Week 2 - Responding to Conflicting Environmental Forces Flashcards
What are the 3 forces for global integration and coordination?
- Scale, scope, and factor costs.
- Free trade
- Global competitors as change agents
Explain the following force for global integration and coordination: Scale, scope, and factor costs (i.e., explain economies of scale, economies of scope, and factor costs).
The Industrial Revolution created pressures for much larger plants that could capture the benefits of the economies of scale offered by new technologies it spawned.
o Economies of scale - a proportionate saving in costs gained by an increased level of production.
• Economies of scope - a proportionate saving gained by producing two or more distinct goods, when the cost of doing so is less than that of producing each separately.
• Factor costs – with changes in technology and markets came the requirement for access to new resources at the best possible prices
Explain the following force for global integration and coordination: Free trade.
- If each country specializes in areas of advantage, and trades with other countries for the products/services in which they specialize, there is an overall gain for each country.
- Dominating trend toward the reduction of barriers to international trade
What are the pros and cons of outsourcing jobs to lower cost countries?
The principal source of employment loss that most relates to globalization is the outsourcing of jobs to lower cost countries.
o PROS: reduced consumer prices, competitive pricing to preserve home-country jobs
o CONS: outsourced jobs are frequently held by less skilled, less educated workers who are very vulnerable and have few available high-paying alternatives
Explain the following force for global integration and coordination: Global competitors as change agents.
Many industries were driven to become more globally integrated primarily through external forces of change. But other industries less affected by such external imperatives were transformed primarily through the internal restructuring efforts of competitors who recognized that by doing so they could gain a significant competitive advantage.
What is the global chess strategy?
Global chess strategy – assume that a company’s competitive position in all markets was linked, and that funds generated in one market could be used to subsidize its position in another.
What are the 3 forces for local differentiation and responsiveness?
- Cultural differences
- Government demands
- Growing pressures for localization
Explain the following force for local differentiation and responsiveness: Cultural differences.
- Nationality provides an important and enduring role in shaping the assumptions, beliefs, and value of individuals.
- Distinct cultural differences across countries result in wide variations in social norms and individual behaviour, and is reflected in the effectiveness of different organizational forms and management systems.
- Cultural differences are also reflected in nationality differentiated consumption patterns, including the way people dress or the foods they prefer.
Explain how interactions between companies and host governments are similar to love-hate relationships.
“Love” – the benefits each could bring to one another
- MNE – represents an important source of funds, technology, and expertise to help further regional development, employment, etc.
- Host government – the key to local market or resource access, providing new opportunities for profit, growth, improved competitive position
“Hate” – the differences in the motivations and objectives of the two partners
- MNE – unrestricted access to resources and markets throughout the world, the freedom to integrate manufacturing and other operations across national boundaries, and the unimpeded right to coordinate and control all aspects of the company on a worldwide basis
- Host government – develop an economy that could survive and prosper in a competitive international environment
What are the challenges/disadvantages associated with MNEs entering foreign markets?
- MNE operations often cause social disruption in the host country through rural exodus, rising consumerism, rejection of indigenous values, or a breakdown of traditional community structures.
- MNEs can represent a political threat because of their size, power, and influence – particularly in developing economies.
- MNE-host government relationships are often seen as a zero-sum game in which the outcome depends on the balance between the government’s power (arising from its control over local market access and competition among different MNEs for that access) and the MNE’s power (arising from its financial, technological, and managerial resources and the competition among national governments for those resources)
What are the challenges and opportunities associated with growing pressures for localization?
- In industry after industry, a large group of consumers has emerged to reject the homogenized product design and performance of standardized global products.
- By reasserting traditional preferences for more differentiated products, they have created openings for companies willing to respond to, and even expand, the need for products and services that are more responsive to those needs.
- The administrative costs of coordination and scheduling worldwide demand through global-scale plants usually is quite significant
Explain the importance of worldwide innovation and learning for MNEs.
- Victory most often goes to the company that can most effectively harness its access to information and expertise around the globe to develop and diffuse innovative products and processes on a worldwide basis.
- First-mover advantages have increased substantially and provided strong incentives for companies to focus attention not only on the internal task of rapidly creating and diffusing innovations within their own worldwide operations but also on the external task of establishing the new product as an industry standard.
What is a global industry? What is a global strategy?
• Global industries – industries in which the economic forces of globalization are dominant
o Success typically belongs to companies that adopt the classic global strategies of capitalizing on highly centralized, scale-intensive manufacturing and R&D operations and leveraging them through worldwide exports of standardized global products
What is a multinational industry? What is a multinational strategy?
• Multinational industries – worldwide businesses in which the dominance of national differences in cultural, social, and political environments allow multiple national industry structures to flourish.
o Multinational strategies – building strong and resourceful national subsidiaries that are sensitive to local market needs and opportunities and allow them to manage their local businesses by developing or adapting products and strategies to respond to the powerful localizing forces.
What is an international industry? What is an international strategy?
• International industries – technological forces are central, and the need for companies to develop and diffuse innovations is the dominant source of competitive advantage.
o International strategy – the ability to effectively manage the creation of new products and processes in one’s home market and sequentially diffuse those innovations to foreign affiliates.
