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 two countries
foreign direct investment (FDI)
a firm's investments in value-chain activities abroad
global strategy
a firm's strategy to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world
regional cluster
a group of interconnected companies and institutions in a specific industry, located near each other geographically and also linked by common characteristics
knowledge spillover
a type of positive externality that is regionally constrained
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
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
power-distance dimension
dimension of culture that focuses on how a society deals with inequality among people in terms of physical and intellectual capabilities, and how those methods translate into power distributions within organizations
uncertainty-avoidance dimension
dimension of culture that focuses on societal differences in tolerance toward ambiguity and uncertainty
masculinity- femininity dimension
dimension of culture that focuses on the relationship between genders and its relation to an individual's role at work and in society
individualism dimension
dimension of culture that focuses on the relationship between individuals in a society, particularly the relationship between individual and collective pursuits
globalization
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
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
localization strategy
strategy pursued by MNEs that attempts to maximize local responsiveness, with the intent that local consumers will perceive them to be domestic companies; strategy arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions; also called a multi-domestic strategy
transactional 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); sometimes called glocalization
international strategy
strategy that involves leveraging home-based core competencies 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 product and service offerings to fit local consumer preferences and host-country requirements; generally entails higher cost
national competitive advantage
world leadership in specific industries