Chapter 10-Combined

Hofstede's Research on Culture

Based on a lot of data, four main dimensions of culture emerged: · 1. Power Distance · 2. Individualism · 3. Masculinity-Femininity · 4. Uncertain Avoidance · 5. Long-term orientation · 6. Indulgence

Why Is This Important to Know?

Because the U.S.S.R. was the last entity to legitimately challenge, and perhaps overcome, the current worldwide hegemony of the United States There is currently no viable alternative to free-market capitalism Which is why reading Marx is even more important, for his critique of capitalism, which is very telling "Everybody has their price," Marx was saying...that even people can be bought and sold like a head of cattle, or a bushel of wheat Commodity fetishism - social relationships not as relationships among people, but as economic relationships

Gain Access to a Larger Market

Becoming an MNE provides opportunities for - Economies of scale - greater and cheaper production over the same per/unit cost - Prozac factory & Prozac pills - Economies of scope - lamb = mutton + wool Opportunities to participate in a larger market Opportunities to outcompete local rivals (Starbucks) Helps firms in smaller economies - Achieve growth - To gain and sustain competitive advantage

Location Economies

Benefits from locating value chain activities in the world's optimal geographies for a specific activity wherever that may be

MNEs pursuing a _______ ocean strategy tend to also pursue a transnational strategy.

Blue

The decision framework that is based on the relative distance b/w home and a foreign target country is the:

CAGE distance framework

Searching for low-cost labor can lead to a loss of reputation for MNEs under which of the following conditions?

Corrupt local governments fail to enforce safety standards.

Absolute Metrics

Cost structures, educated workforce, etc.

Cultural Distance

Cultural disparity between an internationally expanding firm's home country and its targeted host country - English speaking countries are culturally closer to the US (like Australia, UK, New Zealand, etc.)

CAGE distance framework includes:

Cultural distance; administrative and political distance; geographic distance; and economic distance

The oldest form of internationalization is __________, which involves producing goods in one country to sell in another country.

Exporting

Though low-skilled laborers make much less in developing countries, no such difference in wages exist for high-skilled workers.

FALSE

T or F The benefits of local responsiveness always outweigh the costs.

False

True or false: The benefits of local responsiveness always outweigh the costs.

False

1. Factor Conditions 2. Demand Conditions 3. Competitive Intensity in a Focal Industry 4. Related and Supporting Industries/Complementors

Four Interrelated Factors

1. International 2. Multidomestic 3. Global-standardization 4. Transactional

Four different global strategies....

globalization has led to increases in living standards

Germany & Japan - export-led growth, despite devastation after WWII Brazil, Russia, India & China - 40% of world's population, now produce half the world's economic growth - China: the second largest economy worldwide (Chindia) Hong Kong, Singapore, South Korea & Taiwan - now advanced economies, were previously undeveloped

Globalization through Militarization: United Asia?

Greater East-Asia Co-Prosperity Sphere 大東亞共榮圈 - 1930-1945 prior to and during WWII - Globalization as military occupation - Asserted the superiority of the Japanese - A union of Asian nations - Pushing out of the Western colonial powers and their influence

Which country has become a hub for MNEs seeking to outsource business processes such as IT and customer service due to an abundance of highly educated but low-cost labor?

India

What are the four quadrants of the integration-national responsiveness framework?

International strategy; multidomestic Strategy; global-standardization strategy; transnational strategy

Localization Strategy

Is best when entering a host country with a large domestic market

Which of the following statements about pursuing international expansion is true?

It can enhance a firm's competitive advantage.

The following statement about pursuing international expansion is true:

It can enhance a firm's compt. advtg.

Which of the following statements about the CAGE distance framework is true?

It is designed to aid MNEs in deciding where to compete in the world.

Which of the following best defines national competitive advantage?

It is the extent to which a company can compete in international markets

Which of the following best defines national competitive advantage?

It is the extent to which a country can compete in international markets.

Which of the following are benefits of a transnational strategy? (Check all that apply.)

It promotes global learning and the diffusion of best practices and innovations. It harnesses economies of scale.

Though many benefits exist, which of the following are among the drawbacks of a transnational strategy? (Check all that apply.)

It's difficult to implement. It requires implementing a complex organizational structure.

Related and Supporting Industries/Complementors

Leadership in related and supporting industries can also foster world-class competitors in downstream industries - The availability of top-notch complementors - firms that provide a good or service that leads customers to value the focal firm's offerings more when the two are combined - further strengthens national competitive advantage · Ex. Switzerland leveraged its early lead in industrial chemicals into pharmaceuticals

which of the following factors often combine to load to tragic outcomes for workers?

MNE's search for low-cost labor failure to enforce safety standards government corruption

Corporate Social Responsibility

MNEs need to rise to the challenge, also to not lose their reputation

Despite a growing belief in the death-of-distance hypothesis, there remains evidence that certain countries remain leaders in specific industries and maintain a kind of ____________ advtng.

National competitive

The two important country level factors that influence a multinational enterprises decision of where to invest include:

National institutions; national culture

Which of the following statements regarding factor conditions in Porter's diamond framework is true?

Natural resources are not necessarily needed to generate world-leading companies.

Distance

Not only denotes geographic distance, but also includes cultural distance, administrative and political distance, and economic distance

One Global Hotspot: Russia

Overthrow of Imperial Russia under Czar Nicholas II by the Marxist revolutionaries led by Vladimir Lenin in 1918 Nationalists and reactionaries were defeated by radical "Red" Bolsheviks after WWI Centrally planned economy, no free market system Quashing of political dissent; Siberian gulags used to eliminate all resistance Mass media was propagandized and under state control Russian Revolution not as a people's movement, but a grab for power by a small minority: "History will not forgive us tomorrow if we do not act today."

Global Strategy

Part of a firm's corporate strategy to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world - MNE needs a global strategy

4 main dimensions of culture

Power distance individualism masculinity-femininity uncertainty avoidance two additional cultural dimensions: long-term orientation indulgence

Which of the following have helped make globalization possible? (Check all that apply.)

Reductions in transportation costs Falling trade barriers Advances in telecommunications

Multinational enterprise

Refers to companies that deploy resources and capabilities to procure, produce and distribute goods in two or more countries.

Location economies

Refers to the benefits from locating value chain activities in the world's optimal geographies for a specific activity.

Can You Name the 15 former Soviet Socialist Republics?

