Finals Content Flashcards
(20 cards)
Why do firms differ?
- Institutions shape firm attributes and strategies
- Firms must legitimize their activities overseas by adopting different structures, appearances or strategic partners
How do firms compete?
Strategic changes affecting domestic and foreign firms operating in emerging economies are influenced by institutional transitions in those economies (such as changing from JVs to WOS in China)
What determines the scope of the firm?
-Corporate strategy (product market, geographical and verticle)
What determines the international success and failure of firms?
Firm performance is, in part, determined by the institutional frameworks governing strategic choices
Why go abroad? Strategic factors
- Market: offensive and defensive
- Economic: regulatory, capital, costs, labour, natural resources
- Strategic: distinctive resources, first mover, verticle integration, major customer
- Market development: offer growth and efficiency opportunities
- Resource access: secure supply of key and low cost resources
- Management: co-ordination of global activities
- Learning: Understand cutting edge technology; learn to compete in difficult and sophisticated markets
Liabilities of going abroad
- The numerous differences in formal and informal institutions in different countries (e.g. regulatory, language, and cultural differences). Failure to recognize these rules may cost foreign firms dearly
- Customers discriminate against foreign firms, sometimes formally and other times informally
Key success factors: overcome liability of foreignness (5)
- Superior technologies
- Superior brand and marketing capabilities
- Superior logistics and organisation
- Superior knowledge about the cultural and institutional intricacies
- Need to consider if the why’s out weight the why nots
Early mover entry strategy advantages
- Market power
- Preemptive opportunities
- Strategic options
Early mover entry strategy disadvantages
- Environmental uncertainty
- Operational risks
- Extra operational costs
Advantages of JV
○ Improvement of efficiency
○ Access to knowledge
○ Political factors
○ Collusion or restriction in competition
International Entry Strategy: Holistic Approach (3)
- Industry Based Considerations (bargaining power etc)
- Resource Based View (VRIO Framework)
- Institution Based Considerations (country risk)
Industry based view (external environment analysis) [5]
- Porters five forces
- SWOT
- Strategical analysis
- 3 generic strategies
- Strategical and competitor analysis
Resource based view (internal environment analysis) [4]
- Core competencies analysis
- VRIO
- Dynamic capabilities
- Source of competitive advantage
Institution based view (country environment analysis) [3]
- Formal vs informal
- Rule of the game
- Constraints on behaviour and strategy
Competitive advantage can come from?
- Efficiency,
- Innovation
- Customer responsiveness
- Quality
Reducing uncertainty (institutional based view)
- Economic transaction
- Relational contracting: informal
- Arm’s length: formal
Formal and informal behaviours have three pillars. What are they?
- Cognitive
- Normatime
- Regulatory
3 generic strategies
- Cost leadership
- Differentiation
- Focus
Location choice factors
- Cost/ Tax
- Demand factors: market size and growth, customer presence and local competition
- Strategic factors
- Regulatory/ economic factors
- Socio-political factors
- Objectives: strategic, global and market orientation
Types of entry modes
- Non-equity: Exports and contractural
- Equity: JV’s and Wholly owned subsidiary
