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Flashcards in TEST Virks. Strategi - International Deck (39):
1

Describe Strategy as a:
plan
pattern
position

(Mintzberg 1987; S)

Plan:
An intended course of actions which results in an explicit strategy. Formulation before implementation.
(SWOT, Scenario planning, Regional strategies)

Pattern:
Actual actions of an organization. Not the planned ones.
Pattern of these actions. Consistency in behavior, intended or not.
(Internationalization process model)

Position:
Similar to plan is most ways
Except: there is a small number of desirable strategies.
Generic strategies: common, identifiable positions in the marketplace.
(Five Forces, Generic strategies)

2

What is a ploy?

A maneuver to outsmart a competitor

3

Describe Strategy as configuration & learning (S).

Organization is viewed as a configuration of its characteristics.
Company's strengths and weaknesses should be determined "in the context of the problem" - Hard to say in advance whether a competence will be a strength or a weakness for a particular strategy.
(Resource-based view, Role of structure, Dynamic capabilities)

Strategy's role:
Maintain stability & recognize the need for major transformation.

4

What is a Multinational company (S)

One of three definitions:

"A firm that owns and controls operations in several countries (T. Pugel)

Has "direct production and generally direct business activities abroad" (G. Ietto-Gillies)

Any public company that engages in international business activities (J. Cullen & K. Parboteeah)

5

What are the Drivers of company internationalization (Hitt et al. 2016; S).
(In slides: What affects company internationalization)

Target country culture and institutions
- Difference/distance between home and target countries

Previous internationalization experience

International experience of founders
- "Born Globals"

6

What are the Drivers of company internationalization (Hitt et al. 2016; S).
(In slides: What affects company internationalization)

Target country culture and institutions
- Difference/distance between home and target countries

Previous internationalization experience

International experience of founders
- "Born Globals"

7

What drives globalization? (S)

Technology - increased use and expansion

Liberalization - of trade and resource movements

Global products and customers (developing countries increasingly consume)

Global competition

Political changes
-In Eastern Europe, China etc.

8

Semi-globalization & regionalism (S).
Do firms actually use these global opportunities?

Fortune 500 companies:
- Over 50% of world trade
- Very few are global
- Most are regional (EU, North America, Asia)
- Advantages of scale & scope without the risks of global operations

9

What is the Relationship between digitization and globalization* (Ghemawat 2017).

Digitalization can facilitate globalization in certain respects (e.g., by making it easier for small firms to export).

Ghemawat has 8 reasons for why digital technologies are insufficient in driving globalization forward. These include:

Price difference among regions.
Domestic technological interactions dominate international ones.
Governments can interfere with digital and physical flows.
Another error is to conflate digitization with technology to assert that all technological change is pushing in the direction of increased globalization. (e.g. Robots, 3D printing)
and others.

see: https://hbr.org/2017/02/even-in-a-digital-world-globalization-is-not-inevitable

10

What are the Differences between product and competitive strategies (S)

Product strategies:
Choices regarding a company's product line in different geographical markets. What an MNC does in response to multicountry or global markets.
Tailor to local tastes (local responsiveness) vs. standardization (global integration)
(Product mix - Product adaptation matrix)

Competitive strategies:
Analyzing sources of competitive advantage and Locating parts of the value chain activities in markets that offer the best opportunities for the company to enhance its competitive position

Build global presence
- Achieve capability to make and sell globally
- Cross-subsidize

Defend domestic position
- Gain ability to retaliate

Overcome national fragmentation
- Rationalize R&D and production
- Distribute decision-making among subsidiaries


11

Global competition vs. global business (Hamel & Prahalad 1985; S)

Global competition
- Companies pursue global brand, distribution channels
- Battle global competitors

Global business
- Global investments are made to achieve scale and cost efficiency not available in home market.

Different roles of different markets:
- Source at low-cost; maintain minimum scale; retaliate against a global competitor etc.

12

Product adaptation vs. product mix (S).

