!"#$%&' ) * +%'#%&,- #'./01 %"& 23.

4&
Learnlng Coals:
1) 1radlLlonal deflnlLlon of global sLraLegy"
! roducLlon and dlsLrlbuLlon of sLandardlzed producLs and servlces on a worldwlde basls -> greaL
deal of frusLraLlon wlLh Lhls deflnlLlon as nexL Lo lmposslble for managers Lo make a world car"
or world commerclal" Lo conquer Lhe world, nC one-slze flLs all, ofLen reduces local sLraLegy ln
favor of global ofLen Lo poor resulLs
2) 8aLlonale behlnd sLudylng global sLraLegy
! 1o beLLer compeLe ln corporaLe world LhaL wlll appreclaLe experLlse ln global sLraLegy
3) ueflne sLraLegy and global sLraLegy
! sLraLegy as a plan" vS sLraLegy as acLlon" -> book follows sLraLegy as lnLegraLlon"
l. SLraLegy as a plan: sLraLegy ls embodled ln expllclL, rlgorous, formal plannlng as ln Lhe
mlllLary -> seL of plans Lo achleve org ob[ecLlves
o lnLended sLraLegy: sLraLegy ls dellberaLely planned for
o LmergenL sLraLegy: sLraLegy based on ouLcome of a sLream of smaller declslons from
Lhe boLLom-up
ll. SLraLegy as acLlon: sLraLegy ls embodled ln flrm's paLLern of acLlons and declslons
lll. SLraLegy as lnLegraLlon: neLher solely abouL plan or acLlon, lnLegraLes Lhem 8C1P
! SLraLegy: a flrm's Lheory abouL how Lo compeLe successfully
! Clobal sLraLegy:
l. sLraLegy of flrm's around Lhe globe (book defn)
ll. form of lnLl sLraLegy, producLlon and dlsLrlbuLlon of sLandardlzed producLs/servlces on a
worldwlde basls -> only relevanL for 1rlad -based MnLs (LradlLlonal)
4) CuLllne four fundamenLal quesLlons ln sLraLegy
! A) Why do flrms dlffer? 8) Pow do flrms behave? C) WhaL deLermlnes scope of Lhe flrm?
u) WhaL deLermlnes success or fallure around Lhe globe?
! 1rlpod sLraLegy: Lhree leadlng perspecLlves:
l. 1) lndusLry-based 2) resource-based 3) lnsLlLuLlon-based
3) uebaLe on globallzaLlon
! CloballzaLlon: close lnLegraLlon of counLrles and peoples of Lhe world
! Seml-globallzaLlon: perspecLlve LhaL suggesLs barrlers Lo markeL lnLegraLlon aL borders are hlgh
buL noL hlgh enough Lo compleLely lnsulaLe counLrles from each oLher (ln b/w LoLal lsolaLlon
and LoLal globallzaLlon)
! Some vlew globallzaLlon as a recenL phenomenon oLhers as someLhlng evolved slnce dawn of
humanlLy
! 8esL vlewed as a process slmllar Lo Lhe swlng of a pendulum (swlngs from one exLreme Lo Lhe
oLher from Llme Lo Llme)
l. Pelps Lo besL undersLand Lhe ups and downs of globallzaLlon (ex: currenL era of
globallzaLlon opened afLer WWll, posL-9/11 + global recesslon = anLl-globallzaLlon aL work
eLc)
! SLraLeglsLs need Lo know Lhemselves (lncl. Lhelr blases) and know Lhelr opponenLs
l. 8lsk managemenL: ldenLlflcaLlon and assessmenL of rlsks and Lhe lmpacL lL may cause along
wlLh preparlng Lo mlnlmlze Lhelr effecLs
ll. Scenarlo plannlng: preparlng for mulLlple rlsk-level scenarlos LhaL could occur

A Clobal SLraLegy 8ook
MnL (mulLlnaLlonal enLerprlse): flrm engages ln forelgn dlrecL lnvesLmenL (lul) by conLrolllng and
managlng value-addlng acLlvlLles ln oLher counLrles
o MusL adapL Lhelr sLraLegles, producLs, servlces for local markeLs -> ex: no world drlnk (coca-cola
has dlfferenL reclpe around Lhe world wlLh varylng sugar conLenL)
lul (forelgn dlrecL lnvesLmenL): lnvesLmenL ln producLlon and/or servlce acLlvlLles abroad
1rlad: Lhree prlmary reglons of developed economles: n.A, Lurope, Asla
Lmerglng Lconomles: fasL growlng economles slnce 1990
o now accounL for half of global Cu and lul
88lC(S): 8razll, 8ussla, lndla, Chlna, (SouLh Afrlca)
o now accounL for a quarLer of global Cu and lul
Clobal Lconomlc yramld
o 1op 1ler: er caplLa Cu > $20,000 -> approx. 1 bllllon people
o Second 1ler: er caplLa Cu $2k-20,000 -> approx. 1 bllllon people
o 8ase of yramld: er caplLa Cu < $2,000 -> approx. 3 bllllon people
! vasL ma[orlLy of humanlLy reslde here -> 8C lgnored ln Lhe LradlLlonal global sLraLegy,
currenL global sLraLegy: ex CM sells more cars ln Chlna Lhan uS, 1aLa and Ceely Lallor Lo
8C and would surpass CM lf 8C mkLs noL Laken serlously
8everse lnnovaLlon: low-cosL lnnovaLlon from emerglng econ LhaL has poLenLlal ln developed econ
