Multinational Strategic
Planning
Exam questions
Vrije Universiteit Brussel
2022 - 2023
,Chapter 1 : Conceptual foundations of International Business Strategy
1. What is the definition of international business strategy?
International Business Strategy means effectively and efficiently matching a multinational
enterprise’s (MNE’s) internal strengths (relative to competitors) with the opportunities and
challenges found in geographically dispersed environments that cross international borders.
Such matching is a precondition (necessary requirement) to creating value and satisfying
stakeholder goals, both domestically and internationally. This is much more complex than doing
business in a domestic setting because you have all these geographically dispersed entities and
these will differ from your home country.
Dispersed environments: the various locations and markets across different countries or regions
where a MNE operates or intends to operate
2. What are the seven concepts of the unifying framework? + explanation or example
a) Internationally transferable (or non-location bound – NLB) firm specific advantages (FSA’s)
• This is at the heart of international business. If you don’t have this internationally transferable
FSA, it is unlikely that you will be successful. You need to be able to exploit those transferable
advantages.
• Example: Intellectual Property Rights (IPR) refers to legal rights granted to individuals or
organizations for their inventions, creations, or innovations. It provides the owner with
exclusive rights to use, sell, or license their intellectual property, giving them a competitive
edge in the marketplace.
b) Non-transferable (or location-bound) FSA’s
• There might be some elements that are transferable (product), but other not (taxation,
processes). These location-bound advantages should be renewed. Your strength at home is
not immediately transferable.
• Example: knowledge of local laws, government relations, and regulatory compliance
Companies that have established operations in a specific country develop a deep
understanding of the local laws and regulations governing their industry.
c) Location advantages
• Some countries or locations can have advantages that other places don’t have.
• Example: Belgium as a logistic hub, natural resources, clusters, taxation advantages,…
d) Investment in -and value creating through- resource recombination
• In most cases there is no single resource that will create FSAs, you have to combine these
correctly.
• Example: location advantage might not be that useful but recombining it with location and
non-location bound FSA will create the strength of your company.
• Global Supply Chain Integration
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,e) Complementary resources of external actors
• In many cases, you will need complementary resources. They are needed from external actors
(technology providers, licensees, local distributors,..) to be successful abroad.
• Example: if you make luxury goods in Italy and you move to the USA, you’ll need a distribution
channel, a good marketing plan, collaborating with external retail partners,..
f) Bounded rationality
• Scarcity of mind. You always have imperfection information about the future but in your come
country you will probably have a better view of that future than across borders. So, what can
you do about limiting that bounded rationality?
• The closer you are to something, the better you’re able to deal with it. But how much are you
willing to invest?
g) Bounded reliability
• When you do business with people, there’s an assumption that these actors are reliable.
Otherwise, you wouldn’t work with them.
• So you want to select partners that are reliable, but you also need structured agreements to
maximize that reliability.
• ‘trust’ is useless because it makes you vulnerable. In business, you should assume that the
people that you do business with have a level of reliability and then you should use
safeguards. These safeguards should also be location-specific.
• There are 3 forms of unreliability :
i. Dealing with dishonesty (opportunism)
When people try to take advantage of you. You should put elements in the contract
to avoid this.
ii. Benevolent preference reversal
People tend to overcommit. But in reality, people re-prioritize or there could be
failures. A bit combined with bounded rationality. You don’t know what’s going on
in other countries, there’s no sounding board. And then you commit to something
and fail to meet that commitment.
iii. Identity base discordance
2 groups that want the best for the company but they work against each other. Who
you are and what you have done in the past can get in the way of how the firm is
operating. This is not always a bad thing, but generally when there are systems in
place, this could lead to problems.
For example; purchasing department that wants to but in bulk because it’s a cheaper
price per unit. But inventory wants to limit inventory for better efficiency.
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, 3. What are the MNE’s unique resource base?
• Reputational resources • Financial resources • Administrative
• Human resources • Physical resources knowledge
• Upstream knowledge • Downstream knowledge
4. What is the paradox of international transferability of FSA’s + 4 types location bound
FSA’s
If the FSA consists of easily codifiable knowledge (i.e., if it can be articulated explicitly, as in a
handbook or blueprint), then it can be cheaply transferred abroad, but it can also be easily
imitated by other firms.
Local employees could look at your playbook and do the same but better because they have
the local knowledge. That’s why you also need tacit knowledge.
Though expensive and time-consuming to transfer tacit knowledge across borders, the benefit to
the MNE is that this knowledge is also difficult to imitate. It is often a key source of competitive
advantage when doing business abroad. This paradox arises from the tension between the
potential benefits of leveraging existing FSAs globally and the challenges of adapting or creating
new FSAs in diverse markets.
4 types of location bound FSA’s:
a) Stand-alone resources linked to location advantages (privileged retail locations)
b) Local marketing knowledge and reputational resources, such as brand names (may not be
applicable to as host country context, or valued to the same extent) The reputation and
recognition associated with the brand may not carry the same weight or resonate with
consumers in a different cultural context.
c) Local best practices (i.e. routines), such as incentive systems or buyer-supplier relations (may
not work abroad) when expanding abroad, these local best practices may not work
seamlessly due to differences in cultural norms, legal frameworks, or business practices.
d) Domestic recombination capability (may not work in foreign markets). A company that has
a strong capability for customizing its products to suit the preferences and needs of the
domestic market may find that this capability does not work as effectively in foreign markets.
The customization process may rely on specific market knowledge, supply chain relationships,
or distribution channels that are difficult to replicate in a different country.
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