C211 - Competency 1 - Globalization

globalization

close integration of countries and people of the world

global business

business around the globe

resource base view

firms specific resources and capabilities lead to firms’ success and failure

institution base view

formal and informal institutions, the rules of the game, lead to firms’ success and failure

3 views of globalization

a new force, long run historical evolution, pendulum

a new force

sweeping through the world on recent times (Western ideology focused on exploiting the world through MNES)

Long run historical evolution

since the dawn of human history (1 directional) p

pendulum

swings from 1 extreme to another from time to tome (not recent or 1 directional)

multinational enterprise (MNE)

firm that engages in FDI when doing business abroad

Foreign direct investment

investment in controlling and managing value-added activities in other countries (*ownership and control)

Horizontal FDI

duplicating home country activities at the same value- chain stage in a host country

Vertical FDI

upstream or downstream moves in different value chain stages in host country (producing vs selling)

FDI advantages

ownership/ location and internalization

Political views on FDI

radical view, free market view, pragmatic nationalism

radical view

is hostile to FDI and treats FDI as an instrument of imperialism and as a vehicle for exploitation of domestic resources by foreign capitalists and firms

free market view

suggests that FDI, unrestricted by government intervention, will enable countries to tap into their absolute or comparative advantage by specializing in the production of certain goods and services

pragmatic nationalism

viewing FDI as having both pros and cons and only approving FDI when its benefits outweigh costs

Home country benefits and costs

Benefits: repatriated earnings from profits from FDI, increased exports of components and services to host countries, and learning via FDI from operations abroad

Costs: capital outflow + job loss

Host Country benefits and costs

Benefits:

capital inflow, technology spillover, advanced management know how and job creation

Costs: loss of sovereignty, adverse effects on competition and capital outflow

Collusion

collective attempts between competing firms to reduce competition

market characteristics of Resources and Capabilities

few firms, existence of a price leader, homogeneous products, high barriers to entry, high market commonality

Resources influencing competitive dynamics

number of resources, value, rarity, imitability, organization

number of resources

based essentials informed by VRIO framework drive decisions and actions associated w/ competitive dynamics

value

firms must create value when engaging rivals

rarity

nature or nurture, certain assets are rare, generating significant advantage in competitive dynamicsi

imitability

trying to imitate successful rival

organization

some firms are better organized for competitive actions

resources similarity

the extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount to hose of the focal firm

market commonality

overlap between 2 rivals’ markets

Theory of attack/ counterattack

set of actions to gain a competitive advantage (attack)/ set of actions in response to attack (counter attack)c

cooperation and signaling

some firms choose to cooperate in order to reduce competitive intensity

strategies of local firms facing MNES

contender, defender, dodger, extender

Contender

firm engaging in rapid learning and then expand overseas

defender

centers on local assets in areas in which MNES are weak

Dodger

cooperating through joint ventures w/ MNES

Extender

leveraging homegrown competencies abroad