CIF Flashcards
(44 cards)
Forces of globalization
- Emergence of WTO
- Creation of free trade areas
- Benefits of international trade
- Revolution in digitized comms
- Fast and efficient transportation
- Opening of previously closed markets
- Increased cultural awareness
- Emergence of global industry networks (e.g., biotech)
(Levitt)
Criticisms of global business
- Environmental exploitation
- Labor exploitation
- Can outcompete local players
- Shift of power to multinational enterprises
- Negative externalities
Emerging issues in global trade
- Distrust in global supply chains
- Critical components of value chain
- Emerging new tech standards
- Decrease of trade between West and China
There is pushback on global trade in several ways
- Decoupling (severing ties in global market, process signified by decrease in
inter-dependence) -> Witt et. al - BRIC markets challenging to do business in
- Regulations on MNEs (e.g., corruption acts)
Business has not become as global as Levitt expected - why?
- Backlash for global business strategies
- Crippled by protectionist movements and trade wars
BUT - global business has many advantages - standardization leads cost effectiveness
(Ghemwatt)
Distance model for market entry
Market entry model - based on distances between current market and target market:
1) Economy (can serve also poor markets, PP vs population)
2) Culture (ways of doing business)
3) Geography/distribution (geographical distance)
4) Administration (differences in regulation)
Hofstede’s cultural dimensions
1) Power distance (Equality)
2) Femininity (Masculinity)
3) Individualism (Collectivism)
4) Risk-avoidance (risk-acceptance)
Types of distribution dominance
1) Physical dominance of dist. - ikea
2) Digital dominance of dist. - Zalando
3) Leveraging platforms/marketplaces
4) Direct sales/contractual sales - Baby Bjorn
What does Stephen Hymer say about international expansion?
- International firm is automatically at a disadvantage
- Competitive advantage is basis for internationalization
Eclectic paradigm:
The OLI framework, brings theories and aspects to one model
(Dunning)
Behavioral reasons for internationalization
- Networking opportunities (making desirable discoveries of goods opps.)
- Growth aspirations
- Heuristics (experience)
What are Lundan’s 3 components of competitive advantage?
Oa - based on access to an asset
Ot - based on capabilities to organize assets
Oi - based on leadership with formal and informal institutions
Static vs Dynamic o-advantages
Static: Patent, license, brand
Dynamic: Institutional influence, inovativeness (lego), differentiated concept (starbucks), organizational culture (patagonia)
VRIO:
1) Valauble
2) Rare
3) Inimitable
4) Organization
Don’t forget transferability!
Alternatives to the strategic view of the o-advantage
- O-advantages can be optimally matched with foreign markets; assuming rational behavior (Dunning)
- Other researches challenge this as for rationality you would need to have full info (which nobody has)
- instead assume “bounded reality”
Uppsala process model for internationalization
- Companies do not go to optimal markets
- They avoid risk
- Internationalizaton spurred by knowledge development
Model:
1) Market knowledge (state) –>
2) Commitment decisions (change) –>
1) Current activities (change) –>
2) Market commitment (state)
(Johanson and Vahlne)
What is the uppsala model establishment chain:
Y-axis - market commitment
X-axis - market knowledge
1) Export
2) Licensing agreements
3) Partnering/JV
4) Acquisiton
5) Greenfield investment
Sarasvathy’s effectuation model:
Argues firms create their market through collaboration and adaptability by (a) embracing uncertainty and (b) using available resources
1) (a) Different types of uncertainty
- risk -> calculable
- normal uncertainty -> can estimate with variables
- true uncertainty -> unknown unknowns
2) Predictive logic (dunning on established situations and firms with resoruces) vs effectual logic (sarasvathy on new firms, startups and actual uncertainty)
- If you can control the future you do not need to predict
(b) Principals of effectuation
1) Bird in hand - use the resources you have available
2) Lemonade - surprises are inevitable -> adapt
3) Crazy quilt - leverage partnerships and networks
4) Affordable loss - only invest what you are willing to lose
Effectuation logic vs predictive logic
Applicable:
- E - true uncertainty - startups, new firms
- P - established situations, access to resoruces, large firms
Market:
- E - company creates market with stakeholders
- P - market and companies are separate
Market dynamics:
- E - focuses on collaboration
- P - focuses on competition
Resources:
- E - resource-constrained firms
- P - available resources and can be used
Process:
- E - evolutionary process, outcome certainty
- P - planned process, pre-set objectives
Schweizer - internationalization as an entrepreneurship process:
IB is a structure of networks you can be a part of or not
Entrepreneurs know who they are; the knowledge corridors they are in; the social networks they are a part of
Knowledge, opportunities, capabilities (state) -> Relationship commitment decisions (change variables)
Learning, creating, trust building (change) -> creates network position
- LEADS TO NEW O advantage
Entrepreneurial view on internationalization by combining a network perspective and an effectuation perspective:
- Network perspective - internationalization is a by-product of improving the network position
- Effectuation perspective - entrepreneurs act based on effectual logic within the network
What is product/market fit?
How the favorable market conditions fit with the company’s O-advantage - advantages may be transferable but not fit the market
Creating fit may be costly due to liability of foreignness
What are the types of LoF (liability of foreignness):
1) Costs directly associated with spatial distance, such as travel costs
2) Costs from company’s unfamiliarity with local environment
3) Costs from host country - such as lack of legitimacy of foreign firms or economic nationalism
4) Costs from protectionist restrictions issued by home country
(Zaheer)
Two (conflicting) solutions to alleviate LoF:
1) By leveraging company’s competences and adapting best practices (resource-based view)
2) By mimicking local actors (institutional theory)
(Zaheer)
