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IBUS 5003 – Global Business: final exam notes
Exam:
5 out of 7 questions 2 hours
8 points per question
Need to utilize different sources in order to get an HD
Topics:
FDI + emerging markets Entry strategy
Culture
Tips:
o Pay attention to what the question is specifically asking and you will not be pressed for time o Key factor when analyzing global strategy rather than strategy: country factors. Consider
country, inter-‐country and industry factors when analyzing the environment.
o How are MNEs from developing countries able to invest in developed nations at such an increasing rate?
o Be able to identify strategy motivations for FDI
Table of Contents
1. Basic Strategic Framework ... 2
Barney´s RBV (the firm) ... 2
IO – Industrial Organization (the industry environment) ... 2
Matching the firm with the industry: BL-‐GI ... 3
Analyzing the industry ... 3
Porter´s 5 forces ... 3
Analyzing nations ... 5
Porter´s diamond (1990) ... 5
Institutional voids ... 6
Analyzing firms ... 6
Value Chain: identifying core strengths ... 6
Activity value – the smile of value creation ... 7
2. Internationalization motivations – why go abroad ... 7
3. Internationalization Theories: FDI where? ... 8
Agarwal and Ramaswami 1992, ‘Choice of foreign entry mode: impact of ownership, location and internalization factors ... 9
Guillen and Garcia-‐Canal 2009, ‘The American model of the new multinational firm and “new” multinationals from emerging markets’ ... 11
4. International Entry Strategy ... 14
Where – location choice ... 14
What – product and activity choice ... 15
When – timing choice ... 15
Advantages – Disadvantages of Early Mover ... 16
How – entry modes and scale ... 16
Entry modes: KSF ... 18
Factors affecting choice of international entry mode ... 18 Anderson and Gatignon (1986), ‘Modes of foreign entry: a transaction cost analysis and propositions . 20
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5. Culture and global business ... 21
Country factors: ... 21
Hitt, Franklin and Zhu 2006, ‘Culture, institutions and international strategy’ ... 23
Disney – case study ... 23
Emerging markets ... 24
6. FDI: Foreign Direct Investment ... 25
Challenges for Multinationals ... 30
External challenges ... 30
1. Basic Strategic Framework
Barney´s RBV (the firm)
Resource-‐based view (RBV): competitive advantage stems from superior firm-‐specific resources and capabilities (such as reputation, manufacturing process skills, experienced engineers etc.). “Find things you are good at and do more with those things”.
Superior product market positions rest on the ownership of scarce, firm-‐specific resources.
Competitive advantage stems from superior firm-‐specific resources and capabilities (such as reputation, manufacturing process skills, experienced engineers etc.)
-‐ Suggest that above-‐average returns for any large firm are determined by characteristics inside the firm
-‐ Focuses on developing or obtaining valuable resources and capabilities that are difficult or impossible for rivals to imitate
-‐ Ability to obtain a particular resource may be dependent upon unique, historical circumstances
-‐ The resource responsible for the advantage may be socially complex and therefore ‘beyond the ability of firms to systematically manage and influence (e.g. corporate culture)
-‐ Limitation: RBV theorists have tended to see firms as stuck with a few key resources Dynamic capability (1990s)
An extension of the RBV.
-‐ Difference: capabilities are to be developed rather than taken as given
-‐ Firm-‐specific capabilities to perform activities better than competitors can be built and redeployed over long periods of time
Commitment/irreversibility
The constraints imposed by past choices on present ones
Capabilities à Resources commitments à Product Market Activities
IO – Industrial Organization (the industry environment)
Competitive (industry) positioning (IO): competitive advantage stems from superior positioning within an industry versus rivals. IO = industrial organization (1960s – 1980s)
