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25 Cards in this Set

  • Front
  • Back
3 trends toward globalization implications
industries are becoming global in scope

shift from national to global markets

steady decline in barriers to cross border trade and investment
porters diamond 4
factor endowments or conditions

local demand conditions

competitiveness of related and supporting industries

intensity of rivalry
factor endowments or conditions
the cost and quality of factors of production

basic factors: land, labor, capital, and raw material

advanced factors: technological, managerial, infrastructure
local demand conditions
home demand plays an important role in the impetus for upgrading competitive advantage

companies are most sensitive to the needs of their closest customers
intensity of rivalry
different nations characterized by different management ideologoies

strong association between vigorous domestic rivalry and the creation and persistence of competitive advantage in an industry
expanding the market by leveraging products
taking goods or services developed at home and selling them internationally
location economies
economic benefits from performing a value creation activity in the optimal location

leveraging the skills of global subsidiaries

applying these skills to other operations withing firm's global network
pressures for cost reductions
greatest in commodity products

differentiation is difficult

low cost location competitors

consumers are powerful - low switching costs

excess capacity
pressure for local responsiveness
differences in customer tastes and preferences

differences in infrastructure and traditional practices

differences in distribution channels

host government demands

being locally responsive tends to raise costs
standard globalization strategy
reaping the cost reductions that come from economies of scale and location economies

business model based on pursuing a low cost strategy on a global scale

strong pressures for cost reduction and the demand for local responsiveness is minimal
localization strategy
customizing the companys goods or services so that they provide a good match to tastes and preferences in different national markets

substantial differences across nations with regard to consumer tastes and preferences and where cost pressures are not too intense
transnational strategy
difficult to pursue due to its conflicting demands

simultaneously: achieves low costs, differentiates across markets, fosters a flow of skills between subsidiaries
international strategy
mulitnational companies that sell products that serve universal needs (little differentiation) and do not face significant competitors (low cost)
basic entry decisions
which overseas markets to enter (where)
timing of entry (when)
scale of entry (how)
first-mover advantages and disadvantages
adv - preempt and build share

dis - pioneering costs
most manufacturing companies begin their global expansion as exporters and later switch
a foreign licensee buys the right to produce a company's product for a negotiated fee

most of the oversees capital
specialized form of licensing

sells intangible property, insists to follow strict rules as to how it does business
joint ventures
typically 50/50 - very favored
wholly owned subsidiaries
parent company owns 100% of subsidiaries stock - setup or acquire
global strategic alliances
cooperative agreements between companies from different countries that are actual or potential competitors

range from short term to formal joint ventures
global strategic alliance advantages
facilitate entry into a foreign market

share fixed costs and associated risks

bring together complementary skills and assets

set technological standards for its industry
global strategic alliances disadvantages
give competitors a low cost route to gain new technology and market access

alliances can end up giving away technology with very little gained in return
partner selection
a good partner

shares the frims vision

unlikely to exploit

conduct research
success for strategic alliances 3
partner selection

alliance structure

manner in which alliance is managed