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35 Cards in this Set
- Front
- Back
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What does he say about convergence?
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Convergence is the tendency for everything to become more like everything else.
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What is his argument with regard to fixed local preferences?
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When discussing fixed local preferences, he states that although most corporations believe that local preferences are fixed, they are only rigid, and habitual thinking. Companies are conveniently accommodating to what consumers say they want instead of trying to understand exactly what they want.
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Why are coordination and control increasingly important for companies that do business globally?
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-Overseas units are more important financially
-Overseas units often act independently (especially if they were acquired) -Host country governments often demand greater autonomy for their subsidiaries -Strict control is less viable in joint-ventures -Technological advantages of the head office are eroding (especially in maturing industries) -Management/technical know-how is more widespread -Expatriates are a less viable control strategy |
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What do transnational corporations require in order to function properly?
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-Identification with firm-wide rather than local objectives
-Identification with, involvement with, loyalty to, and attachment to the worldwide organization -Creation of verbal information networks (network knowledge, multiple contacts within the network) -Positive attitudes toward other nationalities |
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Bureaucratic Controls
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-Information systems
-Resource allocation procedures -Budgeting, monitoring of objective data -Reports, rules, routines, standard operating procedures -Reward systems (greater compensation through incentives) (regional/corporate performance weighted more) -Hierarchy |
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Organic Controls
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-Shared values, corporate culture
-Task forces, coordination committees, integrators -Short-term transfers, frequent transfers (build less attachment to other social systems) -Significant, repeated travel -Socialization -Due process (procedural justice) |
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What are the key elements of due process?
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1. the head office is familiar with subsidiaries’ local situations
2. that two-way communication exists in the global strategy-making process 3. that the head office is relatively consistent in making decisions across subsidiary units 4. that subsidiary units can legitimately challenge the head office’s strategic views and decisions 5. that subsidiary units receive an explanation for final strategic decisions |
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What are some of the traditional reasons that firms internationalize?
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-International competition (your competitors are going global)
-Trade barriers (tariffs, quotas, etc.) -Regulations and restrictions (avoid restrictive operating environments) -Customer demands (follow your customers) -Secure key supplies -Saturated or limited home market -Market-seeking (you have a successful product domestically and want to leverage your competencies) -Economies of scale and scope (leveraging a resource and getting more out of it) -Low-cost factors of production -Incentives (tax advantages, regulation) -Diversify risk -Exploit an advantage of being foreign -Prestige -Proximity (avoid shipping costs) |
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What are some emerging reasons?
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-Technological developments in production
-Escalating R&D costs -Shortening product life cycles -Scanning and learning capabilities -Competitive positioning (options for strategic moves/countermoves) -ex: France does business in Spain. Go into Spain and do business so that French cannot focus on expanding to Germany, which is where you want to go. Force them to defend themselves. |
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What two dimensions determine the strategic importance of a market?
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market potential and learning potential
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What are the four strategies they propose for winning against host country competitors?
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-Enter by acquiring a dominant local competitor
-Enter by acquiring a weak local competitor who can be quickly transformed and scaled up -Enter a poorly defended niche -Engage in a frontal attack on the dominant and entrenched incumbents |
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When is an accelerated speed of global expansion most appropriate?
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-It is easy for competitors to replicate your recipe for success
-Scale economies are extremely important -Management’s capacity to manage (or learn how to manage) global operations is high |
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What are some of the “myths” about global strategy?
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-That global is synonymous with international, meaning simply having a presence in other countries whether or not there is any connection among activities across countries
-That global strategy means doing everything the same way everywhere -That globalizing means becoming a stateless corporation with no national or community ties -That globalization requires abandoning country images and values -That globalizing means tacking on acquisitions or alliances in other countries, without much integration or change -That to qualify as global, a strategy much involve sales or operations in another country |
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Exporting (Indirect)
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Intermediary or go-between firms provide the knowledge and contacts necessary to sell overseas. Provides the company with an export option without the risks and complexities of doing it alone. Usually involves an export management company (EMC) or an export trading company (ETC). An EMC specializes in particular types of products or particular countries or regions. They typically provide ready-made access to particular international markets, for a commission. An ETC usually takes title to the product before exporting.
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Exporting (Direct)
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More aggressive exporting strategy, where exporters take on the duties of intermediaries and make direct contact with customers in the foreign market. Direct exporters often use foreign sales representatives (who do not take title to products, nor are they employed by the exporter), foreign distributors (who buy products from the exporter and resell at a profit), or foreign retailers to get their products to end users in foreign markets.