o CL slg. reduced prlces of ulLrasound machlnes by developlng Lhem for rural Chlna hosplLals
lnsLead of Lallorlng expenslve wesLern" producLs for local mkLs, became an lnsLanL hlL for
emerglng markeLs/rural cusLomers around Lhe world, LranslaLed lnLo cosL-savlngs for
developed econ cusLomers Loo
Why SLudy Clobal SLraLegy
!"#$ & '()*+$
SLraLeglc mgmL.: managlng flrm from a blg plcLure" perspecLlve
o See deflnlLlons of perspecLlves ln #3 of learnlng goals
,)-#)./0 #1 23.+-0
See 1)-#)./0 +4 *$)./-#)*+$ ln #3 of goals
o SLraLegy: flrm's 1PLC8? on how Lo compeLe successfully, 1PLC8? as opposed Lo acLlons or
plans, Auv: mlx of plan and acLlon, undersLands dlfflculLy of sLraLeglc change, repllcaLlon
(repeaLed LesLlng of Lheory) and experlmenLaLlon
o 1heory/ lnLended sLraLegy = geLLlng from polnL A (where are we? unreallzed sLgy) Lo polnL 8
(where musL we be? LmergenL sLgy)
SLraLegy of lnLegraLlon sLeps:
o SLraLegy formulaLlon: crafLlng of a flrm's sLraLegy
o SLraLegy lmplemenLaLlon: acLlons underLaken Lo carry ouL flrm's sLraLegy
o SWC1 analysls: lnLernal assessmenL of flrm's sLrengLhs, weaknesses, opporLunlLles, LhreaLs
1op mgmL. Leam (1M1) lead by CLC and hlghesL execuLlves make sLraLeglc cholces
o Mld-level and lower-level managers need Lo undersLand sLraLegy buL lack perspecLlve and
experlence Lo execuLe flrm-level sLraLegy
o WhaL only CLCs should do: p.13 Lable 1.3
lundamenLal CuesLlons ln SLraLegy
A) Why do flrms dlffer? -> geography, dlfferences ln developmenL of economy, lndusLry eLc
8) Pow do flrms behave?
1rlpod sLraLegy: Lhree leadlng perspecLlves:
o 1) lndusLry-based : (C1 ln SWC1, orLer's 3) -> SLraLeglc Lask should be Lo examlne comp.
forces wlLhln an lndusLry, Lhen Lake a poslLlon LhaL ls less vulnerable Lo Lhese 3/6 forces
o 2) flrm/resource-based: (SW ln SWC1) -> flrm speclflc capablllLles lead Lo success as a flrm
over oLhers
o 3) lnsLlLuLlon-based: ln addlLlon Lo comp. forces and flrm capablllLles musL also conslder Lhe
formal and lnformal rules of Lhe game
C) WhaL deLermlnes scope of Lhe flrm?
lnsLlLuLlonal dlfferences ln developed versus emerglng economles plays a blg role ln addlLlon Lo
geographlc markeLs parLlclpaLed ln by Lhe flrm
o uownslzlng -> emerglng economles
o CrowLh/conglomeraLlon -> developed counLrles
u) WhaL deLermlnes success or fallure around Lhe globe?
lndusLry-based vlew: success = poslLlonlng whlch reduces LhreaLs from 3 lorces
llrm/8esource-based vlew: success = flrm-speclflc capablllLles
lnsLlLuLlon-based vlew: success = Lhlnk globally" and acL globally" slmulLaneously and musL do
much plannlng Lo learn Lhe rules of Lhe game ln all markeLs Lhey parLlclpaLe ln
Culdellnes exlsL Lo help managers:
o Maxlmlze shareholders or SLakeholders (group or lndlvldual who can affecL/affecLed by an
organlzaLlons acLlons/achlevemenL of goals)?
1rlple boLLom llne: benchmark conslsLlng of economlc, soclal, and envlronmenLal performance
8alanced scorecard: performance eval meLhod from mulLlple perspecLlve (cusLomer, lnLernal eLc)
!"#$%&' ) * +,-./%'0 !12$&%3%31,
Learnlng Coals:
1) ueflne lndusLry CompeLlLlon
! lndusLry: group of flrms produclng slmllar goods/servlces
! lndusLry-based vlew sLraLegy llnked Lo lndusLrlal organlzaLlon (lC) economlcs -> helps
pollcymakers beLLer undersLand how flrms compeLe
! 3 lorces -> ploneered by Mlchael orLer forms backbone of lndusLry-based vlew sLraLegy
2) lndusLry Analysls uslng 3 lorces
! 1he sLronger Lhe forces, Lhe less llkely flrm wlll have beLLer Lhan avg. reLurns
! 1) lnLenslLy of rlvalry wlLhln lndusLry 2) LhreaL of poLenLlal enLranLs 3) bargalnlng power of
suppllers 4) bargalnlng power of buyers 3) LhreaL of subsLlLuLes
3) 1hree Cenerlc SLraLegles
! 1) cosL leadershlp 2) dlfferenLlaLlon 3) focus
4) 7 uebaLes of lndusLry-vlew
! 1) clear vs blurred boundarles of lndusLry 2) LhreaLs vs opporLunlLles
! 3) flve forces vs slxLh force 4) sLuck ln Lhe mlddle vs all-rounder
! 3)lndusLry rlval vs sLraLeglc groups 6) lnLegraLlon vs ouLsourclng
! 7) lndusLry-speclflc vs flrm-speclflc/lnsLlLuLlon-speclflc deLermlnanLs of performance
