Professional Documents
Culture Documents
TABLE OF CONTENTS 1
l
3.
Definition of
international business strategy
l
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Bounded
rationality
Stand-alone
FSAs
Home
Country
Routines
International
border
Re-combination
capabilities
Host
Country
Bounded
reliability
Location advantages
home country
Non-transferable (or
location-bound) FSAs
home country
10
l
l
12
Routines
l
Recombination
l
l
International transferability of
FSAs?
l
Paradox:
If the FSA consists of easily codifiable knowledge (i.e.,
if it can be articulated explicitly, as in a handbook or
blueprint), then it can be cheaply transferred abroad,
but it can also be easily imitated by other firms.
Though expensive and time-consuming to transfer tacit
knowledge across borders, the benefit to the MNE is
that this knowledge is also difficult to imitate. It is often
a key source of competitive advantage when doing
business abroad.
15
17
Location advantages
l
18
19
Home Country
International
border
Stand-alone
FSAs
Host Country
y
tar
en
m
s
le
e
mp urc
Co reso
Routines
Re-combination
capabilities
Internationally
Location advantages Non-transferable (or
location-bound) FSAs transferable (or nonhome country
location bound) FSAs
home country
Internationally
transferable (or nonlocation bound) FSAs
Non-transferable (or
location-bound) FSAs
host country
Location advantages
host country
20
21
Home Country
International
border
Host Country
Internationally
Location advantages Non-transferable (or
location-bound) FSAs transferable (or nonhome country
home country
location bound) FSAs
Internationally
Non-transferable (or Location advantages
transferable (or non- location-bound) FSAs host country
location bound) FSAs host country
22
23
Home Country
International
border
Host Country
Internationally
transferable (or nonlocation bound) FSAs
Internationally
transferable (or nonlocation bound) FSAs
Location advantages
Non-transferable (or
location-bound) FSAs host country
host country
24
25
International
border
Host
Country A
Home
Country
Host
Country B
Host
Country C
26
27
Host
Country A
Stand-alone
FSAs
Home
Country
Host
Country B
Routines
Re-combination
capabilities
Host
Country C
28
29
Geographic
source
Internationally transferable
(Non location-bound) FSAs
Non-transferable
(location-bound) FSAs
II
Home country
operation
I
III
VI
+
Host country
operation
IV
V
VII
+
IX
Network
VIII
X
Key:
30
Complementary resources of
external actors
l
31
Bounded rationality
Scarcity of mind: managers responsible for making
decisions and engaging in purposive action in the firm
always face information problems:
l One source is poor access to information sufficient in
quality and quantity.
l Another source is the limited mental capability to
process complex information bundles.
l Example of Xerox and Fuji-Xerox.
32
Bounded reliability
Scarcity of effort to make good on open-ended promises
l One source is opportunism (ex-ante false promises;
ex-post reneging on promises).
l A second source is benevolent preference reversal
(e.g., good faith local prioritization: distance in time
from punishment; distance in space from the
headquarters monitoring apparatus; proximity to - and
intrinsic satisfaction from - focusing on local opportunities
with immediate local rewards. Scaling back on
overcommitment).
l Need for safeguards.
33
34
2.
3.
4.
5.
Characteristics of a
core competence
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40
Organizational implications
l
Dangers of outsourcing
l
42
43
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Context Second
complementary perspective (1/3)
Andrew Bartmess and Keith Cerny (CMR):
l
Often two wrong assumptions when attempting to
access host country location advantages in
manufacturing.
l
The validity of the two assumptions should be checked
when thinking about exploiting core competences
abroad:
1. Manufacturing knowledge is a stand-alone FSA.
2. This FSA can be effortlessly recombined with foreign
location advantages.
45
Context Second
complementary perspective (2/3)
Reality:
1.
Knowledge in a single functional area (R&D or
marketing) is not a core competence: this involves
combining stand-alone knowledge bundles found in
different functions into routines. Thus: co-location is
important.
2.
