global dimensions of business

strategy

an integrated set of choices and commitments that supports and sustains an MNE’s competitiveness

MNE

multi national enterprise; business operating in more than one country

vision

a future-oriented declaration of its purpose and aspirations

mission

communicates what the MNE is going to do, how it is going to do that, who it is going to do that for, and what value will it create in doing so

the vision statement conveys inspirational, motivational aspirations whereas the mission statement specifies the path the enterprise will take to attain them

difference between vision and mission

purpose, values, goals, and direction

what do the MNE’s mission and purpose combined represent?

strategic planning

comprehensive process that determines how the firm can best achieve its vision and mission

industrial organization (IO)

studies the structure of firms and markets, and how they behave strategically

competencies

the skills, knowledge, abilities, and behaviors that contribute to an organization's performance

value

the difference between the cost of making a product and the price that customers are willing to pay for it

cost leadership strategy

a business method focused on making a product at a given level of quality for a cost below that offered by rivals

disruptive technologies change efficiency standard, customer’s needs change, cheaper and better products from rivals

cost leadership strategy risks

differentiation strategy

develops products that customers value and that rivals find hard, if not impossible, to match

changing customers’ expectations, customers no longer see sufficient value justifying the price premium, a rival introduces a higher performing alternative

differentiation strategy risks

integrated cost leadership-differentiation strategy

a business strategy where a company aims to simultaneously achieve both low costs (cost leadership) and unique product features (differentiation)

understand the performance of resources and capabilities, the context of competencies, and the drivers of value creation

what does value chain analysis help managers do?

primary activities

the core business functions that make and move products

suport activities

the infrastructure of the firm, identifying the activities that support working the primary activities

product design, operations, outbound logistics, marketing, service

primary activities examples

materials and equipment, HR management, systems and solutions, infrastructure

support activities examples

concentrated configuration

the MNE performs all value-chain activities in one location

dispersed configuration

the MNE performs different value-chain activities in different locations

liability of foreignness

the additional costs that multinational enterprises (MNEs) incur when operating in foreign markets compared to local competitors

local responsiveness

a company's ability to adapt its products and services to meet the needs of specific markets

Ceteris paribus

“all other things being equal" or "holding other things constant"

Integration-Responsiveness (IR) Grid

shows that the strategic choice for globally operating organizations lies in the proportion between integration and responsiveness

corporate level strategy

is the set of actions taken by an MNE to manage its business across nations

international strategy

leverage a company’s core competencies into foreign markets; low pressure for global integration and local responsiveness

global standardization strategy

make standardized products that are marketed with little adaptation to local conditions; low pressure for local responsiveness and high pressure for global integration

localization / multidomestic strategy

emphasizes responsiveness to the unique circumstances that prevail in a country’s market; high pressure for local responsiveness and low pressure for global integration

transnational strategy

leverages core competencies worldwide, reduces costs by exploiting location economies, and adapts to local conditions; high pressure for local responsiveness and high pressure for global integration

scanning

compares many countries using information that is readily available, inexpensive, and fairly comparable with the goal of identifying the most promising location

yes or no questions, direct statistics, indirect indicators (potential sales?), qualitative assessment (what is the political leaders’ philosophy on IB?)

four types of questions asked in scanning

U.S. television ads regularly reach Canadians, making it easier for U.S. firms to do business there

spillover effect example

oligopolistic reaction

Managers may purposely crowd a market to prevent competitors from gaining advantages there that they can use to improve their positions elsewhere

harvesting or divesting

reduce commitments in some countries because they have poorer performance prospects than do others

go-no-go decisions

examining one opportunity at a time and pursuing it if it meets some threshold criteria

because unforeseen opportunities give little time to make decisions, • because of difficulty incorporating global performance into singlecountry analyses

why do companies make go-no-go decisions?

geographic diversification strategy

go to many fast and then build up slowly in each

geographic concentration strategy

go to one or a few and build up fast before going to others

moving rapidly to most markets but increasing commitment in only a few

geographic hybrid strategy example

exporting

the sale of goods or services produced by a company based in one country to customers that reside in a different country

internalization

when a company chooses to handle a transaction internally, instead of outsourcing it to another entity

transactions cost theory

companies should seek the lower cost between self-handling of operations and contracting another party to do so for them

appropriability theory

a theory that focuses on the ability of a firm to retain the value it creates from innovations

profits, productivity, and diversification

reasons to export

direct exporting

involves independent representatives, distributors, or retailers outside of the exporter’s home country

indirect exporting

products are sold to an intermediary in the domestic market, which then exports them

when production abroad is cheaper than at home, transportation internationally is too expensive, when companies lack domestic capacity

why might exporting not be feasible?

greenfield expansion or internal new venture

when companies expand their business abroad, creating brand new jobs and/or facilities from the ground up within their company—as opposed to mergers and acquisitions, which occur when one company buys another

resource-based view

holds that each company has a unique combination of competencies

gaining location-specific assets, overcoming legal constraints, diversifying geographically, and minimizing risk exposure

why do companies enter into collaborative arrangements for international operations?

