...concludes by asserting that the eclectic paradigm still remains a powerful and robust framework for examining contextual specific theories of foreign direct investment and international production. Key words: Eclectic paradigm; FDI; MNEs; Strategy; International production; Alliances. JEL classifications: F21, F23, M21. 1. Its Origins Although the eclectic paradigm (or the eclectic theory as it was initially called) of international production was first put forward by the present author at a Nobel Symposium in Stockholm in 1976, its origins can be traced back to the mid-1950s. At that time, I was writing my PhD thesis, later to be published as a book (Dunning, 1958), on US direct investment in British manufacturing industry. Earlier research by Rostas (1948), Frankel (1955) and some Anglo ± American study teams1 had shown that the labour productivity in US manufacturing industry was, on average, 2 to 5 times higher than that in UK industry. The question this fact posed in my mind was: was this difference in productivity a reflection of the superior indigenous (and immobile) resources of the US (cf. the UK) economy; or was it due to the more proficient way in which the managers of US firms (cf. UK firms) harnessed and organised these resources? ± a capability which, I argued, at least to some extent, might be transferable across national boundaries. This article draws on various past contributions of the author, but most...
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...Diversification Desmond W. Ng Texas A&M University abstract For over three decades, the questions of how and why an organization diversifies into related and unrelated businesses have drawn the attention of strategy scholars. However, explanations of unrelated diversification have been less than clear. A conceptual model of unrelated diversification is thus proposed. In drawing on Penrose’s (1959) resource based approach, unrelated diversification is explained by an organization’s ‘three pillars’, which consist of its strength of dynamic capabilities, absorptive capacity, and weak ties. The role of the three pillars is to discover new resource applications or uses in conditions of market failure that are characterized by ‘incomplete’ markets. A novel feature of this model is that an organization can diversify more broadly than predicted by Penrose (1959) and other modern resource-based approaches (Teece et al., 1997). Furthermore, unrelated diversification can be beneficial. This study also offers suggestions to measure the three pillars; its contributions and implications are discussed as well. INTRODUCTION The questions of how and why an organization diversifies into related and unrelated businesses have been a central focus of strategy research (Palich et al., 2000; Rumelt, 1974; Teece, 1982). These diversifications have been defined by the degree to which an organization’s products and services draw from a common pool of resources (Chatterjee and Wernerfelt, 1991; Montgomery and Wernerfelt...
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...An overview of strategic alliances Dean Elmuti Lumpkin College of Business and Applied Sciences, Eastern Illinois University, Charleston, Illinois, USA Yunus Kathawala Lumpkin College of Business and Applied Sciences, Eastern Illinois University, Charleston, Illinois, USA Keywords Strategic alliances, Competitive advantage, Success Introduction Nike, the largest producer of athletic footwear in the world, does not manufacture a single shoe. Gallo, the largest wine company on earth, does not grow a single grape. Boeing, the pre-eminent aircraft manufacturer, makes little more than cockpits and wing bits (Quinn, 1995, p. 1). Abstract Strategic alliances can be effective ways to diffuse new technologies rapidly, to enter a new market, to bypass governmental restrictions expeditiously, and to learn quickly from the leading firms in a given field. However, strategic alliances are not simple or easy to create, develop, and support. Strategic alliances projects often fail because of tactical errors made by management. By using a well managed strategic alliances agreement, companies can gain in markets that would otherwise be uneconomical. Considerable time and energy must be put forth by all involved in order to create a successful alliance. It is essential that corporations enter into strategic alliances arrangements with a comprehensive plan outlining detailed expectations, requirements, and expected benefits. ``How can this be?'' you ask. These companies, like...
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...An overview of strategic alliances Dean Elmuti Lumpkin College of Business and Applied Sciences, Eastern Illinois University, Charleston, Illinois, USA Yunus Kathawala Lumpkin College of Business and Applied Sciences, Eastern Illinois University, Charleston, Illinois, USA Keywords Strategic alliances, Competitive advantage, Success Introduction Nike, the largest producer of athletic footwear in the world, does not manufacture a single shoe. Gallo, the largest wine company on earth, does not grow a single grape. Boeing, the pre-eminent aircraft manufacturer, makes little more than cockpits and wing bits (Quinn, 1995, p. 1). Abstract Strategic alliances can be effective ways to diffuse new technologies rapidly, to enter a new market, to bypass governmental restrictions expeditiously, and to learn quickly from the leading firms in a given field. However, strategic alliances are not simple or easy to create, develop, and support. Strategic alliances projects often fail because of tactical errors made by management. By using a well managed strategic alliances agreement, companies can gain in markets that would otherwise be uneconomical. Considerable time and energy must be put forth by all involved in order to create a successful alliance. It is essential that corporations enter into strategic alliances arrangements with a comprehensive plan outlining detailed expectations, requirements, and expected benefits. ``How can this be?'' you ask. These companies, like...
