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Summary Introduction to IB intermediate one, IB, RUG
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The first four chapters, for the first intermediate for IB at the RUG. International Business.
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Introduction to International Business, IB, RUGChapter 1: conceptual foundations for IBS (p4 - 68)
Where do you locate what type of activity in which way, and what type of effect
does this have on the firm and environment?
International business strategy means effectively and efficiently matching a mne’s
international strength with the opportunities and challenges found in geographically
dispersed environments that cross international borders. such matching is a precondition for
creating value and satisfying stakeholders.
● efficiency seeking
● natural resource seeking
● market seeking
● strategic asset seeking
● export platform: investment and production in a host country, where the output is
largely sold in third markets
firms are seen as resources under common governance, the resources being:
1. physical resources
2. financial resources
3. human resources
4. upstream knowledge
5. downstream knowledge
6. administrative knowledge (organizational structure, culture, and systems)
7. reputational resources
FSA’s: strengths relative to rival companies
core concepts
an MNE is a company that conducts economic transactions across national borders and
owns assets in at least one other country than the home country.
FDI represents acquiring or establishing operations abroad.
MNEs typically enter foreign markets via two modes: exports and outbound FDI.
exports: the product is created in the home country, afterwards, the product or service is
transferred across the borders. ‘shallow integration of global economy)
FDI: a company transfers its resources to the foreign market. it mobilizes additional location-
specific resources in the host environment. ‘deep integration’
FDI: allocation of resource bundles by an MNE in a host country, with the purpose of
performing business activities over which the MNE retains strategic control
, companies that are a part of the fortunate global 500 (annual revenue) often face
competition.
the seven unifying frameworks:
1. non-location-bound FSA’s (internationally transferable): These FSA’s can be
effectively deployed and profitably exploited in foreign locations. skills and
communication
MNE creates value by operating across national borders. the MNE is at a disadvantage
because rivals from the home country possess knowledge that is more appropriately
matched with its stakeholders’ requirements, hence the MNE faces more costs. the MNE
also faces other regional and global companies. to overcome these costs, the MNE must
have proprietary internal strengths, such as technological, marketing, or administrative
knowledge, as well as strength in relationships with outside actors (linkages with suppliers,
agencies, and family connections, that can be leveraged abroad).
this set of MNE internal strengths, the availability of which both allows and
constrains the scope of the firm’s expansion across borders is called non-
location-bound FSA’s. (these skills and connections)
there is a paradox, however. if the FSA’s transferred abroad consists of easy knowledge, it
will be cheap to ship across borders, but easy for other firms to copy. however, tacit
knowledge is more difficult to transfer, because it requires face-to-face communication. thus,
human resources have to be transferred, contributing to more costs. though it is time-
expensive, it is hard to imitate. thus, tacit knowledge is often a key source of competitive
advantage.
the most important bundle of tacit knowledge is administrative knowledge. we can
distinguish four archetypes of administrative heritage, each associated with a specific routine
of international FSA transfer:
1. centralized exporter: this home-country-managed firm builds upon a tradition of
selling products internationally, out of highly cost-efficient or exceptional-quality-
generating facilities in the home country and with only customer-orientated value-
creating activities abroad. standardized products manufactured at home embody the
company’s FSA’s (motion pictures)
2. international projector: knowledge-based FSA’s developed in the home country are
transferred to subsidiaries (dochteronderneming) in host countries. the international
projector MNE seeks international expansion by projecting its home country's
success recipe abroad. (ford and Disneyland)
3. international coordinator: international operations are specialized in specific value-
added activities and form vertical value chains across borders. the MNE’s key FSA’s
are in efficiently linking these geographically dispersed operations through seamless
logistics. (gas, get it everywhere and ship it everywhere)
4. multi-centred MNE: consists of a set of entrepreneurial subsidiaries abroad, which
are key to knowledge-based FSA development. national responsiveness is the
foundation of the international strategy. non-location-bound FSAs that hold these
firms are minimal: common financial governance and the identity and specific
business interests of the owners.
firms not fitting these heritages are for example firms created through colonies and
emergency firms. (EMNEs). EMNEs FSAs identified in the literature and facilitating
international expansion in the early stages include (how to get big in the home country):
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