There are complexities involved in successfully
exploiting and further augmenting FSAs abroad
(importance of managing the required linkages).
46
Context Second
complementary perspective (3/3)
Five criteria to assess the need for co-locating activities
instrumental to further recombination:
1.
Complexity of information to be transferred.
2.
Required level of interaction: higher uncertainty and
need for two-way information flows (mutual
adjustment).
3.
Similarity of background and expertise of people
involved at home and abroad.
4.
Prior relationships affecting communication on
sensitive issues.
5.
Concreteness of information (emotions, feelings,
cultural values embedded?).
47
Management Insights
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48
Geographic
source
Internationally transferable
(Non location-bound) FSAs
Non-transferable
(location-bound) FSAs
II
Home country
operation
I
III
VI
+
Host country
operation
IV
V
VII
+
IX
Network
VIII
X
Key:
49
Host
Country A
Home
Country
Host
Country B
Host
Country C
50
2)
3)
Location advantages? FSA-transfer costs Locationbound FSAs? A strategic architecture alone will not
lead to successful exploitation of core competences
abroad.
Geographical embeddedness of competence
carriers? Co-location matters here too.
Nave view of corporate headquarters versus SBU
relationships (idem versus subsidiaries). In practice,
FSA transfer is very difficult (cf. concept of subsidiaryspecific advantage in Chapter 1).
51
5)
52
2.
3.
4.
5.
Chapter Three:
The Nature of Home Country
Location Advantages
Michael E. Porter
The competitive advantage of nations,
Harvard Business Review 68 (1990), 73-93
2.
3.
4.
5.
Porters diamond
l
56
Porters diamond
l
Porters diamond
l
Context Second
complementary perspective (1/3)
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60
Context Second
complementary perspective (2/3)
l
Context Second
complementary perspective (3/3)
l
62
Management Insights
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63
B
Weak
LAs
A domestic C
LAs
LB FSAs
diamond
diamond).
Strong domestic
diamond
LAs
LAs
LB FSAs
LAs
D
A. Factor conditions
B. Related and supporting industries
C. Demand conditions
D. Firm strategy, industry structure, and rivalry
Home
country
Host
country
64
Geographic
source
Internationally transferable
(Non location-bound) FSAs
Non-transferable
(location-bound) FSAs
II
Home country
operation
Host country
operation
Network
Key:
65
66
Canada
LAs
Canada
International
border
LAs
USA
USA
LAs
Canada
NAFTA
LAs
USA
With the single diamond model, the home country LAs determine whatever FSAs a company may
develop. With the double diamond model, firms also draw on LAs of other nations than the home
country to strengthen their own FSAs. Trade and investment liberalization (as with NAFTA)
institutionalizes this possibility of freely accessing and drawing upon the resources present in a host
country diamond to strengthen FSAs. This is why the trapezoids representing Canadian and US
location advantages are shown as being similar in size, though NAFTA obviously does not eliminate
completely country borders.
67
68
69
70
71
Strengths
Weaknesses
Opportunities
Threats
Factor conditions
Local
State/provincial
National
Foreign
Global
Strengths
Weaknesses
Opportunities
Threats
Demand conditions
Competitive performance
Local
State/provincial
National
Foreign
Global
Strengths
Weaknesses
Opportunities
Threats
Strengths
Weaknesses
Opportunities
Threats
72
73
74
2.
3.
4.
5.
76
Distance components
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Cultural distance
Administrative (or institutional) distance
Geographic (or spatial) distance
Economic distance
77
Case study:
Tricon (now YUM! brands)
l
78
79
80
Context Second
complementary perspective
l
Management Insights
l
82
Non-LB FSAs
LAs
LB FSAs
Non-LB
FSAs
Non-LB FSAs
Non-LB
FSAs
Domestic base
83
LB FSAs
LAs
LB FSAs
Non-LB FSAs
LB FSAs
LB FSAs
Domestic base
84
Geographic
source
Internationally transferable
(Non location-bound) FSAs
Non-transferable
(location-bound) FSAs
Home country
operation
III
+
Host country
operation
Network
Key:
85
Five limitations
1. Macro-level distance may be an important explanation
for lack of success in a foreign market, but only reflects
a macro-level reality.
