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those in which both trade and direct investment are important. These include most major manufacturing industries. Implications for competition Verspreiden niet toegestaan | Gedownload door Elmira van den Broek ([email protected])lOMoARcPSD
If we define the industry in terms of the national market, internationalization directly influences three of the five forces of competition: Competition from potential entrants Rivalry among existing firms Increasing the bargaining power of buyers Comparative advantage = refers to the relative efficiencies of producing different products. So long as exchange rates are well behaved, then comparative advantage translates into competitive advantage. Comparative advantages are revealed in trade performance. Theory of comparative advantage states that a country has a comparative advantage in those products which make intensive use of those resources available in abundance within that country. Porter’s national diamondPorter has extended our understanding of international competitive advantage by emphasizing the dynamics through which resources and capabilities are developed. Porters diamond framework identifies four key factors that determine a country’s competitive advantage within a particular sector. Factor conditions highly specialized resources which are ‘home-grown’, porter points to the local concentration of highly skilled labor, development of substitute capabilities and low-effect manufacturing. Related and supporting industries national competitive strengths tend to be associated with ‘clusters’ of industries. Demand conditions in the domestic market these provide the primary driver of innovation and quality improvement. Strategy, structure and rivalry national competitive performance in particular sectors is inevitably related to the strategies and structures of firms in those industries. Determinants of geographical location National resource availability Firm-specific competitive advantages Tradability Foreign entry strategies How does a firm weigh the merits of different market entry modes? Five key factors are relevant: Is the firm’s competitive advantage based on firm-specific or country specific resources? Is the product tradable and what are the barriers to trade? Does the firm possess the full range of resources and capabilities for establishing a competitive advantage in the overseas market? Can the firm directly appropriate the returns to its resources? What transaction costs are involved? Verspreiden niet toegestaan | Gedownload door Elmira van den Broek ([email protected])lOMoARcPSD
The benefits of a global strategy Global strategy = one that views the world as a single, if segmented, market. There are five major sources of value from operating internationally Cost benefits of scale and replication Serving global customers Exploiting national resources: arbitrage benefits Learning benefits Competing strategically The evolution of Multinational strategies and structures