BUS 498 Chapter 10
Example of liability of foreignness
Walmart entering the market in Germany. Result: Walmart failed. Executive didn't speak any German and simply decreed that English would be the official in-house language.
Porter's diamond national competitive advantage
1. factor conditions 2. demand conditions 3. competitive intensity in focal industry 4. related and supporting industries/complementors
Example loss of reputation:
Apple's brand. Textile industry is notorious for sweatshop conditions.
Example of Global Strategy:
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
location economies
Benefits from locating value chain activities in the world's optimal geographies for a specific activity wherever that may be
Example of transnational strategy:
German multimedia conglomerate Bertelsmann attempts to follow a transnational strategy. Global learning and human resource strategies for executives are coordinated at the network level.
Example of global-standardization strategy:
Lenovo acquired from IBM in 2005. Benefits from low-cost labor and to be close to its main markets in order to reduce shipping costs, manufacturing facilities are in Mexico, India, and China
globalization hypothesis example:
McDonalds
Example multidomestic strategy:
Swiss-based Nestle known for customizing its product offerings to suit local preferences, tastes, and requirements
relating and supporting industries/complementors
The availability of top-notch complementors-firms that provide a good service that leads customers to value the focal firm's offering more when the two are combined-further strengthens national competitive advantage
Example of foreign direct investment
Volkswagen invested $1 billion in Chaattanooga, Tennessee
multinational enterprise
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, administrative and political distance, geographic distance, and economic distance
foreign direct investment
a firm's investments in value chain activities abroad
polycentric innovation strategy
a strategy in which MNEs now draw on multiple, equally important innovation hubs throughout the world characteristic of globalization
liability of foreignness
additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances
Demand conditions
are the specific characteristics of demand in a firm's domestic market
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
greenfield operations
building new, fully owned plants and facilities from scratch
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
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.
CAGE distance framework helps
determine the attractiveness of foreign target markets in a more fine-grained manner based on relative differences
advantages of going global
gain access to a larger market gain access to low-cost input factors develop new competencies
Companies that base their competitive advantage on economies of scale and economies of scope
have an incentive to gain access to larger markets because this can reinforce the basis of their competitive advantage
Globalization
is 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.
Disadvantages of Going Global
liability of foreignness loss of reputation loss of intellectual property
one of the advantages of global-standardization strategy
obtaining the lowest cost point possible by minimizing local adaptations
global strategy
part of a firm's corporate strategy to gain and sustain a competitive advantage when competing against foreign and domestic companies around the world
Globalization allows companies to
source supplies at lower costs, to learn new competencies, and to further differentiate products
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 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
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
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
national competitive advantage
world leadership in specific industries