IS - BEGRIPPEN + FRAMEWORKS
International business strategy = effectively and efficiently matching an MNE’s internal strengths
with the opportunities and challenges found in geographically dispersed environment that cross
international borders.
SEVEN CONCEPTS OF THE UNIFYING FRAMEWORK
1. Internationally transferable FSAs
Do not stop creating value when crossed border between home and host country, value can differ
2. Non-transferable (location-bound) FSAs
Cannot be transferred easily, deployed and exploited in foreign markets
- Stand-alone resources linked to location advantages
- Local marketing knowledge and reputational resources
- Local best practices
- Domestic recombination capabilities
3. Location advantages
Strengths of a location
4. Investment in- and value creation through – recombination
Able to grow by innovation and diversifying
Drop some resources, make new ones
Highest order FSA
5. Complementary resource of external actors
Additional resources provided by external parties
- Market knowledge/access
- Government connections
- Complementary technology
6. Bounded rationality à scarcity of mind à imperfect assessment of a present or future state of
affairs, leading to incorrect beliefs
7. Bounded reliability à scarcity of effort à imperfect effort towards pre-specific goal
achievement, thereby leading to incomplete fulfilment of promises
First three concept as a set reflect the distinct resource base available to the firm, critical to achieving
success in the marketplace
COMPONENTS OF RESOURCES
Firm is viewed as a bundle of resources under common governance
1. Physicical resources à natural resources, building, plant equipment etc (non-transferable)
2. Financial resources à access to equity and loan capital (transferable)
3. Human resources à individuals and teams, entrepreneurial and operational skills (non-
transferable)
4. Upstream knowledge à sourcing knowledge, product- and process-related technology
knowledge (transferable)
5. Downstream knowledge à critical to the interface with customers, and related to marketing,
sales, distribution and after-sales service (non-transferable)
6. Administrative resources (governance-related) à knowledge regarding the functioning of the
organizational structure, organizational culture and systems (transferable)
, 7. Reputational resources à brand names, good reputation for honest business dealings
(transferable)
CHAPTER 1: CONCEPTUAL FOUNDATIONS OF IBS – MNES AND THE GLOBAL
ECONOMY
MNE ARCHETYPES
1. Centralized exporter (essentially market seeker)
- Home-country-managed firm
- Selling in host country
- Only minor, customer-oriented, value-creating activities abroad
2. International projector
- Clones of the home country
- Builds on tradition of transferring its proprietary knowledge develop in home country
to host country subsidiaries
- Relies on extensive cadre of professional managers
3. International coordinator
- Centrally managed firm does not build primarily on home country FSAs
- Builds upon a tradition of managing international operation, both upstream and
downstream
- Logistics function
4. Multi-centered MNE
- Succes does not build primarily on knowledge-based FSAs develop in home country
- Consists of set of entrepreneurial subsidiaries abroad, key to knowledge-based FSA
development
- Portfolio of largely independent businesses
Not every firm is one specific type, can be more
FDI MOTIVES
1. Resource seeking
Search for physical, financial or human resources
2. Market seeking
Search for customers
3. Strategic asset seeking
Desire to gain access to advanced resources, upstream knowledge, downstream knowledge,
administrative knowledge or reputational knowledge
4. Efficiency seeking
Desire to capitalize on environmental changes that make specific locations in the MNEs
international network of operations more attractive than before
,CHAPTER 2: THE CRITICAL ROLE OF FIRM-SPECIFIC ADVANTAGES
CORE COMPETENCE
A core competence should:
- Be difficult for competitors to imitate in terms of achieving the required internal coordination
and learning (points to distinctiveness of the firm’s routines and recombination abilities)
- Provide potential access to a wide variety of markets (points to the capability’s contribution
towards combining or recombining resources for success in new environments)
- Make a significant contribution to the perceived customer benefits of the end product (points
to satisfying the needs of customers, a key stakeholder group)
The loss of a core competence would have an important negative effect on the firm’s present and future
performance, in terms of value creation and satisfying stakeholder objectives
Core competence = FSA
CHAPTER 3: THE NATURE OF HOME COUNTRY LOCATION ADVANTAGES
PORTERS DIAMOND MODEL
1. Factor conditions (firm specific)
o not only factors of production in the home base such as natural resources, but more
importantly, created factor conditions such as skilled labor, scientific knowledge and
infrastructure
o valuable if specialized à customized towards effective deployment in very specific
economic activities and companies
o need to be continuously upgraded
o Basic vs advanced factors
o Generalized vs specialized
2. Demand conditions (firm specific)
o Focus is not on domestic size alone, also buyer sophistication