Investments required to develop location-bound FSAs in
a foreign market will be different for each company (e.g.,
US-based company with senior managers from Taiwan
expanding to Taiwan).
86
Five limitations
2. Higher distance does not necessarily mean reducing
geographic scope:
l Design elements can foster a stronger recombination
capability, e.g., higher functional diversity of senior
management.
l MNE should build into its human resources base and
key decision making routines a deep knowledge on
foreign markets.
87
Five limitations
3. The impact of macro-level distance may be very
different in the various value chain activities, especially
input versus output markets, e.g., Levi Strauss.
Ghemawats analysis is appropriate for centralized
exporters and international projectors, but less so for
international coordinators.
88
Five limitations
4. With strategic asset seeking investment, a high
distance location, though creating high costs for the
firm, may also be instrumental to learning
opportunities unavailable in low distance locations.
Managerial prescription of reduced geographic
scope is not equally valid for all foreign entry
motivations.
89
Five limitations
5. Ghemawats model does not address cooperative
agreements to address the distance challenge.
Complementary resources may reduce distance.
90
2.
3.
4.
5.
Roles of subsidiaries
Two common, wrong assumptions made by senior MNE
management:
1) United Nations model of multinational management:
treat each subsidiary in a similar manner.
Implies either subsidiary independence (multi-centered
MNEs) or complete dependence (global exporters or
international projectors).
2) Headquarters hierarchy syndrome: corporate
headquarters rule (only valid in case of complete
dependence of subsidiaries).
l
95
96
Solution 1
l
97
Solution 2
Simple normative model as a response to differentiated
subsidiary role requirement:
1) Assess each market according to its strategic
importance.
2) Rate each subsidiarys resource base in terms of
sales and marketing achievements, production
capabilities, research and development, or any other
strength contributing to competitiveness.
l
98
High
Low
High
Strategic
importance of
the local market
Low
Resource base of
the subsidiary
99
100
2.
3.
4.
5.
102
High
Subsidiary benefiting
from favorable resource
allocation decisions
Commitment
Trust
Compulsory
execution
Subsidiary facing
unfavorable resource
allocation decisions
Low
Low
Procedural
justice
High
103
Context Second
complementary perspective (1/3)
l
104
Context Second
complementary perspective (2/3)
Five main problems:
1. Japanese MNEs adopt a centralized, autocratic
approach vis--vis their foreign subsidiaries.
2. Japanese MNEs have little confidence in
subordinate, non-Japanese managers.
3. Relationships of trust are confined to a few key
managers.
4. Japanese staffing policies are ethnocentric.
5. Japanese MNEs discriminate against women and
minorities.
105
Context Second
complementary perspective (3/3)
Conclusions:
1. Strong FSAs in technology, production and government
relations do not necessarily imply the MNE has strong
capabilities to manage a foreign subsidiary network.
2. United Nations approach and headquarters-hierarchy
syndrome prevent many Japanese MNEs from
developing strategic leader subsidiaries.
106
Management Insights
Bartlett and Ghoshal suggest that firms need to move
beyond the conventional global exporter, international
projector and multi-centred MNE models (they neglect
the existence of the international coordinator model).
107
Strategic leader
Figure 5.3 MNE resource base subsidiaries
as driving factor
Contributor
LAs
LB FSAs
Non-LB FSAs
Implementer
Black hole
Domestic base
Foreign markets
108
Geographic
source
Home country
operation
Internationally transferable
(Non location-bound) FSAs
Non-transferable
(location-bound) FSAs
I
III
VI
IV
Host country
operation
Network
Key:
109
Management Insights
Limitations
1. After subsidiary roles have been allocated,
valuable subsidiary initiatives often arise in spite
of narrow charter.
