Lecture 2

Question 1

Absolute cost advantage (Smith 1776)

Answer 1

Refers to the ability of one party to produce more of a good or a service than competitors, using the same amount of resources

Question 2

Market imperfection theory (Kindleberg, 1969)

Answer 2

• Lack of perfect information

- Market distortions (taxes, trade barriers, rules, etc)

Question 3

Entry mode theory

Answer 3

Describes the way in which we internationalise

Question 4

The Uppsala model (Johansson and Vahlne, 1977)

Answer 4

Companies go to markets they can most easily understand, for low market uncertainty.

It allows to avoid large scale investment losses

It allows to test one market at a time

Question 5

The Uppsala model, steps how to globalise

Answer 5

1. Gain experience over the domestic market
2. Start operate in a nearby market, and slowly further away
3. Chose to enter market via exports
4. Only after several years, company establishes wholly owned, or majority owned operations

Question 6

Born globals

Answer 6

• Firms that are intended to export immediately upon inception
• Firms that succeed in the world market without an established domestic base

Question 7

Characteristics of born globals, 7 (Knight, 2015)

Answer 7

• Born in a small market
• Multinational customers
• Supply global niche markets
• Significant first-mover advantage
• High value adding supply
• Leaders have significant international experience
• Good at building partnerships

Question 8

Country attractiveness framework

Answer 8

• Country risk analysis (political, economic, competitive, operational risks)
• Market opportunities (size, growth and quality)
• Industry opportunities (industry competitive structure, resource endowments, investment incentives granted by the government)

Question 9

Corporate social responsibility

Answer 9

A self regulating mechanism , which encouraged firms to comply with the spirit - rather than the rule - of law

Question 10

Economic side of CSR

Answer 10

It’s the ethical responsibility of managers to act legally, and to take those actions that maximize shareholder value.

Question 11

Responsibility side of CSR (4)

Answer 11

• Firms are more global than governments
• Firms are more permanent than governments
• Firms should be a force for good in the world
• It’s wrong to take advantage of the weak