Russian Soviet Federative Socialist Republic Ukraine Byelorussia Uzbekistan Kazakhstan Georgia Azerbaijan Lithuania Moldavia Latvia Kirghizia Tajikistan Armenia Turkmenia Estonia

MNE's: the New Robber Barons

Starbucks Google Facebook Apple Microsoft Supranational politico-economic entities who transcend national barriers, administratively & politically, geographically and economically More focus on regions than nations: N. America, Europe, Asia, Africa, S. America (Chindia)

Integration-Responsiveness Framework

Strategy framework that juxtaposes the pressures an MNE faces for cost reductions and local responsiveness to derive four different strategies to gain and sustain competitive advantage when competing globally

Transactional Strategy

Strategy that attempts to combine the benefits of a localization strategy (high local responsiveness) with those of a global-standardization strategy (lowest-cost position attainable) o Arises out of the combination of high pressure for local responsiveness and high pressure for cost reductions o Generally used by MNEs that pursue a blue ocean strategy at the business level o Aims to benefit from global learning o Think globally, but act locally o Difficult to implement because the organizational complexities involved

Multinational enterprises are the driving force behind globalization.

TRUE

Which of the following is an advantage to a multidomestic strategy?

The MNE faces lower exchange rate exposure

At a basic level, the concept of "liability of foreignness" refers to

The additional cost of doing business in an unfamiliar cultural and economic environment

National Culture

The collective mental and emotional "programming of the mind" that differentiates human groups

A multidomestic strategy is appropriate when which of the following conditions exist? (Check all that apply.)

The firm feels little need to reduce costs. Markets in the host country are idiosyncratic. The firm faces high demand for local responsiveness.

Local Responsiveness

The need to tailor product and service offerings to fit local consumer preferences and host-country requirements o Like selling chopsticks in China, Using fish and chicken instead of beef in India, etc. o Entails higher costs, and sometimes even outweighs cost advantages from economies of scale and lower-cost input factors

Semi-globalized

The world is ____________ · Social welfare and living standards can be had through further globalization if future integration is managed effectively through coordination efforts by governments o Ex. European Union is an example of coordinated economic and political integration by 28 countries

semi-globalized

These data indicate that the world is not quite flat yet, or fully globalized, but at best semi-globalized.

Globalization through Militarization: United Europe?

Third Reich (German: Drittes Reich) - 1933-1945 - Hitler as Chancellor of Nazi Germany in 1933 until 1945 - Globalization as the right to conquer and enslave nations - Asserted the superiority of the German people (Aryan race) - Union of all Europe under German "protection" - "Deutschland, Deutschland über alles" ("Germany, Germany above all else")

integration-responsiveness framework

This framework juxtaposes the opposing pressures for cost reductions and local responsiveness to derive four different strategic positions to gain and sustain competitive advantage when competing globally four strategic positions ■ International ■ Multidomestic ■ Global-standardization ■ Transnational

liability of foreignness

This liability consists of the additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances

A _____ strategy focuses on integration at the business level by attempting to reconcile product differentiations at a low cost

Transnational

MNEs impact

U.S. MNEs have a disproportionately positive impact on the U.S. economy (multinational enterprise) They make up less than 1 percent of the number of total U.S. companies, but they: ■ Account for 11 percent of private-sector employment growth since 1990. ■ Employ 19 percent of the work force. ■ Pay 25 percent of the wages. ■ Provide for 31 percent of the U.S. gross domestic product (GDP). ■ Make up 74 percent of private-sector R&D spending.

11% of private-sector employment growth since 1990, employ 19% of the work force, pay 25% of the wages, provide for 31 percent of the US GDP, and make up 74 percent of private-sector R&D spending

US MNEs have a disproportionately positive impact on the US economy o They account for 1% of the number of total US companies but they...

Porter's Diamond of National Competitive Advantage

Used to explain national competitive advantage - why some nations outperform others in specific industries

Transnational strategy

Uses a global matrix structure to combine economies of scale in product lines with economies of learning in geographic regions

What factors assist in reigning supreme in business process outsourcing?

Well-educated English speaking workforce; low-cost labor

National Competitive Advantage

World leadership in specific industries - Companies from home countries that are world leaders in a specific industries tend to be the strongest competitors globally

Which of the following have the effect of shrinking the administrative and political distance between countries? (Check all that apply.)

a colony-colonizer relationship shared currency trade agreements

Calculating cultural distance involves comparing the cultures of which of the following? (Check all that apply.)

a firm's home country a targeted host country

A global strategy is needed in order to ___________

achieve a competitive advantage against other companies

When an MNE does not face strong pressure for cost reductions or local responsiveness, an international strategy is typically ______.

advantageous

When an MNE does not face strong pressure for cost reductions or local responsiveness, an international strategy is typically _____________.

advantageous

When an MNE doesn't face strong pressure for cost reductions or local responsiveness, an international strategy is typically...

advantageous

as MNEs compete internationally, a focus on local responsiveness allows the to do which of the following?

appeal to local consumers more effectively increase product differentiation

When firms from wealthy countries trade with firms from poor countries, they benefit from economic _______.

arbitrage

When firms from wealthy countries trade with firms from poor countries, they benefit from economic __________

arbitrage

transnational strategy

attempt to combine the benefits of a localization strategy (high local responsiveness) with those of a global-standardization strategy (lowest-cost position attainable). This strategy arises out of the combination of high pressure for local responsiveness and high pressure for cost reductions. A transnational strategy is generally used by MNEs that pursue a blue ocean strategy at the business level by attempting to reconcile product and/or service differentiations at low cost

Spex is a leading manufacturer of eyeglasses. Spex is based in the United States but opens a facility in a Japanese city known for cutting-edge eyeglass innovations. Spex is counting on which of the following?

benefiting from location economies

multinational enterprise (MNE)

company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries

Firms can achieve increased competitive advantage as a result of ______, which are firms that produce a good or service that increases the perceived value of a focal firm's offering when the two are combined.

complementors

firms can achieve increased competitive advantage as a result of _____, which are firms that produce a good or service that increases the perceived value of a focal firm's offering when the two are combined.

complementors

When Walmart posted a list of banned suppliers on its website, this was an example of ______.

corporate social responsibility

The strategic foundations of the globalization hypothesis are based primarily on:

cost reduction

Which of the following pressures opposes local responsiveness on the integration-responsiveness framework? (Check all that apply.)

cost reductions

global-collaboration networks freely locate business functions anywhere in the world based on an optimal mix of which factors?