o Nature of buyer needs
o Size and pattern of growth of demand
o Companies must respond to new customer demands
3. Related and supporting industries (firm specific)
o High quality, internationally competitive home-based suppliers, related industries, are
critical to the firm’s international competitiveness
o Industries that share the same tech, inputs, distribution channels, skills, customers or
provide complementary products
o Enhance to be more efficient
4. Firm strategy (firm specific)
o Industry structure and rivalry: highly competitive, home based industry with efficient
macro-level governance and several domestic rivals may help the firms in that industry
become internationally competitive
5. Domestic rivalry (firm specific)
o Instrumental to international competitiveness
o Forces companies to develop FSAs beyond the general location advantages in home
base
, Chance à stumbling upon a new commercial application for an existing resource, or being lucky
Government à regulations and rules
CHAPTER 4: THE PROBLEM WITH HOST COUNTRY LOCATOIN ADVANTAGES
GHEMAWAT CAGE MODEL DISTANCES
1. Cultural distance
o Language
o Religious beliegs
o Social norms
o Race
2. Administrative distance
o Societal institutions
o Common history can reduce distance
o Political ties can reduce distance
o Engaged in effort towards economic and monetary integration/trading arrangements can
reduce distance
o Synchronize government policies can reduce distance
3. Geographic distance
o Distance between countries
o Efficient transport and communication links can reduce distance
4. Economic distance
o Consumer wealth
o Income level and distribution
o Infrastructure characteristics
o Cost of quality of natural, financial and human resources
Businesses tend to overlook administrative distance
CHAPTER 11: ENTRY MODE DYNAMICS 1 – FOREIGN DISTRIBUTORS
GUIDELINES FOR DEALING WITH LOCAL DISTRIBUTORS
1. Proactively select locations and only then suitable distributors
2. Focus on distributors’ market development capabilities
3. Manage distributors as long-term partners
4. Provide resources to support distributors for market development purposes
5. Do not delegate marketing strategy to distributors
6. Secure shared access to the distributors’ critical market and financial intelligence
7. Link national distributors with one another, especially at the regional level (spanning several
countries)
LAURENT CHEVREUX, MICHAEL HU AND SUKETU GANDHI
Argue that many manufacturing and logistics firms now face dual challenges
1. They must adapt rapidly to unexpected changes in demand
2. They must have the technological capability to support governance focused on fast responses
International business strategy = effectively and efficiently matching an MNE’s internal strengths
with the opportunities and challenges found in geographically dispersed environment that cross
international borders.
SEVEN CONCEPTS OF THE UNIFYING FRAMEWORK
1. Internationally transferable FSAs
Do not stop creating value when crossed border between home and host country, value can differ
2. Non-transferable (location-bound) FSAs
Cannot be transferred easily, deployed and exploited in foreign markets
- Stand-alone resources linked to location advantages
- Local marketing knowledge and reputational resources
- Local best practices
- Domestic recombination capabilities
3. Location advantages
Strengths of a location
4. Investment in- and value creation through – recombination
Able to grow by innovation and diversifying
Drop some resources, make new ones
Highest order FSA
5. Complementary resource of external actors
Additional resources provided by external parties
- Market knowledge/access
- Government connections
- Complementary technology
6. Bounded rationality à scarcity of mind à imperfect assessment of a present or future state of
affairs, leading to incorrect beliefs
7. Bounded reliability à scarcity of effort à imperfect effort towards pre-specific goal
achievement, thereby leading to incomplete fulfilment of promises
First three concept as a set reflect the distinct resource base available to the firm, critical to achieving
success in the marketplace
COMPONENTS OF RESOURCES
Firm is viewed as a bundle of resources under common governance
1. Physicical resources à natural resources, building, plant equipment etc (non-transferable)
2. Financial resources à access to equity and loan capital (transferable)
3. Human resources à individuals and teams, entrepreneurial and operational skills (non-
transferable)
4. Upstream knowledge à sourcing knowledge, product- and process-related technology
knowledge (transferable)
5. Downstream knowledge à critical to the interface with customers, and related to marketing,
sales, distribution and after-sales service (non-transferable)
6. Administrative resources (governance-related) à knowledge regarding the functioning of the
organizational structure, organizational culture and systems (transferable)
, 7. Reputational resources à brand names, good reputation for honest business dealings
(transferable)
CHAPTER 1: CONCEPTUAL FOUNDATIONS OF IBS – MNES AND THE GLOBAL
ECONOMY
MNE ARCHETYPES
1. Centralized exporter (essentially market seeker)
- Home-country-managed firm
- Selling in host country
- Only minor, customer-oriented, value-creating activities abroad
