International Business Strategy
How can enterprises become and remain internationally successful?
We will discuss a variety of answers to this key-question to create insight and increase understanding.
Analyzing and comparing these answers/ideas we will use the framework of A.Verbeke.
Learning objectives:
● Explain the key theoretical ideas on IBS
● Describe the strengths and weaknesses of these ideas
● Apply these ideas to real-world cases of multinational firms
● Critically analyze such cases within a team and report them
Focus on firms / microeconomic - Course IM was MACRO
Slide 13: There are different criteria to talk about the size of companies….
Wal-Mart is the company with the highest revenue & has the highest number of employees
(2.300.000). Apple is the most valuable (stock market value) company in the world.
1
,Slide 15: Wal-Mart is an international player with failures in Germany, Korea and Brazil. International
expansion is a complex process prone to failure due to the difference between countries.
Slide 16: List of international failures
⇒ International failure is a frequent occurrence within multinational firms
1. Conceptual Foundations of IBS
1.1. 7 key-concepts of the framework of Alain Verbeke
* FSA = Firm Specific Advantages
2
,1°: Non Locationbound FSAs
(= International transferable FSAs)
= Corporate strengths that can be (technically) transferred to other countries and that can be
profitably exploited there.
Examples: Unique product knowledge technology, administrative knowledge & global brand reputation
NLB-FSA’s Can be transferred abroad in 2 ways:
● Embedded in final product: Export of a car abroad: not transferred as the FSA itself
● As intermediate inputs: Locate a factory abroad, using your own skills (FSA): transferred
separately
Needed to offset the liability of foreignness: the additional costs of doing business abroad
Geographic scope of NLB FSAs is limited due to (i) informal rules (cultural differences) and
(ii) formal rules (institutions, laws and regulation)
● Especially downstream FSA
● Best transferable to countries within the same region: institutional differences within a
region are often smaller than those between regions….
○ differences in the formal and informal ‘rules of the game’
■ formal rules: laws and regulations
■ informal rules: norm, values, habits
Most firms on the FG 500 list realize most of their sales in their home region:
If their NLB FSAs would be exploitable worldwide, mature firms would realize a similar share of sales
in each world region.
Verbeke & Ruyckman study found that only 9 of 500 multinationals are truly global.
→ The FSAs possessed by the multinationals are largely region bound and lose their value
in foreign regions of the world.
Example: Tesco has withdrawn its activities from Asia, Citigroup is disposing of its international retail
network, …
3
, Nr 2°: Location-bound FSA
Non-transferable FSAs
= Cannot be transferred abroad or can be transferred abroad but have little value there.
→ Need to invest to acquire FSAs in corresponding host country
Examples: stores at favorable locations and local market knowledge
Exercise: Dynamic! Evaluate the individual story to determine if it is NLB or LB FSA
Part of Value Chain
Upstream* Downstream**
FSA NLB Product Technology Global brand reputation
Procurement Power Store Layout
Manufacturing Technology
LB Access to natural resources Market knowledge
Locally-embedded R&D team Local distribution network
*Upstream = all of the materials, people and environmental factors that contribute to your product and service.
**Downstream = generally classified as what happens once a product or service has left your door.
Nr 3°: Location Advantages
! Whereas NLB and LB FSAs pertain to firms, LA pertains to geographic areas.
= LAs refer to specific conditions within geographic areas that provide benefits to firms
operating there (countries, agglomerations or supranational regions).
Access to foreign location advantages often requires local presence. It motivates firms to
undertake “Foreign Direct Investment” (FDI).
Firms need NB FSAs to offset the liability of foreignness. They often need to obtain
complementary LB FSAs abroad. They need sufficient access to a variety of location
advantages.
Foreign Direct Investments
= An investment that causes a firm to have a significant ownership stake in (and thus at least
partial control over) a foreign business entity (foreign subsidiary).
● Either a Greenfield investment or an acquisition leads a firm to become a
multinational enterprise (MNE).
○ Greenfield investment = A parent company creates a subsidiary in a different
country, building its operations from the ground up.
Different from foreign Portfolio investment : no desire for control, investment in tiny
ownership stakes to create diversified portfolios.
Different from Contractual expansion modes: direct & indirect exporting, outsourcing,
licensing & franchising.
