WPC 480 CH10

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: cultural distance (C), administrative and political distance (A), geographic distance (G), and economic distance (E).

Foreign direct investment (FDI)

- A firm's investments in value chain activities abroad.

Advantages of expanding internationally

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

National competitive advantage

- World leadership in specific industries.

Liability of foreignness

- additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic differences.

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.

Cultural distance

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

Factor conditions

- describe a country's endowments in terms of natural, human, and other resources.

Porter's diamond framework

- framework to explain national competitive advantage. Four interrelated factors: factor conditions, demand conditions, competitive intensity in focal industry, related and supporting industries/complementors.

Disadvantages of expanding internationally

- liability of foreignness, loss of reputation, loss of intellectual property.

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 the lowest 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, multi-domestic strategy, global-standardization strategy, and transnational strategy.

Multi-domestic strategy

- strategy pursued by MNEs that attempts to maximize local responsiveness, with the intent that local consumers will perceive them to be domestic companies; 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 competencies 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-reduction.

National culture

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

Local responsiveness

- the need to tailor 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.

Demand conditions

- the specific characteristics of demand in a firm's domestic market.