Seminar 1 Atricles

Question 1

What were the issues Lincoln’s electrical company faced after they aggressively internationalised?

Answer 1

• managers at headquarters lacked experience in international markets and knowledge in running complex dispersed firms
• lacked adequate distribution relationships in the market place and a sales force that understood the foreign customers

Question 2

How does the resource based theory describe a firm?

Answer 2

As a bundle of resources that are used to generate products or services that provide value for the consumer

Question 3

What is meant by the ‘relationship between a resource and advantage’?

Answer 3

Not all resources are an advantage to the firm

Question 4

When is a resource considered advantageous? And how can a firm sustain this advantage?

Answer 4

• when it provides the firm with an advantage over its competitors
• to sustain the advantage it needs to be valuable,rare, difficult to imitate and difficult to substitute

Question 5

When is a resource considered disadvantageous?

Answer 5

• when it detracts from the firms adv and reduces value creation

Question 6

What are the 3 difficulties on internationalisation that come from relationship to advantage?

Answer 6

1) loss of advantage
2) creation of disadvantage
3) lack of complementary resources

Question 7

What is meant by a loss of advantage?

Answer 7

This is when resources lose their advantageous nature when transferred to a new country

Question 8

What determines the advantage provided?

Answer 8

• relative to the competitive environment In which it operates and the different characteristics including climate, government,language, wealth

Question 9

What is meant by inability to transfer advantage?

Answer 9

Resources that may be rare in one country may not be rare in another
- domestic competitions may already have the resource, have imitated it or substitute it with another that provides similar or improved benefits

E.g Walmart were able to use the low cost strategy in the US but when entering Germany it wasn’t a source of advantage due to store such as Aldi and Lidl
- however there expansion into Mexico was successful

Question 10

What can be done to over the inability to transfer advantage?

Answer 10

• they could reduce the potential cost by following a gradual internationalisation e.g exporting before forming WOS
• if a firm has already invested it can deinternationalise to save costs

Question 11

What is meant by the inability to create value?

Answer 11

Some cases the environment is so different that the firm is unable to transfer their adv to the new country
- customers may not be able to use,need it pay for the product

Question 12

Why may there be the inability to create value?

Answer 12

• Cultural Norms e.g firms selling alcohol are limited in their ability to create value in countries where alcohols is banned
• Geographic characteristics e.g firm producing mining equipment has in certain locations it can target
• Intitutional characteristics e.f if a country has weak property right music firms won’t be attracted as things can easily be copied

Question 13

How can inability to create value be helped?

Answer 13

• manager collectively working to alter the environment e.g work with the government to enforce property rights/change cultural norms

Question 14

What is meant by ‘creation of disadvantage’?

Answer 14

When resources become liabilities or disadvantageous when they are transferred

Question 15

What is a firm specific disadvantage of transfer?

Answer 15

As a company transfers it resources to another country,routines that were embedded in technical and managerial systems may be comparable with the characteristics of new host countries - leading to a disadvantage

Question 16

How can firm specific disadvantageous of transfers be overcome?

Answer 16

Being selective in choosing the resources suitable in the new host country
Advantages and become disadvantages if the dims diversified into an industry where the resources don’t work

Question 17

What is meant by disadvantage of foreignness?

Answer 17

When conducting business in another country, the government or the consumers may discriminate against a certain nationality

Question 18

How does a countries government have a role in liability of foreignness?

Answer 18

• Government can limit or block operations of foreign firms

- consumers are less likely to be aware of the true company origin Nd may react to the perceived country of origin

Question 19

How can governments discriminate within liability of foreigness?

Answer 19

• may limit the activities of foreign firms as they see it as a threat to their own companies
• they may do it indirectly by making only domestic companies signals for benefits such as purchase contracts

Question 20

What is the impact of the govements actions towards them for being foreign firms?

Answer 20

• lower revenues when foreign firms are constrained in their operations
  -higher costs when foreign firms are excluded from subsidiaries
  -may change with the political environment
  E.g us banning France from bidding for reconstruction contracts due to lack of support in iraq war

Question 21

How can managers over come liabitly of foreigness?

Answer 21

• they can negotiate with governments,highlighting to them the benefits they bring whilst also emphasising its your flexibility to move to another country if they experience unfavourable treatment
• may indirectly overcome it by establishing links with local actors who can obtain the support of the government

Question 22

What is a consumer based disadvantage of foreignness?

Answer 22

• consumers may dislike the country of origin for naturalist reasons or may have a negative perception of the quality of products developed in a foreign country or

Question 23

How can firms reduce the chance of encountering consumer based disadvantage of foreignness?

Answer 23

• don’t have country of origin clearly associated with the product
• don’t indicate where a countries headquarters are or where products is manufactured e.g using regional labels such as ‘made in Europe’

Question 24

What is meant by lack of complementary resources?

Answer 24

• some complementary resources may be needed in the foreign country that aren’t at home
• negatively impacts the firm as they will have to incur expenses local firms don’t
• in RBT these complentsty resources are critical to running a firm in determining what resources aren’t needed

Question 25

What is meant by liability of expansion?

Answer 25

• not having the resources for expansion that may be needed
• internationalisation is often accompanied by an increase in the scale of a firms activities, this add additional costs & requires spare capacity
• if they don’t have this capacity they may have to stretch its existing resources so thinly that they may come ineffective

Question 26

How can firms reduce the risk of facing liability of expansion?

Answer 26

• Ensure they have developed experience and resources from operating on a large scale and coordinating dispersed operations before entering the country

Question 27

What is meant by liability of newness?

Answer 27

• this is when a firm moves to another country but it’s require additional resources as there’s either aren’t developed or they can’t transfer them

Question 28

How can managers overcome liability of newness?

Answer 28

Actively developing or acquiring the complementary resources needed in the new firm

Question 29

What is liability of infrastructure?

Answer 29

This is when issues arise from the host country customers because they lack use of complementary resources needed to use the firms products
- firm may be unable to maker their goods their and so face difficulties

Question 30

How can managers overcome the liability of infrastructure?

Answer 30

• providing customers with the tangible complementary assets needed to use the firms products of the knowledge necessary to use the products
  E.g Kelohs did a marketing coating to train Indian consumers to eat cereal for breakfast and they did begin to
• however allows competitors to free ride

Question 31

What are the benefits from Geographic diversification?

Answer 31

• This enables a firm to elapse economies of scale and scope
• Helps reduce fluctuations in revenue by spreading its investment risks over different countries
• Helps reduce costs and increase revenue by increasing a firms market power over its suppliers, distributors and customers
• having subsidiaries in many host countries can help enhance the knowledge base, capabilities and competitiveness through experiential learning

Question 32

What is economies of scope and economies of scale?

Answer 32

Economies of scope focuses on the average total cost of production of a variety of goods. So when the when the cost of doing so is less than that of producing each separately.
- economies of scale focuses on the cost advantage that arises when there is a higher level of production of one good.

Question 33

What are the issues related to geographic diversification?

Answer 33

• Liabilites of newness and foreigners
• Can lead to higher costs because it cannot conduct business activities as effectively as local firms
• Being foreign means mistakes are likely
• Coordination difficulties, information asymmetry and incentive misalignment between headquarters and subsidiary managers

Question 34

What has a firms reputation got to do with its ability to enter foreign markets?

Answer 34

• A firms reputation has a big impact on its ability to enter a foreign market
• Customers, suppliers, potential partners etc have already determined which foreign firm is the leader whether an investment has occurred or not