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International Business Strategy Summary
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Summary International Business Strategy Chapter 1-7 and 9-11
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Chapter 1- Strategy around the GlobeA Global-Strategy book
International (cross-border) strategy is characterized by the production and distribution of
standardized products/services on a worldwide basis. this strategy is most commonly referred to
as a global strategy.
Multinational enterprises (MNEs) are firms which engage in foreign direct investment (FDI) by
directly controlling and managing value-adding activities in other countries. Where Foreign direct
investment (FDI) is a firms’ direct investment in productions and/or services activities abroad.
MNEs often have to adapt their strategies, products and services for local markets. (one size doesn’t
fit all) The global strategy is not useful for all firms, some firms in certain industries this strategy
often proves to be incomplete/unbalanced. Which is reflected in at least 3 manifestations:
(1) Too often, the quest for worldwide cost reduction, consolidation, and restructuring in the name
of ‘global strategy’ has sacrificed local responsiveness and global learning. Results were
unsatisfactory.
(2) The narrow notion of ‘global strategy’ focuses on how to compete internationally, especially on
how global rivals meet each other in one country after another. As a result, the issue of how
domestic companies compete with each other and wit foreign entrants seems to be ignored.
If some firms represent some of the top MNEs from emerging markets than if such firms are
outside your strategic radar screen, then perhaps the radar has too many blind spots.
(3) The current brand of ‘global strategy’ seems relevant only for MNEs from developed economies,
primarily North America, Europe and Japan – commonly referred to as the Triad – to compete in
other developed economies, where income levels and customers’ preferences may be similar.
Emerging economies (markets), is a term that has gradually replaced the term developing
economies since the 1990s, now command half of the worldwide FDI inflow and nearly half of the
global Gross Domestic Product (GDP) measured at purchasing power parity.
Brazil, Russia, India and China, known as BRIC now command more attention. BRICS is BRIC
+ South Africa. Overall, more than a quarter of the worldwide FDI outflows are now
generated by these emerging multinationals from emerging economies.
As a result, modifying (or even abandoning) the traditional ‘global strategy’ has increasingly been
entertained. In the Global Economic Pyramid,
(1) the top tier consists of about 1 billion people with annual per capita income greater than $20.000
Mostly people in the Triad and a small percentage of rich people in the rest of the world.
(2) Another billion people, making $2.000 to
$20.000 a year, make up the second tier.
(3) The vast majority of the population about 5
billion people, make less than $2.000 a year and
compromise the base of the pyramid (BOP), which
as been ignored by ‘global strategy’.
Many MNEs from developed economies believed
that there was no money to be made in BOP
markets, which is proven to be WRONG.
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