Summary International Strategy
Lecture 1:
Firm-specific advantages (FSAs): core knowledge / competencies / efficiencies / business
models
A core competence should
1. Provide access to a wide variety of markets
2. Contribute significantly to the end-product benefits
3. Be difficult for competitors to imitate
Foreign direct investment (FDI) motives:
1. Market-seeking – replace marketing and sales
2. Efficiency-seeking – replace manufacturing
3. Resource seeking – replace extraction and production (vertically supply chain):
limited location choice
4. Strategic asset-seeking – replace R&D and innovation: more long term/future seeking,
not about exploiting already existing FSAs
Entry modes depends on performance and governance costs (most efficient = minimal
costs)
1. Export
2. Licensing
3. Franchising
4. Joint venture / Alliance
5. FDI
a. Brownfield (acquisition)
b. Greenfield
Unique resources
1. Physical
2. Financial
3. Human
4. Upstream / downstream knowledge
5. Administrative knowledge
6. Reputational
Recombination capabilities (artful orchestration of resources) are built up through host
country specific or general internalization experience
Liability of foreignness (LoF) = disadvantage due to geographic, linguistic, economic, political,
educational, institutional, cultural (etc.) distances
1. Bounded rationality = imperfect assessment leading to incorrect beliefs
2. Bounded reliability = imperfect efforts towards goal achievement leading to
incomplete fulfilment of promises
can be mitigated by governance mechanisms (contracts) focused on
monitoring and incentives
1
,Multinational enterprises (MNEs) types:
1. Centralized exporter – sells overseas
2. International projector – setting up / cloning operations or business model to other
countries
3. International coordinator – bringing non-location-bound firm specific advantages to
different places (recombine in host country)
4. Multi-centered MNE – stand-alone operations in host country (might be adapted to
the host country)
Distance (+) transportation/management costs (-) efficiency
2
, Lecture 2:
Porter’s diamond:
A framework used to analyze and understand the competitive advantage of nations or
regions in specific industries. It highlights various factors that influence a country's or
region's ability to compete in a particular industry.
o Explains how companies emerge with FSAs based on home environment and
thus explains difference in industries between countries and thus prosperity in
countries. Competition leads to competitive advantage in an industry
Innovation and investment in advanced factors (=upgrading competitive advantage) labor
productivity real income per head (=national prosperity)
1. Firm strategy, structure, and rivalry: conditions governing how companies are
created, organized, managed, and rival (leads to pressure to cut costs, improve
quality and innovate)
2. Demand conditions:
a. Nature of buyer’ needs
b. Size of pattern of growth of home demand
c. Internationalization of domestic demand
3. Related and supporting industries: sharing some technology, inputs, distribution
channels, skills, customers or providing complementary products. This leads to
spillovers
4. Factor conditions
a. Basic conditions/factors: resources, infrastructure, geographic location,
demography, unskilled labor
b. Advanced conditions/factors: innovation, educational/scientific institutions,
skilled labor (=most significant)
Government refers to the role of government policies, regulations, and actions in shaping the
competitive environment of a specific industry
Chance events are unpredictable and external factors that can impact a nation's competitive
advantage in specific industries. These events are often beyond the control of governments
and businesses.
3
Lecture 1:
Firm-specific advantages (FSAs): core knowledge / competencies / efficiencies / business
models
A core competence should
1. Provide access to a wide variety of markets
2. Contribute significantly to the end-product benefits
3. Be difficult for competitors to imitate
Foreign direct investment (FDI) motives:
1. Market-seeking – replace marketing and sales
2. Efficiency-seeking – replace manufacturing
3. Resource seeking – replace extraction and production (vertically supply chain):
limited location choice
4. Strategic asset-seeking – replace R&D and innovation: more long term/future seeking,
not about exploiting already existing FSAs
Entry modes depends on performance and governance costs (most efficient = minimal
costs)
1. Export
2. Licensing
3. Franchising
4. Joint venture / Alliance
5. FDI
a. Brownfield (acquisition)
b. Greenfield
Unique resources
1. Physical
2. Financial
3. Human
4. Upstream / downstream knowledge
5. Administrative knowledge
6. Reputational
Recombination capabilities (artful orchestration of resources) are built up through host
country specific or general internalization experience
Liability of foreignness (LoF) = disadvantage due to geographic, linguistic, economic, political,
educational, institutional, cultural (etc.) distances
1. Bounded rationality = imperfect assessment leading to incorrect beliefs
2. Bounded reliability = imperfect efforts towards goal achievement leading to
incomplete fulfilment of promises
can be mitigated by governance mechanisms (contracts) focused on
monitoring and incentives
1
,Multinational enterprises (MNEs) types:
1. Centralized exporter – sells overseas
2. International projector – setting up / cloning operations or business model to other
countries
3. International coordinator – bringing non-location-bound firm specific advantages to
different places (recombine in host country)
4. Multi-centered MNE – stand-alone operations in host country (might be adapted to
the host country)
Distance (+) transportation/management costs (-) efficiency
2
, Lecture 2:
Porter’s diamond:
A framework used to analyze and understand the competitive advantage of nations or
regions in specific industries. It highlights various factors that influence a country's or
region's ability to compete in a particular industry.
o Explains how companies emerge with FSAs based on home environment and
thus explains difference in industries between countries and thus prosperity in
countries. Competition leads to competitive advantage in an industry
Innovation and investment in advanced factors (=upgrading competitive advantage) labor
productivity real income per head (=national prosperity)
1. Firm strategy, structure, and rivalry: conditions governing how companies are
created, organized, managed, and rival (leads to pressure to cut costs, improve
quality and innovate)
2. Demand conditions:
a. Nature of buyer’ needs
b. Size of pattern of growth of home demand
c. Internationalization of domestic demand
3. Related and supporting industries: sharing some technology, inputs, distribution
channels, skills, customers or providing complementary products. This leads to
spillovers
4. Factor conditions
a. Basic conditions/factors: resources, infrastructure, geographic location,
demography, unskilled labor
b. Advanced conditions/factors: innovation, educational/scientific institutions,
skilled labor (=most significant)
Government refers to the role of government policies, regulations, and actions in shaping the
competitive environment of a specific industry
Chance events are unpredictable and external factors that can impact a nation's competitive
advantage in specific industries. These events are often beyond the control of governments
and businesses.
3
