Summary International Business
Strategy
Inhoudsopgave
1 Chapter 1 - Conceptual foundations of IBS............................................................................................................................. 3
1.1 Introduction................................................................................................................................................................................3
1.2 Core concepts.............................................................................................................................................................................4
1.2.1 Non-location bound FSAs....................................................................................................................................................4
1.2.2 Location-bound FSAs...........................................................................................................................................................5
1.2.3 Location advantages............................................................................................................................................................5
Essence of an International Business Strategy.................................................................................................................................6
Archetypes of administrative heritage.............................................................................................................................................6
1.2.4 Value creation through recombination...............................................................................................................................9
1.2.5 Complementary resources of external actors...................................................................................................................10
1.2.6 Bounded rationality...........................................................................................................................................................11
1.2.7 Bounded reliability............................................................................................................................................................11
1.3 Chapter 1 - The Honda Case Study...........................................................................................................................................11
1.4 Implications of IBS for MNE performance................................................................................................................................13
2 Chapter 2 – Critical role of FSAs, Prahalad and Hamel.......................................................................................................... 13
2.1 Engelhoff’s complementary perspective - Concepts of the corporation – SBU or CC...............................................................14
2.2 Complementary perspective - Bartmess and Cerny.................................................................................................................15
2.3 CCs in an international context................................................................................................................................................15
2.4 Weaknesses – Prahalad and Hamel.........................................................................................................................................15
2.5 The IKEA case............................................................................................................................................................................16
3 CH 3 – The nature of home country location advantages..................................................................................................... 16
3.1 Porter : The Diamond model – Source of long-term competitiveness......................................................................................16
3.2 Complementary perspectives...................................................................................................................................................17
3.2.1 Walter Kuemmerle............................................................................................................................................................17
3.2.2 David Teece.......................................................................................................................................................................17
3.3 Verbeke’s reinterpretation.......................................................................................................................................................17
3.3.1 Porter - key weakness.......................................................................................................................................................18
3.3.2 Verbeke’s firm-level diamond...........................................................................................................................................18
4 CH 4 – The problem with home-country LAs........................................................................................................................ 19
4.1 Globalization.............................................................................................................................................................................19
4.2 Ghemawat – CAGE theory: Distance matters...........................................................................................................................19
4.2.1 Cultural distance................................................................................................................................................................20
4.2.2 Administrative or institutional distance............................................................................................................................20
4.2.3 Geographic or spatial distance..........................................................................................................................................21
4.2.4 Economic distance.............................................................................................................................................................21
4.2.5 Conclusion.........................................................................................................................................................................21
4.3 Complementary perspectives...................................................................................................................................................22
4.3.1 Vestring, Rouse, Reinert....................................................................................................................................................22
4.3.2 Schmitt and Pan – Cultural distance..................................................................................................................................22
1
, 4.4 Verbeke’s reinterpretation.......................................................................................................................................................22
4.4.1 Strategic implications A and B...........................................................................................................................................23
4.4.2 Weaknesses of the model.................................................................................................................................................23
4.5 Hutzschenreuter et al. (2014)...................................................................................................................................................23
ARTIKEL...........................................................................................................................................................................................23
4.6 The Walmart Case....................................................................................................................................................................24
5 Combining FSAs and LA in a multinational network............................................................................................................. 24
5.1 Bartlett and Ghoshal’s model...................................................................................................................................................24
5.1.1 Typology of BG of MNEs:...................................................................................................................................................24
5.1.2 Comparison typology with archetypes of administrative heritage of Verbeke................................................................24