Key challenge is not to classify subsidiaries in four
categories, but to craft routines allowing valuable
initiatives to arise bottom-up and to provide support
for such initiatives.
In other words: the key challenge is to identify what
constitutes valuable knowledge?
110
Management Insights
Best practices increase the likelihood that subsidiary
initiatives will come to fruition:
a.
b.
c.
d.
111
Management Insights
2) The importance of host country environments as input
markets and output markets are wrongly equated;
articles focus is almost solely on output markets:
l For access to foreign input markets, the MNE must rely
on subsidiary capabilities at the upstream end
(technology, sourcing).
l Many subsidiary roles are defined primarily by the
input market, not the output market in foreign nations,
and by upstream FSAs, rather than downstream ones.
112
High
Strategic
importance of the
local market as
market for inputs
Low
High
Strategic
importance of the
local market as
market for outputs
Low
High
Upstream subsidiary
competencies
Figure 5.5 A
Low
Low
High
Downstream subsidiary
competencies
Figure 5.5 B
113
Management Insights
3) Bartlett and Ghoshal do not address fully subsidiary
role dynamics, especially after regional integration
schemes:
a) Increase in overlap among markets as a result of
regional integration.
b) Increased internal competition among subsidiaries in
cases of strong regional market unification and
capability commodification.
114
High
Regional
unification of
national
environments as a
market for inputs
Low
High
Regional
unification of
national
environments as a
market for outputs
2
Low
High
Commodification of upstream
subsidiary competencies
Figure 5.6 A
Low
Low
High
Commodification of downstream
subsidiary competencies
Figure 5.6 B
115
Regionally managed
Businesses
Locally managed
Businesses
Market
Market Business
Business
Executive
Manager
Division
Manager
Regional Business
Market Head
Country
Manager
Globally managed
Businesses
Market
Market
Business
Head
Regional
Business
Global
Business
Regional
Business
Head
Global
Business
Head
Country
Country
Business
Country
Business
Product Unit
Manager
Country
Business
Manager
116
Source: Nestle company website
2.
3.
4.
5.
Assess the current organizational structure and decisionmaking processes in your firm and reflect on the different
roles performed by your subsidiaries.
Classify your portfolio of subsidiaries as a function of the
strategic importance of each market where they operate and
the resource base they command.
Respect the five components of due process in each
corporate head office decision that will affect subsidiaries.
Review the main problems faced by many Japanese
MNEs and learn from their mistakes.
Analyze best practices (inside your firm and industry) for
FSA development in subsidiaries and reflect on the key
drivers of subsidiary roles and dynamics.
117
TABLE OF CONTENTS 1
l
119
Chapter Six:
International Innovation
Walter Kuemmerle
Building effective R&D capabilities
abroad
Harvard Business Review 75 (1997), 61-70
Significance (1)
l
l
-
123
Significance (2)
Kuemmerle observed the internationalization of the R&D
function:
l Two distinct types of R&D facilities: home-base exploiting
sites and home-base augmenting sites.
l Home-base exploiting sites supporting manufacturing
facilities in foreign countries or to adapt standard products to
the demand there, with information flows to the foreign
laboratory from the central lab at home.
l Home-base augmenting sites have information flows from
the foreign laboratory to the central lab at home.
124
Significance (3)
l
125
Significance (4)
l
126
Significance (5)
l
127
Significance (6)
l
128
Significance (7)
l
129
Significance (8)
l
130
131
132
Internal and external initiatives are attempts to earn homebase augmenting innovation charters.
Senior management at corporate headquarters may provide
seed funds; invite initiatives through formal calls for
proposals; allow initiatives to flourish in sheltered
circumstances; stimulate internal, social networking.
