Professional Documents
Culture Documents
A competitive firm can choose from a number of trade, contractual, and investment modes of foreign market entry Why can a particular firm in a particular home country develop and maintain its competitiveness as it moves through the trade, contractual, and investment modes of globalization? Why do particular firms accumulate the tangible and
intangible assets that support international competitiveness? Has a lot do with the home base of the firm
Porter introduced a diagramthe Porter diamond that has become very well known Focuses on four central aspects of the home base, which
Porter views as the determinants of competitive advantage Factor conditions Demand conditions Related and supporting industries Firm strategy, structure, and rivalry Main argument: Nations are most likely to succeed in industries or industry segments where the national diamond is most favorable
Porter Diamond
physical capital to be basic factors that are largely inherited More important from Porters point of view are advanced factors that are created which include Sophisticated infrastructure Labor educated and trained in very specific ways Focused research institutions Porter also makes a distinction between Generalized factorscan be used in a number of different
industries Specialized factorstailored for use in specific industries
Porter Diamond
Sophisticated, demanding, and anticipatory (anticipates trends in global demand) home demand contributes to firms success Large, rapidly-growing, and early home demand are positive aspects of the home base The more home demand is synchronized with international demand trends, the more it contributes to firms competitiveness
Degree of internationalization
Porter Diamond
Related and supporting industries Supplying industries in the home base has
several advantages in downstream industries Efficient, early, rapid, and sometimes preferential
access to the most cost-effective inputs Ongoing coordination Innovation and upgrading
Porter Diamond
Firm strategy, structure, and rivalry One country differs from another with regard to
managerial systems and philosophies and with regard to capital markets Institutional environments that allow firms to take a longterm view contribute positively to competitiveness Presence of a large number of competing firms or rivals in the domestic industry Competition among firms is necessary for allocative efficiency in
a market system, but domestic rivalry contributes to dynamic, technological efficiency
geographic regioncontribute to the creation of factors Especially specialized, advanced factors A group of domestic rivals contribute to the presence of specialized and sophisticated suppliers Rivalry among domestic firms producing differentiated products enlarges home demand and makes it more sophisticated
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Flexibility and home base concepts converge in spatial clustering Interlinked firms/activities that exist in the same local and regional
setting (in terms of economic, social, cultural and institutional factors) AKA clusters, networks, centers of excellence, and industrial districts
First noticed in Silicon Valley in the United States, in what is now known as the Third Italy, in Southern Germany, and in East Asia Much productive knowledge cannot be codified into explicit forms Rather, communicated via a highly social process of face-to-face
interaction over a relatively long period of time Consequently, innovation and learning is a spatially-located, social and collective process among a group of firms
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Why do spatial clusters contribute to the productivity of firms? Concentrated communication made possible by
a cluster increases learning and innovation Contributes to the dynamic, technological efficiency of
firms in the cluster
A cluster exists within a milieu which consists of Clusters firms Knowledge embedded within the cluster Institutional environment Ties of the clusters firms to customers, research
institutions, educational institutions, and local government Milieu supports the cluster with rules and norms for business activity, social cohesion, business culture, and government support
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In its home base, a MNE obviously has the possibility of contributing to the local cluster and milieu Also possible that a MNE can tap into selected foreign clusters and milieus In the local milieu where the (MNE) controls full-fledged operations
Can be characterized as an insider Linked to other firms in both formal and informal networks Typically maintains close linkages to local research and education
facilities, governmental bodies, etc.
Provide channels for rapid dissemination of knowledge and information Provide a basis for co-operation leading to a continuous stream of improvements
Spatial clusters are important in both the home base and in the foreign operations of MNEs
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Ownership advantages offset the extra costs of doing business internationally As a firm globalizes its production system it must decide upon Location of the components of the multinational value
network Coordination among these components Summarize some issues raised in book Managing Across Borders: The Transnational Solution by Bartlett and Ghoshal (2002) A recurring theme relating to a creative tension between the local
and the globallocal-global paradox
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Global innovation
Refers to the combined and complementary use of
innovations from many parts of the multinational value network
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Global Firm Subsidiaries are little more than means to deliver uniform goods and
services to local markets Home office of the global firm is very important in planning the realization of global economies of scale and scope Traditionally associated with Japanese MNEs Good at delivering global efficiency; less effective in the areas of local responsiveness and global innovation
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parent companys knowledge to the foreign markets Parent retains considerable influence and control, but less than in a classic global company National units can adopt products and ideas coming from the
center, but have less independence and autonomy than multinational subsidiaries
Traditionally associated with US-based MNEs Good at delivering global innovation but not local
responsiveness and global efficiency
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Argue in favor of a transnational model of global management A flexible centralization/coordination or an integrated network
network, differing among countries
Flows of goods are coordinated through centralization Flows of resources are coordinated through formalization Flows of information are coordinated through socialization Bartlett and Ghoshal advocate the rotation of personel throughout the network
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Home-basedoriginates from a strategic and environmental perspective of how MNEs develop and sustain international competitive advantage Porter emphasizes the importance of the home base in
the process of upgrading competitive advantage
Heterarchicaloriginates from the field of organization and management of the MNE A common theme MNE builds increasingly complex organizational
structures and management processes
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Slvell and Zander stress that the two models have a common ground The mechanisms for fluid exchange of information and upgrading of
level Heterarchical MNErelated to the organizational level, linking diverse influences from around the world through corporate culture
Knowledge is an important connection among the OLI framework, the Porter diamond, spatial clusters, and the transnational model Any understanding of the role of MNEs must include an
understanding of the development, transmission, and application of knowledge
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Cultural Issues
Another difficulty faced by MNEs is culture Adler (2002) argues that cross-cultural business activities typically tend towards either highly effective outcomes or highly ineffective outcomes Managing these sorts of relationships can involve a search for cultural synergy
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Cultural Issues
Cultural dominance
subsidiaries
MNE that imposes its own national or business culture on its foreign
MNE tries to blend into their host country culture at all costs
Cultural avoidance
Weak base on which to build long-term business relationships across cultures Cultural compromise
business in a third country
MNE and partners meet each other half way, sometimes literally, conducting
Another method
Look for ways in which the two cultures can reinforce each other or
compromise in specific ways that benefit both sides
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