Lecture 7 - Internationalization

Question 1

What is meant by “Vertical Integration”?

Answer 1

enter value chain activities where organization is its own supplier or customer

Question 2

What is meant by “Outsourcing”?

Answer 2

subcontract internal activities to external suppliers

Question 3

When should the firm chose to “Integrate”?

Answer 3

When:

1) There exists a building block of distinctive strategic capability
2) The firm is prone to opportunism/lesser quality by subcontractors. Being this can lead to an extraction of higher prices and a reduction of standards.

(slide 8)

Question 4

When should the firm chose to “Outsource”?

Answer 4

When:

1) There exists NO building block of distinctive strategic capability
2) The firm is NOT prone to opportunism/lesser quality by subcontractors

Question 5

• Why internationalise?

Answer 5

Depends on the State of current globalisation

Question 6

How do we decide here to internationalise?

Answer 6

1. CAGE framework

2. Drivers framework: that enable/inhibit internationalisation

Question 7

What is meant by the CAGE framework?

Answer 7

CAGE stands for:

• Cultural: The distance dimension here relates to differences in language, ethnicity, religion and social norms.
• Administrative: Here distance is in terms of incompatible administrative, political or legal traditions.
• Geographic: This is not just a matter of the kilometres separating one country from another, but involves other geographical characteristics of the country such as size, sea-access and the quality of communications infrastructure.
• Economic: The final element of the CAGE framework refers particularly to wealth distances.

And it works as a gravity model of bilateral trade by highlighting the importance of distance.

Question 8

What is meant by the “Drivers Framework”?

Answer 8

There are four factors that could have an impact on te International strategies:
1. MARKET Drivers - Similar customer needs, global customers or transferable marketing.

2. COST drivers - Scale economies, country specific differences or favourable logistics.
3. COMPETITIVE drivers - Interpendence between countries or competitors global strategies
4. GOVERNMENT drivers - Trade policies, technical standards or host government policies.

All the factors of the different drivers.

Question 9

There are 4 choices of international strategies, which ones?

Answer 9

1. Global strategy = HIGH search for global efficency and Geographically UNIFORM (IKEA)
2. Transnational strategy = HIGH search for global efficency and Geographically ADAPTED (Logitech & IKEA)
3. Export strategy = LOW search for global efficency and Geographically UNIFORM (Porsche)
4. Multidomestic strategy = LOW search for global efficency and Geographically ADAPTED (Carrefour)