CH 10

globalization.

"A 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" is the definition of

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, administrative and political distance, geographic distance, and economic distance.

foreign direct investment (FDI)

A firm's investments in value chain activities abroad.

lack of natural resources.

A reason for a country's development of advanced and specialized factors of human capital is often its

endowments in terms of natural, human, and other resources.

According to Porter's diamond of national competitive advantage, factor conditions are best described as a country's

that are related to national and/or religious identity.

According to the CAGE distance framework, cultural distance most affects industries or products

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

According to the CAGE distance framework, what does cultural distance represent?

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.

Competitive intensity in a focal industry

Auto industry in Germany

location economies

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

Demand Conditions

Cell phone needs in Finland

replicate their existing business model more easily.

Companies from wealthy countries tend to trade with other rich countries rather than poor countries because they can

economic value creation.

Companies generally decide to expand globally to increase their

cultural distance

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

factor condition

Japan, due to a lack of undeveloped land, would be an unusual choice of location for a U.S. cattle company to set up local grazing operations. This limiting factor would be identified in what part of Porter's determinants of national advantage?

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.

why high-performing firms in some industries are country-specific.

Porter's National Diamond framework is helpful in understanding

exporting.

Prestige Worldwide Inc. owns coffee plantations in Brazil. The company trades its coffee produce directly with coffee merchants in foreign markets who later resell and distribute it throughout their country. In this scenario, Prestige Worldwide's activities best illustrate

foreign direct investments.

Rekall Autos Inc., an automobile company based in the country of Springfield, made a capital investment of $400,000 to set up production units and distribution channels in the country of Uganda from where it plans to access the Uganda market. Such investments are best known as

It would have increased its local responsiveness to country-specific circumstances by duplicating business functions overseas.

Relaxicab Inc. is a 100-year-old, multinational enterprise (MNE). Which of the following activities would the company most likely have been involved in during the stage of Globalization 2.0?

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 companies.

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.

a multidomestic strategy

Swiss-based Nestlé, the largest food company in the world, is well known for customizing its product offerings to suit local preferences, tastes, and requirements. Which of the following strategies does the company pursue?

international

The Bluth Company is a condominium-building company that is based in the country of Veritas. It sells high-priced homes to consumers in Veritas as well as to consumers in other countries. It has extremely high brand loyalty. The industry it operates in is characterized by low pressure for local responsiveness and low pressure for cost reductions. In this scenario, The Bluth Company most likely pursues a(n) _________ strategy

liability of foreignness.

The additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances, are best described as a(n)

offer better service for lower costs than do the U.S. legacy carriers.

The best explanation of why Gulf airlines are giving U.S. legacy carriers stiff competition is that the Gulf carriers

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.

Globalization

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.

cost reduction.

The strategic foundations of the globalization hypothesis are based primarily on

Related and Supporting Industries

Traditional supplier network for Toyota

global-standardization

Tyrell Corporation is an electronics company based in the country of Palmia. The company has manufacturing facilities in four other countries where labor costs are low. It also has its research centers in three other countries because these countries offer best-of-class capabilities. However, Tyrell Corporation does not offer much product differentiation, which means that price is the main competitive weapon. In this scenario, Tyrell Corporation most likely implements a __________ strategy.

Factor Conditions

Vast oil and gas reserves in Venezuela

joint venture

What type of entry into the Japanese market did KFC use?

liability of foreignness.

When KFC struggled to open its restaurants in Japan, it was experiencing one of the disadvantages of going global. KFC was encountering the

cultural.

When applying the CAGE framework to KFC's early days in Japan, the factor with the most impact on its success seems to be

the absence or presence of weak legal and financial institutions

Which of the following factors best helps capture administrative and political distances?

acquisitions

Which of the following foreign entry modes requires the highest level of investment in terms of capital and other resources and allows for a high level of control?

The company has been able to organize work continuously because its teams in different locations around the globe can work 24/7.

Which of the following is a feature of Logitech as a global collaboration network?

Either one requires low capital investments.

Which of the following is an advantage of using licensing or franchising as a foreign entry mode?

Local responsiveness generally entails higher costs.

Which of the following statements is true of local responsiveness?

the languages spoken in each country

Which of the following strongly affects the cultural distance between two countries?

national competitive advantage

World leadership in specific industries.