3) SLraLeglc lmpllcaLlons for AcLlons
! LsLabllsh undersLandlng of lndusLry Lhrough 3 lorces -> addLl forces may affecL lndusLry
! lndusLry ls nC1 a desLlny -> companles can do well ln an unaLLracLlve lndusLry
ueflnlng lndusLry CompeLlLlon
1radlLlonally based on Adam SmlLh's model of perfecL compeLlLlon" -> less reallsLlc
o lndusLrlal economlcs (lC) served Lo be a more reallsLlc alLernaLlve
o lC: branch of economlcs, beLLer undersLands how flrms compeLe and how Lo regulaLe Lhem
! Coal of lC: help pollcymakers beLLer undersLand flrms ln order Lo regulaLe Lhem beLLer
SLrucLure-conducL-performance (SC) model: lC model LhaL suggesLs lndusLry sLrucLure drlves flrm
conducL (sLraLegy) whlch lnfluences performance
o SLrucLure: aLLrlbuLes of an lndusLry ex: barrlers Lo enLry
! # of flrms conLrol lndusLry: Monopoly (1), Cllgopoly (few) -> duopoly (2)
o ConducL: flrms acLlons (ex: producL dlfferenLlaLlon)
o erformance: resulL of flrm conducL (perf. Lvls: average, below-avg, above avg)
orLer's 3 lorces
1) lnLenslLy of rlvalry amongsL compeLlLlon
o Plgh degree = frequenL prlce wars, prollferaLlon of new producLs, lnLense ad campalgns eLc
o Low degree = many flrms ln lndusLry, greaLer slmllarlLy ln rlvals, frequency of purchase eLc
! Plgh prlce, low freq = low degree, opposlLe = hlgh degree
2) LhreaL of poLenLlal enLry
o LnLry barrlers: lndusLry sLrucLures whlch lncreases cosL of enLry
o Plgh barrlers = economles of scale (hlgher ouLpuL = lower unlL cosL), non-scale based adv
(low-cosL advanLage ex: paLenLs, know-how"), producL prollferaLlon (leavlng no unmeL
demand wlLh producL range), producL dlfferenLlaLlon (brand ldenLlflcaLlon + cusLomer
loyalLy), neLwork exLernallLles (more cusLomers = more value Lo user -> Lhlnk mlcrosofL
offlce), excess capaclLy (capaclLy noL fully uLlllzed), governmenL pollcy (Lhlnk proLecLlonlsm)
3) bargalnlng power of suppllers
o 1he ablllLy of suppllers Lo ralse prlces/reduce quallLy of goods/servlces
o Plgh power = few suppllers, unlque + dlfferenLlaLed producLs, low lmporLance of cusLomer
(8oelng mlghL reduce prlces for buyers of mulLlple planes, noL small alrllnes), forwards
lnLegraLlon (acqulrlng/ownlng downsLream asseLs -> ex: Apple reLall sLores)
4) bargalnlng power of buyers
o 1he ablllLy of buyers Lo reduce prlces/enhance quallLy of goods/servlces
o Plgh power = few buyers, llLLle value added producLs/servlces (ex: yearly updaLes of
sofLware apps = consumer skepLlclsm), sLandard + undlfferenLlaLed producLs, backward
lnLegraLlon (acqulrlng/ownlng upsLream asseLs -> ex: CosLco has own klrkland" brand)
3) LhreaL of subsLlLuLes
o SubsLlLuLe: dlfferenL lndusLrles LhaL saLlsfy cusLomer needs meL by focal lndusLry
o Plgh LhreaL = superlor quallLy + funcLlonallLy + prlce + uLlllLy, low swlLchlng cosLs
key 1akeaways
o lndusLrles vary ln Lerms of proflLablllLy -> less forces = greaLer proflLablllLy (above average)
o MusL assess opporLunlLles and LhreaLs from each force
o key ls Lo poslLlon buslness where lL can mlnlmlze LhreaLs from Lhe 3 forces aka lndusLry
poslLlonlng
o locuses only on lndusLry-level nC1 flrm-level -> see debaLes
1hree Cenerlc SLraLegles
Cenerlc sLraLegles: lnLended Lo sLrengLhen focal flrm's poslLlon relaLlve Lo Lhe flve compeLlLlve
forces, baslc sLraLegles whlch applles Lo flrms ln many lndusLrles hence generlc"
o whaL do Lhey compeLe on? ls Lhere: markeL segmenLaLlon? producL dlfferenLlaLlon?
1) cosL leadershlp
o CompeLlng on low cosL and prlces, LargeLs mass markeLs w/ llLLle producL dlfferenLlaLlon
o ulsadv: conLlnuous search for lower cosLs -> exhausLlve and may reduce quallLy/safeLy
2) dlfferenLlaLlon
o producLs cusLomers value as valuable and dlfferenL, many markeL segmenLs, prlce premlum
o ulsadv: dlfflculL Lo susLaln dlfferenLlaLlon L1 -> harder Lo reLaln cusLomers as lndusLry quallLy
lncreases
3) locus
o Serves needs of parLlcular segmenL/nlche of lndusLry, very hlgh dlfferenLlaLlon
o Lx: cusLomlzed machlnery (speclallzed machlnery)
key 1akeaway: should flrm's sLraLegy have Lhem
o l) erform dlfferenL acLlvlLles or ll) perform acLlvlLles dlfferenLly?