Matrix:
Product mix:
Different in every market => Same in every market

Product adaptation:
Different in every market => Same in every market

13

When to pursue global integration and when local responsiveness (S)

Local responsiveness:
National or regional differences in customer needs
Differences in cultures/tastes and norms
Locally made products, import substitution
=> Tailored products/services

Global integration:
Standardized products and marketing
Little variation in customer preferences
"Cross country arbitrage" to lower costs or higher qualtity
=> scale and scope advantages

14

Multicountry vs. global competitive strategies (Whirlpool case; S).

Multicountry (aka multidomestic) competition:
- Each country is self contained
- Different customer preferences and competitive positions
- For an MNC, competition in each market is different for other markets (different product offerings and rivals)
- Autonomous country subsidiaries
- Value chain functions mostly in home country (R&D, finance, strategic planning, marketing) Manufacturing might be at other locations.

Global competition:
- Prices and competitive positions are strongly interlinked across markets.
- Same competitors in many markets
- MNC's advantage stems from worldwide operations
- Value functions at optimal locations

15

Mention 3 global competitive strategies and provide rationales for each (Hamel & Prahalad 1985; S)

Build global presence
- Achieve capability to make and sell globally
- Cross-subsidize important markets
= reduce competitor's margins to stymie R&D
= gain first-mover advantage

Defend domestic position
- Gain ability to retaliate

Overcome national fragmentation
- Rationalize R&D and production
- Distribute decision-making among subsidiaries

16

Describe the 3 Regional strategies: a) home base, b) portfolio, c) hub (Ghemawat 2005; S).

Home base:
Most activities from the value chain are performed in the home region. Can be dangerous because of lack of risk hedging and running out of room to grow. (Zara)

Portfolio:
Setting up or acquiring operations outside the home region that report directly to the home base. Usually, the first strategy adopted to establish a presence outside of the home market. (Toyota, manufacturing in US)

Hub:
Involves building regional bases, or hubs, that provide a variety of shared resources and services to local (country) operations. Hub strategies often involve transforming a foreign operation into a standalone unit.
It is a multiregional version of the home base strategy.

17

Describe the 2 Regional strategies: d) platform and e) mandate* (Ghemawat 2005; S).

The Platform strategy:
Spreading fixed costs across regions instead of fixed costs across countries in regions.
Not about reducing product variety, but to deliver a variety more cost-effectively by allowing customerization atop common platforms explicitly engineered for adaptability.
(VW's Modular Transverse Matrix platform: Audi A3 and Golf)

The mandate strategy:
Focuses on economies of specialization as well as scale.
Companies award certain regions broad mandates to supply particular products or perform particular roles for the whole organization.
Roles and products are different by region but are used throughout the organization.
Risks:
Local, national or regional interests to influence or even highjack a firm's overall strategy.
Broad mandates cannot handle variations in local, national or regional conditions (Toyota Pickups in the US.)
Carrying the degree of specialization to extremes can create inflexibility.

18

Definition of Resources: (Barney 1991; S)

All assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. controlled by a firm.
That enables the firm to conceive of and implement strategies that improve its efficiency and effectiveness
Needs to be value creating.

19

Define Resource types (physical, human, organizational) (Barney 1991; S)

Physical capital resources:
Plants, equipment, geographic location, access to raw materials etc.

Human capital resources:
Training, experience, judgment, intelligence, relationships etc. of individual managers and workers.

Organizational capital resources:
- Reporting structures, planning, controlling and coordinating systems
- Informal relations among groups within a firm and between the firm and its environment.

20

Competitive advantage vs. sustained competitive advantage (Barney 1991; S)

Competitive advantage:
- A value creating strategy not implemented by a current or potential competitor

Sustained competitive advantage:
- A strategy not implemented by a current or potential competitor
- (Main difference) That cannot be implemented by a competitor (which cannot duplicate the benefits of the strategy)
= competitors might have tried but failed to duplicate the strategy
- Described not so much as long time (during which the strategy cannot be duplicated), but the possibility of duplication per se (an equilibrium condition).
- Might be upended by structural changes (Schumpeterian Shocks) in the industry when VRIN attributes of resources change. Only suggests that it will not be competed away through the duplication of competitors.

