International Busines Strategy - Chapter 1

38 flashcards · Other · by Daniel F.

1. international business strategy

   MNEs possess strengths over their competitors. International business strategy addresses how these strengths can be used to address opportunities and challenges found in different foreign markets in order to create value for different stakeholders.

2. Unique resources

   Physical resources, financial resources, human resources upstream knowledge: products and process downstream knowledge: marketing, sales, after sales administrative knowledge: org structure, culture, systems reputational resources: brand names, reputatin

3. recombination skills

   entrepreneurial skills firms need to continuously look to change products and services

4. The 3 steps resource recombination requires

   entrepreneurial skills unused resources willingness and capacity to use up other resources

5. Routines

   Turning unique resources into real advantages stable patterns of decision and action that coordinate the use of (unique) resources -> generate value

6. FSA

   stand alone (unique) resources + routines + recombination skill

7. What does a multinational enterprise do

   Creates value and satisfies stakeholder needs by operating across national borders . -additional costs due to distances -Liability of foreignness

8. when operating abroad an MNE is

   at a disadvantage

9. costs of doing business abroad

   costs resulting from cultural, economic, institutional, and spatial distance between home and host country environments

10. non-location-bound FSAs

    do not stop creating value when the border is crossed can be embodied in final products

11. paradox of an internationally transferable FSA

    the costs of FSA transfer, deployment, and exploitation may be relatively low, but the potential value that can be derived from actually deploying and exploiting the FSA may also be relatively low

12. 4 MNE archetypes of administrative heritage

    centralized exporter international projector international coordinator multi-centred MNE

13. centralized exporter

    Standardized products manufactured at home embody the company’s FSAs developed on the basis of a favourable home country environment market seeker minimal need to develop location-bound FSAs in the host country, because of the products’ desirability in host environment e.g.: movie production

14. international projector

    Knowledge-based FSAs developed in the home country are transferred to subsidiaries in host countries. the MNE seeks international expansion by projecting its home country success recipes abroad. minimal need to develop location-bound FSAs in the host country, because of the products’ desirability in host environment e.g.: Disney

15. international coordinator

    Main transferable FSA: Coordinate the location advantages accessed in multiple host countries. efficiency seeking use NLB FSAs in each host country to develop LB FSAs it may still be necessary to transfer substantial resource bundles to the host country operations e.g.: Nike

16. multi-centred MNE

    Portfolio of independent businesses, set of enterpreneurial subsidiaries abroad which are key to knowledge-based FSA development fast National responsiveness minimal non-location-bound FSAs: common financial governance and the identity and specific business interests of the founders or main owners only transfers core routines to each host country operation e.g.: McDonalds

17. Tacit knowledge

    difficult to transfer, deploy, and exploit abroad because it cannot be fully replicated through simple communication channels key source of competitive advantage when doing business abroad

18. Companies who do not fit in the four archetypes

    freestanding companies: companies that were set up abroad emerging economy MNEs: build upon generally available resources in home country eg low cost labour

19. Location advantages

    the entire set of strengths characterizing a specific location, and usable by firms operating in that location

20. Non-transferable (or location-bound) FSAs

    can not be easily transferred, deployed and exploited in foreign markets

21. Types of location bound FSAs

    Stand-alone resources linked to location advantages (immobility of domestic networks) local marketing knowledge and reputational resources don't have the same value abroad local best practices may not be considered as such abroad (or are illegal) firm’s domestic recombination capability

22. types of location advantages

    abundant natural resources may help the creation of successful firms in the natural resource industry A superior educational system will support firms that build upon sophisticated human resource skills. the presence of a demanding and sophisticated local market for specific products will likely foster local innovation in the relevant industry LAs in economic clusters cross border LAs (NAFTA)

23. Foreign direct investment

    allocation of resource bundles by an MNE in a host country with the purpose of performing business activities (value creating activities) over which the MNE retains strategic control in that country MNE should engage in FDI only if the host country confers a location advantage relative to the home country

24. motivations to perform activities in a host country rather than at home (FDI)

    Natural resource seeking Market seeking Strategic resource seeking Efficiency seeking

25. Natural resource seeking

    search for physical, financial or human resources in host countries. investment abroad leads to higher value creation than investment at home.

26. Market seeking

    search for customers in host countries deploying productive activities and selling in the foreign market better than engaging in alternative investment projects at home

27. Strategic resource seeking

    The desire to gain access to advanced resources in the sphere of upstream knowledge, downstream knowledge, administrative knowledge or reputational resources. Taking over other companies.

28. Efficiency seeking

    A firm’s desire to capitalize on environmental changes that make specific locations in the MNEs international network of operations more attractive than before technological breakthroughs allowing greater scale economies; an increased industry focus on innovation, triggering higher required R&D investments; customer-induced, shorter product cycles; and the reduction of trade and investment barriers through regional agreements

29. Export platform

    efficiency seeking + market seeking e.g.: sell cars to US customers by making FDI in mexico

30. bounded rationality problems

    incomplete information difficulty with processing information

31. Choosing entry modes

    FDI (whereby FSAs covering the entire value chain are transferred to foreign affiliates) licensing (whereby typically technology-based and manufacturing FSAs are transferred to a foreign licensee) original equipment manufacturing (OEM, whereby typically only technology-based FSAs are transferred, to be combined with the manufacturing capability of a foreign producer)

32. Problems that arise when choosing entry modes

    Licensing: outside actors such as licensees and OEM suppliers can capture the MNE’s FSA’s Outside contracting partner may not fully respect the quality standards FDI: the MNE has to cope with a new institutional regime and usually foreign employees and work practices the use of outside actors versus complete internalization will have an impact on the development trajectory of the MNE’s recombination capability

33. Bounded reliability

    The scarcity of effort to make good on open-ended promises

34. opportunism

    Opportunism is self- interest-seeking behaviour with guile. Here, an intentional effort to cheat/shirk prevails, which benefits the cheating/shirking party.

35. benevolent preference reversal

    an actor’s preferences then change over time, though not with the intent to harm the party to which the promise was made good faith local prioritization or scaling back on over-commitments

36. Alleviate bounded rationality and reliability with mechanisms

    reduce opportunism: inter alia: contractual safeguards sufficient monitoring proper incentives to align interests reduce reprioritization: joint goal development, setting milestones, and frequent communication to align expectations and to sustain cognitive proximity reduce over-commitments: multi-level and multi-stage decision-making processes to reduce the impact of individual evaluation biases and impulsivity

37. Bounded rationality

    scarcity of mind Imperfect assessment of a present or future state of efforts , thereby leading to incorrect beliefs Managers responsible for making decisions to go abroad always face info problems

38. complementary resources of external actors

    technology providers, licensees, local distributors, joint venture partners