134
135
Context Second
complementary perspective (1/3)
l
136
Context Second
complementary perspective (2/3)
l
137
Context Second
complementary perspective (3/3)
l
-
-
-
-
-
-
138
Old model
1
International
border
New model
2
Home-base exploiting
foreign R&D units
1
International
border
LB FSAs in R&D
4
Home-base
augmenting foreign
R&D units
1
International
border
139
l
l
140
Geographic
source
Home country
operation
Internationally transferable
(Non location-bound) FSAs
Non-transferable
(location-bound) FSAs
I
III
VI
+
Host country
operation
+
IX
Network
VIII
Key:
141
Significance (1)
l
146
Significance (2)
Changes in the international business environment driving
assignment of new foreign factory roles:
1. International trade tariffs declined substantially in the
second half of the 20th century, so foreign factories can be
more than branch plants.
2. Modern manufacturing increasingly technologically
sophisticated, so that location in sophisticated knowledge
clusters makes sense.
3. Shortened product life-cycles, requiring close linkages
between knowledge development and production.
147
Significance (3)
Possible roles of foreign manufacturing facilities result from:
l Host country location advantages the MNE wants to
access.
l Level of distinct FSAs held by the plant.
148
Weak
Strong
Access to
knowledge and
skills
Outpost
Leader
Proximity to
market
Access to low
cost production
Server
Contributor
Offshore
Source
149
Significance (4)
Result: Six types of factories
1. Offshore factory: accesses low-cost input production factors;
output exported; no new FSA development; minimum
autonomy.
2. Server factory: supplies predefined, proximate national or
regional output market; overcomes trade barriers, logistics
costs and foreign exchange exposure; some FSA
development; narrow charter with relatively little autonomy or
specialized capabilities.
150
Significance (5)
3. Outpost factory: gathers valuable information from
advanced, host country clusters, mainly on input side;
manufacturing combined with offshore/server factory role.
4. Source factory: accesses low-cost input production factors;
receives resources; engages in resource recombination;
develops FSAs to build best practice plant in MNEs
network; more autonomy; in locations with good infrastructure
and skilled workforce; may be a strategic leader at input side;
narrow charter.
151
Significance (6)
5. Contributor factory: oriented towards host country/region
output market; stronger capabilities; at input market side,
responsible for resource recombination of process
improvements, new product development, customizations,
etc.
6. Lead factory: strong resource recombination and new FSA
development; accesses local clusters valuable inputs and
plays key role in localized manufacturing innovation;
connected with all key-players in input markets (such as
research labs) and end-users at the output side.
152
Significance (7)
l
l
153
Significance (8)
Common obstacles to upgrading of foreign factories:
l Fear of relying on foreign operations for critical skills.
l Treating overseas factories like cash cows and
neglecting long-term investment.
l Creating instability by shifting production in reaction to
fluctuating exchange rates and costs.
l Responding to government relocation incentives to
move factories to new locations that possess minimal
potential for upgrading.
154
155
156
Context Second
complementary perspective (1/2)
J.Galbraith (CMR) Transferring core manufacturing
technologies in high-technology firms.
l Observed firms locked into a situation of profitless
prosperity (e.g., scale advantages linked to price wars).
l Solution: move towards system of flexible, smaller
manufacturing plants that can easily adapt to changes, at
demand and supply sides.
157
Context Second
complementary perspective (2/2)
l
158
159
160
Weak
Strong
Access to
knowledge and
skills
Outpost
Leader
Proximity to
market
Access to low
cost production
Server
Contributor
Offshore
Source
161
Geographic
source
Home country
operation
Internationally transferable
(Non location-bound) FSAs
Non-transferable
(location-bound) FSAs
I
III
VI
+
Host country
operation
Network
Key:
162
Outpost factory
Server factory
Offshore factory
163
164
3.
