International Busines Strategy - Chapter 4

22 flashcards · Other · by Daniel F.

1. liability of foreignness

   Internalising firms spend more time resources and energy trying to make sure their FSAs fit the host country

2. Ghemawat states that

   Senior managers still need to take into account distance when assessing host country location advantages and making decisions about global expansion Senior managers often overestimate the attractiveness of foreign markets because they fail to take into account the risks and costs associated with distance.

3. 4 basic components of distance

   Cultural distance Administrative distance Geographic distance Economic distance

4. Cultural distance

   differences in national cultural attributes such as language, religious beliefs, social norms, and race e.g. 'Soft' consumer goods (food) are more sensitive to cultural distance than 'hard' items (industrial machinery

5. Administrative distance

   differences in societal institutions Governments can create administrative distance can be lowered if two or more countries share a common history (including colonial relationships) or political ties

6. Geographic distance

   represents the physical distance between countries Having a common border or easy access via river and ocean waterways may keep this distance low.

7. Economic distance

   differences in consumer wealth, income level and distribution, infrastructure characteristics, the cost and quality of natural, financial, and human resources, and prevailing business practices

8. Limitations of Ghemawat's distance framework

   Macro level distance, does not always hold for all firms (distance for a firm ≠ distance for all firms) -> Companies are doing business, not countries -Psychic distance -Psychic distance Paradox: A firm’s FSA can be that it is able to deal with these distances -Impact of distance differs for part of the value chain (Ghemawat: one size fits all) - Ghemawat assumes that FSAs are developed in the home market, but firms may also develop FSA in a host country - Ghemawat does not discuss cooperative…

9. Psychic distance

   the distance formed in an individual’s mind due to perceived differences between the individual’s native country and a foreign country

10. Shenkar 2001: conceptual illusions associated with culture distance: 1. The illusion of symmetry

    The cultural distance measure implicitly assumes that the Cultural distance between country A and B is similar to the distance between country B and country A. But: it may be much easier for Chinese firms to invest in the USA, then vice versa.

11. Shenkar 2001: conceptual illusions associated with culture distance: 2. The illusion of stability

    As cultural distance is measured at a single point in time, the Cultural distance is assumed to be constant over time. But: cultures change, and firms may gain experience, so role of Cultural distance changes over time

12. Shenkar 2001: conceptual illusions associated with culture distance: 3. The illusion of linearity

    only one measure of Cultural distance for explaining location of MNE activity, the entry mode chosen and the subsequent success of these foreign activities is that Cultural distance affects all these different phenomena in a linear way. But: the effect of Cultural may depend on a firm’s learning curve and hence is not linear.

13. Shenkar 2001: conceptual illusions associated with culture distance: 4. The illusion of causality

    Distance is a multidimensional construct and should be studied not in isolation but together with geographic distance, institutional distance

14. Shenkar 2001: conceptual illusions associated with culture distance: 5.The illusion of discordance

    The assumption is that all aspects of the cultural distance between home and host countries matter equally. But: some dimensions of a culture matter more than other

15. Shenkar 2001: conceptual illusions associated with culture distance: 6. The assumption of corporate homogeneity

    By using national cultural measures, the Cultural Distance concept only incorporates variance at the national cultural level and assumes a lack of variance at the corporate level. But: this is not complete (Hofstede et al. 1990). National culture vs organizational culture

16. Shenkar 2001: conceptual illusions associated with culture distance: 7. The assumption of spatial homogeneity

    By calculating Cultural distance on the basis of national level sores, potential intra-country variation is excluded. a firm's exact location in a country is not measured, excluding potential border effects reducing the size of the Cultural distance and leading to overestimations of the Cultural distance

17. What environmental changes did Honda face in the early 1970s?

    1. The rising value of the yen against the US dollar- increased costs of exporting cars to the US( largest overseas market 2. New US regulations of tailpipe emissions- put honda at the same starting lines as its rivals in the US 3. Oil crisis - negatively affected honda's domestic operations- rising oil cost-cost of manufacturing high- public demanding more fuel efficent cars to ruduce oil prices

18. What challanges do Honda face after the expansion to the US?

    1 Honda grew large+complex + facing symptoms of the @big-company disease@, coordination difficulties,focus on own divisions,less attention to customer needs 2.Decentralised SEDB(sales,engineering,Development and buying) model= complexity in vehicle models+ engineering processes= increasing workload=quality decline 3. Increased attention on cost and budge

19. What was Ghemawat's general conclusion?

    higher distances correspond with lower inter-country trade levels, implying a lower probability of success

20. What does the argument of cultural distance suggest?

    -Increased complexity to deal with foreign workforce=more risky investments=relatively small investments or low level of commitment or no local partners -if CD is high, then local knowledge is required+firm from country A investing in culturally distant country B may wish to cooperate with another firm from country B (complementary resources

21. What are Geert Hofstede's 4(/5/6) dimensional framework's?

    1. Uncertainty avoidance 2. Power distance 3. Individualism-collectivism 4. Masculinity-femininity 5. Long term orientation (pragmatic vs. normative) 6. Indulgence vs. self-restraint

22. What were the main challenges that Honda faced when expanded in the US?

    1. Selecting and training employees: -employees selected based on passion. -Japanese engineers trained the workers at Honda of America Manufacturing - HAM managers sent to Japan 2. Developing a lean supplier network: Honda had to develop new supplier network from three sources: -Suppliers of motorcycle parts (had to be willing to make auto parts eventually) -Other small suppliers in Ohio and surrounding states ( lean requirements of Honda) -Large suppliers who also serviced other automakers ( G…