5.1.3 Strategies for MNE management......................................................................................................................................25
5.1.4 Assignment of roles to subsidiaries...................................................................................................................................26
5.2 Verbeke’s reinterpretation.......................................................................................................................................................27
5.2.1 Limitations of model..........................................................................................................................................................27
5.3 Case study – Nestlé...................................................................................................................................................................28
5.4 Unilever: from Transnational to neo-global.............................................................................................................................29
1 Hamel, Doz and Prahalad.................................................................................................................................................... 30
6 Complementary perspectives.............................................................................................................................................. 31
6.1 Anderson and Jap.....................................................................................................................................................................31
6.2 Kale and Anand.........................................................................................................................................................................32
7 Reinterpretation of Verbeke............................................................................................................................................... 33
7.1 Limitations model.....................................................................................................................................................................34
7.2 Reinterpretation Kale and Anand.............................................................................................................................................34
8 In class assignment : Starbucks – Tata JV............................................................................................................................. 34
9 Case Danone – Wahaha....................................................................................................................................................... 35
1 Ghemawat and Ghadar....................................................................................................................................................... 36
10 Reinterpretation of Verbeke.............................................................................................................................................. 37
10.1 Limitations of model...............................................................................................................................................................37
11 In-class assignment........................................................................................................................................................... 37
1 Khanna, Palepu, Sinha......................................................................................................................................................... 38
11.1 Components of institutional context......................................................................................................................................39
11.2 Response to institutional voids...............................................................................................................................................40
12 Reinterpretation of Verbeke.............................................................................................................................................. 40
12.1 Filling institutional voids.........................................................................................................................................................40
12.1.1 Sharing FSAs in emerging economies..............................................................................................................................41
12.1.2 Spillovers.........................................................................................................................................................................42
13 Assignment – Stil Worth It................................................................................................................................................. 42
1 Ghemawat and Hout........................................................................................................................................................... 43
14 Complementary perspectives............................................................................................................................................ 44
2
, 14.1 Gadiesh and Vestring.............................................................................................................................................................44
14.2 Tsai and Eisingrich..................................................................................................................................................................44
14.2.1 Types of EMNEs...............................................................................................................................................................44
14.2.2 FSA upgrading..................................................................................................................................................................45
15 Verbeke’s reinterpretation................................................................................................................................................ 46
16 Cuerzo – Cazurra............................................................................................................................................................... 46
1 Chapter 1 - Conceptual foundations of IBS
1.1 Introduction
Many companies fail internationally: what is the cause and how should they adapt their strategy?
- MNE: Multinational enterprise
Definition: a firm that owns and controls value-adding operations in more than one country – not all
internationally active firms are MNEs. Firm with economic operations in at least two countries.
- FSA: Firm-specific advantage
Definition: internal strengths of a company, relative to rival companies
- International Business Strategy
Definition: effectively and efficiently matching an MNE’s internal strengths (relative to competitors) with the
opportunities and challenges found in geographically dispersed foreign environments
Relevant concepts of IBS underlying the conceptual framework:
1. Non-location bound FSAs
1-3: distinct resource base available to the firm in
2. Location-bound FSAs
quest for international success. Critical in achieving
3. Location advantages
success in the market place.
4. Value creation through recombination
5. Complementary resources of external actors
6. Bounded rationality
7. Bounded reliability
Broad base of LAs builds smaller base of LB FSAs and still smaller set on NLB FSAs.
Bounded Rat. & Rel. limit capacity to transfer the NLBs . Resource base (pag 5 HB)
- Physical resources: natural resources,
plants, equipment…
- Financial resources: equity and loan
capital
- Human resources: skills of individuals
and teams
- Upstream knowledge: sourcing, product
and process-related knowledge
- Downstream knowledge: marketing,
sales, distribution..
- Administrative knowledge regarding
functioning of organizational structure,
culture, system
- Reputational resources: brand names…
FSAs and location advantages: can be located in each of these. Important in international strategy: the ability to
transfer routines effectively.
International transfer difficulties: in part reflect generic differences between host and home country. Require
recombination and adaptation ability. Highest-order FSA is the ability to recombine resources internationally.
Complementary resources of external actors might be needed to fill resource gaps.
3
, Still factors that might impede international success: behavioral l characteristics of managers.
- Bounded rationality: limits in capacity of individuals to absorb, process and act upon complex and often
incomplete information.
- Bounder reliability: insufficient effort to deliver on promised behavior or performance.