uebaLes
1) clear vs blurred boundarles of lndusLry
o 8oundarles are beglnnlng Lo become more blurred ex: moblle communlcaLlons
o normally deflned by elasLlclLy, geography, producL -> buL wlLh MnLs, globallsaLlon,
Lechnology very dlfflculL Lo dlsLlngulsh boundarles
2) LhreaLs vs opporLunlLles
o More balanced approach: don'L [usL vlew 3 forces as LhreaLs, see Lhem as opporLunlLles
! Lx: collaboraLlon wlLh rlvals, seeklng ouL comp. lndusLrles Lo make producL beLLer
3) flve forces vs slxLh force
o 6) ComplemenLors: flrm LhaL sells producLs LhaL add value Lo Lhe producLs of a focal lndusLry
! Lx: appllcaLlons are complemenLors for Lhe C lndusLry, oll prlces effecL sales of
Suvs
4) sLuck ln Lhe mlddle vs all-rounder
o SLuck ln Lhe mlddle: flrms pursulng boLh cosL leadershlp Anu producL dlfferenLlaLlon
o 1echnology ls a key componenL -> Lech developmenLs may enable flrms Lo produce
dlfferenLlaLed producLs aL low cosL ex: flexlble mfn Lechnology + mass cusLomlzaLlon
! Slngapore Alrllnes: buys new alrcrafL buL low repalr cosLs and malnLenance, besL
sLaff buL pald average ln Slngapore whlch ls less Lhan ln mosL counLrles
3)lndusLry rlval vs sLraLeglc groups
o SLraLeglc groups: groups of flrms wlLhln a broad lndusLry
! Lx: auLo lndusLry groups: Mass markeL, Luxury, ulLra-Luxury
o MoblllLy barrlers: wlLhln lndusLry dlfference hamperlng Lhe movemenL b/w sLraLeglc groups
6) lnLegraLlon vs ouLsourclng
o CuLsourclng:
! Adv: cheaper cosLs, more pressure for suppller Lo updaLe, easler Lo swlLch b/w
suppllers
! ulsadv: less conLrol, paLenL lnfrlngemenL
o lnLegraLlng backward (compeLe wlLh suppllers) or forward (compeLe wlLh buyers)
! 8eLLer when: Plgh mkL uncerLalnLy, coordlnaLlon w/ suppllers + buyers requlres
LlghL conLrol, # of suppllers/buyers ls small -> more conLrol, less lnfrlngemenL, more
flexlble mfn
! ulsadv: less lncenLlve Lo lnnovaLe
7) lndusLry-speclflc vs flrm-speclflc/lnsLlLuLlon-speclflc deLermlnanLs of performance
o ldea LhaL lndusLry ls nC1 a desLlny -> flrms can do well ln oLherwlse unaaLracLlve sLrucLural
lndusLrles
! 8rlngs abouL flrm-speclflc deLermlnanLs of perf: lndlvldual flrms possess flrm-speclflc
resources and capablllLles wlLh allow for success ln sLrucLurally unsound lndusLrles
Savvy SLraLeglsL SLeps
1) lndusLry Analysls -> orLer's 3 lorces 2) Cbserve addlLlonal forces 3) lndusLry ls nC1 desLlny
!"#$%"&#'("&) +,-'"$-- .#%&#$/0 1 23&4#$% 5
!"#$%&'"# )*+ ,)-)./0/1/"#
2"3/*/1/$*#
8esource-based vlew
o A leadlng perspecLlve of sLraLegy LhaL suggesLs LhaL dlfferences ln flrm performance
are mosL fundamenLally drlven by dlfferences ln flrm resources and capablllLles
8esource
o 1he Langlble and lnLanglble asseLs a flrm uses Lo choose and lmplemenL lLs sLraLegles
CapablllLy
o 1he Langlble and lnLanglble asseLs a flrm uses Lo choose and lmplemenL lLs sLraLegles
1anglble resources and capablllLles
o Cbservable and more easlly quanLlfled resources and capablllLles
lnLanglble resources and capablllLles
o Pard-Lo-observe and dlfflculL-Lo-codlfy resources and capablllLles
value chaln
o Coods and servlces produced Lhrough a chaln of verLlcal acLlvlLles LhaL add value
8enchmarklng
o LxamlnaLlon as Lo wheLher a flrm has resources and capablllLles Lo perform a
parLlcular acLlvlLy ln a manner superlor Lo compeLlLors
CommodlLlzaLlon
o A process of markeL compeLlLlon Lhrough whlch unlque producLs LhaL command hlgh
prlces and hlgh marglns generally lose Lhelr ablllLy Lo do so - Lhese producLs Lhus
become 'commodlLles'
CuLsourclng
o 1urnlng over all or parL of an acLlvlLy Lo an ouLslde suppller Lo lmprove Lhe
performance of Lhe focal flrm
Cffshorlng
o lnLernaLlonal/forelgn ouLsourclng
Cnshorlng
o CuLsourclng Lo a domesLlc flrm
CapLlve sourclng
o SeLLlng up subsldlarles Lo perform ln-house work ln a forelgn locaLlon. ConcepLually
ldenLlcal Lo lul (lorelgn dlrecL lnvesLmenL)
v8lC framework
o A resource-based framework LhaL focuses on value, rarlLy, lmlLablllLy, and
organlzaLlonal aspecLs of resources and capablllLles
Causal amblgulLy
o 1he dlfflculLy of ldenLlfylng Lhe casual deLermlnanLs of successful flrm performance
ComplemenLary asseLs
o numerous noncore asseLs LhaL complemenL and supporL Lhe value-addlng acLlvlLles
of core asseLs
AmbldexLerlLy
o AblllLy Lo use one's hands equally well. ln managemenL [argon, Lhe Lerm has been
used Lo descrlbe capablllLles Lo slmulLaneously deal wlLh paradoxes (such as
exploraLlon versus explolLaLlon)
Soclal complexlLy
o 1he soclally complex ways of organlzlng Lyplcal of many flrms
SLraLeglc ambldexLerlLy
o llrms' dynamlc capablllLles Lo slmulLaneously manage lnfluences from boLh
governmenLs and markeLs
PypercompeLlLlon
o A way of compeLlLlon cenLered on dynamlc manoeuvrlng lnLended Lo unleash a
serles of small, unpredlcLable, buL powerful acLlons Lo erode Lhe rlval's compeLlLlve
advanLage
8uslness process ouLsourclng (8C)
o CuLsourclng of buslness processes such as loan orlglnaLlon, credlL card processlng,
and call cenLer operaLlons
Crlglnal equlpmenL manufacLurer
o A flrm LhaL execuLes deslgn blueprlnLs provlded by oLher flrms and manufacLures
such producLs
Crlglnal deslgn manufacLurer
o A flrm LhaL boLh deslgns and manufacLures producLs
Crlglnal brand manufacLurer
o A flrm LhaL deslgns, manufacLures and markeLs branded producLs

4*$50"+6" 7.8"'1/9"#

1. Lxplaln whaL flrm resources and capablllLles are
a. 8esource: 1he Langlble and lnLanglble asseLs a flrm uses Lo choose and lmplemenL lLs
sLraLegles
b. CapablllLy: 1he Langlble and lnLanglble asseLs a flrm uses Lo choose and lmplemenL
lLs sLraLegles.
