JVs often involves partners from different backgrounds and with different goals

Jvs often involves partners from different

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JVs often involves partners from different backgrounds and with different goals = conflicts are natural Nature of JVs doesn’t give an MNE the tight control over a foreign sub that it may need for global coordination Wholly owned subsidiary (WOS) o Sub located in a foreign country that is entirely owned by parent multinational o Two means to set up a WOS Greenfield operations Building new factories and offices from scratch Acquisition Buy a company in host country and take over control Represents approx. 70% of worldwide FDI 10-5 Management Savvy Three implications for actions emerge from resource and institutional based perspectives o From an institution-based view Managers need to understand the rules of the game (both formal and informal) governing competition in foreign markets Failure to do so can be costly Need to do good homework, keep their heads low, and work on low- profile acquisitions, which are routinely approved in developed countries o From resource-based view Managers need to develop overwhelming capabilities to offset the liability of foreignness Being good enough is not good enough o Managers need to match entries with strategic goals If goal is to deter rivals in their home markets through price slashing as TI did in Japan then be prepared to fight a nasty price war and lose money If goal is to generate decent returns, then withdrawing from some tough nets to crack may be necessary (e.g. Walmart’s withdrawal from Germany) Chapter 12: Strategizing, Structuring and Learning Around the World 12-1 Multinational Strategies and Structures Pressures for Cost Reduction and Local Responsiveness o MNEs confront primarily two sets of pressures: Cost reduction Local responsiveness Means reacting to different consumer preferences and host-country demands o Makes local customers and governments happy, but increases costs o These 2 are dealt within the Integration-Responsiveness Framework which allows managers to deal with the pressures for both global integration and local responsiveness Cost pressures call for global integration Local responsiveness pushes MNEs to adapt locally o Some companies downplay/ignore different needs and wants of various local markets and instead market a global version of products and services This idea is traced by to a 1983 by Theodore Levitt He argued that worldwide consumer tastes are converging o Pointed to cases of Coke, Levi jeans and Sony colour TV
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o Predicted that such convergence would characterize most product markets in the future This idea has been the intellectual force propelling many MNEs to globally integrate their products while minimizing local adaptation o Ford tried a “world car” was not successful, Ford found consumer tastes ranged widely around the globe o “one size does not fit all” Four Strategic Choices (based on the integration-responsiveness framework) 1. Home Replication (or “international/export” strategy) Advantages Leverages home country-based advantages
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