Lecture 9 - International Strategy

Question 1

What are the 4 main benefits of globalisation for a company?

Answer 1

• Cost benefits from scale and replication
• Global learning (move ideas from 1 market to another)
• Servicing global customers (same systems for them globally)
• Arbitrage benefits:
  Wage differentials
  Local resources/capabilities
  Tax structures/government support

Question 2

What are two ways companies can operate internationally? (Broadly speaking)

Answer 2

• Trade (sell outside home country)
• Direct investment (building or investing internationally)

Question 3

In terms of production and trade, how can countries be economically efficient?

Answer 3

They should focus on what they are good at producing, and import what they aren’t (if exchange rates are well behaved) to be economically efficient.

Question 4

What are the categories in the matrix between international trade and foreign investment? Explain the position of each. (If paper, draw it)

Answer 4

IT = International Trade
FDI = Foreign Direct Investment
Trading - High IT, Low FDI
Global - High IT, High FDI
Sheltered - Low IT, Low FDI
Multidomestic - Low IT, High FDI

Question 5

Give an example of a trading industry.

Answer 5

Military hardware, diamond mining

Question 6

Give an example of a sheltered industry.

Answer 6

Taxi services, hairdressing

Question 7

Give an example of a global industry.

Answer 7

Oil, cars

Question 8

Give an example of a multidomestic industry.

Answer 8

Frozen foods, hotels

Question 9

What is Porter’s National Diamond Framework?

Answer 9

A diagram depicting the relationships between various factors that make up the interactions between companies in those nations.

Question 10

What are the 4 elements in Porter’s Competitive Advantage of Nations?

Answer 10

Factor Conditions
Strategy, Structure and Rivalry of firms in that country
Demand Conditions (customer wants)
Relating and Supporting Industries

Question 11

In Porter’s Competitive Advantage of Nations, what are factor conditions?

Answer 11

“Home grown” resources and capbilities are more important than natural endowments

Question 12

In Porter’s Competitive Advantage of Nations, what are demand conditions?

Answer 12

Discerning domestic customers drive the direction of quality and innovation (e.g. the fast cars of Germany driven by the autobahns)

Question 13

In Porter’s Competitive Advantage of Nations, what are relating and supporting industries?

Answer 13

The idea of industry clusters forming and moving together

Question 14

In Porter’s Competitive Advantage of Nations, what is strategy, structure and rivalry?

Answer 14

The idea that these 3 factors can influence the formulation and development of industries in a nation, e.g. domestic rivlaries drive upgrading

Question 15

What 3 factors should be considered when locating production?

Answer 15

• National resource conditions
• Firm-specific advantages (could the competitive advantage of the firm be eroded by relocating?)
• Tradeability issues (can the product be transported from there and still be economical - for production)

Question 16

What are the 3 dimensions to multinational strategy?

Answer 16

Adaptation, Aggregation and Arbitrage

Question 17

Why would an organisation differentiate internationally? (3 reasons)

Answer 17

• Transportation and communication costs from geographical distance
• Differences in customer needs (cultures/norms, governmental)
• Market and infrastructure differences from different economic development

Question 18

What is the CAGE framework and what is it used for?

Answer 18

Used to assess how to select a new foreign market.

• Cultural distance
• Administrative and political distance
• Geographical distance
• Economic distance (consumer disposable income, exchange rates, etc.)

Question 19

What are 3 routes to internationalisation?

Answer 19

• Born global (often tech businesses)
• Uppsala model (sequentially expanding, incremental commitment)
• Network model (go where your contacts take you/network is strong)

Question 20

What are the 4 factors that are used to choose between different modes of overseas market entry?

Answer 20

Speed, cost, risk and control

Question 21

In what 3 ways does Porter’s competitive advantage of nations extend the traditional theory of comparative advantage? (What more does it add?)

Answer 21

• International competitive advantage is about companies not countries - the national environment is simply a home base for the company.
• Sustained competitive advantage is dependent on dynamic factors such as innovation and the upgrading of resources and capabilities

The national environment affects the dynamics of this upgrading and innovation.

Question 22

What is the opposite of national differentiation?

Answer 22

Globalisation

Question 23

What framework should you use to assess the factors that contribute to a company’s international competitive advantage?

Answer 23

Porter’s National Diamond Framework

Question 24

What is aggregation?

Answer 24

Achieving economies of scale or scope by creating regional or global efficiencies

Question 25

What framework should be used to choose a foreign market?

Answer 25

CAGE

Question 26

What type of company might struggle if there is significant administrative and political differences between the country of source and the destination country?

Answer 26

Industries viewed by the home government as strategically important, e.g. energy, defence and telecom