs
- Search and information costs
- Bargaining costs
- Policing and enforcement costs
Bounded rationality
The decision making is bounded by uncertainty
Bounded reliability
Homo economicus is assumed to be a self interested individual
Level of transaction costs
- Asset specificity
- Uncertainty / complexity
- Frequency
Strategic alliances
Formal arrangements between otherwise independent firms, who pool resources, to achieve a mutually agreed goal
Joint venture
Partners form a jointly owned enterprise to peruse the goals of the alliances
Problems with M&A
- Costs of integrating the target are often underestimated
- Expected benefits from the deal are often overestimated
Forces for globalization
- cost benefit of scale
- serving global customers
- learning in multiple national environments
Forces for nationalization
- transportation and communication costs arising from geographical distance
- differences in customer needs and behavioral norms
The global functional model
Worldwide centralization at functional level; global R&D, global marketing, global HRM.
All strategic decisions are made at HQ level
The geographical model
Worldwide decentralization of decision making; European manager, North American manager
Strategic decisions are made at the regional level
The single matrix model
Equal power is given to both function and geography; European manager & global R&D manager
Multi-business global product division model
Product managers are given full strategic and operational responsibilities for their product line across territories; global pens manager, global sticky-tape manager
Multi-business geographic model
Country managers act autonomously and are given full strategic and operational responsibilities for all product lines in their territory
Multi-business matrix model
Shared power; function, region, product
Agency costs
Losses that are made when the agent fails to act fully in the interest of the principal, increase;
1. Uncertainty
2. Information asymmetry
Corporate governance
The system of mechanisms, processes and relations used to control and direct a firm
Industry-based view
Suggest that the firm must position itself against five external environmental forces;
- threat of rivalry
- threat of substitutes
- threat of new entrants
- power of suppliers
- power of buyers
And competitive advantage comes from the firm’s ability to structure itself to face this
Resource-based view
Focusses on the internal resources of the organization in considering the source of competitive advantage
Resources
Factors that are owned of controlled by the firm;
- tangible
- intangible
- human
VRIN
Resources can be evaluated using the VRIN framework
Valuable
Rare
Inimitable
Non-substitutable
Impediment to imitation
- Legal restrictions
- superior access to inputs and customers
- market size and scale economies
- intangible barriers to imitation
Early mover advantage
- learning curves
- reputation and buyer uncertainty
- switching costs
- network effects
4 dimensions of innovation
- type
- level; radical vs incremental
- location
- effect; competence enhancing vs destroying
Institution-based view
Highlight the importance of formal and informal institutions in explaining firm performance
Two fundamental claims;
1. That individuals and organizations are limited by what is ‘expected’ of them by their institutional environment
2. Conforming to expectations confers ‘legitimacy’
Non-market strategy
Is about
- advantages for our firm
- disadvantages for our competitors
Non-market analysis
Four I’s;
1. Interest
2. Institutions
3. Information
4. Issues
Corporate social responsibility
Self regulating mechanism, which encourages the firm to comply with the spirit of the law
Goal is to have firms make a positive social impact
Corporate political activity
Involves the activities taken by organizations to acquire, develop and use power to obtain an advantage
Liability of foreignness
Set of costs based on a particular company’s unfamiliarity with and lack of roots in a local environment
Isomorphism
Type of entry mode that imitates local/domestic competitors