c. 8esources and capablllLles are used ln Lhe book lnLerchangeably and ln parallel,
Lherefore deflned Lhe same way.
d. 8esources and capablllLles can be Langlble and lnLanglble.
l. 1anglble: observable and more easlly quanLlfled resources such as flnanclal,
physlcal and Lechnologlcal resources
ll. lnLanglble: hard Lo observe and quanLlfy, buL sLlll Lhere. Such as human
resources, lnnovaLlon, and repuLaLlon resources.
2. underLake a baslc SWC1 analysls along Lhe value chaln
a. value chaln: Coods and servlces produced Lhrough a chaln of verLlcal acLlvlLles LhaL
add value. 1hey Lyplcally conslsL of Lwo areas: prlmary and supporL acLlvlLles.
rlmary acLlvlLles are 8&u, Assembly, markeLlng eLc. SupporL acLlvlLles are
lnfrasLrucLure, loglsLlcs and Puman resources.
b. 8enchmarklng: LxamlnaLlon as Lo wheLher a flrm has resource and capablllLles Lo
perform a parLlcular acLlvlLy superlor Lo compeLlLors.
c. Managers perform benchmarklng ln SWC1 Lo declde wheLher or noL Lo ouLsource a
Lask/acLlvlLy
3. ueclde wheLher Lo keep an acLlvlLy ln-house or ouLsource lL
a. CommodlLlzaLlon: a process of markeL compeLlLlon Lhrough whlch unlque producLs
LhaL command hlgh prlce and hlgh marglns generally lose Lhelr ablllLy Lo do so,
evenLually becomlng 'commodlLles'.
b. llrms Lyplcally ouLsource acLlvlLles wlLh a hlgh degree of commodlLlzaLlon.
c. Cffshorlng - lnLernaLlonal/forelgn ouLsourclng
d. Cnshorlng - domesLlc ouLsourclng
e. CapLlve sourclng - seLLlng up subsldlarles Lo perform ln-house work ln forelgn
locaLlons
4. Analyse Lhe value, rarlLy, lmlLablllLy, and organlzaLlonal (v8lC) aspecLs of resources and
capablllLles
a. A v8lC framework suggesLs LhaL only resources and capablllLles LhaL are valuable,
rare, lnlmlLable, and organlzaLlonally embedded wlll generaLe susLalnable
compeLlLlve advanLage.
b. Cnly value-addlng resources can lead Lo compeLlLlve advanLage.
c. lf everyone has Lhe resource, you can'L make (addlLlonal) money from lL.
d. valuable and rare resources and capablllLles can be a source of compeLlLlve
advanLage only lf lL ls dlfflculL Lo lmlLaLe Lhem. MlghL be slmple Lo copy Langlble a
resource such as machlnery, Lhe dlfflculLy comes ln copylng lnLanglble resources.
e. CrganlzaLlon. valuable, rare, and hard Lo lmlLaLe resources can sLlll noL be a source
of susLalnable compeLlLlve advanLage lf Lhey aren'L organlzed well. Analogy from Lhe
LexLbook: Movle sLars don'L make Lhe movle, buL raLher Lhe hundreds of oLher
people ln supporL roles such as make-up and llghLlng. Also known as complemenLary
asseLs.
3. arLlclpaLe ln four leadlng debaLes concernlng Lhe resource-based vlew
a. llrm-speclflc versus lndusLry-speclflc deLermlnanLs of performance
l. llrm-speclflc capablllLles are sLronger deLermlnanLs of flrm performance
Lhan lndusLry-speclflc effecLs.
ll. AlLhough some people belleve lL ls Lhe comblnaLlon of lndusLry-speclflc and
flrm-speclflc aLLrlbuLes LhaL collecLlvely drlve flrm performance
b. SLaLlc resources versus dynamlc capablllLles
l. 1he currenL resource based vlew may over-emphaslse Lhe role of leveraglng
exlsLlng resources and underemphaslzes Lhe role of developlng new ones. ln
a world of hypercompeLlLlon whereby susLalnable compeLlLlve advanLage
may be unreallsLlc, a serles of shorL-Lerm unpredlcLable advanLage seems Lo
be Lhe besL a flrm can hope for.
c. Cff-shorlng versus non-offshorlng
l. Cffshorlng creaLes enormous value for flrms by leLLlng Lhem Lap lnLo low-
cosL hlgh quallLy labor, LranslaLlng lnLo cosL savlngs. roblem ls, once Lhe off-
shorlng company has enough compeLency ln Lhe Lask, Lhey mlghL declde Lo
dlrecLly compeLe wlLh Lhelr former cllenL.
d. uomesLlc resources versus lnLernaLlonal capablllLles
l. uo flrms LhaL are successful domesLlcally have whaL lL Lakes Lo wln
lnLernaLlonally?
ll. lL ls lmporLanL Lo emphaslze Lhe advlce: Lhlnk global, acL local. ln pracLlce,
Lhls means LhaL desplLe grand global sLraLeglc deslgns, companles have Lo
concreLely wln one local markeL afLer anoLher.