EX: Fedex: Hub-and-spoke approach, Cisco ERP system in China…
1.2 Core concepts
1.2.1 Non-location bound FSAs
When crossing home-country border, MNE is at a disadvantage compared to firms from host country:
- they are in possession of a knowledge base that is more easily matched to local stakeholder requirements.
- Additional costs of doing business abroad: cultural, economic, institutional and spatial distance
Liability of foreignness: overcome with proprietary internal strengths
Definition: internationally transferrable FSAs. Corporate strengths that are technically transferrable to other
countries AND can be profitably exploited there.
Important assumption: FSAs can be effectively used and profitably exploited in foreign locations. NOT only
the technical transferability!
Set of FSAs that do not stop creating value when a border is crossed.
Examples:
- unique product technology
- general management skills
- global brand reputation
Forms of non-location bound FSAs
- Embodied in final products : when MNE exports goods that are highly valued by host country consumers
o Toyota, …
- As intermediate inputs: transfer FSAs abroad directly, through external actors or network partners that can
add their own complementary resources to strengthen the position by filling resource gaps.
Paradox of NLB FSAs
If FSA consists of easily codifiable knowledge, can be articulated explicitly
It can be transferred cheaply transferred and effectively deployed.
BUT: it can also be easily imitated
Consequence: potential value that can be derived can also be relatively low;
VS: Tacit knowledge: hard to transfer: associated with sending human resources abroad, building up experience over
time…
Difficult to imitate
Often a key source of competitive advantage
Important bundle of tacit knowledge: in. administrative heritage : key routines developed by a firm since its
inception. Often depends on the vision of the founder and external circumstances.
Limits of non-location bound FSAs
NLB FSA: corporate strengths that are technically transferrable to other countries AND can be profitable exploited
there
Does NOT mean they can be exploited worldwide
Evidence: Most of Fortune’s 500 Global 500 list realize most of their sales in their home region. If they were
exploitable worldwide, firms would realize similar share of their sales in each world region.
4
Strategy
Inhoudsopgave
1 Chapter 1 - Conceptual foundations of IBS............................................................................................................................. 3
1.1 Introduction................................................................................................................................................................................3
1.2 Core concepts.............................................................................................................................................................................4
1.2.1 Non-location bound FSAs....................................................................................................................................................4
1.2.2 Location-bound FSAs...........................................................................................................................................................5
1.2.3 Location advantages............................................................................................................................................................5
Essence of an International Business Strategy.................................................................................................................................6
Archetypes of administrative heritage.............................................................................................................................................6
1.2.4 Value creation through recombination...............................................................................................................................9
1.2.5 Complementary resources of external actors...................................................................................................................10
1.2.6 Bounded rationality...........................................................................................................................................................11
1.2.7 Bounded reliability............................................................................................................................................................11
1.3 Chapter 1 - The Honda Case Study...........................................................................................................................................11
1.4 Implications of IBS for MNE performance................................................................................................................................13
2 Chapter 2 – Critical role of FSAs, Prahalad and Hamel.......................................................................................................... 13
2.1 Engelhoff’s complementary perspective - Concepts of the corporation – SBU or CC...............................................................14
2.2 Complementary perspective - Bartmess and Cerny.................................................................................................................15
2.3 CCs in an international context................................................................................................................................................15
2.4 Weaknesses – Prahalad and Hamel.........................................................................................................................................15
2.5 The IKEA case............................................................................................................................................................................16
3 CH 3 – The nature of home country location advantages..................................................................................................... 16
3.1 Porter : The Diamond model – Source of long-term competitiveness......................................................................................16
3.2 Complementary perspectives...................................................................................................................................................17
3.2.1 Walter Kuemmerle............................................................................................................................................................17
3.2.2 David Teece.......................................................................................................................................................................17
3.3 Verbeke’s reinterpretation.......................................................................................................................................................17
3.3.1 Porter - key weakness.......................................................................................................................................................18
3.3.2 Verbeke’s firm-level diamond...........................................................................................................................................18
4 CH 4 – The problem with home-country LAs........................................................................................................................ 19
4.1 Globalization.............................................................................................................................................................................19
4.2 Ghemawat – CAGE theory: Distance matters...........................................................................................................................19
4.2.1 Cultural distance................................................................................................................................................................20
4.2.2 Administrative or institutional distance............................................................................................................................20
4.2.3 Geographic or spatial distance..........................................................................................................................................21
4.2.4 Economic distance.............................................................................................................................................................21
4.2.5 Conclusion.........................................................................................................................................................................21
