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Globalization

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has two meanings: 1) is the increase in international exchange, including trade in goods and services as well as exchange of money, ideas, and information. 2) is the growing similarity of laws, rules , norms, values, and ideas across countries.

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Diamond of National Advantage

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a framework for explaining why countries foster successful multinational corporations, consisting of four factors: factor endowments; demand conditions; related and supporting industries; and firm strategy, structure and rivalry.

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Factor Endowment (national advantage)

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a nation's position in factors of production.

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Demand Conditions (national advantage)

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the nature of home-market demand for the industry's product or service.

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Related and Supporting Industries (national advantage)

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the presence, absence, and quality in the nation of supplier industries and other related industries that supply services, support, or technology to firms in the industry value chain.

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Firm Strategy, Structure, & Rivalry (national advantage)

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the conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry.

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Multinational Firms

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firms that manage operations in more than one country.

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Arbitrage Opportunities

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an opportunity to profit by buying and selling the same good in different markets.

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Reverse Innovation

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new products developed by developed country multinational firms for emerging markets that have adequate functionality at a low cost.

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Political Risk

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potential threat to a firm's operations in a country due to ineffectiveness of the domestic political system.

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Rule of Law

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a characteristic of legal systems where behavior is governed by rules that are uniformly enforced.

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Economic Risk

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potential threat to a firm's operations in a country due to economic policies and conditions, including property rights laws and enforcement of those laws.

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Counterfeiting

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selling of trademarked goods without the consent of the trademark holder.

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Currency Risk

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potential threat to a firm's operations in a country due to fluctuations in the local currency's exchange rate.

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Management Risk

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potential threat to a firm's operations in a country due to the problems that managers have making decisions in the context of foreign markets.

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Outsourcing

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Using other firms to perform value creating activities that were previously performed in-house.

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Offshoring

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shifting a value creating activity from a domestic location to a foreign location.

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International Strategy

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a strategy based on firm's diffusion and adaptation of the parent companies' knowledge and expertise to foreign markets, used in industries where the pressures for both local adaptation and lowering costs are low.

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Global Strategy

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a strategy based on firm's centralization and control by the corporate office, with the primary emphasis on controlling costs, and used in industries where the pressure for local adaptation is low and the pressure for lowering costs is high.

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Multidomestic Strategy

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a strategy based on firm's differentiating their products and services to adapt to local markets, used in industries where the pressure for local adaptation is high and the pressure for lowering costs is low.

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Transnational Strategy

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a strategy based on firm's optimizing the trade offs associated with efficiency, local adaptation, and learning, used in industries where the pressure for both local adaptation and lowering costs are high.

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Regionalization

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increasing international exchange of goods, services, money, people, ideas, and information; and the increasing similarity of culture, laws, rules, and norms within, a region such as Europe, North America, or Asia

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Trading Blocs

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groups of countries agreeing to increase trade between them by lowering trade barriers.

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Exporting

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producing goods in one country to sell to residents of another country.

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Licensing

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a contractual arrangement in which one company receives a royalty or fee in exchange for the right to use its trademarks, patent, trade secret, or other valuable intellectual property.

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Franchising

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a contractual arrangement in which one company receives a royalty or fee in exchange for the right to use its intellectual property; it usually involves a longer time period than licensing and includes other factors, such as monitoring of operations, training, and advertising.

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Wholly Owned Subsidiary

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a business in which a multinational company owns 100 percent of the stock.

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Rivalry is intense in nations with conditions of __________ consumer demand, __________ supplier bases, and __________ new entrant potential from related industries.

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strong; strong; high

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Which of the factors below has not made the software services industry in India extremely competitive on a global scale?

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tax and antitrust legislation that protects the dominant players in the industry

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Which of the following is NOT a motivation for a company to pursue international expansion?

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It wishes to increase foreign market penetration by developing products for the home market.

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________ occurs when a firm decides to utilize other firms to perform value-creating activities that were previously performed in-house.

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outsourcing

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In considering the decision to offshore, which of the following generally is not one of the hidden costs?

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wage deflation

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When firms expand into global markets, they are faced with the choice of reducing costs and/or adapting to the local market. When high pressures exist to lower costs, companies should choose a __________ or __________ in order to compete in the global marketplace.

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global strategy; transnational strategy

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When firms expand into global markets, they are faced with the choice of reducing costs and/or adapting to the local market. When high pressures exist to adapt locally, companies should choose a __________ or __________ in order to compete in the global marketplace.

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transnational strategy; multidomestic strategy

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Which would be the appropriate strategy for companies to use to compete in the global marketplace if the marketplace pressure is for lower costs with little pressure for local adaptation?

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international strategy

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Recent trends that might lead managers of multinational corporations (MNCs) to adopt a more decentralized strategy for their operations would include all of the following EXCEPT ______.

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customer needs, interests, and tastes becoming increasingly homogenized

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Which one of the following explains why so few firms are global?

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Geographic distance is multiplied by distance in culture, language, religion, and legal and political systems.

Strategic Management Chapter 7: International Strategy – Flashcards

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