The Main Arguments of Evolution Theory

International Management Prof. dr. Niels Noorderhaven Lecture 1 Agenda †¢ †¢ †¢ 1. 2. 3. Introduction and organizational matters Does â€Å"international† still matter? Conceptual foundations of international business strategy (1) †¢ †¢ Case: Honda in the USA Literature: Textbook chapter 1 (pp 13-33 + 59-62) Team Lectures Niels Noorderhaven Cases Fons Naus Ana Aranda Gutierrez Zhengyu Li Teaching strategy Complementarity of lectures – readings †¢ Individual case participation †¢ Each lecture, one or several cases from the book will be expanded to put the theory into practice †¢ Importance of research articles Grading †¢ 70% MC exam – See Study manual for correction formula †¢ Exam dates December 13, 2012 and April 12, 2013 †¢ 30% 2 Interactive lectures – individual participation †¢ Interactive lectures grades of 2010 and 2011 can be transferred Book †¢ http://www. cambridge. rg/features/manag ement/verbeke/ Does â€Å"international† still matter? 7 Transportation & communication costs fall 17 September 2012 8 Tariffs fall, anti-dumping measures rise anti- 17 September 2012 9 Globalization Theory: †¢ Linguistic, trade and cultural barriers become less important †¢ ‘Stateless’ MNCs †¢ Within MNCs worldwide diffusion of technologies, knowledge and information Convergence of world economies 17 September 2012 10 Why is nationality important to people? Individual identity and social identity †¢ Three processes of social identity formation: †¢ social categorization †¢ social comparison †¢ social identification †¢ (Self-)categorization: what is the salient category? 17 September 2012 11 Why is nationality important to people? †¢ Positive stereotyping of â€Å"in-group†, negative stereotyping of â€Å"out-group† †¢ Nationality differences are particularly salient when people have no common history †¢ Nationality then becomes a source for one’s own identity and for the ascribed identity of the other 7 September 2012 12 Does â€Å"international† still matter? Yes, because †¦. †¢ Cultural , institutional and language differences persist †¢ Leading to differences in (business) decision making †¢ Nationality forms an important basis for social categorization processes †¢ Leading to shortcuts like cultural attribution and stereotyping With the effect that doing business across borders is different than domestic business 13 Conceptual foundations of international business strategy 4 Definition of international business strategy International business strategy means effectively and efficiently matching a multinational enterprise’s (MNE’s) internal strengths (relative to competitors) with the opportunities and challenges found in geographically dispersed environments that cross international borders. Such matching is a precond ition to creating value and satisfying stakeholder goals, both domestically and internationally. 15 TABLE OF CONTENTS (1) Introduction and overview of the book’s framework †¢ Part one: Core concepts (1) Conceptual foundations of international business strategy (2) The critical role of firm-specific advantages (3) The nature of home country location advantages (4) The problem with host country location advantages (5) Combining firm-specific advantages and location advantages in an MNE network 16 TABLE OF CONTENTS (2) †¢ Part two: Functional issues (6) (7) (8) (9) (10) International innovation International sourcing and production International finance International marketing Managing managers in the multinational enterprise 7 TABLE OF CONTENTS (3) †¢ Part three: Dynamics of global strategy (11) Entry mode dynamics 1: foreign distributors (12) Entry mode dynamics 2: strategic alliance partners (13) Entry mode dynamics 3: mergers and acquisitions (14) The role of emerging economies (15a) International strategies of corporate social responsibility (15b) International strategies of environmental sustainability 18 The seven concepts of the unifying framework †¢ †¢ †¢ †¢ †¢ †¢ Internationally transferable (or non-location bound) firmspecific advantages (FSAs) Non-transferable (or location-bound) FSAs Location advantages Investment in – and value creation through – recombination Complementary resources of external actors Bounded rationality Bounded reliability The MNE’s unique resource base †¢ Physical resources (natural resources, buildings, plant equipment). †¢ Financial resources (equity and loan capital) †¢ Human resources (individuals