Lecture 1:
Introduction:
Strategy is the achieving of a sustained competitive advantage, which leads to an above
average performance. This advantage is achieved by building upon FSAs (Firm specific
advantages)
International strategy then is: Matching the MNE’s internal strengths with opportunities
and challenges found in cross-border environment. Mostly it is a disadvantage that you
are a foreign company in a host country. However, you may be able to capitalize on this
as well. In addition you could capitalize if you would have an international network.
The why where what and how of internationalization by
Benito (2015) – why and how motives still matter
Why
Internationalization motives;
- Market seeking
- Efficiency seeking
- Natural resource seeking
- Strategic asset seeking
Where
Location choice:
- Attractiveness of the country
- “Distance” to home country
What
Which part of the organisation is internationalizing:
- Marketing and sales
- Manufacturing
- Purchasing
- R&D
- Etc.
,How
What will be the entry mode:
- Export
- Licensing
- Franchising
- JV/Alliance
- Foreign direct investment (FDI)
o Brownfield
o Greenfield
Table explaining:
For explaining differences in modes (so different whys, looking at either, market,
efficiency, resource or strategic asset seeking) you look at more underlying factors.
Difference between the market, efficiency, resource and strategic asset seeking lies in
the factors of:
Where:
- Key location factors: what is it you are looking for in the market you are entering
o E.g. market size, low costs level, availability of resources or a particular
interesting development level.
How:
- Key internationalization factors: what is the reason or strength you are
internationalizing.
- Typical sectors and industries: refer to in what industries the type of
internationalization typically is done (looking at market, efficiency, resource and
strategic asset).
o Market = consumer goods and services
o Efficiency = production of goods or back-office services
o Resource = primary sectors or vertical supply chain upgrades
o Strategic asset = high tech (because of the knowledge)
What:
- Exemplar activities: what activities are then done in a foreign country:
o Market = marketing and sales
o Efficiency = manufacturing/production
o Resource = extraction and production
o Strategic asset seeking = research and development
, - Key performance indicators how is each internationalization motive measured
o Market = market share, volume sold, sales growth
o Efficiency = Productivity, cost margins/reduction, profitability
o Resource = input cost, supply reliability
o Strategic asset = innovations, patents or new product introductions.
Foundations of international business strategy
- Firm specific advantages (FSAs)
o Non location bound FSA
▪ Internationally transferable
o Location bound FSA
▪ Not internationally transferable
- Location advantages
o The advantages the host country offers
- Investment in and value creation trough Recombination of resources
o Combining existing assets with new ones acquired in the foreign market
- Complementary resources
o A firm combining its own FSAs with the new FSA held by external actors
(that being the country, company or people)
- Bounded rationality
o Something is done to the best knowledge, but that knowledge is not
extensive enough to handle in the best possible interest, and thus not
giving optimal results
- Bounded reliability
o Something is deliberately done not in the best interest of the company due
to for example opportunism
- Advantage or foreignness
o Cult
FSA transferable and nontransferable examples
- Physical resources
- Financial resources
- Human capital
- Reputation
- Upstream knowledge
- Downstream knowledge
- Administrative knowledge
, Core competencies of the corporation
FSAs are core competencies.
These should
- Provice access to a wide variety of markets
- Contribute significantly to the end product benefits
- Be difficult for competitors to imitate
So: need to provide access, need to contribute to products and must have a high
imitability.
Complementary resources of external actors are:
- Market knowledge or access
- Government connections
- Complementary technology
- Distributors, suppliers
Liability of foreignness (LOF)
This states that a foreign firm has a disadvantage as to a local firm, because of:
- DESTEP distances
- Bounded rationality
o Imperfect assessment because of incomplete information
▪ Leads to incorrect beliefs
- Bounded reliability
o Imperfect effort because of opportunism
▪ leading to incomplete fulfilment of promises
o Can be safeguarded through joint goal development or
regulations/incentives
Advnatage of foreignness
Cultural attractiveness
- Because of brand or (mostly) associated country (French wine, Italian pizza)
- Arbitraging between different regimes (lower taxes in foreign country)
Introduction:
Strategy is the achieving of a sustained competitive advantage, which leads to an above
average performance. This advantage is achieved by building upon FSAs (Firm specific
advantages)
International strategy then is: Matching the MNE’s internal strengths with opportunities
and challenges found in cross-border environment. Mostly it is a disadvantage that you
are a foreign company in a host country. However, you may be able to capitalize on this
as well. In addition you could capitalize if you would have an international network.
