Strategy and Non-Market Environment (SNME)
Lecture 1, What is Global Strategy and why does it matter?
Global market and non-market environment
Buckley, 2022
- Three vectors of power in global strategy
o State governance through coordination
Non-market stakeholder. Home country (orange) AND abroad = complex.
o Civil Society governance through argumentation
Non-market stakeholder
o Market governance through competition
Stakeholders of company
Why global strategy?
- International trade, for example US vs China
- Covid
- Global value chains
- 2030 agenda UN sustainable development
- Cyber security
Example – US-Africa Trade
- US suspends African countries
o (Allowed African countries to export)
o Why? “Either with or against us”. Civil war in Africa tell them to stop fighting with
suspending them from international trade.
- Consequences for international business
o Investment decisions
Rebuild home country
Abandon countries in Ethiopia – reshore
Reinvest in other countries
o Export decisions
Continue supplying to US because of clients (even though it costs more)
Other countries than US
Stop global business, profit from local activities.
Global strategy matters!
= “involves the study of cross-border activities of economic agents or the strategies and governance
of firms engaged in such activity”
- Corporate “strategy in context”
,Why important?
- Global trends in technology, society, politics, economics, etc
- Variations in the sociocultural, politico- legal, techno-economic, and geographic
characteristics of countries (i.e., non-market elements!)
merge insights from international business (IB) with corporate (competitive) strategy!
Competitive advantages in a global environment
What is a competitive advantage?
= “it is what distinguished a business from other same business in market. It is a set of unique
characteristics of company product or service that attract customer to buy its product” (Porter, 1985).
- Competitive advantage relative to competitors
- Unique characteristics VRIO framework (Barney, 1991) sustained comp. adv.
BUT: Porter didn’t look at country differences.
Will a competitive advantage work in other markets? Can it be transferred to international
markets? (Hu, 1995)
Context matters
- Non-transferability
o International immobility of CA
E.g., geographical specificity (e.g. monopolies, Made in Germany, tacit nature
of knowledge, etc.)
o CA loses its value in the host environment (“misfit”). For example because of culture
clashes.
Propositions
1. Domestic strengths do not necessarily mean competitive advantage and success in a foreign
country
2. The company that operates most successfully abroad may not be the strongest firm in the
industry at home
a. E.g. Japanese cars
3. For the same firm with international operations, the advantage that matters most in the
home nation may not be the same as the advantage that has most value in a foreign country.
Costs of doing business abroad
= “broadly defined as all additional costs a firm operating in a market overseas incurs that a local firm
would not incur.” (Zaheer, 1995)
Market-driven economic costs (Hymer, 1976) vs. non-market driven social costs (Zaheer, 1995) cause
competitive disadvantage
- Market-driven costs apply to all firms
- Non-market driven costs apply to only certain firms (= liability of foreignness), specific
,Liability of Foreignness
- Sources for LoF (Zaheer, 1995)
o Costs directly associated with spatial distance, e.g. travel, transportation and
coordination over distance and across time zones
Leaning towards market-driven!
o Firm-specific costs based on a particular company’s unfamiliarity with and lack of
roots in a local environment
o Costs resulting from the host country environment, e.g. the lack of legitimacy of
foreign firms and economic nationalism
o Costs from the home country environment, e.g. trade restrictions
Bottom line = global non-market environment matters!
Non-market environment
= ‘’(the) set of forces [that] are manifested outside of markets but often work in conjunction with
them and consists of the social, political and legal arrangements that structure interactions among
companies and their public” (Baron, 1995: 48)
Conclusion Lecture 1
1. Consider non-market environment
2. Context (host country) matters in global strategy
3. Powers
Lecture 2, Complexities of going international (market)
Recap of lecture 1
- Market- and non-market environment
o Government non-market stakeholder
o Competitors market stakeholder
o Civil society non-market stakeholder
o Suppliers market stakeholder
o Media non-market stakeholder
, o Customers market stakeholder
Why and how do firms internationalize?
- It matters because there is so much research out there, which shows different results
Internationalization-performance relationship, Wang et al. (2019)
Internationalization theories
Academic debate
- Eclictic (OLI) Theory vs the Uppsala model
o Eclectic (OLI) by Dunning (1980, 1988)
Economic approach of internationalization
Focus: rational choice and perfect information
o Uppsala model by Johanson & Vahlne (1977, 1990)
Behavioral approach of internationalization
Focus: organizational knowledge and learning, step by step
Dunning’s (1980) eclectic paradigm of FDI
How to turn domestic firms into multinationals
Ownership advantages, location advantages and internalizing advantages needed
Lecture 1, What is Global Strategy and why does it matter?
