MNCs and Their Strategies: International Business Week 7

Vocabulary practice flashcards covering international strategy frameworks, pressures for integration versus responsiveness, corporate-level strategic postures, and entry modes with their associated trade-offs.

Bartlett and Ghoshal (2002) Approach

The most widely accepted framework for building sustainable competitive advantage in international business, stating firms must simultaneously develop efficient international values, flexibility to manage diverse country-led risks and opportunities, and the ability to learn internationally and exploit that learning worldwide.

Pressures for Global Integration

Forces that drive MNEs toward global coordination, primarily consisting of the globalization of markets and the efficiency gains achieved through standardization.

Globalization of Markets

A driver of global integration characterized by homogeneous consumers' preferences, advances in communication and transportation technologies, falling trade barriers, formation of regional economic blocs, and technological breakthroughs.

Efficiency Gains of Standardization

Cost reductions achieved through the worldwide standardization of an MNE's products, purchases, methods, and policies, such as using a single product design or a universal message in advertising.

Pressures for Local Responsiveness

Demands placed on MNEs arising from two primary sources: consumers divergence (varied tastes and preferences across markets) and host-government policy variations that influence value chain configuration and coordination.

International Corporate-Level Strategy

The actions an MNE takes to gain competitive advantage by selecting and managing its business across nations, articulating how to reconcile global integration and local responsiveness while defining headquarters and subsidiary roles.

Global Standardization Strategy

A strategy focusing on increasing profitability and profit growth through cost reductions by pursuing a low-cost goal; suitable when pressure for local responsiveness is low and pressure for cost reduction is high.

Localization Strategy (Multi-Domestic Strategy)

A strategy focused on increasing profitability by customizing the firm's goods or services using a very decentralized structure; appropriate when pressures for local responsiveness are high and cost reduction pressure is not intense.

Transnational Strategy

A strategic posture that simultaneously attempts to achieve low costs through economies of scale, learning effects, and location economies while differentiating products across geographic markets; used when pressures for cost reduction and local responsiveness are both intense.

International Strategy

A strategy involving taking products originally produced for the domestic market and selling them abroad with minimal local customization, keeping critical value chain elements centralized at headquarters; works well when rivals lack the firm's core competencies and pressures for cost reduction and local responsiveness are both low.

Control (Foreign Entry)

The ability of a firm to influence the decisions, operations, and strategic resources involved in a foreign venture.

Low-Control Strategies

Foreign market entry methods that delegate responsibility, specifically including exporting, countertrade, and global sourcing.

Moderate-Control Strategies

Contractual entry relationships utilized by firms, such as licensing, franchising, and project-based collaborative ventures.

High-Control Strategies

Foreign entry methods such as equity joint ventures and foreign direct investment (FDI), wherein the focal firm establishes physical presence and ownership of key assets to attain maximum control.

Trade-Offs of High-Control Strategies

The associated disadvantages of high control, including substantial resource commitments (high cost), limited flexibility for operational reconfiguration due to a permanent base, and substantial risk stemming from political, cultural, and currency uncertainties.