and teams, entrepreneurial and operational skills). Upstream knowledge (sourcing knowledge, product and process-related technological knowledge). †¢ Downstream knowledge (marketing, sales, distribution and after sales service). †¢ Admin istrative knowledge (organizational structure, culture and systems). †¢ Reputational resources (brand names, reputation for honest business dealings). International transferability of FSAs? †¢ Paradox: If the FSA consists of easily codifiable knowledge (i. e. , if it can be articulated explicitly, as in a handbook or blueprint), then it can be cheaply transferred abroad, but it can also be easily imitated by other firms.Though expensive and time-consuming to transfer tacit knowledge across borders, the benefit to the MNE is that this knowledge is also difficult to imitate. It is often a key source of competitive advantage when doing business abroad. Some FSAs are not transferable abroad: location-bound locationFSAs (1) Four main types: †¢ Stand-alone resources linked to location advantages (privileged retail locations). †¢ Local marketing knowledge and reputational resources, such as brand names (may not be applicable to a host country context, or valued to the s ame extent). Local best practices (i. e. routines), such as incentive systems or buyer-supplier relations (may not work abroad). †¢ Domestic recombination capability (may not work in foreign markets – e. g. , because co-location of resources is needed). Some FSAs are not transferable abroad: location-bound locationFSAs (2) †¢ Even if transferability of the relevant resources were technically possible, this does not mean potential for profitable deployment, i. e. the resource bundles that may be transferable from a technical perspective (e. g. , the way n which a product is marketed at home), do not constitute an FSA abroad. Location advantages †¢ Entire set of strengths of a location, and accessible by firms in that location. †¢ Should always be assessed relative to the strengths of other locations. †¢ Instrumental to FSAs Motivations for foreign expansion †¢ Natural resource seeking – Verbeke: physical, financial or human resources †¢ Market seeking †¢ Strategic resource seeking – e. g. , knowledge, finance †¢ Efficiency seeking – E. g. , low labor cost Case: Honda in the USA Background Prior to 1970s exports of motorcycles and cars †¢ Drivers of foreign production: – Rising value of the yen against US$ – Fear of import restrictions – The Clean Air Act in the US – First oil crisis †¢ Motivation for expansion (natural resource, market, strategic resource, efficiency seeking? ) Honda’s approach †¢ After four-year decision process Honda of America Manufacturing established in Marysville, Ohio, in 1978 †¢ Top priority: attain Japanese-level quality and efficiency – – – – – Selection of employees Training program Fly in managers and workers from Japan Develop lean supplier network Upgrade supplier quality level 1980: start production of cars †¢ Present: 9 production plants in USA Honda’s FSAs †¢ Non-location bound FSAs: – – – – – – – Know-how four-strike engines with optimal power-to-weight ratio Management principles Quality systems Employee selection processes Training and knowledge transfer routines Manufacturing expertise Supplier management approach †¢ †¢ Location-bound FSAs in the host country: – High demand for specific products Resource recombination: – – – Use four-strike engines in many products (motorcycles, small cars, generators, †¦) Design and manufacturing skills + knowledge of consumer preferences in USA Melding existing and new resources through management exchange program Exploit new capabilities worldwide Complementary resources of external actors †¢ Opportunity to study American way of production at Ford †¢ Extensive use of American experts and consultants (especially for selecting location) †¢ Critical role of suppliers Bounded rationality issues lack of knowledge local conditions †¢ Suppliers’ lack of familiarity with Honda †¢ New employees lack of familiarity with â€Å"The Honda Way† Bounded reliability issues †¢ Moral hazard/adverse selection employees †¢ American managers have local priorities Deliberate strategy? Agenda for next lecture 1. 2. 3. 4. Four types of MNEs Recombination Bounded rationality & reliability Firm-specific advantages (FSAs) †¢ Cases: 3M & IKEA †¢ Literature: Textbook chapter 1 (pp 33-76) + chapter 2 NB: Class will be in SZ 31