E2, Ch 10: Global Strategy

Question 1

globalization

Answer 1

intensified flow and integration of goods, services, technology, culture, etc. worldwide

Question 2

globalization is made possible by… (3)

Answer 2

• falling trade and investment barriers
• advance in telecommunications
• reductions in transportation costs

Question 3

trade barriers, such as.. (3)

Answer 3

• tariffs (tax on imports)
• quotas, embargos
• political alliances

Question 4

global strategy

Answer 4

part of firm’s corporate strategy to gain/sustain competitive advantage and compete in the global marketplace

Question 5

foreign direct investment

Answer 5

investments in value chain activities abroad

Question 6

multinational enterprise

Answer 6

deploys resources and capabilities in 2+ countries

Question 7

globalization 1.0, 1900-1941

Answer 7

• sales, operations, some procurement
• strategy flowed from domestic headquarters to international sites

Question 8

globalization 2.0, 1945-2000 (4)

Answer 8

• reconstruct from war
• focus on European countries, Japan, and Australia
• greater local responsiveness
• headquarters set goals and international sites influenced tactics

Question 9

globalization 3.0, 21st century

Answer 9

• business function location is based on costs, capabilities, and PESTEL
• companies can operate 24/7, 365

Question 10

the world now is only ___-______, and there is a possibility for __________ in the future with a rise in nationalism

Answer 10

semi-globalized (10-25%)
retrenchment

refer to slides for further details

Question 11

advantages of international expansion (2)

Answer 11

• access new markets and lower-cost inputs
• develop new competencies

Question 12

disadvantages of international expansion (3)

Answer 12

• liability of foreignness
• loss of reputation
• loss of intellectual property

Question 13

explain the advantage of gaining access to larger markets (3)

Answer 13

• helps multinational enterprises with economies of scope and scale through participating in a larger market
• opportunity to outcompete local rivals
• helps firms in smaller economies grow

Question 14

pursuing low-cost inputs helps multi-national enterprises…

Answer 14

pursue a low-cost leadership strategy (lumber, iron, ore, oil, coal)

Question 15

low labor costs are the main focus now…

Answer 15

• India provides well-educated, English-speaking young people
• China provides low labor costs and efficient infrastructure

Question 16

explain the advantage of developing new competencies (3)

Answer 16

• communities of learning
• location economies
• locating value chain activities in optimal geographies

Question 17

explain the disadvantage of liability of foreignness (3)

Answer 17

• unfamiliar cultural and economic environment
• coordinating across geographic distances
• can result in additional costs

Question 18

______ is one of the most valuable resources. _____ dimensions include (3)

Answer 18

reputation
reputation
1. innovation
2. customer service
3. brand reputation

Question 19

loss of ______ can diminish competitiveness; for example… (3)

Answer 19

reputation
- loss of wages, long hours, poor conditions
- local govt can be corrupt
- unenforceable safety standards

Question 20

In terms of loss of intellectual property, it can be difficult to…
and some countries are known for….

Answer 20

…protect IP in foreign markets (software, movies, etc.)
…initial partnerships, then reverse-engineering

Question 21

CAGE Framework is used in evaluating entering foreign markets. CAGE stands for…

Answer 21

Cultural,
Administrative/political,
Geographic,
Economic factors

Question 22

CAGE ultimately calculates a “_____;” if this is greater, the market will be harder to enter

Answer 22

(cultural) distance

Question 23

administrative and political distance factors include (4)

Answer 23

• democracy?
• hostility
• financial institutions
• trade barriers

Question 24

geographic distance includes (3)

Answer 24

• similar in size?
• topography
• access to waterways

Question 25

economic distance factors includes (2)

Answer 25

- GDP similar to ours? - wealthy nations tend to engage more in cross-border trade, and trade with other wealthy nations

Question 26

entry modes to foreign investment

Answer 26

contract-based --> strategic alliance --> wholly owned subsidiary

Question 27

contract-based entry modes include... (1)

Answer 27

exporting

Question 28

exporting (4)

Answer 28

- using domestic plants as a production base for exporting to foreign markets - great INITIAL strategy for pursuing international sales - minimizes risk and capital requirement - BUT tariffs and transportation costs are high

Question 29

strategic alliances include... (3)

Answer 29

- long-term contracts: franchising and licensing - equity alliances - joint ventures

Question 30

franchising and licensing is often used when a firm has ________ _______, like a (1) or (2) but does not wish to commit their own _______ to enter foreign markets.

Answer 30

valuable resources (business model, patented product) resources

Question 31

advantage and disadvantage of franchising and licensing

Answer 31

- avoids risk of committing resources to unfamiliar markets - risk of providing know-how to foreign firms and losing control over its use