Week 1: Theoretical Foundations
KC 1 – GLOBALIZATION
Internationalization: extension of economic activities across borders
Globalization: internationalization + ‘functional integration’
also: cultural, technological, political dimensions
Three debates around globalization:
1. Is globalization real?
2. Is globalization dead?
3. Is globalization good?
Debate 1: hyperglobalists vs. sceptics (Is globalization real?)
Hyperglobalists:
“…Today’s global economy is genuinely borderless. Information, capital, and innovation flow
all over the world at top speed, enabled by technology…”
Global products
Standardization
Homogeneous tastes
The world is flat (Friedman)
Sceptics:
Globalization is a myth (Hirst & Thompson)
o In certain respects, world economy less globalized than at the turn of 19th/20th
century (e.g. labour migration, free trade, gold standard)
Enduring variation in national business systems (e.g. U.S., Germany, Japan)
Most trade and FDI within each of the ‘Triads’
Regionalization?
Debate 2: end of globalization? (Is globalization dead?)
,Debate 3: is globalization good for…? (Is globalization good?)
Democracy: post-democracy (Crouch)
Environment: sustainability, global warming
Instability: globalization and its discontents (Stiglitz)
Culture: homogenization
Equality
How does globalization affect business?
Return of the state? More regulation?
Future of trade deals?
Populist backlash? More ‘Brexit’ cases?
Underestimate cultural differences?
Product adaption?
KC 2 – MNE ACTIVITIES ACROSS THE GLOBE
GVC = Global Value Change
How to organize international activities?
How do MNEs organize their GVCs?
How do MNEs make strategic decisions about GVC activities?
MNE’s GVCs: Why so complex?
The complexity of MNEs GVCs arises from geographic and organizational dispersion of
business activities.
GVCs: innovation systems and production networks
,How and where to spread business activities across the GVC?
The key decision’s drivers
Transactional cost theory of MNE strategic management:
Firm-specific advantages (FSAs): represent unique capabilities which are built upon
product, process technology, marketing or distribution skills (know-how, unique
assets, transactional advantages, brand power, innovation capabilities, etc.)
Country-specific advantages (CSAs): are related to resources and competences
available in a specific location (access to the nature of resources, supportive tax
system, etc.)
Internalization advantages (IAs):
How do FSAs, CSAs and IAs interact?
FSAs are not solely developed in the home country and may be transferred within the
MNE network
CSAs (also in a specific host country) can contribute to the development of new FSAs
IAs depend on a company’s transactional FSAs to operate foreign subsidiaries
The transnational strategic solution
The transnational solution: Unilever
, both non-location bound (Brand Portfolio) and location-bound (Local Product
Development)
KC 3 – FORMULATING INTERNATIONAL STRATEGIES
How to formulate a business strategy?
1. How to organize international activities?
2. How to leverage differences across countries?
How to become an MNE? => How to formulate a strategy for an MNE
Michael Porter’s view
Porter poses a key distinction between multi-domestic and global industries:
Multi-domestic industries: an industry in which the competition is especially
segmented from country to country (Allianz, insurance).
Global industries: industries in which the competition crosses national borders on a
worldwide base (Apple, electronics).
Value Chain (Porter, 1986)
“A firm that competes internationally must decide how to spread the activities in the value
chain among countries”
2 dimensions:
1. Configuration (concentrated vs. dispersed): geography of activities
2. Coordination (market vs. internationalization): governance of activities
KC 1 – GLOBALIZATION
Internationalization: extension of economic activities across borders
Globalization: internationalization + ‘functional integration’
also: cultural, technological, political dimensions
Three debates around globalization:
1. Is globalization real?
2. Is globalization dead?
3. Is globalization good?
Debate 1: hyperglobalists vs. sceptics (Is globalization real?)
Hyperglobalists:
“…Today’s global economy is genuinely borderless. Information, capital, and innovation flow
all over the world at top speed, enabled by technology…”
Global products
Standardization
Homogeneous tastes
The world is flat (Friedman)
Sceptics:
Globalization is a myth (Hirst & Thompson)
o In certain respects, world economy less globalized than at the turn of 19th/20th
century (e.g. labour migration, free trade, gold standard)
Enduring variation in national business systems (e.g. U.S., Germany, Japan)
Most trade and FDI within each of the ‘Triads’
Regionalization?
Debate 2: end of globalization? (Is globalization dead?)
,Debate 3: is globalization good for…? (Is globalization good?)
Democracy: post-democracy (Crouch)
Environment: sustainability, global warming
Instability: globalization and its discontents (Stiglitz)
Culture: homogenization
Equality
How does globalization affect business?
Return of the state? More regulation?
Future of trade deals?
Populist backlash? More ‘Brexit’ cases?
Underestimate cultural differences?
Product adaption?
KC 2 – MNE ACTIVITIES ACROSS THE GLOBE
GVC = Global Value Change
How to organize international activities?
How do MNEs organize their GVCs?
How do MNEs make strategic decisions about GVC activities?
MNE’s GVCs: Why so complex?
The complexity of MNEs GVCs arises from geographic and organizational dispersion of
business activities.
GVCs: innovation systems and production networks
,How and where to spread business activities across the GVC?
The key decision’s drivers
Transactional cost theory of MNE strategic management:
Firm-specific advantages (FSAs): represent unique capabilities which are built upon
product, process technology, marketing or distribution skills (know-how, unique
assets, transactional advantages, brand power, innovation capabilities, etc.)
Country-specific advantages (CSAs): are related to resources and competences
available in a specific location (access to the nature of resources, supportive tax
system, etc.)
Internalization advantages (IAs):
How do FSAs, CSAs and IAs interact?
FSAs are not solely developed in the home country and may be transferred within the
MNE network
CSAs (also in a specific host country) can contribute to the development of new FSAs
IAs depend on a company’s transactional FSAs to operate foreign subsidiaries
The transnational strategic solution
The transnational solution: Unilever
, both non-location bound (Brand Portfolio) and location-bound (Local Product
Development)
KC 3 – FORMULATING INTERNATIONAL STRATEGIES
How to formulate a business strategy?
1. How to organize international activities?
2. How to leverage differences across countries?
How to become an MNE? => How to formulate a strategy for an MNE
Michael Porter’s view
Porter poses a key distinction between multi-domestic and global industries:
Multi-domestic industries: an industry in which the competition is especially
segmented from country to country (Allianz, insurance).
Global industries: industries in which the competition crosses national borders on a
worldwide base (Apple, electronics).
Value Chain (Porter, 1986)
“A firm that competes internationally must decide how to spread the activities in the value
chain among countries”
2 dimensions:
1. Configuration (concentrated vs. dispersed): geography of activities
2. Coordination (market vs. internationalization): governance of activities