costs capabilities PESTEL factors

The cultural disparity between the internationally expanding firm's home country and its targeted host country is known as ______.

cultural distance

The specific characteristics of a needs in a firm's domestic market, such as customers who hold companies to a high standard of value creation and cost containment, are also called:

demand conditions

The specific characteristics of needs in a firm's domestic market, such as customers who hold companies to a high standard of value creation and cost containment, are also called ______.

demand conditions

the specific characteristics of demand in a firm's domestic market, such as customers who hold companies to a high standard of value creation and cost containment, are also called ____

demand conditions

what are the factors in michael porter's model of national competitiveness

demand conditions factors conditions competitive intensity in a focal industry related industries/complementors

What are the factors in Michael Porter's model of national competitiveness? (Check all that apply.)

demand conditions related industries/complementors competitive intensity in a focal industry factors conditions

Which of the following factors helped make Germany, which was a tough environment for a car company, conducive to successful car companies?

demanding customers no-speed-limit autobahn fierce domestic competition

which of the following factors helped make germany conductive to successful car companies?

demanding customers no-speed-limit autobahn fierce domestic competition

factor conditions

describe a country's endowments in terms of natural, human, and other resources. Other important factors include capital markets, a supportive institutional framework, research universities, and public infrastructure (air- ports, roads, schools, health care system), among others

During the first stage of globalization, business functions that took place abroad were limited to which of the following? (Check all that apply.)

distribution sales

When a country's demand conditions include high-density urban living and high energy costs, consumers can be expected to prefer air conditioners that are which of the following? (Check all that apply.)

energy-efficient small quiet

the oldest form on internationalization is _____, which involves producing goods in one country to sell in another country

exporting

When looking at the modes of foreign-market entry, one could conclude that ______.

exporting might be the earliest stage of commitment because it allows the firm to test whether a foreign market is ready for its products

A country's natural, human, and other resources can be expressed in terms of ______.

factor conditions

Porter's diamond framework to explain national competitive advantage includes four interrelated factors: demand conditions, competitive intensity in a focal industry, related and supporting industries/complementors, and ______.

factor conditions

True or false: The benefits of local responsiveness always outweigh the costs.

false

True or false: Though low-skilled laborers make much less in developing countries, no such difference in wages exists for high-skilled workers.

false

which of the following are distinct features of globalization 3.0?

firms create global networks of local expertise MNEs reorganize into a more seamless global enterprise technology has helped to reduce communication distances

complementors

firms that provide a good or service that leads customers to value the focal firm's offering more when the two are combined—further strengthens national competitive advantage

multinational enterprises that manufacture commodity products that focus on cost leadership tend to use a ______ strategy

global-standardization

Which three of the following conditions (select three) suggest a multi-domestic strategy might be the appropriate strategy for MNEs?

high demand for local responsiveness host countries with idiosyncratic domestic markets little need for cost reductions

During globalization 1.0 all important business functions were located in the home country, whereas during globalization 2.0 multinationals began to copy themselves

in a few key countries

During globalization 1.0 all important business functions were located in the home country, whereas during globalization 2.0 multinationals began to copy themselves __________

in a few key countries

In order for a company to be considered a multinational enterprise, it must operate ______.

in more than one country

In order for a company to be considered a multinational enterprise, it must operate...

in more than one country

in order for a company to be considered a multinational enterprise, it must operate

in more than one country

As the standard of living rises in emerging economies, MNEs are hoping that ______.

increased purchasing power will enable workers to purchase the products previously made only for export

With a multidomestic strategy, products are manufactured on a local level. This has the potential of ______.

increasing the risk of intellectual property appropriation

Companies seek to access international markets as a means of:

increasing their economic value creation

though natural resources can be a boon to a country's economy, more important than resources are a country's ___ frameworks

institutional

Due to globalization, the world's market economies are becoming more ______.

integrated and interdependent

Due to globalization, the world's market economies are becoming more ________

integrated and interdependent

Due to globalization, the world's market economies are becoming more:

integrated and interdependent

due to globalization, the world's market economies are becoming more ______

integrated and interdependent

Dream Donuts is a very successful business in the UK. it is contemplating global expansion. Which strategy is Dream Donuts most likely to pursue at these beginning stages of expansion?

international

IKEA offers the same products in every market. This indicates that IKEA has followed a(n) ______ strategy.

international

IKEA offers the same products in every market. This indicates that IKEA has followed a(n) ___________ strategy.

international

If a firm's goal is to leverage home-based core competencies in foreign markets, it should pursue a(n) ______ strategy.

international

Mount Mountain is a manufacturer of outdoor gear and apparel. It uses American sizing and standards for its apparel and gear across all markets. Which strategy is Mount Mountain adhering to?

international

A benefit of an international strategy is ______.

leveraging core competences

a benefit of an international strategy is

leveraging core competences

according to _____, consumer needs and preferences throughout the world are converging and becoming increasingly homogenous

levitt's globalization hypothesis

Benicio's Burritos is a leader in the Mexican fast-food category in the United States. It decides to expand internationally, starting in Japan. Benicio's Burritos fails within a year, learning later that Mexican food is uncommon in Japan and that the flavor profiles are not compatible with Japanese palates. The failure of Benicio's Burritos can be attributed to which of the following?

liability of foreignness

in the global economy, according to Porter, competitive advantages increasingly exist in ____ knowledge, relationships, and motivation

local

MNEs pursuing a multi-domestic strategy hope that ______

local consumers will perceive them to be a domestic company

MNEs pursuing a multi-domestic strategy hope that ___________

local consumers will perceive them to be a domestic company

MNEs pursuing a multidomestic strategy hope that ______.

local consumers will perceive them to be a domestic company

Which of the following put opposing pressures on the integration-national responsiveness framework?

local responsiveness cost reductions

which of the following put opposing pressures on the integration-national responsiveness framework?

local responsiveness cost reductions

The benefits to be accrued from locating value chain activities in the world's optimal geographies for a specific activity are known as________ economies.

location

The benefits to be accrued from locating value chain activities in the world's optimal geographies for a specific activity are known as:

location economies

Which of the following risks do companies face when expanding internationally?

loss of reputation the liability of foreignness loss of intellectual property

Rising wages and other costs are likely to negate any benefits MNEs have of access to ______.

low-cost inputs

which of the following factors enabled india to gain a competitive advantage in business process outsourcing?

low-cost labor well-educated english speaking workforce

One notable advantage of a multidomestic strategy is the...