4.3 Complementary perspectives...................................................................................................................................................22
4.3.1 Vestring, Rouse, Reinert....................................................................................................................................................22
4.3.2 Schmitt and Pan – Cultural distance..................................................................................................................................22
1
, 4.4 Verbeke’s reinterpretation.......................................................................................................................................................22
4.4.1 Strategic implications A and B...........................................................................................................................................23
4.4.2 Weaknesses of the model.................................................................................................................................................23
4.5 Hutzschenreuter et al. (2014)...................................................................................................................................................23
ARTIKEL...........................................................................................................................................................................................23
4.6 The Walmart Case....................................................................................................................................................................24
5 Combining FSAs and LA in a multinational network............................................................................................................. 24
5.1 Bartlett and Ghoshal’s model...................................................................................................................................................24
5.1.1 Typology of BG of MNEs:...................................................................................................................................................24
5.1.2 Comparison typology with archetypes of administrative heritage of Verbeke................................................................24
5.1.3 Strategies for MNE management......................................................................................................................................25
5.1.4 Assignment of roles to subsidiaries...................................................................................................................................26
5.2 Verbeke’s reinterpretation.......................................................................................................................................................27
5.2.1 Limitations of model..........................................................................................................................................................27
5.3 Case study – Nestlé...................................................................................................................................................................28
5.4 Unilever: from Transnational to neo-global.............................................................................................................................29
1 Hamel, Doz and Prahalad.................................................................................................................................................... 30
6 Complementary perspectives.............................................................................................................................................. 31
6.1 Anderson and Jap.....................................................................................................................................................................31
6.2 Kale and Anand.........................................................................................................................................................................32
7 Reinterpretation of Verbeke............................................................................................................................................... 33
7.1 Limitations model.....................................................................................................................................................................34
7.2 Reinterpretation Kale and Anand.............................................................................................................................................34
8 In class assignment : Starbucks – Tata JV............................................................................................................................. 34
9 Case Danone – Wahaha....................................................................................................................................................... 35
1 Ghemawat and Ghadar....................................................................................................................................................... 36
10 Reinterpretation of Verbeke.............................................................................................................................................. 37
10.1 Limitations of model...............................................................................................................................................................37
11 In-class assignment........................................................................................................................................................... 37
1 Khanna, Palepu, Sinha......................................................................................................................................................... 38
11.1 Components of institutional context......................................................................................................................................39
11.2 Response to institutional voids...............................................................................................................................................40
12 Reinterpretation of Verbeke.............................................................................................................................................. 40
12.1 Filling institutional voids.........................................................................................................................................................40
12.1.1 Sharing FSAs in emerging economies..............................................................................................................................41
12.1.2 Spillovers.........................................................................................................................................................................42
13 Assignment – Stil Worth It................................................................................................................................................. 42
1 Ghemawat and Hout........................................................................................................................................................... 43
14 Complementary perspectives............................................................................................................................................ 44
2
, 14.1 Gadiesh and Vestring.............................................................................................................................................................44
14.2 Tsai and Eisingrich..................................................................................................................................................................44
14.2.1 Types of EMNEs...............................................................................................................................................................44
14.2.2 FSA upgrading..................................................................................................................................................................45
15 Verbeke’s reinterpretation................................................................................................................................................ 46
16 Cuerzo – Cazurra............................................................................................................................................................... 46
1 Chapter 1 - Conceptual foundations of IBS
1.1 Introduction
Many companies fail internationally: what is the cause and how should they adapt their strategy?