6. uraw sLraLeglc lmpllcaLlons for acLlon
a. v8lC can vary from SWC1. 1hus lf a manager compares S&W agalnsL compeLlng
flrms, you may end up wlLh acLlvlLles LhaL are medlocre and need Lo be ouLsourced
counLed as a sLrengLh.
b. 8elenLless lmlLaLlon or benchmarklng ls noL llkely Lo be a successful sLraLegy.
lmlLaLors Lend Lo mlmlc Lhe mosL obvlous, and leasL lmporLanL pracLlces of wlnnlng
flrms. AL besL follower flrms LhaL copy everyLhlng wlnnlng flrms can hope Lo aLLaln
compeLlLlve parlLy. llrms so well endowed wlLh resources Lo copy a flrm 100 may
be beLLer off developlng Lhelr own capablllLles.
c. Pow does Lhe resource based vlew answer Lhe four fundamenLal quesLlons ln
sLraLegy?
l. Why do flrms dlffer?
1. Lach flrm ls a unlque bundle of resources and capablllLles
ll. Pow do flrms behave?
1. uepends on how Lhey Lake advanLage of Lhelr sLrengLhs embodled
ln resources and capablllLles and overcome Lhelr weaknesses
lll. WhaL deLermlnes Lhe scope of Lhe flrm?
1. value chaln analysls suggesLs Lhe scope ls deLermlned by how a flrm
performs dlfferenL value-addlng acLlvlLles relaLlve Lo rlvals.
lv. WhaL deLermlnes flrms' lnLernaLlonal success and fallure?
1. uepends on flrm-speclflc resources and capablllLles.
!"#$%&' ) * +,-%.%/%.0,-1 !/2%/'&-1 #,3 4%".5-
uLllnl1lCn
lnsLlLuLlon-based vlew
o A leadlng perspecLlve of sLraLegy LhaL argues LhaL ln addlLlon Lo lndusLry- and flrm-level
condlLlons, flrms also need Lo Lake lnLo accounL wlder lnfluences from sources such as Lhe
sLaLe and socleLy when crafLlng sLraLegy.
lnsLlLuLlon
o Pumanly devlsed consLralnLs LhaL sLrucLure human lnLeracLlon - lnformally known as 'Lhe
rules of Lhe game'
lnsLlLuLlonal framework
o A framework of formal and lnformal lnsLlLuLlons governlng lndlvldual and flrm behavlour
lormal lnsLlLuLlons
o lnsLlLuLlons represenLed by laws, regulaLlons and rules
8egulaLory plllar
o Pow formal rules, laws and regulaLlons lnfluence Lhe behavlour of lndlvlduals and flrms
lnformal lnsLlLuLlons
o lnsLlLuLlons represenLed by norms, culLures, and eLhlcs
normaLlve plllar
o Pow Lhe values, bellefs and norms of oLher relevanL players lnfluence Lhe behavlour of
lndlvlduals and flrms
norm
o 1he prevalllng pracLlce of relevanL players LhaL affecL Lhe focal lndlvlduals and flrms
CognlLlve plllar
o 1he lnLernallzed, Laken-for-granLed values and bellefs LhaL gulde lndlvldual and flrm
behavlour
1ransacLlon cosLs
o CosLs assoclaLed wlLh economlc LransacLlon - or more broadly, cosLs of dolng buslness.
CpporLunlsm
o Self-lnLeresL seeklng wlLh gulle
8elaLlonal conLracLlng
o ConLracLlng based on lnformal relaLlonshlps
lnformal, relaLlonshlp-based, personallzed exchange
o A way of economlc exchange based on lnformal relaLlonshlps among LransacLlon parLles.
Also known as relaLlonal conLracLlng.
Arm's-lengLh LransacLlons
o 1ransacLlons ln whlch parLles keep a dlsLance
lormal, rule-based, lmpersonal exchange
o A way of economlc exchange based on formal LransacLlons ln whlch parLles keep a
dlsLance
lnsLlLuLlonal LranslLlons
o lundamenLal and comprehenslve changes lnLroduced Lo Lhe formal and lnformal rules of
Lhe game LhaL affecL organlzaLlons as players
llrm sLraLegy, sLrucLure and rlvalry
o Pow lndusLry sLrucLure and flrm sLraLegy lnLeracL Lo affecL lnLerflrm rlvalry
lacLor endowmenLs
o 1he endowmenLs of producLlon facLors such as land, waLer and people ln one counLry
8elaLed and supporLlng lndusLrles
o lndusLrles LhaL are relaLed Lo and/or supporL Lhe focal lndusLry
uomesLlc demand
o uemand for producLs and servlces wlLhln a domesLlc economy
8ounded raLlonallLy
o 1he necesslLy of maklng raLlonal declslons ln Lhe absence of compleLe lnformaLlon
CulLure
o 1he collecLlve programmlng of Lhe mlnd LhaL dlsLlngulshes Lhe members of one group or
caLegory of people from anoLher
ower dlsLance
o 1he degree of soclal lnequallLy
lndlvlduallsm
o 1he perspecLlve LhaL Lhe ldenLlLy of an lndlvldual ls mosL fundamenLally based on hls or
her own lndlvldual aLLrlbuLes (8aLher Lhan Lhe aLLrlbuLes of a group)
CollecLlvlsm
o 1he perspecLlve LhaL Lhe ldenLlLy of an lndlvldual ls mosL fundamenLally based on Lhe
ldenLlLy of hls or her collecLlve group
MascullnlLy
o A relaLlvely sLrong form of socleLal-level sex role dlfferenLlaLlon whereby men Lend Lo
have occupaLlons LhaL reward asserLlveness and women Lend Lo work ln carlng
professlons
lemlnlnlLy
o A relaLlvely weak form of socleLal-level sex role dlfferenLlaLlon whereby more women
occupy poslLlons LhaL reward asserLlveness and more men work ln carlng professlons.
uncerLalnLy avoldance
o 1he exLenL Lo whlch members ln dlfferenL culLures accepL amblguous slLuaLlons and
LoleraLe uncerLalnLy
Long-Lerm orlenLaLlon
o A perspecLlve LhaL emphaslzes perseverance and savlngs for fuLure beLLermenL.