lower exchange rate exposure

In ______ societies, competitiveness, assertiveness, and the exercise of power are considered ideal.

masculine

examples of local responsiveness

metal chopsticks in south korea sale of toads for preparation in china sale of mutton burgers in india

The Japanese market is very particular, and MNEs tend to have a challenging time breaking into the market successfully. To provide the most local responsiveness and to influence Japanese consumers in believing that the products are local, an MNE should follow a(n) ______ strategy.

multidomestic

A company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries is a ______.

multinational enterprise

despite a growing belief in the death-of-distance hypothesis, there remains evidence that certain countries remain leaders in specific industries and maintain a kind of ________ competitive advantage

national

Despite a growing belief in the death-of-distance hypothesis, there remains evidence that certain countries remain leaders in specific industries and maintain a kind of ______ advantage.

national competitive

When companies face a highly competitive environment at home, they are more likely to ______.

outperform global competition that lacks such intense domestic competition

When companies face a highly competitive environment at home, they are more likely to:

outperform global competition that lacks such intense domestic competition

When companies face a highly comptv. environment at home, they are more likely to:

outperform global competition that lacks such intense domestic competition

When multinationals draw on multiple innovation hubs that all have equal status, they pursue a ______.

polycentric innovation strategy

Globalization

process of closer integration and exchange between different countries and peoples worldwide made possible by: - falling trade and investment barriers - advances in telecommunications - reductions in transportation costs - M------------n? Combined, these factors reduce the costs of doing business around the world, opening the doors to a much larger market than any one home country. Globalization also allows companies to source supplies at lower costs, to learn new competencies, and to further differentiate products

Which of the following characteristics help make an MNE's international strategy successful? (Check all that apply.)

prominent brand names large domestic markets strong reputation

which of the following are common reasons for companies to make foreign direct investments?

reduced tax burdens reduced labor costs avoiding import restrictions

As MNEs compete internationally, a focus on local responsiveness allows them to do which of the following?

tailor product offerings to fit local preferences and requirements

A multinational enterprise would likely be motivated to pursue a global-standardization strategy in order to ______. (Check all that apply.)

take advantage of economies of scale take advantage of location economies

A multinational enterprise would likely be motivated to pursue a global-standardization strategy in order to ______. (Check all that apply.)

take advantage of location economies take advantage of economies of scale

Which of the following are distinct features of globalization 3.0?

technology has helped to reduce communication distances firms create global networks of local expertise MNEs reorganize into a more seamless global enterprise

A company should only expand abroad if ______.

the benefits outweigh the costs

A company should only expand abroad if:

the benefits outweigh the costs

a company should only expand abroad if

the benefits outweigh the costs

cultural distance - (entry decisions based on Hofstede)

the cultural disparity between the internationally expanding firm's home country and its targeted host country. A firm's decision to enter certain international markets is influenced by cultural differences. A greater cultural distance can increase the cost and uncertainty of conducting business abroad. In short, greater cultural distance increases the liability of foreignness. i.e. we're similar to Australia

The belief that the importance of location is diminishing as an explanation of firm-level compt. advntg. is called:

the death-of-distance hypothesis

Which of the following are among the primary considerations when determining the mode in which a firm enters a foreign market? (Check all that apply.)

the desired level of control over foreign operations the degree of investment

which of the following are among the primary considerations when determining the mode in which a firm enters a foreign market?

the desired level of control over foreign operations the degree of investment

All other things equal, the greater the cultural distance, ______.

the greater the liability of foreignness

When a company has difficulty coordinating operations across geographic distance and between distinct culture environments, it experiences

the liability of foreignness

When a company has difficulty coordinating operations across geographic distance and between distinct culture environments, it experiences ______.

the liability of foreignness

Which of the following factors help define the administrative and political distance between two countries? (Check all that apply.)

the strength of legal or financial institutions the absence or presence of shared monetary associations the absence or presence of political hostilities

leading biotechnology, software, and internet companies and leading computer manufacturers are concentrated in which of the following countries?

the united states, taiwan, china

Which of the following are reasons firms expand internationally?

to gain access to a larger market to develop new competencies to gain access to low-cost input factors

Which of the following are reasons firms expand internationally? (Check all that apply.)

to gain access to low-cost input factors to develop new competencies to gain access to a larger market

A ______ strategy focuses on integration at the business level by attempting to reconcile product differentiations at low cost.

transnational

A(n) ______ strategy focuses on integration at the business level by attempting to reconcile product differentiations at low cost.

transnational

A(n) __________ strategy focuses on integration at the business level by attempting to reconcile product differentiations at low cost

transnational

If an MNE wishes to be responsive to the needs of its local consumers but also wants to attain a lowest-cost position, it should follow a(n) ______ strategy.

transnational

The integration-responsiveness framework suggests that companies facing high pressure for both local responsiveness and cost reduction should follow a(n) ______ strategy.

transnational

the integration-responsiveness framework suggests that companies facing high pressure for both local responsiveness and cost reduction should follow a ______ strategy

transnational

The extent to which members of a society feel anxious when faced w an unknown situation is known as:

uncertainty avoidance

which of the following helped motivate globalization after the end of world war 2?

unfilled needs during the war years the need to reconstruct economies damaged by war

Which of the following are the most important determinants of economic distance?

wealth per capita income

Which of the following are the most important determinants of economic distance? (Check all that apply.)

wealth and per capita income

globalization hypothesis

which states that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenous

1. Rising wages and other costs are likely to negate any benefit of access to low-cost input factors 2. As the standard of living rises in emerging economies, MNEs are hoping that increased purchasing power will enable workers to purchase the products they used to make for export only

· Global Economic Development: Impact on MNES o Two consequences for MNEs...

Porter's Diamond of national competitive advantage

■ Factor conditions. ■ Demand conditions. ■ Competitive intensity in focal industry. ■ Related and supporting industries/complementors.

What conditions suggest multidomestic strategy might be the appropriate strategy for MNEs?

- high demand for local responsiveness - little need for cost reductions - host countries with idiosyncratic domestic markets

As MNEs compete internationally, a focus on local responsiveness allows them to do what two things

- increase product differentiation - appeal to local consumers more effectively

True about economic distance:

-wealthy countries tend to trade w/ other wealthy countries -wealthy companies benefit from trade when their comp. advntg. is based on economies of experience, scale and scope.

