Designing Global Strategies: Comparative and Competitive Value-Added Chains

Question 1

comparative advantage

Answer 1

location-specific advantage

Question 2

competitive advantage

Answer 2

advantage based on the firm

Question 3

value-added chain

Answer 3

Evaluating each link’s contribution to total cost to
find links that are not cost competitive

Question 4

what does location-specifc advantage influence the decision of? (2)

Answer 4

1. where to source and market
2. what activities and technologies along the value-added chain a firm should concentrate its investment and managerial resources in, relative to other firms in its industry

Question 5

If a firm strategically benefit from comparative advantage, it can gain _____________.

Answer 5

competitive advantage

Question 6

Differences between firms regarding the location of their sourcing can give rise to ______________

Answer 6

strategic advantages

Question 7

value-added chain (describe what to do)

Answer 7

We compare the costs incurred by each link in the value chain and against competitors. Then we locate the “critical success factors” that must be addressed.

We may need to acquire new technologies or divest as a result of such comparative value chain analysis.

Identify concretely what links in the VAC generate those attributes most strongly desired by consumers and which of those attributes correspond to the present and potential competitive advantage of the firm.

Question 8

describe asset manipulation issues

Answer 8

Strategy formulation is not limited to choosing the right market or product attributes.

Assets are needed to produce products and services.

Assets must be bought, acquired, or redeployed.

Redeploying assets is associated with costs and risks.

Thus, RBV of the firm makes great sense here.

Question 9

Differences in factors costs have powerful implications for where a firm should ________________ of its value-added chain internationally

Answer 9

locate the links

Question 10

what is the rule about locating links?

Answer 10

locate activities in countries with comparative advantage in terms of the relevant intensive factor

Question 11

The ordering of isoquants along an isocost line corresponds to ______________________

Answer 11

comparative advantage for countries

Question 12

What are factors impacting chain of comparative advantage?

Answer 12

1. Perfect competition assumption
2. Same price for goods across countries
3. Cost of transportation and tariffs
4. Small differences in factor costs exist between countries
5. Firm level competitive advantage
   *Scale: A firm gains scale economies in Canada where labor cost is high!
   *Scope: A firm has a competitive advantage in one good and extends this to the production of the second good despite location disadvantage.
   *Learning: A firm possess advanced knowledge/skill despite location disadvantages

Question 13

Matrix- Modes od International Competition

Answer 13

No comparative adv, no compet adv : Nationally segmented markets

Comparative adv, no compet adv: interindustry trade, international vertical integration of firms
*Driver of competition is comparative advantage

No comparative adv, competitive adv: intraindustry trade, international horizontal integration of firms
*Driver of compt. is firm-level competitive edge.
–>Factor costs are similar across borders.

Comparative and competitive advantage: internationally vertically and horizontally integrated firms with different configurations of market penetrations and sourcing sites
*Driver of competition is both firm level C.A. and comparative advantage.
–> Internationalization of production
–> Internationalization of markets
–> Fighting for global market share
–> Fighting to acquire cheaper factors of production