21

VRIN characteristics of resources (Barney 1991; S).

Valuable:
It must be valuable, in the sense that it exploits opportunities and/or neutralizes threats in a firm's environment. (SWOT framework)

Rare:
It must be rare among a firm's current and potential competition
If fewer firms possess a valuable resource than the number of firms needed for perfect competition in an industry, this resource is rare and a potential source of competitive advantage.

Imitable:
It must be imperfectly imitable
- Too expensive
- Legal reasons
How can that happen:
- First mover advantage (e.g. patents)
- Path dependence
- Complex social resources
= interpersonal relationships, trust, culture etc. that are costly to imitate in the short term
Competitors don't know if a resource leads to advantage
- Multiple non-testable hypotheses exit about why a firm has a competitive advantage, and when a firm's advantage is based on complex sets of interrelated capabilities


Non-substitutable:
There cannot be strategically equivalent substitutes for this resource that are valuable but neither rare or imperfectly imitable.
That there are strategically equivalent resources suggest that other current or potential competing firms can implement the same strategies, but in a different way, using different resources. If these alternative resources are either not rare or imitable, then numerous firms will be able to conceive of and implement strategies which will not generate sustained competitive advantage.


22

The link between VRIN resources and sustained competitive advantage (S).

Valuable and rare organizations can only be sources of sustained competitive advantage if firms that do not possess these resources cannot obtain them.
Furthermore, is case that there are strategically equivalent resources suggest that other current or potential competing firms can implement the same strategies, but in a different way, using different resources. If these alternative resources are either not rare or imitable, then numerous firms will be able to conceive of and implement strategies which will not generate sustained competitive advantage.

23

Dynamic capabilities definition (Teece et al. 1997; S)

The firm's ability to integrate, build and reconfigure internal and external competencies to address rapidly changing environments

24

Difficulties in being a “dynamic” firm (Teece et al. 1997; S)

Some assets and competencies are not tradable, have to build yourself
- values, culture
Firms are to some degree stuck with what they have and may have to live without what they lack
- Determined by path dependencies, which take time to form

25

Path dependency definition (Teece et al. 1997; slides for class 9).

Once a practice or decision has been implemented, the likelihood that in the future alternatives will be considered diminishes.

Where a firm can go is a function of its current position and the paths ahead. Its current position is often shaped by the path it has travelled.

26

Replication vs. imitation* (Teece et al. 1997; S).

Replication:
Redeployment of resources from one concrete economic setting to another.
Difficult because
- From tacit to explicit knowledge (even understanding what all the relevant routines are that support a particular competence may not be transparent. Some sources of competitive advantage a so complex that the firm itself does not understand them.)
- Location or non-location bound resources
- Learning (trial and error)

Imitation:
Replication by a competitor
What is difficult in replication is also difficult in imitation
Also protected by:
- Causal ambiguity
- property rights
- Appropriability

27

Core competencies: definition (Prahalad & Hamel 1990; S)

A competency (skills, knowledge,...) that:
1) Is hard to imitate
2) Can be deployed in many markets and serves as a base for several classes of products, now or in the future
3) Provides significant consumer benefits

Leads to durable competitive advantage
Typically a few (~5) core competencies

28

What are Core competencies, core products and end products (Prahalad & Hamel 1990; S)

Core competencies:
Class of product functionality (Adhesives)

Core products:
Embodiment of core competencies (Sticky materials)

End products:
Extensions of core products (Scotch tape, Post-it)
Expose the brand to the customer to raise brand awareness.

29

Difference between a) VRIN resources, b) dynamic capabilities and c) core competencies (S).

VRIN:
Resource attributes that enables a sustainable competitive advantage

Dynamic capabilities:
Reconfigurable resources, capabilities, processes.

Core competencies:
Can be deployed in many products and markets.

30

4 subsidiary roles (Bartlett & Ghoshal 1986; S).