Polycentric Innovation Strategy

A strategy in which MNEs draw on multiple, equally important hubs throughout the world characteristic of Globalization 3.0

The decision framework that is based on the relative distance between home and a foreign target country is the ______.

CAGE distance framework

Because Going Backwards Would Be Disastrous

Chancellor Erich Honecker - East Germany General Secretary Nicolae Ceausescu - Romania General Secretary Joseph Stalin - U.S.S.R. Chairman Mao - China (Great Leap Forward) Dear Leader Kim Il Sung - North Korea - Marxism/Leninism GLOBALIZATION TOOK A DETOUR IN THE 20th CENTURY

Globalization in the 18th & 19th century

Colonization of the Rest of the World by the Europeans Spain/Portugal (Iberia) - North, South and Central Americas England - "the sun never sets on the British empire" France - Franco-Ottoman alliance (16th century) Francis I & Suleyman the Magnificent Germany - exerted influence on Japanese culture Colonization achieved through war, conquest and administrative control

Competitive Intensity in a Focal Industry

Companies that face a highly competitive environment at home tend to outperform global competitors that lack such intense domestic competition

Multidomestic Strategy

Strategy pursued by MNEs that attempts to maximize local responsiveness, with the intent that local consumers will perceive them to be domestic companies o Arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions o When entering a large and or idiosyncratic domestic markets, such as Japan or Saudi Arabia o One of the main strategies in the Globalization 2.0 stage o Is costly and inefficient because it requires the duplication of key business functions across multiple countries o Risk of IP appropriation increases

Globalization

The process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade and investment barriers, advancements in telecommunications, and reductions in transportation costs - Reduce the costs of doing business around the world, opening doors to a much larger market than any one home country - Significant opportunities for individuals, companies and countries - Has resulted in many economies around the world growing significantly, and living standards rising

2017: when were you born?

Why do I ask? Because only Peer and I were alive before the fall of Communism The world was essentially bifurcated between liberal-democratic free-markets and Leninist/Stalinist centrally planned economies. Russia was very concerned about the 3rd reunification of Germany The concept of two superpolitical powers has been transcended by the supra-national MNE

Which of the following factors contribute to the existence of high-quality suppliers and complementors in a given industry?

a high level of competition sophisticated customers

when an MNE doesn't face strong pressure for cost reductions or local responsiveness, an international strategy is typically

advantageous

multidomestic strategy

attempt to maximize local responsiveness, hoping that local consumers will perceive their products or services as local ones. This strategy arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions

Companies seek to access international markets as a means of ______.

increasing their economic value creation

The benefits to be accrued from locating value chain activities in the world's optimal geographies for a specific activity are known as ______ economies.

location

the benefits to be accrued from locating value chain activities in the world's optimal geographies for a specific activity are know as ____ economies

location

which of the following risks do companies face when expanding internationally?

loss of intellectual property loss of reputation the liability of foreignness

one notable advantage of a multi-domestic strategy is the

lower exchange rate exposure

One notable advantage of a multidomestic strategy is ______.

lower exchange-rate exposure

One notable advtg. of a multi-domestic strategy is

lower exchange-rate exposure

In order to implement a transnational strategy, MNEs typically adopt a global _______ structure

matrix

What are the four quadrants of the integration-responsiveness framework?

multi-domestic strategy global standardization strategy international strategy transnational strategy

When a company wants to be more responsive to local consumers in multiple countries, it will likely shift to a(n) ____________ strategy

multidomestic

Gunther is transferred from the United States to Hong Kong for work. He notices that his colleagues at the new office, most of whom are Hong Kong natives, behave and communicate in a similar manner that is a striking contrast to what Gunther is accustomed to. Gunther is observing his colleagues' ______.

national culture

When multinationals draw on multiple innovation hubs that all have equal status, they pursue a...

polycentric innovation strategy

when a country's demand conditions include high-density urban living and high energy costs, one would expect consumers to prefer air conditioners with which of the following characteristics?

quiet, small, energy-efficient

The integration-responsiveness framework suggests that companies facing high pressure for both local responsiveness and cost reduction should follow a(n) _____________ strategy.

transnational

integration-responsiveness framework suggests that companies facing high pressure for both local responsiveness and cost reduction should follow a:

transnational strategy

The extent to which members of a society feel anxious when faced with an unknown situation is known as ______.

uncertainty avoidance

why do firms expand internationally?

■ Gain access to a larger market. ■ Gain access to low-cost input factors. ■ Develop new competencies. - communities of learning - location economies -

disadvantages of going global

■ Liability of foreignness. ■ Loss of reputation. ■ Loss of intellectual property.

These factors often combine to lead to tragic outcomes for domestic workers of MNEs:

-failure to enforce safety standards -govt. corruption -MNEs search for low-cost labor

a global strategy is needed in order to ______

achieve a competitive advantage against other companies

The Japanese market is very particular, and MNE's tend to have a challenging time to breaking into the market successfully. To provide the most local responsiveness and to influence Japanese consumers in believing that the products are local, an MNE should follow a:

multidomestic strategy

When a company wants to be more responsive to local consumers in multiple countries, it will likely shift to a...

multidomestic strategy

Which of the following characteristics help make an MNE's international strategy successful?

strong reputation large domestic markets prominent brand names

With a multidomestic strategy, products are manufactured on a local level. This has the potential of __________.

- increasing the risk of intellectual property appropriation

polycentric innovation strategy

a strategy in which MNEs now draw on multiple, equally important innovation hubs throughout the world characteristic of Globalization 3.0

which of the following statistic regarding MNEs are correct?

account of 11% of private-sector employment growth since 1990 employ 19% of the work force pay 25% of the wages provide for 31% of the us gdp make up 74% of private-sector r&d spending

The CAGE Distance Framework

Guides MNE decisions on which countries to enter acronym for different types of distance - Cultural (a common language or religion) - Administrative and political (liberal-democratic vs. command and control) - Geographic (land and water barriers) - Economic (free-market vs. socialist/communist) Although absolute metrics such as country wealth or market size matter to some extent—as we know, for example, that a 1 percent increase in country wealth leads to a 0.8 percent increase in international trade—the relative factors captured by the CAGE distance model matter more. For instance, countries that are 5,000 miles apart trade only 20 percent of the amount traded among countries that are 1,000 miles apart. Cultural distance matters even more. A common language increases trade between two countries by 200 percent over country pairs without one.