- MNE: Multinational enterprise
Definition: a firm that owns and controls value-adding operations in more than one country – not all
internationally active firms are MNEs. Firm with economic operations in at least two countries.
- FSA: Firm-specific advantage
Definition: internal strengths of a company, relative to rival companies
- International Business Strategy
Definition: effectively and efficiently matching an MNE’s internal strengths (relative to competitors) with the
opportunities and challenges found in geographically dispersed foreign environments
Relevant concepts of IBS underlying the conceptual framework:
1. Non-location bound FSAs
1-3: distinct resource base available to the firm in
2. Location-bound FSAs
quest for international success. Critical in achieving
3. Location advantages
success in the market place.
4. Value creation through recombination
5. Complementary resources of external actors
6. Bounded rationality
7. Bounded reliability
Broad base of LAs builds smaller base of LB FSAs and still smaller set on NLB FSAs.
Bounded Rat. & Rel. limit capacity to transfer the NLBs . Resource base (pag 5 HB)
- Physical resources: natural resources,
plants, equipment…
- Financial resources: equity and loan
capital
- Human resources: skills of individuals
and teams
- Upstream knowledge: sourcing, product
and process-related knowledge
- Downstream knowledge: marketing,
sales, distribution..
- Administrative knowledge regarding
functioning of organizational structure,
culture, system
- Reputational resources: brand names…
FSAs and location advantages: can be located in each of these. Important in international strategy: the ability to
transfer routines effectively.
International transfer difficulties: in part reflect generic differences between host and home country. Require
recombination and adaptation ability. Highest-order FSA is the ability to recombine resources internationally.
Complementary resources of external actors might be needed to fill resource gaps.
3
, Still factors that might impede international success: behavioral l characteristics of managers.
- Bounded rationality: limits in capacity of individuals to absorb, process and act upon complex and often
incomplete information.
- Bounder reliability: insufficient effort to deliver on promised behavior or performance.
EX: Fedex: Hub-and-spoke approach, Cisco ERP system in China…
1.2 Core concepts
1.2.1 Non-location bound FSAs
When crossing home-country border, MNE is at a disadvantage compared to firms from host country:
- they are in possession of a knowledge base that is more easily matched to local stakeholder requirements.
- Additional costs of doing business abroad: cultural, economic, institutional and spatial distance
Liability of foreignness: overcome with proprietary internal strengths
Definition: internationally transferrable FSAs. Corporate strengths that are technically transferrable to other
countries AND can be profitably exploited there.
Important assumption: FSAs can be effectively used and profitably exploited in foreign locations. NOT only
the technical transferability!
Set of FSAs that do not stop creating value when a border is crossed.
Examples:
- unique product technology
- general management skills
- global brand reputation
Forms of non-location bound FSAs
- Embodied in final products : when MNE exports goods that are highly valued by host country consumers
o Toyota, …
- As intermediate inputs: transfer FSAs abroad directly, through external actors or network partners that can
add their own complementary resources to strengthen the position by filling resource gaps.
Paradox of NLB FSAs
If FSA consists of easily codifiable knowledge, can be articulated explicitly
It can be transferred cheaply transferred and effectively deployed.
BUT: it can also be easily imitated
Consequence: potential value that can be derived can also be relatively low;
VS: Tacit knowledge: hard to transfer: associated with sending human resources abroad, building up experience over
time…
Difficult to imitate
Often a key source of competitive advantage
Important bundle of tacit knowledge: in. administrative heritage : key routines developed by a firm since its
inception. Often depends on the vision of the founder and external circumstances.
Limits of non-location bound FSAs
NLB FSA: corporate strengths that are technically transferrable to other countries AND can be profitable exploited
there
Does NOT mean they can be exploited worldwide
Evidence: Most of Fortune’s 500 Global 500 list realize most of their sales in their home region. If they were
exploitable worldwide, firms would realize similar share of their sales in each world region.
4