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...Responses to Review Questions Answer One What are the factors that influence a company's decision to go abroad? Please explain how these are related to each other. In the discussion on the internationalisation process of a firm, the product life cycle model plays a major role. Please explain and discuss the usefulness this model. (A) Generally, the first decision to go abroad is a specific one. It is a decision to look at the possibility of a specific investment in a specific country, not a general decision to look around the globe for investment opportunities. At this stage the organisation has no experience with the complexities of foreign investment, although it often has had some export experience. There are no standard operating guidelines, which can be given to deal with these complexities. What is needed mostly is a strong push and/or commitment to go abroad. A company benefits from these earlier experiences in the subsequent investment decisions. The organisational factors include: • role of the management • motives of the organisation • success at home Other than these internal forces, a number of factors in the environment, outside the organisation, may also force a company to go abroad. These drivers of internationalisation may include: • unsolicited proposal that cannot be ignored. These may include proposals from a foreign government, distributor or customer • competitive drive or bandwagon effect following other competitors or a general belief...
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...Chapter 7: * Merger: a strategy through which two firms agree to integrate their operations on a relatively co-equal basis * Acquisition: a strategy through which one firm buys a controlling, or 100% interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio. After acquisition, management of the acquired firm report s to the management of the acquiring firm * Takeover: a special type of acquisition when the target firm did not solicit the acquiring firm’s bid for outright ownership * Friendly acquisition: the management of the target firm wants the firm to be acquired * Unfriendly acquisition (hostile takeover): the management of the target firm does not want the firm to be acquired (direct negotiations with the firm’s owners; tender offer; bear hug) Explain the popularity of acquisition strategies in firms competing in the global economy * There are seven reasons why acquisitions in firms competing in the global economy work * Increased Market Power: * This is the primary reason for acquisition * If a firm achieves enough market power, it can become market leader * Example: AT&T acquisition with T-Mobile made them in the lead with market share in w-ireless service providers * Also, not only would their market share increase, but their customers would increase by 1/3 and all cell towers and wireless spectrum that t-mobile had would also turn to AT&T ...
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...relating of four primary functions; marketing, finance and accounting, suppliers, and human resources to create a competitive advantage in global markets (Russell & Taylor, 2011). The business environment has become increasingly competitive over the past decade, due to the global economic crisis, environmental challenges, technological innovations, as well as, consumer lifestyle changes. As a result of the changes, many multi-national corporations (MNC), in an effort, to remain competitive and sustainable are responding by creating global strategic management plans to address the competitive trends occurring in the market (Kim, Bak, & Bae, 2010). In fact, the aforementioned factors created a rich environment for firms to access new technologies, materials, customer bases, as well as, the ability to form business partnerships, globally (Russell & Taylor, 2011; Nembhard, Shi, & Park, 2000). Consequently, there has been a shift in the way business operations are performed and managed. Procter and Gamble Company (P&G), is an excellent example of an iconic firm maintaining a competitive advantage in global markets through the effective implementation of global operations strategies and management. In fact, P&G is the leading consumer goods firm, generating annually $84 billion in sales, operating in 180+ countries, spanning the Americas, Europe, the Middle East and Africa (EMEA), and Asia. In terms of manufacturing sites, P&G own and operate 32 US manufacturing...
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...and l Organizational Capabilities Classifying Capabilities The Architecture of Capability l Appraising Resources and Capabilities Establishing Competitive Advantage Sustaining Competitive Advantage Appropriating the Returns to Competitive Advantage l Putting Resource and Capability Capabilities in Strategy Formulation Basing Strategy on Resources and Capabilities Resources and Capabilities as Sources of Profit l The Resources of the Firm Tangible Resources Intangible Resources Human Resources Analysis to Work: A Practical Guide Step 1 Identify the Key Resources and Capabilities 123 CSAC05 1/13/07 9:21 Page 124 124 PART II THE TOOLS OF STRATEGY ANALYSIS Step 2 Appraising Resources and Capabilities Step 3 Developing Strategy Implications l Developing Resources and Capabilities The Relationship between Resources and Capabilities Replicating Capabilities Developing New Capabilities Approaches to Capability Development l Summary l Self-Study Questions l Appendix: Knowledge Management and the Knowledge-based View of the Firm l Notes Introduction and Objectives In Chapter 1, I noted that the focus of strategy thinking has been shifted from the...