Demand Conditions

The specific characteristics of demand in a firm's domestic market · Ex. a home market made up of sophisticated customers who hold companies to a high standard of value creation and cost containment contributes to national competitive advantage

global-standardization strategy

attempt to reap significant economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost. The global-standardization strategy arises out of the combination of high pressure for cost reductions and low pressure for local responsiveness. MNEs using this strategy are often organized as networks (Globalization 3.0). This lets them strive for the lowest-cost position possible. Their business-level strategy tends to be cost leadership. Because there is little or no differentiation or local responsiveness because products are standardized, price becomes the main competitive weapon. To be price competitive, the MNE must maintain a minimum efficient scale

when a company wants to be more responsive to local consumers in multiple countries, it will likely shift to a

multidomestic strategy

A company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries is a:

multinational enterprise

Globalization 1.0 (1900-1941)

o Basically, all the important business functions were located in the home country o Blossoming of the idea of MNEs o Strategy formation and implementation, as well as knowledge flows, followed a one-way path - from domestic headquarters to international outposts

Administrative and Political Distance

o Captured in factors such as the absence or presence of shared monetary or political associations, political hostilities, and weak or strong legal and financial institutions o Tariffs, trade quotas, FDI restrictions, etc. to protect domestic competitors o Legal and ethical pillars as well as well-functioning economic institutions such as capital markets and an independent central bank reduce distance

Globalization 3.1: Retrenchment

o Several black swan events have buffeted the world economy in recent years - Financial crisis of 2008 - European sovereign debt crisis - Etc. o All of these macro events contributed to a rise of nationalism in the US and Western Europe - Countries are looking inward, "America First," European right-wing nationalist parties exiting the EU, etc.

Advantages of International Expansion

- Access new markets - Access lower-cost inputs - Develop new competencies

Part of culture:

-beliefs -social norms -social mores

These conditions suggest a that a multi-domestic strategy might be the appropriate strategy for MNEs:

-high demand for local responsiveness -little need for cost reductions -host countries with idiosyncratic domestic markets

As MNE's compete internationally, a focus on local responsiveness allows them to:

-increase product differentiation -appeal to local consumers more effectively

Disadvantages of the multi-domestic strategy:

-it is costly -it is inefficient

True about the CAGE distance framework:

-it is designed to aid MNEs in deciding where to compete in the world

A benefit of an international strategy is:

-leveraging core competencies

If the economic value creation of international expansion is negative, a firm should:

-not expand internationally

Factors that help define administrative and political distance:

-political hostilities -shared monetary associations -the strength of financial institutions

The following have helped make globalization possible:

-reductions in transportation costs -reduced investment barriers -advances in telecommunications

Less

Although many large firms are more than 50% globalized, the world itself is far _________ global

Death-of-Distance Hypothesis

Assumption that geographic location alone should not lead to firm-level competitive advantage because firms are now, more than ever, able to source inputs globally o However, it turns out that high-performing firms in certain industries are concentrated in specific countries § Like the US for tech companies, Italy for fashion, China for manufacturing, etc.

Economic Arbitrage

Companies from wealthy countries trading with companies from poor countries to benefit

Factor Conditions

Describe a country's endowments in terms of natural, human, and other resources · Universities, infrastructure, capital markets, etc.

The benefits of local responsiveness always outweigh the costs

FALSE

Why do firm expand internationally?

Gain access to a larger market; gain access to low-cost input factors; develop new competencies

Due to globalization, the world's market economies are becoming more

Integrated and interdependent

The oldest types of global strategies and the first step companies take when beginning to conduct business abroad is:

International strategy

Cost Reductions and Local Responsiveness

MNEs face two opposing forces when competing around the globe:

The global hypothesis suggest that consumer needs and preference throughout the world are becoming

More homogeneous

Exporting

Producing goods in one country to sell in another - is one of the oldest forms of internationalization

Which of the filling diminishing is not considered in the CAGE distance framework?

Risk aversion distance

National culture may be defined as

The collective mental and emotional programming of the mind that differentiates human groups.

For a U.S. company doing business internationally, which of the following would be examples of local responsiveness? (Check all that apply.)

Walmart selling live animals for food preparation in China Ikea selling metal chopsticks in South Korea McDonald's selling teriyaki burgers in Japan

Calculating cultural distance involves comparing the cultures of which of the following?

a firm's home country and a targeted host country

When a company has difficult coordinating operations across geographic distance and b/w distinct culture environments, it experiences:

a liability of foreignness

MNEs pursuing a _____ ocean strategy tend to also pursue a transnational strategy

blue

MNEs pursuing a ____________ ocean strategy tend to also pursue a transnational strategy

blue

which of the following dimensions are considered in the CAGE distance framework>

economic distance geographic distance cultural distance

The oldest form of internationalization is ______, which involves producing goods in one country to sell in another country.

exporting

The benefits of competing on a global scale exist ______.

for an increasing number of firms

Multinational enterprises that manufacture commodity products that focus on cost leadership tend to use a(n) ______ strategy.

global-standardization

The process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs, is known as ______.

globalization

death-of-distance hypothesis

globalization can lead us to believe that firm location is becoming increasingly less important Because firms can now, more than ever, source inputs globally, many believe that location must be diminishing in importance as an explanation of firm-level competitive advantage

as the standard of living rises in emerging economies, MNEs are hoping that _____

increased purchasing power will enable workers to purchase the products they used to make for exports only

If a firm's goal is to leverage home-based core competencies in foreign markets, it should pursue an:

international strategy

Though many benefits exist, which of the following are among the drawbacks of a transnational strategy?

it's difficult to implement it makes working across cultures difficult it requires organizational complexity

Which of the following factors enabled India to gain a competitive advantage in business process outsourcing? (Check all that apply.)

its low-cost labor its well-educated, English-speaking workforce

which of the following characteristics help make an MNEs international strategy successful?

large domestic markets prominent brand names strong reputation

If the economic value creation of international expansion is negative, a firm should ______.

not expand internationally

Which of the following are the most important determinants of economic distance?

per capita income wealth

when multinationals draw on multiple innovation hubs that all have equal status, they pursue a _______

polycentric innovation strategy

the ____ dimension of national culture focuses on how a society deals with inequality among people

power-distance

In a global-standardization strategy, the main competitive element is ______.

reduced cost

which of the following have helped make globalization possible?

reduced investment barriers reductions in transportation costs advances in telecommunications

Which of the following have helped make globalization possible?

reductions in transportation costs advances in telecommunications reduced investment barriers

