Peng Inst Chapter 10 REVISED (2nd Edition)

Peng Inst Chapter 10 REVISED (2nd Edition) - Peng...

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Peng Global Business 2e Chapter 10 Entering Foreign Markets 1
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LEARNING OBJECTIVES After studying this chapter, you should be able to: 1. Identify ways in which institutions and resources affect the liability of foreignness. 2. Match the quest for location-specific advantages with strategic goals. 3. Compare and contrast first-mover and late-mover advantages. 4. List the steps in the comprehensive model of foreign market entries. 5. Participate in three leading debates on foreign market entries. 6. Draw implications for action. 2
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LIABILITY OF FOREIGNNESS The disadvantage foreign firms face in host countries.   Manifested in  two  ways: 1.Differences in formal and informal institutions (e.g.,  many governments ban foreigners from owning assets  in certain strategic areas).   1.Discrimination against foreign firms, formally (e.g.,  “Buy American” in government procurement) and  informally (e.g., consumer resistance in Japan and  Europe to genetically modified foods). 3
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HOW DO FIRMS OVERCOME THE LIABILITY OF  FOREIGNNESS WHEN ENTERING NEW MARKETS? Institution-based view -  foreign firms  act according to expectations of the  various formal and informal institutions  (e.g., Toyota and Honda in USA  -“American Made”) Resource-based view -  foreign firms  deploy overwhelming resources (e.g.,  Pearl River in low-end pianos in North  America).    4
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ENTERING FOREIGN MARKETS Where?  Match the quest for advantage  with strategic goals (e.g., efficiency seeking  goals matched with manufacturing in  China). When?  First-mover (e.g., Yahoo! in Japan)  vs. late-mover (e.g., Boeing in commercial  aircraft). How?  Scale (large vs. small) and Modes of  Entry (equity/nonequity).   6
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WHERE TO ENTER? Two considerations affect the decision: 1. Strategic goals  (i.e., natural resource,  market, efficiency, and innovation  seeking).  2. Cultural distance  (i.e., cultural  differences) and  institutional distance   (i.e., differences in regulatory,  normative, and cognitive institutions). 7
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STRATEGIC GOALS Location-specific advantages  – Certain  locations possess geographic features that are  difficult for others to match (e.g., In Focus 10.2,  Rotterdam - the gateway of Europe to the world). Agglomeration  –Other location-specific  advantages arise from the clustering of economic  activities in certain locations (e.g., aerospace  firms cluster in Wichita, Kansas, In Focus 6.1). 8
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Peng Inst Chapter 10 REVISED (2nd Edition) - Peng...

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