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Summary International Strategy
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SamenvattingInternational Strategy
Week 1 - Course set-up & Theoretical foundations
● Rugman & Verbleke (1992) → Transaction cost theory (TC)
- An economic theory developed to understand the various costs associated
with economic transactions, particularly in the context of business activities
(this theory focuses on the costs incurred in the process of exchanging
goods, services or assets, emphasizing the role of transaction costs in
shaping the structure of economic activities)
1. FSA advantages → These encompass proprietary known-how
(unique assets) and transactional advantages (product technology,
marketing skills, property know-how)
2. CSA advantages → Benefits associated with locating activities in
specific countries due to structural market imperfections and
opportunities (access to growing market or natural resources)
3. Internalizations advantages (IAs) → Benefits that a company gains
from internationalizing its operations (proprietary technology or
protection of intellectual property, relative benefits associated with
different entry modes when serving foreign markets)
- FSAs are not confined to the home country (niet gebonden aan het thuisland)
and can be transferred across borders (think of brand reputation, managerial
expertise)
- CSAs in a host country can contribute to the development of new FSA (think
of unique skill set or local expertise)
- IAs depend on a company’s transactional FSAs to operate foreign
subsidiaries (think of advanced technologies, efficiency supply chain
management, marketing strategies)
- Transnational solution → A strategic framework for MNEs that can
simultaneously develop both location-bound and non-location bound
firm-specific advantages (FSAs) in both the home and host countries (it is
complex and it involves a network of technology, financial resources, creative
ideas and people, complexity of balancing global integration and local
responsiveness)
1. LB → Benefit a company in a specific location (think of agricultural
production, tourist attractions, mining operations)
2. Non-LB → Can be exploited globally and lead to benefits of scale
scope or exploitation of national differences (think of software
development, e-commerce, consulting services)
- Example → Unilever, a brand present in many countries. The brand
recognition and the brand power are non-location bound firm specific
advantages because they can be leveraged in more than one country (also, it
offers local products by adapting products to local needs and characteristics,
therefore it is a location-bound firm specific advantage because it
incorporates information that has value in a specific country)
,● Foss & Pederson (2004) → Focuses on knowledge and supports the idea that
when studying MNCs it is key to focus on knowledge. It must be combined with a
view of organizational mechanisms as instruments of influencing the sourcing,
building, deployment and transfer of knowledge resources (combine
knowledge-based view with an understanding of organizational mechanisms)
● Cantwell, Dunning & Lundman (2010) → A MNE is a company that engages its
activities in more than one country (but following the authors the MNE is
characterized by the sum of total of all its value-creating activities, aka ownership
advantages, over which it has a significant influence)
- They say that institutions shape firms behaviours (macro), but also that firms
shapes institutions (micro)
- Institutional-theory → Framework that examines how formal and informal
rules, norms and structures collectively known as institutions, influence and
shape the behavior of firms operating across national borders
1. Coercive pressures → Rise from formal regulations and laws
2. Normative pressures → Stem from social norms and expectations
3. Mimetic pressures → MNEs imitate practices of successful peers or
competitors
- Legitimacy and isomorphism → MNEs seek legitimacy in their host
countries, aiming to be perceived as socially acceptable and compliant
with local norms. The pursuit of legitimacy can lead to isomorphic
behavior, where MNEs adopt similar structures and practices as other firms
in the industry or region
● Porter (1986) → The author argues that firms need to adapt to these changes
(international competition) by developing new strategies and capabilities (firms
can pursue a combination of standardization/concentration and
tailoring/dispersion in their international operations, and in certain cases,
simultaneously employ both strategies through effective coordination. Finding a
harmonious balance between global consistency and local adaptability)
1. High foreign investment with extensive coordination among
subsidiaries (the goal is to create a seamless and integrated operation on a
global scale)
2. Purest global strategy (consistent and standardized approach across all
countries it operates in)
3. Country-centered strategy by multinationals with a number of domestic
firms operating in only one country (recognizes the unique characteristics
and demands of each market)
4. Export based strategy with decentralized marketing (exporting products to
different countries and allowing each local market to handle its own marketing
and adaptation, less central control)
- Market attractiveness model (firms need to thrive in attractive markets, think
of size, growth potential and customer purchasing power) and competitive
advantage theory (stresses the importance of strategic positioning, firms
need to distinguish from its competitors)
, ● Ghemawat & Pankaj (2008) → Adaption, aggregation and arbitrage
1. Adaption → Local responsiveness (adapt to local markets)
2. Aggregation → Achieving economies of scale and scope (the goal is to
leverage commonalities across different markets, leading to cost savings and
improved)
3. Arbitrage → Exploiting economic differences (this involves taking advantage
of differences in factors like labor costs, capital costs, tax rates and other
economic conditions to optimize resource allocation and enhance
competitiveness)
● KC1
- Globalization → Increasing interconnectedness and integration of
economics and business worldwide (globalization goes beyond business
activities)
- Internationalization → Extension of economic activities across domestic
border and establishing presence in international markets (think of exporting,
franchising, licensing and foreign direct investment)
- Global strategy (1) → One product, one marketing plan and one way of
doing things that fits every country you sell to (standardization, think of apple)
- Transnational strategy (2) → A mix of global and local adjustments, you
have a main plan, but adjust it to fit local needs (global efficiency and local
responsiveness, think of unilever)
- International strategy (3) → Operating in many countries but treating each
country as a separate, independent market (adapting to unique markets
characteristics, think of coca cola)
- Multidomestic strategy (4) → Customizing to each country’s preference,
focus is local responsiveness (tailoring products to each local market, think of
nestle)
- Global value chain → The interconnected process of creating and
delivering a product, where each step happens globally in various
geographic locations
- Porter’s view → Porter emphasizes the importance of creating a
sustainable competitive advantage by focusing on unique strengths and
capabilities
- Porter’s configuration → When you focus on concentrated configuration
(where a company focus it activities and resources in a specific locations or
few locations), can be lead to competitive advantage
- Porter’s dispersed → Spreading activities across many locations may
dilute a company’s advantage
- Uppsala model (internationalization) → The model proposes that firms form
small, domestic markets internationalize their activities through a cumulative
stage-dependent process where international expansion is a function of
experiential market knowledge (it emphasizes the importance of knowledge
and experience in the internationalization process, suggesting that firms
typically begin their international operations in nearby markets and gradually
move to more distant ones as they become more knowledgeable and
confident)
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