In a global economy, according to Porter, compt. advtgs. increasingly exist in _____________, such as Silicon Valley

regional geographic clusters

During the first stage of globalization, which of the following business functions typically took place abroad?

sales distribution Not: strategic management research

When pursuing an international strategy, a company ______.

sells the same product in both domestic and foreign markets

When pursuing an international strategy, a company...

sells the same product in both domestic and foreign markets

when pursuing an international strategy, a company

sells the same product in both domestic and foreign markets

a multinational enterprise would likely be motivated to pursue a global standardization strategy in order to

take advantage of location economies and economies of scale

A company should expand abroad if:

the benefits outweigh the costs

all other things equal, the greater the cultural distance,

the greater the liability of foreignness

when a company has difficulty coordinating operations across geographic distance and between distinct culture environments, it experiences

the liability of foreignness

Which of the following risks do companies face when expanding internationally? (Check all that apply.)

the liability of foreignness loss of intellectual property loss of reputation

Which of the following helped motivate globalization after the end of WWII?

the need to reconstruct economies damaged by war unfilled needs during the war years

local responsiveness

the need to tailor product and service offerings to fit local consumer preferences and host-country requirements; it generally entails higher costs.

demand conditions

the specific characteristics of demand in a firm's domestic market. A home market made up of sophisticated customers who hold companies to a high standard of value creation and cost containment contributes to national competitive advantage

True or false: Multinational enterprises are the driving force behind globalization.

true

National culture, according to Geert Hofstede, can be defined as different groups' distinctive

"Programming of the mind"

National culture, according to Geert Hofstede, can be defined as different groups' distinctive ______.

"programming of the mind"

National culture, according to Geert Hofstede, can be defined as different groups' distinctive __________:

"programming of the mind"

Disadvantages of International Expansion

- Liability of foreignness - Loss of reputation - Loss of intellectual property

distinctive features of globalization 3.0?

-Tech. helps reduce communication distances -firms create global networks of local expertise -MNEs reorganize into a more seamless global enterprise

Leading biotech, software, and internet companies and leading computer manufacturers are concentrated in which countries/states?

-The US -China -Taiwan

Stats regarding MNEs

-They account for 11% of the private sector employment growth since 1990 -They make up 74% of the private sector R&D spending since 2000 -They pay 25% of wages in the US

Calculating cultural distance involves comparing the cultures of:

-a firm's home country -a targeted host country

Global-collaboration networks freely locate business functions anywhere in the world based on an optimal mix of which factors:

-capabilities -costs -PESTEL factors

When a country's demand conditions include high-density urban living and high energy costs, consumers can be expected to prefer air conditioners that are:

-energy-efficient -quiet -small

Porter's diamond framework to explain national compt. advtg. includes four interrelated factors: demand conditions, comptv. intensity in a focal industry, related and supporting industries/complementors, and

-factor conditions

Dimensions considered in the CAGE distance framework:

-geographical distance -cultural distance -economic distance

The 4 quadrants of the integration-responsiveness framework:

-global standardization strategy -multidomestic strategy -transnational strategy -international strategy

Benefits of Transnational Strategy

-it promotes global learning and the diffusion of best practices and innovations -It harnesses economies of scale

Though many benefits exist, which are among the drawbacks of a transnational strategy?

-it requires organizational complexity -it's difficult to implement

These characteristics help make an MNE's international strategy successful:

-large domestic markets -prominent brand names -strong reputation

The following factors helped make Germany, which was a tough environment for a car company, conducive to successful car companies?

-no speed-limit autobahn -fierce domestic competition -demanding customers

What are the factors in Michael Porter's model of national competitiveness?

-related industries/complementors -demand conditions -factor conditions -comptv. intensity in a focal industry

Help shrink the administrative and political distance b/w countries:

-shared currency -trade agreements -a history of colonization

A multinational enterprise would likely be motivated to pursue a global-standardization strategy in order to:

-take advtg. of location economies -take advtg. of economies of scale

These are among the primary considerations when determing the mode in which a firm enters a foreign market:

-the degree of investment -the desired level of control over foreign operations

Risks that companies face when expanding internationally:

-the liability of foreignness -loss of reputation -loss of intellectual property

Examples of local responsiveness:

-the sale of metal chopsticks in South Korea -the sale of toads for preparation in China -the sale of teriyaki burgers in Japan

Reasons firms expand internationally:

-to gain access to low-cost input factors -to gain access to a larger market -to develop new competencies

Reasons firms expand Internationally?

-to gain access to low-cost input factors -to develop new competencies -to gain access to a larger market

a manufacturing worker in the United States makes about ____ times as much as a similar worker in china.

20

Relative Distance

A company must consider such things like the CAGE model to determine where to ultimately land

Multinational Enterprise (MNE)

A company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries

CAGE Distance Framework

A decision framework based on the relative distance between home and a foreign target country along four dimensions: 1. Cultural Distance 2. Administrative and Political Distance 3. Geographic Distance 4. Economic Distance

Foreign Direct Investment

A firm's investment in value chain activities abroad - A way MNEs engage abroad

Which of the following statements about workers in the United States versus workers in other countries is true?

A manufacturing worker in the United States makes several times what a similar worker in China.

Natural Resources

A type of factor condition, often not needed to generate world-leading companies because competitive advantage is often based on other factor endowments such as human capital and know-how

Which of the following is not a characteristic of a global strategy?

A well designed global strategy almost certainly leads to success

Liability of Foreignness

Additional costs of doing business in an unfamiliar culture and economic environment, and of coordinating across geographic distances

Global Hypothesis

Assumption that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenous o Shown by how the same products can be sold in many different markets (like McDonalds in Japan, etc.)

A multinational enterprise would likely be motivated to pursue a global-standardization strategy in order to _________

- take advantage of economies of scale - take advantage of location economies

MNEs pursuing a________ ocean strategy tend to also pursue a transnational strategy.