The why where what and how of internationalization by
Benito (2015) – why and how motives still matter
Why
Internationalization motives;
- Market seeking
- Efficiency seeking
- Natural resource seeking
- Strategic asset seeking
Where
Location choice:
- Attractiveness of the country
- “Distance” to home country
What
Which part of the organisation is internationalizing:
- Marketing and sales
- Manufacturing
- Purchasing
- R&D
- Etc.
,How
What will be the entry mode:
- Export
- Licensing
- Franchising
- JV/Alliance
- Foreign direct investment (FDI)
o Brownfield
o Greenfield
Table explaining:
For explaining differences in modes (so different whys, looking at either, market,
efficiency, resource or strategic asset seeking) you look at more underlying factors.
Difference between the market, efficiency, resource and strategic asset seeking lies in
the factors of:
Where:
- Key location factors: what is it you are looking for in the market you are entering
o E.g. market size, low costs level, availability of resources or a particular
interesting development level.
How:
- Key internationalization factors: what is the reason or strength you are
internationalizing.
- Typical sectors and industries: refer to in what industries the type of
internationalization typically is done (looking at market, efficiency, resource and
strategic asset).
o Market = consumer goods and services
o Efficiency = production of goods or back-office services
o Resource = primary sectors or vertical supply chain upgrades
o Strategic asset = high tech (because of the knowledge)
What:
- Exemplar activities: what activities are then done in a foreign country:
o Market = marketing and sales
o Efficiency = manufacturing/production
o Resource = extraction and production
o Strategic asset seeking = research and development
, - Key performance indicators how is each internationalization motive measured
o Market = market share, volume sold, sales growth
o Efficiency = Productivity, cost margins/reduction, profitability
o Resource = input cost, supply reliability
o Strategic asset = innovations, patents or new product introductions.
Foundations of international business strategy
- Firm specific advantages (FSAs)
o Non location bound FSA
▪ Internationally transferable
o Location bound FSA
▪ Not internationally transferable
- Location advantages
o The advantages the host country offers
- Investment in and value creation trough Recombination of resources
o Combining existing assets with new ones acquired in the foreign market
- Complementary resources
o A firm combining its own FSAs with the new FSA held by external actors
(that being the country, company or people)
- Bounded rationality
o Something is done to the best knowledge, but that knowledge is not
extensive enough to handle in the best possible interest, and thus not
giving optimal results
- Bounded reliability
o Something is deliberately done not in the best interest of the company due
to for example opportunism
- Advantage or foreignness
o Cult
FSA transferable and nontransferable examples
- Physical resources
- Financial resources
- Human capital
- Reputation
- Upstream knowledge
- Downstream knowledge
- Administrative knowledge
, Core competencies of the corporation
FSAs are core competencies.
These should
- Provice access to a wide variety of markets
- Contribute significantly to the end product benefits
- Be difficult for competitors to imitate
So: need to provide access, need to contribute to products and must have a high
imitability.
Complementary resources of external actors are:
- Market knowledge or access
- Government connections
- Complementary technology
- Distributors, suppliers
Liability of foreignness (LOF)
This states that a foreign firm has a disadvantage as to a local firm, because of:
- DESTEP distances
- Bounded rationality
o Imperfect assessment because of incomplete information
▪ Leads to incorrect beliefs
- Bounded reliability
o Imperfect effort because of opportunism
▪ leading to incomplete fulfilment of promises
o Can be safeguarded through joint goal development or
regulations/incentives
Advnatage of foreignness
Cultural attractiveness
- Because of brand or (mostly) associated country (French wine, Italian pizza)
- Arbitraging between different regimes (lower taxes in foreign country)