Coopetition

a business strategy that involves competitors working together while still competing

Scale alliances

a strategic partnership between companies that contribute similar capabilities to a project

link alliance

a partnership where companies contribute different capabilities

vertical alliance

connects firms in different levels of their value chains, such as a food franchiser with a franchisee

horizontal alliance

partnership between businesses that operate as competitors in the same level

exclusive license

the licensor can give rights to no other company for the asset over a specified geographic area for a specified period of time

licensing

the rights for use of intangible property/assets

cross-licensing

companies in various countries exchange technology or other intangible property rather than compete with each other on every product in every market

franchising

providing an intangible asset (usually a trademark) and a continual infusion of necessary assets

turnkey operations

A project that is constructed and sold as a completed product, requiring minimal effort from the new owner

consortium

when more than two companies participate in a joint venture

equity alliance

collaborative arrangement in which at least one of the companies takes an ownership position (almost always minority) in the other(s)

mergers and acquisitions, internal new venture or greenfield

considered an FDI

termination by acquisition, termination by dissolution, termination by reorganization of the alliance

how to dissolve a joint venture

management contract

a company is paid a fee to transfer management personnel and administrative know-how abroad to assist a company

production, sales, customer, strategic marketing, and social marketing

Five common marketing orientations applied around the world

price, place, promotion, product

marketing 4 ps

commodity

raw materials used to create the products consumers buy

sales orientation

a business strategy that focuses on selling products or services rather than on customer needs or product innovation

business orientation

a business strategy that prioritizes the needs of the customer over the needs of the business

country-of-origin effect

the influence a product's manufacturing country has on a consumer's perception and purchasing decision, where the stereotypes associated with that country impact how they view the product's quality, reliability, or desirability

export price escalation

the increase in price of a product when it is exported to a foreign market

gray market or product diversion

the selling and handling of goods through unofficial distributors, thus enabling the unofficial ones to import cheaper supplies from abroad to compete against official ones - selling official products unofficially and at a cheaper price

promotion

the presentation of messages intended to help sell a product or service

push

uses direct selling techniques to promote

pull

relies on mass media to promote

self-service is not predominant, advertising is restricted, and product price is a high portion of income

when is push more likely than pull in promotion?

Type of distribution system, cost and availability of media to reach target markets, consumer attitudes toward sources of information, and price of the product compared to incomes

what do companies look at to determine how much push and pull they use?

may need to supplement its Internet sales with other means of promotion and distribution, which is expensive and switching to Internet sales risks upsetting existing distributors

problems with selling abroad

brand

identifying mark for products or services

labeling requirements, environmental protection regulations, indirect legal considerations

firms alter products for

introduction, growth, shakeout, maturity, decline

product / industry life cycle

place (distribution)

the course that goods take between production and consumption

gap analysis

a company estimates potential sales for a given type of product and compares how emphasis on different marketing mix elements can better help it serve prospective customers

to expand sales, to acquire resources, and to diversify or reduce risks

three IB objectives

Usage—collectively, all competitors sell less than the market potential, Product line—the company lacks some product variations, Distribution—the company misses coverage by geography or type of outlet, Competitive—competitors’ sales are not explained by product-line and distribution gaps

reasons managers look at when they conduct gap analysis to understand why their sales are low

supply chain

the network that links together the different aspects of the value chain, from sourcing and procurement, to conversion through operations, to the final consumer

supply chain management

refers to activities in the value chain that occur outside the company; the coordination of a business’ entire production flow, from sourcing the raw materials to delivering a finished item

operations management or logistics management

the process of planning, organizing, and controlling the production of goods and services internally

logistics or materials management

part of the supply-chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers’ requirement

compatability

the degree of consistency between FDI decisions and a company’s competitive strategy

compatibility, configuration, coordination, and control

factors that the success of a global operations strategy depends on

offshore manufacturing

any part of the production process that takes place in a country other than the home country

outsourcing

when a company hires a third party to manage and improve their supply chain

supply chaining

a method of collaborating horizontally among suppliers, retailers, and customers to create value

vertical integration

when a company owns the entire supplier network, or at least a significant part of it

industrial clusters

an alternative way to reduce transportation and transaction costs. Under clustering, buyers and suppliers locate close to each other to facilitate doing business

keiretsus

groups of independent companies that work together to manage the flow of goods and services along the entire value chain