LLhlcs
o 1he norms, prlnclples and sLandards of conducL governlng lndlvldual and flrm behavlour.
Code of conducL
o WrlLLen pollcles and sLandards for corporaLe conducL and eLhlcs
LLhlcal relaLlvlsm
o 1he relaLlve Lhlnklng LhaL eLhlcal sLandards vary slgnlflcanLly around Lhe world, and LhaL
Lhere are no unlversally agreed upon eLhlcal and uneLhlcal behavlours
LLhlcal lmperlallsm
o 1he lmperlallsLlc Lhlnklng LhaL one's own eLhlcal sLandards should be applled unlversally
around Lhe world
CorrupLlon
o 1he abuse of publlc power for prlvaLe beneflL, usually ln Lhe form of brlbery
lorelgn CorrupL racLlces AcL
o A uS law enacLed ln 1977 LhaL bans brlbery of forelgn offlclals
ln-group
o lndlvlduals and flrms regarded as parL of 'us'
CuL-group
o lndlvlduals and flrms noL regarded as parL of 'us'
CulLural dlsLance
o 1he dlfference beLween Lwo culLures along some ldenLlflable dlmenslons
lnsLlLuLlonal dlsLance
o 1he exLenL of slmllarlLy of dlsslmllarlLy beLween Lhe regulaLory, normaLlve and cognlLlve
lnsLlLuLlons of Lwo counLrles
8LSLn1A1lCn
- CulLural dlsLance: hLLp://www.slldeshare.neL/rofessorMaLhur/9-examples-of-flrms-
lmplemenLlng-global-sLraLegy-by-adapLaLlon
- Confldence, have a real-llfe example for each, make a powerpolnL presenLaLlon, lnvolve Lhe group
ln dlscusslon, graphs + Lables
- Show overvlews of poslLlon durlng Lhe debaLe, have LheoreLlcal argumenLs and maLch Lhese wlLh
emplrlcal evldence
- lnLroducLlon (general), Lheory (1), supporL (S), real-llfe examples (8), repeaL (1,S,8) for 2
nd
Loplc,
Lhen provlde a summary of Lhe dlfferences and argumenLs for each Loplc, Lhen ask for Lhe
audlence's vlewpolnL
o llrsL explaln: whaL ls eLhlcs? uneLhlcal behavlour? 8ole of culLure ln eLhlcs.
-
Learnlng Cb[ecLlves
1) ConcepL of lnsLlLuLlons
Pow flrms play Lhe game and wln/lose depends on how Lhe rules are made and enforced
lnsLlLuLlon-based vlew: perspecLlve LhaL Lakes lnLo accounL noL only lndusLry- and flrm-level
condlLlons buL also wlder lnfluences such as Lhe sLaLe and socleLy when crafLlng sLraLegy
lnsLlLuLlons: humanly devlsed consLralnLs LhaL sLrucLure human lnLeracLlon
Aka rules of Lhe game": lnsLlLuLlons have boLh formal (laws, regulaLlons, rules) and lnformal
(norms, eLhlcs, values) componenLs, each w/ dlfferenL supporL plllars:
o 1) 8egulaLory plllar: how rules, laws, regulaLlons lnfluence Lhe behavlour of lndlvlduals and
flrms (lormal)
o 2) normaLlve: how values, bellefs, and norms of sLakeholders lnfluence behavlour of lndlv/flrms
(lnformal)
o 3) CognlLlve: lnLernallzed values and bellefs LhaL gulde lndlv/flrm behavlour (lnformal)

2) 1wo prlmary ways of exchange LransacLlons LhaL reduce uncerLalnLy
key role ls Lo reduce uncerLalnLy (ex: pollLlcal and economlc uncerLalnLles)
o 8educe LransacLlon cosLs (cosL of dolng buslness) by lnlLlaLlng framework whlch manages
opporLunlsm (self-lnLeresL seeklng)
1) lnformal !"#$%&'()*&+,-$)"., personallzed exchanges (aka relaLlonal conLracLlng)
o Lconomlc exchange based on lnformal relaLlonshlps amongsL LransacLlng parLles
o Lx: no need for an lCu noLe, frlends assume Lhey wlll pay back no need for formallLles
! 8oller coasLer: lnlLlally cosLs>beneflLs, Lhen relaLlonshlp lasLs long and beneflLs
ouLwelgh, buL Lhen lf noL llmlLs exlsL Lhen cosLs > beneflLs
2) lormal !/#",-$)". lmpersonal changes w/ 3
rd
parLy enforcemenL (aka arm's-lengLh LransacLlon)
o Lconomlc exchange based on formal relaLlonshlps amongsL parLles aL an arms-lengLh"
o Lx: borrowlng from local, ouL of sLaLe, ouL of counLry banks w/ llmlLs/rules
! lnlLlally cosLs>beneflLs due Lo formallLles of lnsLlLuLlons (banks, courLs, lawyers) buL Lhe
beneflLs are much greaLer over Llme
1akeaway: no presumpLlon LhaL elLher ls lnherenLly beLLer
o 8elaLlonal adv: when slze of economy ls llmlLed 8u1 creaLes loyalLles and barrlers Lo enLry
o Arm's lengLh adv: when LransacLlons are complex and long-dlsLance

3) 1wo proposlLlons underplnnlng an lnsLlLuLlon-based vlew of buslness sLraLegy
orLer ulamond -> deLermlnanLs of naLlonal (of dlfferenL lndusLrles ln dlfferenL counLrles)
compeLlLlve advanLage (noL super lmporLanL)
! orLer lgnores hlsLorles and lnsLlLuLlons (le: whaL ls behlnd flrm rlvalry) whlch ls a ma[or
downfall ln Lhe framework -> Lhls lnfo ls lmporLanL when decldlng Lo enLer a new counLry
