Management Chapter 10
multinational enterprise (MNE)
A company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least 2 countries
CAGE Distance Framework
A decision framework based on the relative distance between home and a foreign target country along 4 dimensions; cultural distance, administrative and political distance, geographical 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 culture 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 homogeneous
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
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
Porter's Diamond Framework
Framework that explains national competitive advantage- why are some nations outperforming others in specific industries. Consists of 4 interrelated factors; factor conditions, demand conditions, competitive intensity in focal industry, related and supporting industries/complementors
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-of-class capabilities reside at lower cost
integration-responsiveness framework
Strategy framework that juxtaposes the pressure an MNE faces for cost reductions and local responsiveness to derive four different strategies to gain and sustain competitive advantage when competing globally; international strategy, multidomestic strategy, global standardization strategy, and transnational strategy
multidomestic strategy
Strategy pursued by MNE's that attempts to maximize local responsiveness, with the intent that local consumers will perceive them to be domestic companies; the strategy arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions
transnational 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)
international strategy
Strategy that involves leveraging home-based core competenciess by selling the same products or services in both domestic and foreign markets; advantageous when the MNE faces low pressures for both local responsiveness and cost reductions
national culture
The collective mental and emotional "programming of the mind" that differentiates human groups
local responsiveness
The need to tailor the product and service offerings to fit local consumer preferences and host-country requirements; generally entails higher costs
globalization
The process of closer integration and exchange between different countries and people worldwide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs
national competitive advantage
World leadership in specific industries