Voyevodins' Library _ "International Business: Competing in the Global Marketplace" / Charles W.L. Hill ... Chapter 12 ... legal risk, legal system, Leontief paradox, letter of credit, licensing, local content requirement, location economies, location-specific advantages, logistics, Maastricht Treaty, maker, managed-float system, management networks, market economy, market imperfections, market makers, market power, market segmentation, marketing mix, masculinity versus femininity, mass customization, materials management, mercantilism, MERCOSUR, minimum efficient scale, MITI, mixed economy, money management, Moore's Law, moral hazard, mores, multidomestic strategy, Multilateral Agreement on Investment (MAI), multilateral netting, multinational enterprise (MNE), multipoint competition, multipoint pricing, new trade theory, nonconvertible currency, norms, North American Free Trade Agreement (NAFTA), oligopoly, Organization for Economic Cooperation and Development (OECD), outflows of FDI, output controls, Paris Convention for the Protection of Industrial Property Voevodin's Library: legal risk, legal system, Leontief paradox, letter of credit, licensing, local content requirement, location economies, location-specific advantages, logistics, Maastricht Treaty, maker, managed-float system, management networks, market economy, market imperfections, market makers, market power, market segmentation, marketing mix, masculinity versus femininity, mass customization, materials management, mercantilism, MERCOSUR, minimum efficient scale, MITI, mixed economy, money management, Moore's Law, moral hazard, mores, multidomestic strategy, Multilateral Agreement on Investment (MAI), multilateral netting, multinational enterprise (MNE), multipoint competition, multipoint pricing, new trade theory, nonconvertible currency, norms, North American Free Trade Agreement (NAFTA), oligopoly, Organization for Economic Cooperation and Development (OECD), outflows of FDI, output controls, Paris Convention for the Protection of Industrial Property


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Chapter 12 Outline

Chapter Summary

This chapter reviewed the various ways in which firms can profit from global expansion and the strategies that firms which compete globally can adopt, discussed the optimal choice of entry mode to serve a foreign market, and looked at the issue of strategic alliances. This chapter made the following points:

  1. For some firms, international expansion represents a way of earning greater returns by transferring the skills and product offerings derived from their core competencies to markets where indigenous competitors lack those skills.

  2. Due to national differences, it pays a firm to base each value creation activity it performs where factor conditions are most conducive to the performance of that activity. We refer to this strategy as focusing on the attainment of location economies.

  3. By building sales volume more rapidly, international expansion can assist a firm moving down the experience curve.

  4. The best strategy for a firm to pursue may depend on a consideration of the pressures for cost reductions and the pressures for local responsiveness.

  5. Pressures for cost reductions are greatest in industries producing commodity-type products where price is the main competitive weapon.

  6. Pressures for local responsiveness arise from differences in consumer tastes and preferences, national infrastructure and traditional practices, distribution channels, and from host government demands.

  7. Firms pursuing an international strategy transfer the skills and products derived from distinctive competencies to foreign markets, while undertaking some limited local customization.

  8. Firms pursuing a multidomestic strategy customize their product offering, marketing strategy, and business strategy to national conditions.

  9. Firms pursuing a global strategy focus on reaping the cost reductions that come from experience curve effects and location economies.

  10. Many industries are now so competitive that firms must adopt a transnational strategy. This involves a simultaneous focus on reducing costs, transferring skills and products, and being locally responsive. Implementing such a strategy may not be easy.
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