Summary International Management 2016
Lecture 1
International business strategy means effectively
and efficiently matching a multinational
enterprise’s (MNE’s) internal strengths (relative to
competitors) with the opportunities and
challenges found in geographically dispersed
environments that cross international borders. .
The seven concepts of the unifying framework
1. Internationally transferable (or non-location
bound) FSAs
a. Tacit know-how(difficult to transfer)
b. Explicit knowledge (easy to transfer)
2. Non- transferable (location bound) FSAs
a. Marks & Spencer: first in its chain to open. Advantage: prime
real estate Transfer to Canada No transfer of advantage
b. Local market knowledge
c. Domestic recombination capabilities
d. Local best practices: Toyota Supplier networks and incentive
systems or routines
e. Reputation based
3. Location advantages
a. Silicon valley
i. Huge pool of qualified engineers (Stanford close by) / Clusters
4. Investment in – and value through – recombination
a. The heart of int. business strategy: the highest-order FSA is the ability, not just to combine
reliably the MNE’s existing resources, but to recombine its resources in novel ways, usually
including newly accessed resources where in a limited geographic space or internationally
5. Complementary resources of external actors (not explicit in figure)
a. Additional resources, provided by external actors but accessible to the MNE, which may be
necessary to fill resource gaps and achieve success in the marketplace
6. Bounded rationality
a. Access to information is often insufficient in quality & quantity
b. Limited capability to process complex information correctly
c. Make choices based on your preferences, which might be stupid
d. Decision making based only on prices (utilarian theory)
7. Bounded reliability
a. There is inconsistency between what you expect and what actually
happens. There are limits to which you can rely on someone else.
b. Opportunistic ex ante false promises/ ex post reneging on promises
Summary International Management G. Timmermans 1
, MNE’s unique resources
Physical resources Downstream knowledge (e.g. marketing, sales)
Financial resources Administrative knowledge (organizational
Human resources structure, culture, systems)
Upstream knowledge (product and process Reputational resources
related technological knowledge)
Tacit know-how is difficult to transfer, whereas explicit knowledge is easy to transfer. Explicit knowledge
therefore is cheaper to transfer, but it can also be easily imitated by other firms. Some FSAs are not
transferable, four main types:
Stand-alone resources (linked to location advantages: privileged retail locations)
Local marketing knowledge and reputational resources (brand names)
Local best practices (such as incentive systems or buyer-supplier relations)
Domestic recombination capability
The essence of international business strategy
Complementary resources of external actors.
Needed from external actors to be successful
abroad. Reason: ‘distance’ (culture, economic,
etc.) Conditions: (1) attempts at internal
development would lead to lower NPS; (2)
external actors are able and willing to provide the
resources.
!! Bounded rationality.
Scarcity of mind: 2 sources: poor access to
information, limited mental capability to process.
Scarcity of effort: to make good on open-ended
promises. 2 sources: opportunism, benevolent
preference reversal
Summary International Management G. Timmermans 2
Lecture 1
International business strategy means effectively
and efficiently matching a multinational
enterprise’s (MNE’s) internal strengths (relative to
competitors) with the opportunities and
challenges found in geographically dispersed
environments that cross international borders. .
The seven concepts of the unifying framework
1. Internationally transferable (or non-location
bound) FSAs
a. Tacit know-how(difficult to transfer)
b. Explicit knowledge (easy to transfer)
2. Non- transferable (location bound) FSAs
a. Marks & Spencer: first in its chain to open. Advantage: prime
real estate Transfer to Canada No transfer of advantage
b. Local market knowledge
c. Domestic recombination capabilities
d. Local best practices: Toyota Supplier networks and incentive
systems or routines
e. Reputation based
3. Location advantages
a. Silicon valley
i. Huge pool of qualified engineers (Stanford close by) / Clusters
4. Investment in – and value through – recombination
a. The heart of int. business strategy: the highest-order FSA is the ability, not just to combine
reliably the MNE’s existing resources, but to recombine its resources in novel ways, usually
including newly accessed resources where in a limited geographic space or internationally
5. Complementary resources of external actors (not explicit in figure)
a. Additional resources, provided by external actors but accessible to the MNE, which may be
necessary to fill resource gaps and achieve success in the marketplace
6. Bounded rationality
a. Access to information is often insufficient in quality & quantity
b. Limited capability to process complex information correctly
c. Make choices based on your preferences, which might be stupid
d. Decision making based only on prices (utilarian theory)
7. Bounded reliability
a. There is inconsistency between what you expect and what actually
happens. There are limits to which you can rely on someone else.
b. Opportunistic ex ante false promises/ ex post reneging on promises
Summary International Management G. Timmermans 1
, MNE’s unique resources
Physical resources Downstream knowledge (e.g. marketing, sales)
Financial resources Administrative knowledge (organizational
Human resources structure, culture, systems)
Upstream knowledge (product and process Reputational resources
related technological knowledge)
Tacit know-how is difficult to transfer, whereas explicit knowledge is easy to transfer. Explicit knowledge
therefore is cheaper to transfer, but it can also be easily imitated by other firms. Some FSAs are not
transferable, four main types:
Stand-alone resources (linked to location advantages: privileged retail locations)
Local marketing knowledge and reputational resources (brand names)
Local best practices (such as incentive systems or buyer-supplier relations)
Domestic recombination capability
The essence of international business strategy
Complementary resources of external actors.
Needed from external actors to be successful
abroad. Reason: ‘distance’ (culture, economic,
etc.) Conditions: (1) attempts at internal
development would lead to lower NPS; (2)
external actors are able and willing to provide the
resources.
!! Bounded rationality.
Scarcity of mind: 2 sources: poor access to
information, limited mental capability to process.
Scarcity of effort: to make good on open-ended
promises. 2 sources: opportunism, benevolent
preference reversal
Summary International Management G. Timmermans 2
