Competing Globally Key Terms

deepening strategy

deepening strategy

A global strategy that widens an organization’s existing competitive advantage. Competing across geographic markets allows an organization to enhance existing products or create new ones (increasing willingness to pay) or improve its production or procurement (decreasing costs).

deployment strategy

A global strategy that creates value by aggregating demand across markets, thus increasing volume. The relationship between cost and willingness to pay stays the same but is enacted across multiple countries.

development strategy

A global strategy that creates value by (1) expanding into countries to obtain new sources of competitive advantage and (2) using those capabilities to create value in the organization’s other global markets.

global advantage

The competitive advantage available to organizations that enact more than one global strategy (deployment, development, and deepening) simultaneously, applying each to the products and countries where it is most suited and developing organizational capabilities to reconcile the conflicts between them.

global location strategy

A cohesive set of location choices, over time and geographies, that allows firms to create and capture value while competing globally.

global strategy

A value-creation strategy that capitalizes on similarities and differences across geographic markets.

global value creation

The act of increasing the wedge, relative to competitors, between the price customers are willing to pay for a product and the cost of producing it.

hollowing out

The threat that domestic firms relying on offshore outsourcing may unintentionally transfer capabilities to their foreign suppliers, causing a long-term and irreversible decline in innovation.

horizontal foreign direct investment

An investment that a firm makes in a foreign market in order to expand its operations for its current lines of business.

inshoring/reshoring

Returning activities within a value chain to within the geographic boundaries of the firm.

insourcing

Returning a segment of the value chain to within the organizational boundaries of the firm.

international strategy

A strategy in which national units that have little autonomy focus primarily on adapting ideas and products that come from a firm’s headquarters, where the value perceived in being globally integrated or responsive to national differences is low.

liability of being a foreigner

The extra costs borne by organizations that expand beyond their home country.

multinational strategy

A strategy in which a firm attempts to differentiate products and services across country markets.

offshore outsourcing

Assigning a segment of the value chain to an organization that resides outside the home country of the originating firm. This approach creates value by lowering costs and freeing up domestic producers to concentrate on innovation and other high-value activities, but it may dampen innovation and allow capabilities to migrate to foreign suppliers.

offshoring

Locating a segment of the value chain outside the organization’s home country. This approach creates value by combining firm capabilities with the comparative advantages of different countries.

outsourcing

Assigning a segment of the value chain to another organization. This approach creates value by combining the competitive advantages of different firms.

paradox of being consistent

The contradiction that is created when firms with the greatest competitive advantages in their domestic markets have a business model that is optimized for those markets, but when expanding abroad, these firms find their advantages harder to replicate.

transnational strategy

A strategy in which a firm attempts to realize the cost and efficiency advantages of global organizations while remaining responsive to national preferences.

value capture

The appropriation of the value created by a product, service, or process.