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...internationalization process Learning outcomes After reading this chapter, you should be able to: ➤ Understand the motives for internationalization. ➤ Apply the theories underpinning the internationalization process. ➤ Explain the Psychic Distance and Born Global concepts. 5 ➤ Advise a multinational firm on choosing an appropriate entry mode for internationalization. ➤ Advise a multinational firm on de-internationalization. 148 Global strategic development Opening case study Internationalization of a French retailer—Carrefour In 1960, Carrefour opened its first supermarket in France. In 1963, Carrefour invented a new store concept—the hypermarket. The hypermarket concept was novel, and revolutionized the way French people did their shopping. It moved daily shopping from small stores to enormous stores where customers find everything they want under one roof, in addition to selfservice, discount price, and free parking space. The first Carrefour hypermarket store was established at the intersection of five roads—hence the name, Carrefour, which means ‘crossroads’. Carrefour is the leading retailer in Europe and the second largest worldwide, with Exhibit A International development of Carrefour Year Country and mode of entry No. of stores (2009) 1969 1973 1975 1982 1989 1991 1993 1993 1994 1995 1996 1997 1997 1998 1998 2000 Belgium—Carrefour’s first hypermarket outside France Spain Brazil—Carrefour’s first hypermarket in the Americas Argentina Taiwan—Carrefour’s first hypermarket...
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...Maria Giulia Nisii Katarzyna Rybak STRATEGIC MANAGEMENT PROJECT ON SAP AG TABLE OF CONTENTS 1. Executive Summary…………………..…………….……………. Pg 3 2. Description of the Company....……………………..…………….. Pg 5 3. Business Software Industry Analysis…………………………….. Pg 7 4. SAP Internal Analysis……..………………………….………….. Pg 11 5. SAP Competitive Strategy..……………………………………… Pg 15 6. SAP Vertical Integration…………………………………………. Pg 18 7. SAP International Strategy………….……………………………. Pg 20 8. SAP Non-Diversification and Sybase Acquisition……………...... Pg 23 9. SAP Strategic Alliances.………….………………………………. Pg 26 10. Conclusions and Recommendation…………………………........ Pg 28 11. References Section..………………..……………….………..….. Pg 30 1. Executive Summary We are two students of Carlos III University of Madrid and our report purposes were the ones of detecting the main lines of SAP strategy and finding out which were the key success factors for the company. SAP AG is a German multinational software corporation that makes enterprise programs to manage business operations and customer relations. It is one of the largest software companies in the world and is the market leader in enterprise resource planning applications (ERP programs). First of all, to start our research, we identified how the business software industry was looking like to understand the company’s surrounding environment. The industry of e-business is using Information Technology (IT) and the Internet to conduct business in order to operate...
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...April 2008, he was awarded the degree of Doctor Honoris Causa by the Technical University of Košice. He is married to Heather and has two grown-up children, David and Rachel. In his spare time he is a keen amateur pianist and organist. Brief Course Description International business activity is one of the key features of the contemporary global economy. The decision to venture abroad involves the evaluation of alternative entry modes, bearing in mind the degree of risk and the suitability of the business environment in a potential host country or region. Political, economic, cultural and other factors are all of vital importance. This short course aims to explore these issues in the light of current research and with reference to recent developments in the global economy. The course will be delivered through a combination of lectures, discussion groups, plenary discussion and case study analysis. LECTURE PROGRAMME: INTERNATIONAL ENTRY AND COUNTRY ANALYSIS 1. Motives for Going International Businesses venture abroad for a variety of reasons and there is a large international business literature on this...