165
Chapter Eight:
International Finance
DR Lessard and JB Lightstone, Volatile
exchange rates can put operations at
risk
Harvard Business Review 64 (1986),
107-114
168
Significance (1)
l
l
l
169
Significance (2)
l
170
Significance (3)
l
171
Strong
Exposure
absorption
capability on
the input
market side
Weak
Weak
Strong
Exchange rate
pass-through on
the output
market side
172
173
174
175
176
177
Context Second
complementary perspective
l
l
l
178
179
Figure 8.2 Patterns of FSA development from managing operating exposure in MNEs
Generic FSA-type
Geographic
source
Home country
operation
Internationally transferable
(Non location-bound) FSAs
Non-transferable
(location-bound) FSAs
I
III
IV
Host country
operation
Network
Key:
180
181
182
International
border
The thin, curved arrow out of the home country triangle, pointing to the host countrys LAs, means that the firms NLB FSAs allow for a
strong exchange rate pass through capability in the output market: unfavourable changes in exchange rates, leading to price increases
in the host countrys currency, are simply passed on to host country customers without loss in exported sales volume. The areas A and
B reflect macro-level location characteristics affecting the real exchange rate between the currencies of countries A and B.
183
International
border
184
International
border
The firm operates a centralized exposure management system, meant to reduce overall operating exposure risks faced by the firm, but the unique currency
exposure position of each subsidiary co-determines the functioning of this central system (shown by the thin, curved double-headed arrow connecting home
and host country). The exchange rate pass through capability of each subsidiary depends on the specific inputs it is mandated to access in the host country
and/or on the specific outputs it must sell in the host country (shown by the second double-headed arrow). A and B reflect macro-level location characteristics
affecting the real exchange rate between the currencies of countries A and B.
185
International
border
186
Chapter Nine:
International Marketing
T Levitt
The globalization of markets
Harvard Business Review 61 (1983), 93
Significance (1)
l
190
Significance (2)
l
191
Significance (3)
l
192
Significance (4)
- Second: converging tastes allow globally standardized
products.
High quality and low cost are complementary goals
achievable through innovation and efficiency.
Even small niches allow for a global approach
satisfying the three criteria (quality, reliability and low
price).
193
Significance (5)
l
194
195
196
197
198
199
Context Second
complementary perspective (1/4)
David Arnold, Julian Birkinshaw and Omar Toulan
(CMR): the potential and limits of global account
management.
l Global account management: dedicating specialized
resources, typically non-location bound routines, to
serve internationally operating customers in an
integrated fashion.
l Implies standardized supply contracts.
l Host country subsidiaries loose their ability to alter
the marketing mix when serving local operations of
international customers.
200
Context Second
complementary perspective (2/4)
Four pitfalls to global account management:
1. If customer is further ahead with international
coordination, main effect may be price squeezes,
with little benefits to the supplier. Customers
automatically demand the lowest price and volume
discounts.
If the supplier also engages in international coordination
the focus of negotiations on global account agreements
can be redirected from cost considerations to
strategic issues such as additional value added
services, but only if the vendor is one of the customers
main suppliers and the customer is a lead user.
l
201
Context Second
complementary perspective (3/4)
2. Global accounts should be assigned to experienced
executives with a long-term vision, rather than to mere
sales people interested in maximizing short-term sales.
3. Suppliers local sales will remain active so that it may
become impossible to separate the value added of the
suppliers global account team and its local sales
organizations.
4. Alienation may be felt by local marketing management
teams.
202
Context Second
complementary perspective (4/4)
- Senior MNE management must communicate clearly
with local marketing organizations and support global
account managers.
- Senior MNE management must enlist commitment from
local marketing people to the principles of global account
management through allocating sales commissions to
both global account management teams and local
marketing people (formalized incentive splitting).
203
International
border
204
205
Generic FSA-type
Geographic
source
Home country
operation
Internationally transferable
(Non location-bound) FSAs
Non-transferable
(location-bound) FSAs
IV
Host country
operation
Network
Key:
206
207
Chapter Ten:
Managing Managers in the
Multinational Enterprise
JS Black and HB Gregersen
The right way to manage expats
Harvard Business Review 77 (1999), 52-63
Significance (1)
l
Significance (2)
l
Significance (3)
Four common problems in how firms manage their
expatriates:
1. Senior managers in the home country underestimate
impact of distance and do not invest in selecting and
training potential candidates.
