Summary International Strategy
Table of Contents
Lecture 1 – Introduction to International Strategy .............................................................2
Elements of international strategy – Internationalization theory (Benito, 2015)......................... 2
Four types of MNEs .................................................................................................................. 5
Lecture 2 – Home and Host country: location advantages & distance .................................7
Location advantages ................................................................................................................ 7
Distance between home & host countries............................................................................... 11
Lecture 3 – Cultural distance and institutions ..................................................................13
Cultural distance and dimensions ........................................................................................... 13
Institutions and Institutional distance..................................................................................... 18
Lecture 4 – International entry modes .............................................................................22
Entry modes .......................................................................................................................... 22
International entry mode theories (understanding theoretical perspectives) ........................... 27
Lecture 5 – Subsidiaries and International Innovation......................................................32
The role of subsidiaries .......................................................................................................... 32
International Innovation ........................................................................................................ 34
Lecture 6 – International sourcing and production ...........................................................38
Lecture 7 – Emerging economies & international CSR ......................................................44
Emerging economies .............................................................................................................. 44
Emerging economy MNEs (eMNEs) ......................................................................................... 46
International CSR ................................................................................................................... 48
Lecture 8 – Corporate governance & business ethics from a cross cultural perspective .....49
Cross-cultural aspects of corporate governance ...................................................................... 49
Business ethics from a cross-cultural perspective .................................................................... 51
Lecture 9 – Q&A Session..................................................................................................53
1
,Lecture 1 – Introduction to International Strategy
Strategy objectives
We assume that the general objective of strategy is: achieving sustainable competitive advantage
leading to above-average economic performance.
→ This usually involves building upon firm-specific advantages such as core knowledge,
competencies, efficiencies and business models.
What is international strategy?
Matching a multinational enterprise’s (MNE’s) internal strengths
- With the opportunities and challenges found in cross-border environments
- While overcoming the disadvantages of being a foreign company
- And/or capitalizing on the advantages of being a foreign company
- And/or capitalizing on the advantages of having an international network
Example Swapfiets: strategy is to build upon its unique resources and capabilities (business model,
service excellence, distinctive branding, partnerships with suppliers).
→ International strategy relies on:
- Markets outside the Netherlands (focusing on cities)
- Started with the cities with the biggest cycling infrastructure and culture
- Local adaption?
Example Apple: strategy is to build upon its unique resources and capabilities (technology, brand,
complementary products)
→ International strategy relies on:
- Global markets for smartphones and electronic products
- Global opportunities for sourcing and manufacturing – has a global network, even from the
Netherlands
- Increasingly tapping into foreign knowledge and partnering
- Does Apple change its products much overseas? → No
- Apple encounters many difficulties in foreign environments
- Apple stores over the world have the same interior
IKEA example: strategy is to build upon its unique resources and capabilities (design, unique business
model, brand)
→ International strategy relies on:
- Global opportunities for design, sourcing and manufacturing – has a global network of
suppliers
- Global customers
- Does IKEA change its products much overseas? → Somewhat:
o Indian furniture can beat the heat and humidity
o Chinese IKEA showrooms het their very own balconies
o Demand for vases in the USA (Americans are used to large portions, so they saw
vases as large drinking glasses)
Elements of international strategy – Internationalization theory (Benito, 2015)
Internalization theory: these choices are fundamentally about finding the most efficient (cost
minimizing) way of operating abroad. For example, establishing a subsidiary in a foreign country,
often referred to as FDI, would be the preferred choice of operating when the joint costs of
performing and governing an activity – or a set of activities – in-house are lower than the equivalent
costs of other options, such as exports, licensing or alliances
2
,3
, Conceptual foundations of international business strategy
1. Internationally transferable (or non-location bound) firm specific advantages (FSAs) – e.g.
toothpaste company, Apple
2. Non-transferable (or location-bound) FSAs – e.g. Swapfiets, FEBO
3. Location advantages
4. Investment in – and value creation through – resource combination
5. Complementary resources of external actors
6. Bounded rationality
7. Bounded reliability
+ Advantages of foreignness: cultural attraction and arbitraging
1 & 2 – FSAs (Transferable & Non-transferable)
The MNEs unique resource base
- Physical resources (plants)
- Financial resources
- Human resources
- Upstream knowledge (R&D, value creation)
- Downstream knowledge (understanding the customer)
- Administrative knowledge
- Reputational resources
Example question: Evaluate how location and non-location bound firm specific advantages affect
Swapfiets’ internationalization.
Prahalad and Hamel: “The core competence of the corporation” (1990)
Firm-specific advantages (= core competencies)
→ A core competence should:
- Provide access to a wide variety of markets
- Contribute significantly to the end-product benefits
- Be difficult for competitors to imitate
3 – Location advantages
Something that makes it better than other locations.