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Exporting Benefits
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-Low cost
-Economies of scale -Low risk |
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Exporting Costs
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-Shipping Costs
-Setting up distribution system -Buying foreign advertising -Far away from your customers -Trade barriers and import regulations |
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Licensing
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-Contractual agreement between a domestic licensor and a foreign licensee
-Licensor usually has a valuable patent, technological know-how, training, trademark, or company brand name that it provides to the foreign licensee -Licensee provides royalties to the licensor |
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Licensing Benefits
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-Low cost
-Low risks -Quick access to foreign market -Royalties |
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Licensing Costs
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-Difficult to control licensee
-Licensee may pass on trade secrets to competitors -Educating a potential competitor -Low income -May remove the opportunity to enter the country through other means because the licensee has exclusive right to trademarks or technologies in their countries |
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Franchising
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Special type of licensing involving: (1) longer commitments; (2) mainly service firms; and (3) tight controls and operating rules.
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Franchising Benefits
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-Greater control than license
-Shift costs to franchisee -Shift risks to franchisee |
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Franchising Costs
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-Control issues still a concern
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Strategic alliance
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Agreement between two or more firms to cooperate in any value-chain activity. An alliance may not involve ownership, but reflects a greater level of commitment and partnership. Typical alliances include production alliances (shared facilities), R&D alliances (joint research), financial alliances (reduce monetary risks associated with costly projects), and marketing alliances (sharing of marketing-related expertise or services).
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Equity Joint Venture
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Two or more firms have ownership in a separate company. Ownership percentages may vary (e.g., 50/50 vs. 30/70, etc.)
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Joint Venture Benefits
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-Cost sharing
-Risk sharing -Knowledge sharing -Allay mistrust of foreigners |
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Joint Venture Costs
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-Time, complex negotiations required
-Lack of decision-making autonomy and control -Cultural/managerial conflict -Knowledge sharing |
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WOFS Benefits (Greenfield approach)
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-Pick site that maximizes location economies
-Build new, modern facilities -No prior history of labor troubles |
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WOFS Costs (Greenfield approach)
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-Timely
-Expensive -Extensive recruitment and training |
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WOFS Benefits (Acquisition approach)
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-Ideal when the acquired firm has competitive advantages
-Quick |
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WOFS Costs (Acquisition approach)
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-Complicated negotiations and financial transactions
-Legal/political hurdles ties to the firm -Buying the problems of the acquired firm |
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Why are more companies now using wholly-owned subsidiaries in China?
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-WFOEs take less time to establish than EJVs, are not required to have a board of directors, and are prohibited in some sectors in which EJVs are approved
-Pioneering companies in China are choosing to operate as WFOEs -WFOEs are taking hold in the current environment because, while experimenting with WFOEs, companies have only met minimal resistance from Chinese authorities |
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What is guanxi? How can an organization manage its guanxi?
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Literally means “relationship” or “connection”, but is basically a means of good connections
Is said to be the source of sustained competitive advantage for foreign companies doing business in China Even if a certain advantage is gained, it can be difficult to maintain because guanxi can be easily disrupted |
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What is Section 301? Has it been effective in opening foreign markets to U.S. companies?
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-Was often thought to be one of the principal tools of “aggressive unilateralism”, authorizing retaliatory action by the U.S. government if unfair trading practices were confirmed and if the offending party failed to remedy the situation
-Once a petition was filed, the USTR had 12 months to investigate the complaint and negotiate before imposing sanctions -Developed a reputation as the crowbar tactic in foreign market penetration; both critics and supporters referred to it as the H-Bomb of trade policy -Admirers hailed it as an essential tool in trade policy that could work in conjunction with multilateral trade negotiations -Critics charged that it smacked of aggressive unilateralism and protectionism, and that it threatened to undermine the world’s trading system and the effectiveness of organizations like the WTO -the Japanese government refused to negotiate under the threat of ---Section 301 sanctions and suggested that a multilateral forum be used or a complaint lodged with the Japan Fair Trade Commission |
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Aggressive Unilaterlism
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term coined by the economist Jagdish Bhagwati, describes instances in which the United States would unilaterally determine what unfair practices existed and then unilaterally decide what concessions were necessary to redress the situation
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