4
How can enterprises become and remain internationally successful?
We will discuss a variety of answers to this key-question to create insight and increase understanding.
Analyzing and comparing these answers/ideas we will use the framework of A.Verbeke.
Learning objectives:
● Explain the key theoretical ideas on IBS
● Describe the strengths and weaknesses of these ideas
● Apply these ideas to real-world cases of multinational firms
● Critically analyze such cases within a team and report them
Focus on firms / microeconomic - Course IM was MACRO
Slide 13: There are different criteria to talk about the size of companies….
Wal-Mart is the company with the highest revenue & has the highest number of employees
(2.300.000). Apple is the most valuable (stock market value) company in the world.
1
,Slide 15: Wal-Mart is an international player with failures in Germany, Korea and Brazil. International
expansion is a complex process prone to failure due to the difference between countries.
Slide 16: List of international failures
⇒ International failure is a frequent occurrence within multinational firms
1. Conceptual Foundations of IBS
1.1. 7 key-concepts of the framework of Alain Verbeke
* FSA = Firm Specific Advantages
2
,1°: Non Locationbound FSAs
(= International transferable FSAs)
= Corporate strengths that can be (technically) transferred to other countries and that can be
profitably exploited there.
Examples: Unique product knowledge technology, administrative knowledge & global brand reputation
NLB-FSA’s Can be transferred abroad in 2 ways:
● Embedded in final product: Export of a car abroad: not transferred as the FSA itself
● As intermediate inputs: Locate a factory abroad, using your own skills (FSA): transferred
separately
Needed to offset the liability of foreignness: the additional costs of doing business abroad
Geographic scope of NLB FSAs is limited due to (i) informal rules (cultural differences) and
(ii) formal rules (institutions, laws and regulation)
● Especially downstream FSA
● Best transferable to countries within the same region: institutional differences within a
region are often smaller than those between regions….
○ differences in the formal and informal ‘rules of the game’
■ formal rules: laws and regulations
■ informal rules: norm, values, habits
Most firms on the FG 500 list realize most of their sales in their home region:
If their NLB FSAs would be exploitable worldwide, mature firms would realize a similar share of sales
in each world region.
Verbeke & Ruyckman study found that only 9 of 500 multinationals are truly global.
→ The FSAs possessed by the multinationals are largely region bound and lose their value
in foreign regions of the world.
Example: Tesco has withdrawn its activities from Asia, Citigroup is disposing of its international retail
network, …
3
, Nr 2°: Location-bound FSA
Non-transferable FSAs
= Cannot be transferred abroad or can be transferred abroad but have little value there.
→ Need to invest to acquire FSAs in corresponding host country
Examples: stores at favorable locations and local market knowledge
Exercise: Dynamic! Evaluate the individual story to determine if it is NLB or LB FSA
Part of Value Chain
Upstream* Downstream**
FSA NLB Product Technology Global brand reputation
Procurement Power Store Layout
Manufacturing Technology
LB Access to natural resources Market knowledge
Locally-embedded R&D team Local distribution network
*Upstream = all of the materials, people and environmental factors that contribute to your product and service.
**Downstream = generally classified as what happens once a product or service has left your door.
Nr 3°: Location Advantages
! Whereas NLB and LB FSAs pertain to firms, LA pertains to geographic areas.
= LAs refer to specific conditions within geographic areas that provide benefits to firms
operating there (countries, agglomerations or supranational regions).
Access to foreign location advantages often requires local presence. It motivates firms to
undertake “Foreign Direct Investment” (FDI).
Firms need NB FSAs to offset the liability of foreignness. They often need to obtain
complementary LB FSAs abroad. They need sufficient access to a variety of location
advantages.
Foreign Direct Investments
= An investment that causes a firm to have a significant ownership stake in (and thus at least
partial control over) a foreign business entity (foreign subsidiary).
● Either a Greenfield investment or an acquisition leads a firm to become a
multinational enterprise (MNE).
○ Greenfield investment = A parent company creates a subsidiary in a different
country, building its operations from the ground up.
Different from foreign Portfolio investment : no desire for control, investment in tiny
ownership stakes to create diversified portfolios.
Different from Contractual expansion modes: direct & indirect exporting, outsourcing,
licensing & franchising.
4
