Week 4 Flashcards
What are the 3 competitive advantages for international business?
- Global efficiencies (EOScope, EOScale, location adv)
- Multinational flexibility (diversify risks)
- Worldwide learning (learning curve effect)
Is it possible for a company to obtain global efficiencies, learning/knowledge, and multinational flexibility?
No, trade-offs are needed. Global efficiency requires centralisation BUT what about product customisation to meet local customer needs?
Is centralisation or decentralisation better for worldwide learning?
A bit of both — you can achieve global efficiencies through cherry picking
What are the drivers of global integration?
- Globalisation
- Standardisation
- Efficiency
- Economies of Scale
What is the Home Replication Strategy? What are its pros and cons?
It utilises its core competency that it developed at home as its main competitive weapon in the foreign market that it enters.
Pros:
- Relatively easy to implement
- Moderate operational costs = high profits
- Exploit EOScale from home country
Cons:
- Limited learning
- Possible to misread host market
- Risk of local competitors developing a competitive advantage based on local responsiveness
What is the Multidomestic Strategy? What are its pros and cons?
It tries to achieve maximum local responsiveness by customizing both their product offering & market strategy to match.
Pros:
- Rapid penetration of multiple markets
- Reduces political risk (seen as local company)
- Lower oversight costs
Cons:
- Coordination difficulties (e.g. corporate wide initiatives)
- Risk of global competitors emerging
- Limited information sharing / global learning opp.
What is the Global Strategy? What are its pros and cons?
Looks at the world as 1 single market and producing 1 tailored product to suit the global consumer e.g. Apple.
Pros:
- EOScale
- EOScope
- Global learning
Cons:
- Highly dependent on coordination & high costs
- Lower responsiveness to local markets
- Limit opportunities for new areas of competitive adv.
What is the Transnational Strategy? What are its pros and cons?
Pursues dual goals of global-scale flexibility and local flexibility.
Pros:
- Combine the benefits of global efficiencies with local responsiveness
Cons:
- Mainly organisational
What is the AAA Triangle?
A prescriptive model that focuses on scale economies vs. local responsiveness. It allows managers to see which of the 3 strategies is likely to afford the most leverage for their companies or in their industries overall.
- Adaptation — seeks to boost revenues & market share by adapting the firm’s product or service to the local context (localisation)
- Aggregation — seeks to deliver EOScale by creating regional or global operations (standardisation)
- Arbitrage — exploitation of differences between national/regional markets, by locating separate parts of the supply chain in different places
With regards to the AAA Triangle, do companies only focus on 1 A?
No — Even though all strategies require hard and soft integrative devices, there are some companies that pursue more than 1 A e.g. P&G, Cognizant, TCS
What are the pros and cons of releasing full range products?
Pros:
- EOScale from day 1
- Reputational benefits with customers & suppliers
- Greater sales & profits
Cons:
- Higher risks of failure since too many products to manage
- Assumes managers are immediately ready
What are the pros and cons of releasing incremental products?
Pros:
- Tests the market
- Buys time for managers to develop skills, local knowledge & capabilities
Cons:
- Low EOScale
- Lower sales & profits
What are the pros and cons of releasing new products?
Pros:
- Necessary for differentiated local customer tastes / competitive environment
- Test market for new products & people able to provide input for product development
Cons:
- Greatest risk
What should you consider with regards to the Timing of Entry?
- Motivation
- Intensity of existing competition from domestic & foreign firms
- Types of skills/capabilities a firm already possesses
- Whether the resources required for entry will be depleted if others enter first
With regards to the AAA Triangle, why should companies try to focus on only 1 A?
- Complexity is limited by managerial bandwidth
- Perception that an organization should only have 1 culture
- Capable competitors can force a company to choose which dimension it is going to try to beat them on