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...Why Too Many Alliances End in Divorce John W. Medcof Learning, Positioning and Alliance Partner Selection What do General Motors, Norsk Hydro, Matsushita Electric Industries, A T & T , Rh6ne-Poulenc Rorer, Rubbermaid Inc., Olivetti, Syntex, Daewoo Motors and Coors Brewing C om pany all have in com mon? T h e y have all participated in international strategic alliances w h i c h e n d e d in divorce. 1 Such divorces are not u n c o m m o n 2 but they have failed to d a m p e n the enthusiasm of corporations for alliances as a m o de of doing business. Between 1988 and 1992 over 20 000 business alliances were formed in the USA alone, contributing to the 25% annual rate of increase in alliances since 1985. 3 In surveys of its members over the last few years the Industrial Research Institute has f o u n d that, in each year surveyed, b e t w e e n 45% and 49% of r e s p o n d e n t s have projected increasing their alliance participation. 4 The enthusiasm for alliances is partly driven by numbers w h i c h show, for instance, that alliances o u tp e r f or m more traditional forms of business activity by over 50%. 5 Despite the enthusiasm and despite the favourable numbers, though, the i n c i d e n c e of expensive and messy alliance failures is surprisingly high, and a reality that alliance 'players' must consider seriously. Although there are m any reasons for alliance failures, m a n y writers agree that poor selection of alliance partners is among the most i m p o r t a...
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...Challenges………………………………………………………………….…10 Strategic Recommendation……………………………………………………….……11 Implementation Plan……………………………………………………………...……13 Conclusion………………………………………………………………………………14 Bibliography……………………………………………………………….……………15 Appendices………………………………………………………………………………16 2 Executive Summary Tesla’s uniqueness and innovative products has served as a catalyst to an entire industry seeking an alternative to the complacent market of gas-powered only vehicles. But what strategies where utilized in their great success? How will the firm continue to innovate after the growth stage? This report will introduce you to Tesla and its current operating environment by examining the industry in which it operates via internal and external analysis. The report will tell of how Tesla pioneered technologies that were mostly untapped and unavailable to the masses. By examining the resources and capabilities of the firm, it will better help to delineate the firm’s core competencies later in the report. The strategic challenges and recommendations sections will outline obstacles that are currently faced by the firm and how the firm can implement various strategies to counter those obstacles. Finally the report will conclude with an implementation plan for said strategies along with a conclusion to the report findings. 3...
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...FOREIGN DIRECT INVESTMENT AND THE MULTINATIONAL CORPORATION CHAPTER 2. 2.1. INTRODUCTION International business activity is by no means a recent phenomenon. The lives of Phoenicians and Carthaginians, in the ancient world, were deeply dependent on international business. This economic activity included foreign direct investment (FDI), joint ventures and strategic alliances, among other forms of internationalisation (Moore and Lewis, 1999). Several multinational corporations (MNEs) can also be identified in Europe in the middle ages and in the beginning of the modern era (Dunning, 1993a; Jones, 1996). The origins of modern international business activity however, are associated with the industrial revolution. Modern MNEs, in particular, have their roots in the massive international movement of factors that took place in the nineteenth century (Dunning, 1993a: p.99). Resource-seeking was the most common motivation of FDI in this period, even if by 1850 many firms had already crossed the Atlantic, in both directions, in what can be defined as market-seeking investment (Dunning, 1993a: p.100; Jones, 1996: p.5). 8 Despite the presence of FDI, most foreign investment in the nineteenth century - and indeed until the late 1940s – was portfolio capital. As a result, international business activity was largely ignored in economic theory until the late 1950s. On the one hand, the phenomenon did not have a major perceived economic impact. It was widely assumed that MNEs were...
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...University of Western Ontario ‘This book provides a comprehensive, well-organized and richly illustrated analysis of inter-firm cooperation. While relevant for managers and business students, it extensively draws on the most up-to-date research, making it also a valuable source for academics studying strategic alliances and the wide array of management issues they raise. Child, Faulkner, and Tallman have done a remarkable job of putting together in a highly consistent way all the knowledge available on what has become an essential facet of business development, namely Cooperative Strategy.’ Pierre Dussauge, Professor of Strategic Management, HEC – School of Management, Paris ‘I highly recommend this book for alliance scholars and practitioners. The breadth of coverage of the practical and theoretical literature on cooperative strategy is one of the book’s primary contributions. The authors demonstrate a comprehensive understanding of the subject matter and the numerous case studies demonstrate a close connection with actual experience.’ Andrew Inkpen, J. Kenneth and Jeanette Seward Chair in Global Strategy, Thunderbird, The Garvin School of International Management ‘Companies need to know not just how to compete with other firms, but how to cooperate with them. The proliferation of joint ventures, partnerships, and strategic alliances reflect the increasingly dispersed and networked structure of modern business organisation. This book is a manager’s guide to this significant trend...
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