• Contributor
○ Unimportant market
○ Subsidiary with distinctive skills
○ Use the subsidiary's skills company-wide
• Strategic leader
○ Important market
○ Competent sub
○ Not only implement but also develop corporate strategy
• Black hole
○ Important market
○ Small/undeveloped subsidiary; local rivals are better
○ "Spy" on competitors develop a full fledged business
• Implementer
○ Market potential is limited
○ Subsidiary resources are limited
○ Earn money in the market

Remember matrix:
Strategic importance of local environment and Competence of local organization on axis

31

Value of competencies of upstream vs. downstream subsidiaries for the organization (S).

a. Upstream: competence is often more "universal" (transferable to other markets)
i. Subsidiary with this competence is more valued
1) R&D
2) Manufacturing
b. Downstream: competence is often local-for-local (highly contextualized)
i. Subsidiary is less valued
1) Marketing
2) Sales

32

Hierarchy vs. heterarchy (Birkinshaw & Morrison 1995; S).

Hierarchy:
Critical resources are at the top
- HQ: strategic decisions + monitoring and control of divisions
- Divisions: operational decisions, but overseen by management
- "M-form"
Brings transaction costs downs
- E.g. by less lateral communication.
"Do things right"

Heterarchy:
Top managers don't know everything about the subsidiaries
Resources, managerial capabilities and decisionmaking are dispersed throughout the organization
Control through norms rather than finance/calculative
2+ dimensional matrix structures (geography, product lines etc.)
More lateral communication
"Do the right thing"

33

What is Subsidiary autonomy (S).

Definition:
The ability of units and sub-units "to take decisions for themselves on issues that are reserved to a higher level in comparable organizations" or
The degree to which the foreign subsidiary of the MNC has strategic and operational decision-making authority

34

Potential downsides of subsidiary autonomy (S)

Subsidiary management acts:
For the benefit of their host country
For their own benefit
=> Rather than for the HQ benefit

May happen due to
- Host country laws
- Customer requirements
...when the subsidiary has specific resources and capabilities

35

Strategic vs. operational autonomy (Birkinshaw & Morrison 1995; S)

Strategic: Decisions on what to sell and how to do it.

36

Relationship between the company and its environment according to the a) “traditional” and b) network views of the MNC* (S)

"Traditional" view:
- Clear seperation between the organization and its environment: suppliers, regulators etc.
- Organization is internally homogenous, coherent, consistent
- Environment is exogenous
= Source of undefined uncertainties (resource scarcity, volatility)

Network view:
- Parts of the company (especially subsidiaries) are enmeshed in the environment (culturally, legally etc.)
- The company depends on the environment for its survival
- MNC's structure and configuration of resources is affected by the environment.

37

What is Resource dependency (Luo 2003; S).

A foreign market environment is a source of resources sought by competing MNEs, and a dependency situation arises when MNE subsidiaries rely on irreplaceable resources controlled by local possessors
- Resources like physical, workforce, infrastructure, marketing and information

If an MNE subsidiary can therefore reduce its dependence on local resources by utilizing more internal resources coming from its parent or subsidiaries, the economic risks or transactional costs associated with resource acquisition will be substantially decreased.

38

Using local responsiveness and control flexibility to alleviate resource dependency (Luo 2003; S).

??

Local responsiveness:
helps to back up local managers' initiatives, dispel conflicts between subsidiary and stimulate internalization efficiencies.

Control flexibility:
The creation of this flexibility permits the subsidiary better to exploit future changes or opportunities and better to respond to a volatile yet promising market. Control flexibility allows subsidiary managers to alter their decisions to cope with emerging conditions. If a decision made now has a change of being altered later in response to new information, then the economic consequences of such changes should be properly accounted for when evaluating the current decision.

39

When environments modify the parent—subsidiary relationship* (Luo 2003; S).

??

The managerial implication is that firms can improve subsidiary performance in this situation by either committing more resources and responsiveness (the defensive way) or building a better relationship with the governmental authorities in charge (the offensive way). If regulatory interference occurs, it is difficult for firms to avoid related threats