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mgmtstudyguide - Chapter 8 Globalization-> caused companies...

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Chapter 8: Globalization -> caused companies to move from a strategic posture that granted considerable autonomy to operations in individual countries to realizing the market is global 2 strategic issues: 1. how managers decide which foreign mkts to enter, when to enter them and on what scale 2. what kind of vehicle or means a company should use to expand globally and enter a foreign country Multinational company: company that does business in 2 or more national mkts thru exporting, licensing, setting up a joint venture with a foreign company and setting up a wholly owned subsidiary Global and National Environments- In last 50years: - barriers to international trade and investment have disappeared -huge global mkts for goods and services have been created and companies from different nations are entering each others mkts increasing the intensity of completion - avg tariff rate dropped significantly and regulations against foreign companies entering domestic mkts have been removed - increase international trade and increased the value of foreign direct investment Globalization of Production: -take advantage of national differences in the cost and quality of factors of production- lower cost, higher profits - industry boundaries no longer stop at national boarders - has intensified competitive rivalry in every industry- more critical to maximize efficiency, quality, customer responsiveness and innovative ability -opened up many once protected mkts to companies based outside them 4 attributes of a country specific environment that have an important impact on the global competitiveness of companies within that country: Figure 8.1 1. Factor Endowments: a nations position in factors of production such as skilled labor or the infrastructure necessary to compete in a given industry - cost and quality of production are prime determinants of competitive advantage - basic factors: land, labor, capital & raw materials -advanced factors: technological & managerial intelligence & physical infrastructure 2. Local Demand Conditions: nature of home demand for the industry’s product or service - companies are typically more sensitive to the needs of their closest customers - companies gain competitive advantage when their domestic customers are sophisticated and demanding and pressure companies to produce high quality, innovative products 3. Competitiveness of Related Supporting Industries- the presence or absence in a nation of supplier industries and related industries that are internationally competitive - benefits of investments in advanced factors of production by related and supporting industries can spill over into another industry 4. Intensity of Rivalry- the conditions in the nation governing how companies are created, organized and managed and the nature of domestic rivalry
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- different nations have different management ideologies - there is a strong association btwn vigorous domestic rivalry and the creation and persistence of competitive advantage in an industry- induces companies to improve
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