why firms go abroad? Flashcards
Whta is aMNC?
a fim that has at least one working affiliate abroad
what is liability of foreignness
additional costs that MNC have to face relatively to theirindigegneus competiorswhen operating in a foreign market
Why firms go abroad?
new demand new market
economies of scale cost reduction
talent nature resources new competitive advanatage
what is the difference between horizontal foreign activities and vertical foreign activities?
The horizontal foreign expansion implies that a company is performing in a host country the same activity as in the home country (e.g., this can be a production activity with multiple plants in various countries).
This can be contrasted with the vertical foreign expansion when a company is performing in a host country the activities different from those performed in the home country (for example, a company has a production activity in the home country, while in a host country it is performing R&D activity or a procurement of input materials for the production process).
What are different types of advantges of global inetgration?
agrgregation- benefiting from expanding and exploiting econome sof scale and economies of scope
increasing bargaining power and benefitting from experience which may allow for cost recutio
Arbitrage- national differences in comparative advantage, benefiting from differences in labor and capital costs and in knowledge and technology
there’s also tax arbitrage
What are the Pros of Product Standardization?
fewer duplication of fized and overhead costs
speed in entering foreign markets
ability to develop a global brand name
ability to centralize know-how and skills
What are the pros of global inetgraion?
benefit from differences in comparative advanages across nations
Increased bargaining power
economies of scale in production
fewer duplication of fixed and overhead costs
global learning and R&D to keep up with complex and fast-changing technologies
What are the cons of global integration?
a global startegy oftenrequires a standardization of products in order to achieve cost benefits
potentially high transportation costs potentially high import duties