- What is better in Silicon Valley? → A lot of knowledge, proximity to engineering universities,
partnering with other countries, funding/money flow
- Why Tesla in Tilburg? → The port in Rotterdam, transportation structure. To Berlin for the
knowledge about car manufacturing
4 – Recombination capabilities
- An orchestration of resources, especially knowledge bundles, e.g. Honda
- In the international arena, recombination of capabilities are built up through international
experience
o Host-country specific experience
o General internationalization experience
5 – Complementary resources of external actors
- Market knowledge/access
- Government connections
- Complementary technology
Reason: cultural, economic, institutional and spatial ‘distance’ (meaning: missing success
ingredients)
4
Table of Contents
Lecture 1 – Introduction to International Strategy .............................................................2
Elements of international strategy – Internationalization theory (Benito, 2015)......................... 2
Four types of MNEs .................................................................................................................. 5
Lecture 2 – Home and Host country: location advantages & distance .................................7
Location advantages ................................................................................................................ 7
Distance between home & host countries............................................................................... 11
Lecture 3 – Cultural distance and institutions ..................................................................13
Cultural distance and dimensions ........................................................................................... 13
Institutions and Institutional distance..................................................................................... 18
Lecture 4 – International entry modes .............................................................................22
Entry modes .......................................................................................................................... 22
International entry mode theories (understanding theoretical perspectives) ........................... 27
Lecture 5 – Subsidiaries and International Innovation......................................................32
The role of subsidiaries .......................................................................................................... 32
International Innovation ........................................................................................................ 34
Lecture 6 – International sourcing and production ...........................................................38
Lecture 7 – Emerging economies & international CSR ......................................................44
Emerging economies .............................................................................................................. 44
Emerging economy MNEs (eMNEs) ......................................................................................... 46
International CSR ................................................................................................................... 48
Lecture 8 – Corporate governance & business ethics from a cross cultural perspective .....49
Cross-cultural aspects of corporate governance ...................................................................... 49
Business ethics from a cross-cultural perspective .................................................................... 51
Lecture 9 – Q&A Session..................................................................................................53
1
,Lecture 1 – Introduction to International Strategy
Strategy objectives
We assume that the general objective of strategy is: achieving sustainable competitive advantage
leading to above-average economic performance.
→ This usually involves building upon firm-specific advantages such as core knowledge,
competencies, efficiencies and business models.
What is international strategy?
Matching a multinational enterprise’s (MNE’s) internal strengths
- With the opportunities and challenges found in cross-border environments
- While overcoming the disadvantages of being a foreign company
- And/or capitalizing on the advantages of being a foreign company
- And/or capitalizing on the advantages of having an international network
Example Swapfiets: strategy is to build upon its unique resources and capabilities (business model,
service excellence, distinctive branding, partnerships with suppliers).
→ International strategy relies on:
- Markets outside the Netherlands (focusing on cities)
- Started with the cities with the biggest cycling infrastructure and culture
- Local adaption?
Example Apple: strategy is to build upon its unique resources and capabilities (technology, brand,
complementary products)
→ International strategy relies on:
- Global markets for smartphones and electronic products
- Global opportunities for sourcing and manufacturing – has a global network, even from the
Netherlands
- Increasingly tapping into foreign knowledge and partnering
- Does Apple change its products much overseas? → No
- Apple encounters many difficulties in foreign environments
- Apple stores over the world have the same interior
IKEA example: strategy is to build upon its unique resources and capabilities (design, unique business
model, brand)
→ International strategy relies on:
- Global opportunities for design, sourcing and manufacturing – has a global network of
suppliers
- Global customers
- Does IKEA change its products much overseas? → Somewhat:
o Indian furniture can beat the heat and humidity
o Chinese IKEA showrooms het their very own balconies
o Demand for vases in the USA (Americans are used to large portions, so they saw
vases as large drinking glasses)
Elements of international strategy – Internationalization theory (Benito, 2015)
Internalization theory: these choices are fundamentally about finding the most efficient (cost
minimizing) way of operating abroad. For example, establishing a subsidiary in a foreign country,
often referred to as FDI, would be the preferred choice of operating when the joint costs of
performing and governing an activity – or a set of activities – in-house are lower than the equivalent
costs of other options, such as exports, licensing or alliances
2
,3
, Conceptual foundations of international business strategy
1. Internationally transferable (or non-location bound) firm specific advantages (FSAs) – e.g.
toothpaste company, Apple
2. Non-transferable (or location-bound) FSAs – e.g. Swapfiets, FEBO
3. Location advantages
4. Investment in – and value creation through – resource combination
5. Complementary resources of external actors
6. Bounded rationality
7. Bounded reliability
+ Advantages of foreignness: cultural attraction and arbitraging
1 & 2 – FSAs (Transferable & Non-transferable)
The MNEs unique resource base
- Physical resources (plants)
- Financial resources
- Human resources
- Upstream knowledge (R&D, value creation)
- Downstream knowledge (understanding the customer)
- Administrative knowledge
- Reputational resources
Example question: Evaluate how location and non-location bound firm specific advantages affect
Swapfiets’ internationalization.
Prahalad and Hamel: “The core competence of the corporation” (1990)
Firm-specific advantages (= core competencies)
→ A core competence should:
- Provide access to a wide variety of markets
- Contribute significantly to the end-product benefits
- Be difficult for competitors to imitate
3 – Location advantages
Something that makes it better than other locations.
- What is better in Silicon Valley? → A lot of knowledge, proximity to engineering universities,
partnering with other countries, funding/money flow
- Why Tesla in Tilburg? → The port in Rotterdam, transportation structure. To Berlin for the
knowledge about car manufacturing
4 – Recombination capabilities
- An orchestration of resources, especially knowledge bundles, e.g. Honda
- In the international arena, recombination of capabilities are built up through international
experience
o Host-country specific experience
o General internationalization experience
5 – Complementary resources of external actors
- Market knowledge/access
- Government connections
- Complementary technology
Reason: cultural, economic, institutional and spatial ‘distance’ (meaning: missing success
ingredients)
4
