Chapter 10

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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

foreign direct investment (FDI)

a firm's investments in value-chain activities abroad

global strategy

a firm's strategy to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world

regional cluster

a group of interconnected companies and institutions in a specific industry, located near each other geographically and also linked by common characteristics

knowledge spillover

a type of positive externality that is regionally constrained

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

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

power-distance dimension

dimension of culture that focuses on how a society deals with inequality among people in terms of physical and intellectual capabilities, and how those methods translate into power distributions within organizations

uncertainty-avoidance dimension

dimension of culture that focuses on societal differences in tolerance toward ambiguity and uncertainty

masculinity- femininity dimension

dimension of culture that focuses on the relationship between genders and its relation to an individual's role at work and in society

individualism dimension

dimension of culture that focuses on the relationship between individuals in a society, particularly the relationship between individual and collective pursuits

globalization

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

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

localization 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; also called a multi-domestic strategy

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); sometimes called glocalization

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 reductions

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 cost

national competitive advantage

world leadership in specific industries


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