Chapter 10 - Global Strategy: Competing Around the World

Cultural Distance

-cultural disparity between an internationally expanding firm's home country and its targeted host country different languages, ethnicities, religions, social norms and dispositions lack of social networks lack of trust and mutual respect

liability of foreignness

-working in an unfamiliar cultural environment working in an unfamiliar economic environment -can result in additional costs

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.

economies of scale and scope

Becoming an MNE gives a company access to a larger market which gives them: 1) ________ and 2) ________

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. ex: Fierce domestic competition in Germany, for example, combined with demanding customers and the no-speed-limit autobahn make a tough environment for any car company.

Factor Conditions

Describe a country's endowments in terms of natural, human, capital and other resources.

labor cost

During Globalization 3.0, firms have expanded globally to benefit from lower _______ costs in manufacturing and services.

by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs

How was globalization made possible?

Related and Supporting Industries/ Complementors

Leadership in related and supporting industries can also foster world-class competitors in downstream industries. The availability of top-notch complementors—firms that provide a good or service that leads customers to value the focal firm's offering more when the two are combined—further strengthens national competitive advantage. ex: Toyota's global success in the 1990s and early 2000s was based to a large extent on a network of world-class suppliers in Japan

1) cost reductions 2) local responsiveness

MNEs face two opposing forces when competing around the globe:

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. ex: Starbucks

Local Responsiveness

The need to tailor product and service offerings to fit local consumer preferences and host-country requirements.

Demand Conditions

The specific characteristics of demand in a firm's domestic market. ex: Japanese customers demand small, quiet and energy-efficient air conditioners due to hot and humid summers in dense urban areas

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

What are some disadvantages to going global?

1) gain access to a larger market 2) gain access to low-cost input factors 3) develop new competencies

Why do firms expand internationally?

National Competitive Advantage

a consideration of world leadership in specific industries.

Cage Distance Framework 1) Cultural distance 2) Administrative and political distance 3) Geographic distance 4) Economic Distance

a decision framework based on the relative distance between home and a foreign target country along four dimensions:

foreign direct investment (FDI)

by making investments in value chain activities abroad, MNES engage in this ex: the European aircraft maker Airbus is investing $600 million in Mobile, Alabama, to build jetliners

National Culture

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

differentiation strategy

developing new competencies can be attractive for firms that develop a _________ __________

Economic Distance

different consumer wealth and incomes different costs and quality of resources different info or knowledge

Geographic Distance

different time zones, climates, common border

global strategy

gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world

1900-1941

globalization 1.0 took place:

1945-2000

globalization 2.0 took place:

21st century

globalization 3.0 took place:

globalization

process of closer integration and exchange between different countries and peoples worldwide

Multinational Enterprise (MNE)

the engine behind globalization, a company that deploys resources and capabilities in the procurement, production and distribution of goods and services in at least 2 countries

Administrative and Political Distance

week or strong legal and financial institutions absence of trading bloc absence of shared currency political hostilities