Ism Lecture 2

Front 1

Explain the theory of Competitive Advantage

Back 1

The ability of one party (an individual, or firm, or country) to produce more of a good or service than competitors, using the same amount of resources

Front 2

Explain the Heckscher-Ohlin Model

Back 2

-> countries will tend to export products that use their abundant and cheap factor(s) of production, and will import products that use the countries' scarce factor(s).
Comparative advantages in those goods for which the required factors of production are relatively abundant.
The relative endowments – resources -- of the countries factors of production (land, labour, and capital) determine a country's advantage.

Front 3

Sum up the terms of comparative and absolute advantage and the H-O model

Back 3

Absolute advantage may explain the flows of manufacturing to China Comparative advantage may explain the flow of high tech jobs within Europe And the H-O model may explains why countries should trade.

Front 4

What are the motives for expansion across borders?

Back 4

(1) Escape stagnation in their home markets.
(2) Keep up with international expansion of their domestic rivals
(3) Follow domestic customers abroad
(4) Follow supplies, to cut costs

Front 5

Name the theories of internationalization, why what and how?

Back 5

1.Uppsala model
2.The Born Global Concept
3.Diamond model

Front 6

Explain the steps of the Uppsala model.

Back 6

Internationalization should go slowly, to markets we can understand, with reversible commitments, to allow for learning and mistakes.

(1) gain experience in domestic markets,
(2) then operate in nearby market --> slowly penetrated far away markets;
(3) choose to enter markets through export, instead of using sales or manufacturing subsidiaries of their own.
(4) onlyafter years a wholly owned or majority-owned operation is possible

Front 7

Which types of distance does the Uppsala model refer to?

Back 7

(1) Physical Distance – in kilometres
(2) Or Psychic Distance - differences in language, culture and political systems

Front 8

Key concepts of Uppsala model.

Back 8

(A) distance can mean one of two things;
(B) commitments should be increased slowly;
(C) commitments are reversible

Front 9

Key concepts of the Born Global Model

Back 9

All information is public, and the firm can – and even should – internationalize to take advantage of opportunities in foreign markets.

Firms can enter even very distant markets almost immediately.
Due to increased information, everyone has access to information about the export market, and can begin from its inception, without having to build a domestic base.

Front 10

Name the four modes of the Born Global model

Back 10

1. Geographically Focused Start-Up;
high # of activities, low # of countries
2. Export / Import Start-Up;
low # of activities, low # of countries
3. Global Start-Up;
high # of activities, high # of countries
4. Multinational Trader;
low # of activities, high # of countries

Front 11

Explain the concept of the cluster model and the cluster analysis = diamond

Back 11

The firm should internationalize to destinations with the necessary supplier, customer, competitor networks, to improve the efficiency of the firms operation.

Competitiveness – or, in our terms, the decision to locate oneself in a country with clusters of rival firms – can be understood in term of:

1. Factor Conditions
2. Demand Conditions
3. Related and Supporting Industries
4. Firm Strategy, Structure and Rivalry
5. Government
6. Chance

-> Porter's diamond

Front 12

Name the three categories of country attractiveness, or country attractiveness framework

Back 12

(1) Country Risks
(2) Market Opportunities
(3) Industry Opportunities

Front 13

Name the categories of country risk analysis

Back 13

A. Political Risks
-shareholder exposure
-employee exposure
-operational exposure
B. Economic Risks
-Economic Growth
-Variability
-Inflation
-Input Costs
-Exchange Rates
C. Competitive Risks
-infrastructure
-regulations
D. Operational Risks
-business logics; corruption, cartels and networks

Front 14

Name the three concepts of market opportunities

Back 14

A. Market Size
B. Market Growth
C. Quality of Demand

Front 15

Explain high and low end of quality of demand

Back 15

High End:
-Differentiated Products
-Functionality and Performance
-Less Price-Sensitive
Low End:
-Undifferentiated Products
-Mass Production and Distribution
-Price-Sensitive

Front 16

Explain the industry opportunities

Back 16

Measures how easy it is to compete in the country. And is measured in three ways:
A. Industry Competitive Structure
B. Resource Endowments
C. Investment Incentives Granted by Government

Front 17

Explain the quality of the competitive environment using Porter's 5 forces

Back 17

1. New Entrants
2. Supplier Bargaining Power
3. Customers Bargaining Power
4. Substitutes
5. Intensity of Competitive Rivalry

Front 18

What kind of resources attract foreign investors?

Back 18

1. Natural Resources
2. Human Resources
3. Infrastructure and Support Industries.

Front 19

What are examples of government incentives?

Back 19

Governments have designed and implemented a series of
incentives to attract foreign investors:
1. Fiscal
2. Financial
3. Competitive
4. Operational

Front 20

explain the concept of Corporate Social Responsibility

Back 20

A built-in, self-regulating mechanism whereby business monitors and ensures its active compliance with the spirit – rather than the mere rule – of the law, ethical standards, and international norms.
CSR encourages the firm to be ethical and not just legal in its actions

Front 21

There are two sides in CSR, economic one and the responsibility side, explain them.

Back 21

Economic side: The ethical responsibility of the manager is to act legally, and to take those actions that maximise shareholder value. Shareholders = Owners. The business of business is business.
pro-social only justified if:
- The loss in revenue from the pro-social decision leads to greater value (in terms of branding)
- The loss in revenue is make in a strategic way, to gain first mover advantages over competitions, in anticipation of future changes in regulation
- The loss in revenue is taken in a voluntary way simply to prevent government from intervening

Responsibility side:
-firms are more easily coordinated that governments
-firms are more global than governments
-firms are more permanent than governments
-firms take and should give
-firms have more power than people