Intro to International Business - Ch. 6, 7, 8

19 flashcards · Other · by Daniel F.

  1. Kummerle: international projectors are

    decentralizing their R&D

  2. Reasons for decentralizing R&D

    MNE's feel the need to be present in various knowledge and innovation clusters scattered around the world. Given the commercial requirement of moving quickly from innovation to market, MNEs must integrate their R&D facilities more closely with host country manufacturing operations to support complex production tasks.

  3. Two types of host county R&D facilities (Porter's home base concept)

    Home-base exploiting sites Home-base augmenting

  4. Home-base exploiting sites

    supporting manufacturing facilities in the foreign country, or adapt standard products from the demand there Information flow: central lab at home ---> foreign lab challenge Overcome the distance between home & host country and manage flow of information solution Put managers in charge in foreign lab that knows the firm and the central lab

  5. Home-base augmenting

    The firm's eyes and ears in the host country, accessing knowledge from rivals and research institutions there. Information flow: foreign lab ---> central lab at home Should be located in critical knowledge clusters, where it will be well positioned to tap into new sources of innovations challenge Access local knowledge and use while not being an insider is difficult strengthen the ties with local community, but also make sure knowledge is usable and relevant for manufacturing operations.

  6. Key stages in development of R&Ds

    Selecting the decision makers Technology steering committee Strengthen the facility's initial capabilities Home base exploiting sites Locate close to key markets and the MNE's own foreign manufacturing unit Led by managers who are intimately familiar with the company's culture and systems to forge close ties between the new lab's engineers and the foreign community's manufacturing and marketing facilities Home base augmenting sites Locate in critical knowledge clusters relevant to the MNE's bus…

  7. Limitations of Kuemmerle's model

    Ignores any tension between host country lab(s) and central headquarters' lab in setting the research agenda: subsidiaries' managers versus central top management team He does not include the possibility of joint venture or strategic alliance as options to tap into foreign country's knowledge He does not take into account the hidden (and rising) costs of offshoring

  8. Ferdow: senior MNE managers should

    try to upgrade their host country factories to give them the ability to develop FSAs just as important as low cost

  9. 3 major changes that leads production subsidiaries to become more than just cheap production locations

    International tariffs went down: (GATT/WTO), need to establish plants to overcome trade barriers are not that important anymore. Production is more complex in terms of supply chain management and planning: not just Iow wages, but overall productivity is important, including technology and infrastructure, worker education and skills Time to go from manufacturing to marketing has become shorter: MNEs increasingly co-locate development and manufacturing (broad mandate for subsidiaries)

  10. Six roles for foreign manufacturing

    Based on 2 parameters 1. strategic purpose of the plant, proximity to market access to low-cost production access to knowledge and skills 2. The level of distinct FSAs, so the additional strengths added by the plant itself weak strong

  11. Upgrading offshore, server and outpost factories requires a high lever of commitment and involves resource recombination spread over 3 stages

    Enhancing internal performance (e.g. through employee training and education, self-managed teams, JIT) Accessing & developing external resources (e.g. strengthening the plant's supplier network and improving the logistics integration with distributors) Developing new knowledge that can benefit the overall network Does not take place often HQs fear to be too relying on foreign subsidiaries for critical skills Treating overseas factories like cash cows neglecting long term investment Creating ins…

  12. Critique on Ferdow's model

    Ferdow believes that management should upgrade all factories; not necessarily true Ferdow underestimates the value of Iow cost (high efficient) factories in host countries. This may still be important The choice for permanent offshoring can be a good one if the firm's FSA is the capability to flexibly offshore activities

  13. Transaction exposure

    the risk that currency exchange rates will change after the companies have already entered initial obligations.

  14. Translation exposure

    the risk that a company's equities, assets, liabilities or income will change in value as a result of exchange rate changes

  15. Economic exposure

    the impact of changes in real exchange rates relative to the MNEs competitors

  16. To minimize this impact of economic exposure, Lessard and Lightstone recommend that senior managers strive to

    Have a flexible sourcing structure (able to shift production from one country to another quickly and efficiently.) Attain the capability to engage in exchange rate pass through (capability to raise prices in response to exchange rate fluctuations without losing sales volume). This should be obtained by obtaining a market leadership position with highly differentiated products. Fluctuations in foreign exchange rates create the risk of net present value reduction of the firm's future income strea…

  17. Three elements of economic exposure

    Economic exposure should be viewed as a parameter that adds uncertainty to the value of a firm's location advantages. Economic exposure implies that the location advantages benefiting an MNE should be considered, not only in a positive sense, but also as a portfolio of potential risks for future cash flows. MNEs can choose to develop specific FSAs allowing risk mitigation in the foreign currency area by immunizing their products to economic exposure.

  18. Classification of operating exposure at the subsidiary level

    2 parameters Exposure absorption capability: Each unit's capability relative to rivals to adjust its sourcing structure, and thus its cost position, to a potential new exchange rate reality Exchange rate pass through capability: Each unit's capability to "pass through" changes in real exchange rates

  19. Implications and three ways to manage economic exposure

    In the long run, managers should consider economic exposure when setting strategy and worldwide product planning Companies that hedge their transaction exposure but fail to take economic exposure into account may actually be raising their total exposure managing economic exposure Assessing each unit individually Each unit configures its own operations in such a way as to reduce its specific economic exposure Trade-off between increased production costs and lowered risks Company-wide assessment…