mgt 405: chapter 7 - international strategy

what is the main goal of international strategy?

to create value and gain competitive advantage in global markets

what does globalization refer to?

the increasing interdependence of national economies through trade, investment, technology, and information exchange

what major challenge does globalization present?

serving diverse customer bases, and balancing efficiency and adaptation

what are the four elements of porters diamond?

1. factor endowments

2. demand conditions

3. related and supporting industries

4. firm strategy, structure, and rivalry

how does factor endowments contribute to competitiveness?

the provide key resources that are specialized, valuable, rare, and difficult to imitate

how do demand conditions explain how some nations outperform others?

sophisticated consumers may push firms to innovate and improve

why are strong domestic rivals beneficial?

intense home competitions drive innovation and global competitiveness

what are the economic and strategic motivations for international expansions?

larger market size, economies of scale, arbitrage opportunities, and extending product life cycles.

what are the learning and optimization motivations for international expansions?

optimize value chain location, learning opportunities, and reverse innovation

what is economies of scale?

cost efficiency, the more you produce, the cheaper it becomes.

what is reverse innovation?

developing products in another emerging market, and then bringing them back to developed ones.

what are the four types of risk in international expansion?

political, economic, currency, and management.

what is political risk?

the potential for government instability or conflict disrupting operations.

what is management risk?

cultural or communication missteps leading to failure.

what is economic risk?

piracy, counterfeiting, or unstable economy

what is outsourcing?

contracting external firms to perform certain value chain activites

what is offshoring?

relocating business activities abroad to reduce costs(MAY BE COSTLY THOUGH)

what are the common hidden costs of offshoring?

wage inflation, longer lead times, IP theft, and supply chain distrubution.

what are two opposing pressures that shape international strategy?

cost reduction vs local adaptation.

what was Levitt’s view on globalization?

firms should standardize products globally to reduce costs.

why is “one size fits all” rarely successful?

consumers differ across cultures and have different preferences.

what are the four main international strategies?

international, global, multidomestic, and transnational

describe international strategy?

centralized knowledge, low pressure for cost or adaptation, leverages core competencies.

describe global strategy?

standardized products, cost efficient focus, high pressure for lower costs, low pressure for adaptations

describe multidomestic strategy?

decentralized, local adaptation focus, high responsiveness, low pressure for lower costs

describe transnational strategy?

balances efficiency + adaptation + learning, local adaptation, centralized and decentralized elements, high pressure for lower costs

what strategy is the hardest to implement but the best long term.

transnational

what is regionalization?

focusing on specific geographic regions rather than global expansion

why might regionalization be more effective than globalization?

cultural, economic, legal, and political similarities matter.

what helps regional trade?

trade blocs(EU, NAFTA, ASEAN) - help reduce tariffs and ease trade.

list the four main entry modes?

exporting, licensing/franchising, joint ventures/alliance, wholly owned subsidiary. 

what are the pros and cons of exporting?

pro: low risk, con: limited local control

what are the pros and cons of licensing/franchising?

pro: low investment, con: loss of control and profit

what are the pros and cons of joint ventures?

pro: shared risk and resources, con: cultural conflicts

what are the pros and cons of wholly owned subsidiaries?

pro: full control and profit, con: high cost and risk