ch 10 Mgmt 493

4 interrelated factors explain national competitive advantage:

(1) factor conditions, (2) demand conditions, (3) competitive intensity in a focal industry, and (4) related and supporting industries/complementors.

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 framework

A decision framework based on the relative distance between home and a foreign target country along four dimensions: cultural distance, administrative and political distance, geographic distance, and economic distance.

foreign direct investment (FDI)

A firm's investments in value chain activities abroad.

liability of foreignness

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

globalization hypothesis

Assumption that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenous.

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.

benefits of transnational strategy

Attempts to combine benefits of localization and standardization strategies simultaneously by creating a global matrix structure. Economies of scale, location, experience, and learning.

location economies

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

cultural distance

Cultural disparity between an internationally expanding firm's home country and its targeted host country.

risks of multidomestic strategy

Duplication of key business functions in multiple countries leads to high cost of implementation. Little or no economies of scale. Little or no learning across different regions. Higher risk of IP expropriation.

porter's diamond framework

Factor conditions. Demand conditions. Competitive intensity in focal industry. Related and supporting industries/complementors. (all leading to national competitive advantage)

advantages of going global

Gain access to a larger market. Gain access to low-cost input factors. Develop new competencies.

risks of transnational strategy

Global matrix structure is costly and difficult to implement, leading to high failure rate. Some exchange-rate exposure. Higher risk of IP expropriation.

benefits of multidomestic strategy

Highest-possible local responsiveness. Increased differentiation. Reduced exchange-rate exposure.

benefits of international strategy

Leveraging core competencies. Economies of scale. Low-cost implementation through: • Exporting or licensing (for products) • Franchising (for services) • Licensing (for trademarks)

disadvantages of going global

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

benefits of global-standardization strategy

Location economies: global division of labor based on wherever best-of-class capabilities reside at lowest cost. Economies of scale and standardization.

risks of global-standardization strategy

No local responsiveness. Little or no product differentiation. Some exchange-rate exposure. "Race to the bottom" as wages increase. Some risk of IP expropriation.

risks of international strategy

No or limited local responsiveness. Highly affected by exchangerate fluctuations. IP embedded in product or service could be expropriated.

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.

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-ofclass capabilities reside at the lowest cost.

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.

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.

transnational strategy

Strategy that attempts to combine the benefits of a localization strategy (high local responsiveness) with those of a globalstandardization strategy (lowest-cost position attainable).

international strategy

Strategy that involves leveraging home-based core competencies by selling the same products or services in both domestic and foreign markets.

local responsiveness

The need to tailor product and service offerings to fit local consumer preferences and host-country requirements.

national competitive advantage

World leadership in specific industries.

product, service, and capital

___ ____ and ____ markets are more globalized than labor markets. The level of everyday activities is roughly 10 to 25 percent integrated, and thus semi-globalized. Rothaermel, Frank. Strategic Management: Concepts (p. 354). McGraw-Hill Higher Education. Kindle Edition.

CAGE

cultural administrative and political geographic economic

four strategic positions

international multidomestic global-standardization transnational

globalization

involves closer integration and exchange between different countries and peoples worldwide, made possible by factors such as falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs.

MNEs

many ______ are more than 50 percent globalized; they receive the majority of their revenues from countries other than their home country.