2. International projector
- Clones of the home country
- Builds on tradition of transferring its proprietary knowledge develop in home country
to host country subsidiaries
- Relies on extensive cadre of professional managers
3. International coordinator
- Centrally managed firm does not build primarily on home country FSAs
- Builds upon a tradition of managing international operation, both upstream and
downstream
- Logistics function
4. Multi-centered MNE
- Succes does not build primarily on knowledge-based FSAs develop in home country
- Consists of set of entrepreneurial subsidiaries abroad, key to knowledge-based FSA
development
- Portfolio of largely independent businesses
Not every firm is one specific type, can be more
FDI MOTIVES
1. Resource seeking
Search for physical, financial or human resources
2. Market seeking
Search for customers
3. Strategic asset seeking
Desire to gain access to advanced resources, upstream knowledge, downstream knowledge,
administrative knowledge or reputational knowledge
4. Efficiency seeking
Desire to capitalize on environmental changes that make specific locations in the MNEs
international network of operations more attractive than before
,CHAPTER 2: THE CRITICAL ROLE OF FIRM-SPECIFIC ADVANTAGES
CORE COMPETENCE
A core competence should:
- Be difficult for competitors to imitate in terms of achieving the required internal coordination
and learning (points to distinctiveness of the firm’s routines and recombination abilities)
- Provide potential access to a wide variety of markets (points to the capability’s contribution
towards combining or recombining resources for success in new environments)
- Make a significant contribution to the perceived customer benefits of the end product (points
to satisfying the needs of customers, a key stakeholder group)
The loss of a core competence would have an important negative effect on the firm’s present and future
performance, in terms of value creation and satisfying stakeholder objectives
Core competence = FSA
CHAPTER 3: THE NATURE OF HOME COUNTRY LOCATION ADVANTAGES
PORTERS DIAMOND MODEL
1. Factor conditions (firm specific)
o not only factors of production in the home base such as natural resources, but more
importantly, created factor conditions such as skilled labor, scientific knowledge and
infrastructure
o valuable if specialized à customized towards effective deployment in very specific
economic activities and companies
o need to be continuously upgraded
o Basic vs advanced factors
o Generalized vs specialized
2. Demand conditions (firm specific)
o Focus is not on domestic size alone, also buyer sophistication
o Nature of buyer needs
o Size and pattern of growth of demand
o Companies must respond to new customer demands
3. Related and supporting industries (firm specific)
o High quality, internationally competitive home-based suppliers, related industries, are
critical to the firm’s international competitiveness
o Industries that share the same tech, inputs, distribution channels, skills, customers or
provide complementary products
o Enhance to be more efficient
4. Firm strategy (firm specific)
o Industry structure and rivalry: highly competitive, home based industry with efficient
macro-level governance and several domestic rivals may help the firms in that industry
become internationally competitive
5. Domestic rivalry (firm specific)
o Instrumental to international competitiveness
o Forces companies to develop FSAs beyond the general location advantages in home
base
, Chance à stumbling upon a new commercial application for an existing resource, or being lucky
Government à regulations and rules
CHAPTER 4: THE PROBLEM WITH HOST COUNTRY LOCATOIN ADVANTAGES
GHEMAWAT CAGE MODEL DISTANCES
1. Cultural distance
o Language
o Religious beliegs
o Social norms
o Race
2. Administrative distance
o Societal institutions
o Common history can reduce distance
o Political ties can reduce distance
o Engaged in effort towards economic and monetary integration/trading arrangements can
reduce distance
o Synchronize government policies can reduce distance
3. Geographic distance
o Distance between countries
o Efficient transport and communication links can reduce distance
4. Economic distance
o Consumer wealth
o Income level and distribution
o Infrastructure characteristics
o Cost of quality of natural, financial and human resources
Businesses tend to overlook administrative distance
CHAPTER 11: ENTRY MODE DYNAMICS 1 – FOREIGN DISTRIBUTORS
GUIDELINES FOR DEALING WITH LOCAL DISTRIBUTORS
1. Proactively select locations and only then suitable distributors
2. Focus on distributors’ market development capabilities
3. Manage distributors as long-term partners
4. Provide resources to support distributors for market development purposes
5. Do not delegate marketing strategy to distributors
6. Secure shared access to the distributors’ critical market and financial intelligence
7. Link national distributors with one another, especially at the regional level (spanning several
countries)
LAURENT CHEVREUX, MICHAEL HU AND SUKETU GANDHI
Argue that many manufacturing and logistics firms now face dual challenges
1. They must adapt rapidly to unexpected changes in demand
2. They must have the technological capability to support governance focused on fast responses
