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level: W05 Why firms go abroad

Questions and Answers List

level questions: W05 Why firms go abroad

Question	Answer
Multinational corporation. The firm needs to have at least one other branch/office/entity abroad to be considered as a ¨MNC¨. Other terms used as synonymes. Multinational Enterprise - MNE Transnational Corporation - TNC	"MNC"
When a firm aquires or creates an internal business. It is a good strategy for expanding internationally. It can happen by aquiring another company, buying a new facility or merging with another company/stakeholder. (M&A) Expanding the product line within a category is also called horizontal integration. Ex a Shoe retailer that originally only sells sneakers expands and starts selling running shoes as well.	¨Horizontal integration¨
When a company expands and executes other operations in the same supply chain. Ex. A car manufacturer can invest and open up a car store. (vertical intergration - distribution)	¨Vertical intergration¨
Describes how value is added or removed across the distribution of a value chain.	¨The smiling curve¨
When a company vertically integrates and decides to open up manufacturing facilities for instance, arbitrage opportunities arise. Big companies are most likely to invest in a contry with a low labor cost. They are leveraging arbitrage in terms of a cheap workforce. Ex. H&M, ZARA, Nike etc	Link these concepts: "Vertical integration" & "Arbitrage"
R&D: Home country Design: Home country Manufacturing: Home country Sales: Host country/countries Distribution & Service: Host country/countries	How does the "Home replication strategy" work?
R&D: Home country Design: Home country & host countries Manufacturing: Home country & host countries Sales: Home country & host countries Distribution & Service: Home country & host country	How does the ¨Multidomestic strategy¨ work?
R&D: Home country Design: country 1 Manufacturing: country 1 & 2 Sales: Home country Distribution & Service: Home country & host countries Ex. Nike, ZARA	How does the "Global strategy" work?
Reduced overhead/administrative costs Allows for rapid expansion centralization of skills Brand name development	Why is standardization beneficial?
Some local needs and demands might be to important to overlook. Adaptation enables "economies of learning" since these new local tastes are yet unknown for the company.	Why is it better to adapt rather than to implement a standardized approach?
McDonals!!! Standardized operations for maximum efficiency. They are working in the line of semi-gloabalization Local tastes are fullfilled. McLobster in Canada...	Name one of the biggest brands in the world who are experts in adaptation while in the same time have very standardized operations.
-benefit from differences in comparative advantages across nations -increased bargaining power -economies of scale in production -fewer duplication of fixed and overhead costs -global learning and R&D to keep up with complex and fast-changing technologies	What are the pros of global integration?
-A global strategy often requires a standardization of products in order to achieve cost benefits -May be necessary to adjust / adapt product to local tastes -Potentially high transportation costs -Potentially high import duties	What are the cons of global integration?