Ch. 8 Review Questions BBB

What are the strategic competitiveness outcomes firms can reach through international strategies, and particularity through an international diversification strategy?

Above average returns as well as enhanced innovation are the outcomes that a company can hope to achieve through international strategies and diversification. International diversification strategy helps a firm to effectively implement and manage the firm's international operations. International diversification also helps in achieving the economies of scope and allows for learning, which helps in improving the returns.

What are some global environmental trends affecting the choice of international strategies, particularly international corporate-level strategies?

Liability of foreignness and regionalization are the two global environmental trends that are affecting the international strategy that a company will use at the international corporate strategy level. Liability of foreignness refers to the differences in the domestic market and the international market. Regionalization refers to regions like NAFTA , EU, ASEAN. etc. rather than the individual countries.

(A.) What are political risks and what are economic risks? (B.) How should firms approach dealing with these risks?

Political risks - are those where the operations could be disrupted by political forces and events such as military engagements and civil wars. The best way to handle the political risks is to do a political risk evaluation so the company can be aware of what to expect and how to work around in certain situations. Economic risks - are the basic weaknesses that are inherent to each country or region's economy that can affect the overall effectiveness of the global initiative. A company should select a country that protects its intellectual property on a high level It should also look for countries that have a high level of national security as well.

What are two important issues that can potentially affect a firm's ability to successfully use international strategies?

Size and complexity are two areas of interest that can affect a company's ability to navigate international strategies. The bigger the size of the firm with a lot of resources, the easier it would be, for the firm to manage and implement the strategies. The more complex the market is, t.he more difficult it would be for a firm, to do business in a complex country.

(A.) What five entry modes do firms consider as paths to use to enter international markets? (B.) What is the typical sequence in which firms use the entry modes?

The five modes to enter an international market are: (1) exports, (2) licenses, (3) strategic alliances, (4) acquisition, and (5) greenfield venture. The typical sequence that a company would use to enter a new market based on cost and risk is export, licensing, strategic alliances or acquisitions, greenfield venture. As we move from export to a greenfield projects, the amount of risk goes on increasing. Also, the amount of capital investment required goes on increasing.

(A.) What are the three international corporate-level strategies? (B.) What are the advantages and disadvantages associated with these individual strategies?

The three international corporate level strategies are: multidomestic, global, and transnational strategy. The multidomestic strategy tries to capture market share in each country in which it operates. Using this strategy, the firm comes up with products that suit the local needs. The advantage is that it will typically build the local market share; however its disadvantage is that it is less knowledge sharing and the inability to develop economies of scale. The global strategy advantage is that it can create more standardized products globally across the markets as well as it can create economies of scale. It also has an advantage that it can launch innovative campaigns and products across the markets as well Large multinationals particularly use this strategy. The disadvantage is that it cannot be differentiated or cannot be localized. The transnational strategy is a combination of multidomestic and the global strategy. The advantage is that the strategy is very flexible depending upon the requirements. The downside is that it can lose touch with standardization, as well as profitability, as it tries to meet local needs for products.

What four factors are determinants of national advantage and serve as a basis for international business- level strategies?

There are four factors that can determine the national advantage from which the basis of international business-level strategies can be honed. These factors are: (1) factors of production, (2) demand conditions, (3) related and supporting industries, (4) firm strategy, structure, and rivalry. Factors of production define the relative availability of resources like land, labor and capital in the particular country. Demand conditions define the demand for the particular product manufactured by the firm in that country. Related and supporting industr ies define the allied industries that aid the growth of the main industry. For example, the automobile industry to flourish in a particular area requires the presence of the various component manufacturers with-in a short radius from the manufacturing hub so the transportation and other related costs can be brought down. Firm strategy, structure and rivalry defines the amount of competitiveness in the particular industry, the structure of the industry and the strategy used by the firm in order to capture enough market share.

What incentives influence firms to use international strategies?

There are several incentives used to entice companies to use international strategies. The incentives are: (1) ability to extend product life cycle, (2) easier access to scarce resources and raw materials, (3) more opportunity to integrate into global operations, (4) more opportunities to use the evolving technology, (5) extended access to more consumers in emerging economies.

What are the three basic benefits firms can achieve by successfully using an international strategy?

There are three basic benefits to a company using an international strategy. These benefits are: (1) larger market access, (2) economies of scale with additional learning opportunities, (3) strategic and lower cost location advantages such as labor and energy. Larger market access allows the firm to market and sell its products and services to large number of customers. International strategy allows a firm to produce in large volumes so that the per unit cost for the product goes down, thereby allowing the company to have a large market share. Strategic and lower cost location advantages allow a company to manufacture and assemble the components in a country where it has large market share for the product or where the labor is cheaply available in abundant quantities.