Global market and non-market environment
Buckley, 2022
- Three vectors of power in global strategy
o State governance through coordination
Non-market stakeholder. Home country (orange) AND abroad = complex.
o Civil Society governance through argumentation
Non-market stakeholder
o Market governance through competition
Stakeholders of company
Why global strategy?
- International trade, for example US vs China
- Covid
- Global value chains
- 2030 agenda UN sustainable development
- Cyber security
Example – US-Africa Trade
- US suspends African countries
o (Allowed African countries to export)
o Why? “Either with or against us”. Civil war in Africa tell them to stop fighting with
suspending them from international trade.
- Consequences for international business
o Investment decisions
Rebuild home country
Abandon countries in Ethiopia – reshore
Reinvest in other countries
o Export decisions
Continue supplying to US because of clients (even though it costs more)
Other countries than US
Stop global business, profit from local activities.
Global strategy matters!
= “involves the study of cross-border activities of economic agents or the strategies and governance
of firms engaged in such activity”
- Corporate “strategy in context”
,Why important?
- Global trends in technology, society, politics, economics, etc
- Variations in the sociocultural, politico- legal, techno-economic, and geographic
characteristics of countries (i.e., non-market elements!)
merge insights from international business (IB) with corporate (competitive) strategy!
Competitive advantages in a global environment
What is a competitive advantage?
= “it is what distinguished a business from other same business in market. It is a set of unique
characteristics of company product or service that attract customer to buy its product” (Porter, 1985).
- Competitive advantage relative to competitors
- Unique characteristics VRIO framework (Barney, 1991) sustained comp. adv.
BUT: Porter didn’t look at country differences.
Will a competitive advantage work in other markets? Can it be transferred to international
markets? (Hu, 1995)
Context matters
- Non-transferability
o International immobility of CA
E.g., geographical specificity (e.g. monopolies, Made in Germany, tacit nature
of knowledge, etc.)
o CA loses its value in the host environment (“misfit”). For example because of culture
clashes.
Propositions
1. Domestic strengths do not necessarily mean competitive advantage and success in a foreign
country
2. The company that operates most successfully abroad may not be the strongest firm in the
industry at home
a. E.g. Japanese cars
3. For the same firm with international operations, the advantage that matters most in the
home nation may not be the same as the advantage that has most value in a foreign country.
Costs of doing business abroad
= “broadly defined as all additional costs a firm operating in a market overseas incurs that a local firm
would not incur.” (Zaheer, 1995)
Market-driven economic costs (Hymer, 1976) vs. non-market driven social costs (Zaheer, 1995) cause
competitive disadvantage
- Market-driven costs apply to all firms
- Non-market driven costs apply to only certain firms (= liability of foreignness), specific
,Liability of Foreignness
- Sources for LoF (Zaheer, 1995)
o Costs directly associated with spatial distance, e.g. travel, transportation and
coordination over distance and across time zones
Leaning towards market-driven!
o Firm-specific costs based on a particular company’s unfamiliarity with and lack of
roots in a local environment
o Costs resulting from the host country environment, e.g. the lack of legitimacy of
foreign firms and economic nationalism
o Costs from the home country environment, e.g. trade restrictions
Bottom line = global non-market environment matters!
Non-market environment
= ‘’(the) set of forces [that] are manifested outside of markets but often work in conjunction with
them and consists of the social, political and legal arrangements that structure interactions among
companies and their public” (Baron, 1995: 48)
Conclusion Lecture 1
1. Consider non-market environment
2. Context (host country) matters in global strategy
3. Powers
Lecture 2, Complexities of going international (market)
Recap of lecture 1
- Market- and non-market environment
o Government non-market stakeholder
o Competitors market stakeholder
o Civil society non-market stakeholder
o Suppliers market stakeholder
o Media non-market stakeholder
, o Customers market stakeholder
Why and how do firms internationalize?
- It matters because there is so much research out there, which shows different results
Internationalization-performance relationship, Wang et al. (2019)
Internationalization theories
Academic debate
- Eclictic (OLI) Theory vs the Uppsala model
o Eclectic (OLI) by Dunning (1980, 1988)
Economic approach of internationalization
Focus: rational choice and perfect information
o Uppsala model by Johanson & Vahlne (1977, 1990)
Behavioral approach of internationalization
Focus: organizational knowledge and learning, step by step
Dunning’s (1980) eclectic paradigm of FDI
How to turn domestic firms into multinationals
Ownership advantages, location advantages and internalizing advantages needed
