Chapter 7 - International Strategy and Global Markets

Globalization

The increase in international exchange and the growing similarity of laws, rules, and norms across countries.

Diamond of National Advantage

A framework consisting of factor endowments, demand conditions, related/supporting industries, and firm strategy/structure/rivalry.

Factor Endowments

A nation's position in factors of production, such as skilled labor or infrastructure, necessary to compete in a given industry.

Demand Conditions

The nature of home-market demand for the industry's product or service, driving firms to innovate and meet high standards.

Related and Supporting Industries

The presence or absence of internationally competitive supplier industries and related industries that enhance innovation and efficiency.

Firm Strategy, Structure, and Rivalry

Conditions governing how companies are created, organized, and managed, with domestic rivalry being a strong indicator of global success.

Arbitrage Opportunities

Profiting by buying something where it is cheap and selling it where it commands a higher price across value chain stages.

Reverse Innovation

New products developed by developed-country multinational firms for emerging markets that offer adequate functionality at low cost.

Political Risk

Potential threat to a firm's operations due to ineffectiveness of the domestic political system, social unrest, or lack of rule of law.

Rule of Law

A characteristic of legal systems whereby behavior is governed by rules that are uniformly enforced.

Economic Risk

Potential threat to operations due to economic policies and conditions, including property rights laws and enforcement.

Counterfeiting

Selling of trademarked goods without the consent of the trademark holder, representing a major intellectual property risk.

Currency Risk

Potential threat to a firm's operations in a country due to fluctuations in the local currency's exchange rate.

Management Risk

Challenges and risks managers face when responding to differences in foreign markets like culture, customs, language, and income levels.

Outsourcing

Using other firms to perform value-creating activities that were previously performed in-house.

Offshoring

Shifting a value-creating activity from a domestic location to a foreign location.

International Strategy

Strategy based on diffusion and adaptation of the parent company's knowledge and expertise to foreign markets with low cost and local adaptation pressures.

Global Strategy

Strategy based on centralization and control by the corporate office, focusing on cost reduction through standardized products and few locations.

Multidomestic Strategy

Strategy based on differentiating products and services to adapt to local markets where local pressure is high and cost pressure is low.

Transnational Strategy

Strategy striving to optimize trade-offs associated with efficiency, local adaptation, and organizational learning.

Regionalization

Increasing international exchange and similarity of culture, laws, and norms within a specific geographic region like Europe or North America.

Trading Blocs

Groups of countries agreeing to increase trade between them by lowering trade barriers and tariffs, such as the EU or USMCA.

Exporting

Producing goods in one country to sell to residents of another country, involving the lowest investment, risk, and control.

Hub-and-Spoke System

A delivery model utilizing central urban hubs for complex care and smaller spoke facilities for routine treatments to lower costs.

Beachhead Strategy

A stepwise approach to penetrating foreign markets through initial exporting followed by incremental increases in investment.

Economies of Scale

Cost advantages obtained due to size, output, or scale of operation, often achieved through global product standardization.

Supply Chain Resilience

The ability of a supply chain to absorb disruption, heightened by strategies like regionalization and early warning screening.

Intellectual Property Rights

Legal protections for creations of the mind; lack of their enforcement poses severe economic and competitive risks for firms.

Location of Value-Chain Activities

Optimizing physical locations for every value-chain activity to yield performance enhancement, cost reduction, or risk reduction.

Emerging Markets

Developing economic zones producing world-class companies with huge domestic markets and growing purchasing power.