2. Human resources managers have little international
experience themselves.
214
Significance (4)
3. Senior management views expatriates as well paid and
well looked after.
4. Misconception that expatriates do not need help
readjusting after having returned home.
215
Significance (5)
Firms with superior expatriate management practices in
terms of job satisfaction, performance and retention tend
to adopt three best practices:
1. Clear understanding of the expatriations purpose and
related expectations (e.g., creating knowledge and
developing global leadership skills at Nokia)
216
Significance (6)
2. Selecting appropriate candidates whose technical skills
are matched or exceeded by their cross-cultural
abilities.
3. Substantial attention to re-integrating expatriates in
their home country.
(Honda: example that implements all three practices).
217
Significance (7)
Three approaches to select the most suitable candidates:
1. A senior executive personally observes employees in
various cultural settings.
2. Extensive survey early in the employees career and
discussions between potential candidates and senior
managers to identify interest/gaps and establish
personalized development and training plans.
3. Hiring employees with prior international experience
and sending prospects for expatriation on shorterterm, foreign training assignments.
218
219
Problem if increased international competition and costcutting needs impose rationalization of the MNE as an
organization, but with corporate headquarters unable
to impose such rationalization.
A control gap exists, which can be closed through an
adequate organizational context.
220
221
Actual change processes to move unintended multicentered MNEs back to having more centralized control:
each successful change process included the same
sequence of eight steps focused on altering the
organizational context, whereby ultimately the four
orientations were fundamentally changed.
222
223
224
Context Second
complementary perspective (1/3)
Christopher Bartlett and Sumantra Ghoshal (CMR)
describe how firms move from an MNE archetype
towards a more balanced approach: not through big
changes in structure, but through adjustments of the
organizational context.
1. How centralized exporters try to shed their
dysfunctional properties.
Matsushita example: use of expatriates; coordination
mechanisms in the most downstream activities (internal
trade shows); personnel transfers across functions.
225
Context Second
complementary perspective (2/3)
2. How multi-centred MNEs try to shed their
dysfunctional properties.
Philips example: increased focus on innovation in
subsidiaries and more attention to integration, through
expatriates (similar to what is expected in many
countries diplomatic services).
226
Context Second
complementary perspective (3/3)
l
227
228
230
International
border
231
International
border
Host
Country A
Host
Country B
Host
Country C
232
International
border
Host
Country A
Home
Country
Host
Country B
Host
Country C
233
Chapter 11
Entry Mode Dynamics 1:
Foreign Distributors
D. Arnold,
'Seven rules of international distribution',
Harvard Business Review 78 (2000),
131-137
Significance (1)
l
Significance (2)
l
238
Significance (3)
l
Significance (4)
l
Significance (5)
Guidelines for MNEs managing local distributors:
1. Pro-actively select locations and only then suitable
distributors: do not expand as a response to unsolicited
proposals from local distributors. Best distributors are
not necessarily the largest, who may have contracts with
rivals and an interest in dividing the existing market among
them, rather than rapidly building this market for one firm.
2. Focus on distributors market development
capabilities. Critical is the best company fit in terms of
strategy, culture and willingness to invest, not the market
fit with distributors already serving key target customers
with related products.
241
Significance (6)
3. Manage distributors as long-term partners: give
incentives to invest in long-term development. E.g., if the
buy-back price depends on sales volumes, not profit
margins, the distributor may position the product as a
commodity, rather than extract the highest price from
customers and harm the products positioning.
4. Provide resources (managerial, financial and
knowledge-based) to support distributors for marketdevelopment purposes: committing more resources
(skilled support staff, minority equity participations and
knowledge sharing) earlier may foster higher performance.
242
Significance (7)
5. Do not delegate marketing strategy to distributors:
the MNE should provide clear leadership on choice of
products, their positioning, marketing budget size, etc.
Distributors should adapt this strategy to local market
needs.
6. Secure shared access to the distributors critical
market and financial intelligence: their willingness to
share this information, signals their commitment to
becoming a solid, long-term partner.
