Management Chapter 10

multinational enterprise (MNE)

A company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least 2 countries

CAGE Distance Framework

A decision framework based on the relative distance between home and a foreign target country along 4 dimensions; cultural distance, administrative and political distance, geographical distance, and economic distance

foreign direct investment (FDI)

A firm's investments in value chain activities abroad

liability of foreignness

Additional costs of doing business in an unfamiliar culture 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 homogeneous

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

Porter's Diamond Framework

Framework that explains national competitive advantage- why are some nations outperforming others in specific industries. Consists of 4 interrelated factors; factor conditions, demand conditions, competitive intensity in focal industry, related and supporting industries/complementors

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

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 lower cost

integration-responsiveness framework

Strategy framework that juxtaposes the pressure an MNE faces for cost reductions and local responsiveness to derive four different strategies to gain and sustain competitive advantage when competing globally; international strategy, multidomestic strategy, global standardization strategy, and transnational strategy

multidomestic strategy

Strategy pursued by MNE's that attempts to maximize local responsiveness, with the intent that local consumers will perceive them to be domestic companies; the strategy arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions

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 competenciess 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 the product and service offerings to fit local consumer preferences and host-country requirements; generally entails higher costs

globalization

The process of closer integration and exchange between different countries and people worldwide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs

national competitive advantage

World leadership in specific industries