Blue

Global-Standardization Strategy

Strategy attempting to reap significant economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost o High pressure for cost reductions and low pressure for local responsiveness o Products are standardized, so prices become the main competitive weapon o MNEs that manufacture commodity products such as computer hardware or offer services such as business process outsourcing generally pursue a global-standardization strategy § Tech companies offshoring manufacturing to cheaper countries

Before World War II, business strategy, implementation, and knowledge typically moved

from domestic headquarters to outposts abroad

A company's ________ is the part of a corporate strategy that addresses how to gain and sustain a compt. advtg. when competing against other foreign and domestic companies around the world:

global strategy

Since expanding internationally, IKEA has shifted focus, concentrating on effectively managing a global supply chain in order to achieve economies of scale. This is reflective of a(n) _____________ strategy

global-standardization

Which of the following help shrink the administrative and political distance between countries?

shared currency trade agreements a history of colonization

Which of the following comprise culture?

social mores beliefs social norms

Before World War II, business strategy, implementation, and knowledge typically flowed ______.

from domestic headquarters to outposts abroad

prior to the second world war, business strategy, implementation, and knowledge typically moved

from domestic headquarters to outposts abroad

Which of the following dimensions are considered in the CAGE distance framework?

geographic distance economic distance cultural distance

Which of the following dimensions are considered in the CAGE distance framework? (Check all that apply.)

geographic distance economic distance cultural distance

Since expanding internationally, IKEA has shifted focus, concentrating on effectively managing a global supply chain in order to achieve economies of scale. This is reflective of a(n) ______ strategy.

global-standardization

Globalization 2.0 (1945-2000)

o MNEs began to create smaller, self-confined copies of themselves, with all business functions intact, in a few key countries; notably, Western European countries, Japan and Australia - Required a significant amount of Foreign Direct Investment o Local mini-MNE had leeway in day-to-day operations in the new country o Knowledge flow back to the US headquarters remained limited in most cases

Foreign Direct Investment (FDI)

By making investments in value chain activities abroad, MNEs engage in foreign direct investment (FDI). For example, the European aircraft maker Airbus is investing $600 million in Mobile, Alabama, to build jetliners. It's doing so in order to avoid import restrictions, be closer to customers in North America, and take advantage of business-friendly conditions such as lower taxes, labor cost, and cost of living, plus other incentives provided by host states in the Southern United States.

State of Globalization

The level of globalization is no more than 10 to 25 percent total. Evidence: 2% of all voice-calling minutes are cross-border. 3% of world's population are first-generation immigrants. 9% of all investments are foreign direct investments. 15% of patents list at least one foreign inventor. 18% of Internet traffic crosses national borders. The world isn't fully globalized. Only semi-globalized Continued economic development across the globe has two consequences for MNEs. First, rising wages and other costs are likely to negate any benefits of access to low-cost input factors. Second, as the standard of living rises in emerging economies, MNEs are hoping that increased purchasing power will enable workers to purchase the products they used to make for export only.

which of the following are reasons firms expand internationally?

gain access to a larger market gain access to low-cost input factors develop new competencies

Geographic Distance

o The cost to cross-border trade rise with geographic distance o Also other attributes like the country's physical size, the within-country distances to its borders, the country's topography, its time zones, and whether the countries are contiguous to one another or have access to waterways and the ocean o Countries infrastructure

Economic Distance

o The wealth and per capita income of consumers is the most important determinant of economic distance o Wealthy countries engage relatively more cross-boarder trade than poorer ones § Richer countries tend to trade with richer ones, etc. o Replication of an existing business model is much easier in a country where the incomes are relatively similar and resources, complements, and infrastructure are of roughly equal quality Economic Arbitrage

which of the following help shrink the administrative and political distance between countries?

shared currency a history of colonization trade agreements

Greenfield Operations

Building new, fully owned plants and facilities from scratch in a new country

stages of globalization

Globalization 1.0: 1900-1941 - Sales, operations, and some procurement - Strategy flowed from HQ to international sites Globalization 2.0: 1945-2000 - To reconstruct damage from WWII (Cold War) - Focus on European countries, Japan, and Australia - Greater local-responsiveness - HQ set goals, international sites influenced tactics Globalization 3.0: 21st Century - Business function locations are based on costs, capabilities, and PESTEL factors - Companies can operate 24/7, 365 days a year - MNE's: Apple, Google, Microsoft, Facebook, Starbucks

MNEs pursuing lost-cost leadership strategy

Helps MNEs that pursue a low-cost leadership strategy Examples of low-cost raw materials: - Lumber, iron ore, oil, and coal Was a key driver of Globalization 1.0 and 2.0 - During Globalization 3.0, firms benefit from lower labor costs in manufacturing and services India carved out a competitive advantage in business process outsourcing (BPO), not only because of low-cost labor but because of an abundance of well-educated, English-speaking young people. Infosys, TCS, and Wipro are some of the more well-known Indian IT service companies. Taken together, these companies employ more than 250,000 people and provide services to many of the Global Fortune 500. Many MNEs have close business ties with Indian IT firms. Some, such as IBM, are engaged in foreign direct investment through equity alliances or building their own IT and customer service centers in India. More than a quarter of Accenture's work force, a consultancy specializing in technology and outsourcing, is now in Bangalore, India

Globlization 3.0 (2001-pressent)

o China entered the WTO in 2001, big moment o Communication limitations of the past were all but reduced, and MNEs have been able to expand greatly to wherever they want o The MNE's strategic objective changes - Moved from a multinational company with self-contained operations in a few select countries to a more seamless global enterprise with centers of expertise · Each of these centers of expertise is a hub within a global network for delivering products and services o Some new ventures organize as global collaboration networks from the start

Common reasons for companies to make foreign direct investments:

-to reduce labor costs -to avoid import restrictions -to reduce tax burdens

MNE's pursuing a differentiation strategy

Helps MNEs that pursue a differentiation strategy Foreign direct investments provide access to: - Communities of learning: often contained in specific geographic regions -- Globally present -- Locally responsive - Location economies: benefits from locating value chain activities in optimal geographies - Tata Steel, Carnegie Steel AstraZeneca, a Swiss-based pharmaceutical company, relocated its research facility to Cambridge, Massachusetts, to be part of the Boston biotech cluster, in hopes of developing new R&D competencies in biotechnology. Cisco invested more than $1.6 billion to create an Asian headquarters in Bangalore and support other locations in India, in order to be in the middle of India's top IT location. Unilever's new-concept center is located in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations on-site, while Unilever researchers monitor consumer reactions.

International Strategy

Strategy that involves leveraging home-based core competencies by selling the same products or services in both domestic and foreign markets o One of the oldest types of global strategies and is frequently the first step companies take o Advantageous when the MNE faces low pressures for both local responsiveness and cost reductions o Can leave itself open to the expropriation of intellectual property

Which of the following factors help define administrative and political distance?

shared monetary associations political hostilities the strength of financial institutions