243
Significance (8)
7. Link national distributors with each other, especially
at the regional level (spanning a number of
countries): regional headquarters to coordinate
distribution efforts, or autonomous distributor councils,
may lead to best practices diffusion inside the
distributors network, and act as an internal monitoring
mechanism, stimulating more consistent strategy
implementation throughout the region.
244
245
Context Second
complementary perspective (1/2)
Lee (2002) 'Aligning supply chain strategies with
product uncertainties', CMR
l Demand uncertainty results from MNEs limited
capability to understand the requirements for LB FSAs in
distribution to develop new markets, as a complement
to its internationally transferable FSA-bundle,
embodied in its exported products.
l Supply side uncertainty results from bounded
rationality challenges in logistics optimization (new
country needs must be linked to existing supply chain).
247
Context Second
complementary perspective (2/2)
To remove demand and supply side uncertainties:
- Share sufficient information on demand.
- Postponement strategy, i.e. maximize flexibility by
leaving customization to the latest point, e.g. Benetton
sweater colours.
- Risk hedging, e.g. regional level inventory pool.
l
248
249
Generic FSA-type
Geographic
source
Home country
operation
Internationally transferable
(Non location-bound) FSAs
Non-transferable
(location-bound) FSAs
I
III
IV
Host country
distributors
+
IX
Distributors
networks
X
Key:
III
IV
IX
251
High
High
3A
3B
4A
4B
Requirements for
technical
customization/
adaptation (location
unrelated)
Low
Low
High
252
253
High
High
3A
3B
4A
4B
Requirements for
technical
customization/
adaptation (location
unrelated)
Low
Low
High
254
International
border
E
B
255
Chapter 12
Entry Mode Dynamics 2:
Strategic Alliance Partners
G Hamel, YL Doz and CK Prahalad
Collaborate with your competitors and
win
Harvard Business Review 67 (1989),
133-139
Significance (1)
l
259
Significance (2)
l
260
Significance (3)
l
Significance (4)
l
262
Significance (5)
l
Significance (6)
l
Significance (7)
l
265
267
Context Second
complementary perspective (1/7)
Prashant Kale and Jaideep Anand (CMR): Alliances in
emerging economies (India).
l Joint ventures are often set up when they are the foreign
MNEs only penetration option, given a restrictive
regulatory regime.
l Local partner substantive contribution results from FSAs
in government relations and other location-bound
FSAs allowing national responsiveness.
269
Context Second
complementary perspective (2/7)
l
270
Context Second
complementary perspective (3/7)
l
271
Context Second
complementary perspective (4/7)
l
-
-
272
Context Second
complementary perspective (5/7)
-
273
Context Second
complementary perspective (6/7)
l
274
Context Second
complementary perspective (7/7)
l
275
Asian MNE
JV
Re-combination
capabilities
Combination
Routines
capabilities
Stand-alone
FSAs
Stand-alone
FSAs
Routines
Re-combination
capabilities
Western MNE
Asian MNE
Re-combination
capabilities
Combination
Routines
capabilities
Stand-alone
FSAs
Stand-alone
FSAs
Stand-alone
FSAs
Routines
Re-combination
capabilities
Western MNE
276
Stand-alone
FSAs
Routines
Re-combination
capabilities
Large MNE
Non-location
bound FSAs
Location-bound FSAs
Location advantages
277
Large MNE
Both the foreign MNE and the
emerging economy MNE
contribute NLB FSAs to the
alliance in the emerging economy
(represented by the dotted circle)
as equal partners.
Large MNE
Large MNE
278
Targeted FSAs
Entry mode
Location-bound
complements to extant
FSA bundles
Investments to develop
internationally exploitable
FSAs and SSAs
Investments to develop
location-bound FSAs
Wholly-owned
afilliate
Alliance
Non-location bound
complements to extant FSA
bundles
Access to location-bound
FSAs through alliance
Key:
SSAs
ASAs
279
280
282