especlally wlLh Lhe large hlsLorlcal dlfference of emerglng v developed
o 1) flrm sLraLegy, sLrucLure, and rlvalry
o 2) counLry facLor endowmenLs: naLural/human resource reperLolres
o 3) relaLed and supporLlng lndusLrles: provlde foundaLlon upon whlch key lndusLrles can excel
o 4) domesLlc demand: demand for producLs wlLhln a counLry
! Lx: Pollywood movles are of oLher-world sLandard due Lo Lhe sLrlcL appeLlLes of Lhe
Amerlcan crlLlcs/audlence, consLanLly work Lo make beLLer
lnsLlLuLlon-based vlew focuses on Lhe dynamlc lnLeracLlon beLween 1) lnsLlLuLlons and 2) flrms, and
conslders Lhe 3) sLraLeglc cholces as Lhe ouLcome of such an lnLeracLlon
roposlLlon 1: managers/flrms !$%&'($##0 pursue Lhelr lnLeresLs and make sLraLeglc cholces wlLhln
formal and lnformal consLlLuLlonal consLralnLs
o Lx: flrm from emerglng 88lC counLry raLlonally decldes Lo go abroad even Lhough Lhere ls
large growLh ln domesLlc counLry due Lo large lnsLlLuLlon-based hassles back home
o 8ased on bounded raLlonallLy: maklng raLlonal declslons based on lncompleLe/mlsslng lnfo
roposlLlon 2: when formal consLralnLs fall, lnformal consLralnLs play a #$!1"! role
o Larger role ln reduclng uncerLalnLy and provldlng consLancy for managers
o lnformal consLralnLs are more pervaslve, formal rules only make up small parL of lnsLlLuLlonal
consLralnLs ln a developed economy

4) SLraLeglc roles of culLures
CulLure: collecLlve programmlng of Lhe mlnd LhaL dlsLlngulshes members of one group or caLegory
of people from anoLher
o 1here are many layers of culLure, lL ls noL easlly deflned Lo speclflc reglons (le: sLraya culLure v
Canada culLure) as Lhere are many sub-groups
llve dlmenslons of naLlonal culLure (PofsLede) and Lhelr effecLs on sLraLeglc cholces -> represenLs
sLarLlng polnL when Lrylng Lo deLermlne role of culLure ln global buslness Anu effecLs sLraLeglc
behavlour:
o 1)power dlsLance: degree of soclal lnequallLy, exLenL Lo whlch Lhe less powerful accepL
unequal power dlsLrlbuLlon
o 2)lndlvlduallsm/collecLlvlsm:
! lndlvlduallsm: ldenLlLy of lndlv. ls based on personal aLLrlbuLes, less Lles b/w lndlvlduals
! CollecLlvlsm: ldenLlLy of lndlv. ls based on ldenLlLy of collecLlve group, group orlenLed
o 3)mascullnlLy/femlnlnlLy -> role of sexual dlfferenLlaLlon
! MascullnlLy (femlnlnlLy): socleLy where men (women) Lend Lo perform occupaLlons LhaL
reward asserLlveness and women (men) Lend Lo have more carlng professlons
o 4)uncerLalnLy avoldance: Lhe exLenL Lo whlch member of socleLy accepL amblguous
slLuaLlons/LoleraLe uncerLalnLy -> ex: LolerablllLy Lo change
o 3)long-Lerm orlenLaLlon: perseverance and savlngs for fuLure beLLermenL
llve dlmenslons effecL sLraLeglc behavlour -> ex: low uncerLalnLy avoldance
managers rely on guL feellng" whereas hlgh uncerLalnLy avoldance rely on rules
and procedures

3) SLraLeglc role of eLhlcs leadlng Lo a sLraLeglc response framework
LLhlcs: norms, prlnclple, and sLandards of conducL governlng lndlvldual and flrm behavlour
o 8asls of lnformal Anu formal lnsLlLuLlons (le: rules and regs)
Code of conducL: wrlLLen pollcles and sLandards or corporaLe conducL and eLhlcs
Why do companles pursue eLhlcal behavlour?
o negaLlve vlew: [umplng on bandwagon" Lo appear more leglLlmaLe w/o acLually belng more
eLhlcal
o oslLlve vlew: self-moLlvaLed Lo do Lhe rlghL Lhlng" for socleLy
o lnsLrumenLal vlew: seelng LhaL good eLhlcs = good proflLs
1wo schools of LhoughL when managlng overseas:
o 1) eLhlcal relaLlvlsm: relaLlve Lhlnklng LhaL eLhlcal sLandards vary slgnlflcanLly around Lhe
world and LhaL Lhere are no unlversally agreed upon eLhlcal/uneLhlcal behavlours
o 2) eLhlcal lmperlallsm: one's own eLhlcal sLandards should be applled unlversally around Lhe
world
! nelLher schools of LhoughL are reallsLlc
Mlddle of Lhe road" prlnclples:
o 1) human dlgnlLy and baslc rlghLs 2) local LradlLlons + culLural senslLlvlLy 3) lnsLlLuLlonal
conLexL -> undersLandlng local lnsLlLuLlons
lramework of sLraLegles for confronLlng eLhlcal challenges:
o 1) reacLlve -> deny responslblllLy, do less Lhan requlred
o 2) defenslve -> admlL respon, buL flghL lL, do leasL LhaL's requlred
o 3) accommodaLlve -> accepL respon, do all LhaLs requlred
o 4) proacLlve -> anLlclpaLe respon, do more Lhan requlred
CorrupLlon: abuse of power for prlvaLe beneflL usually ln form of brlbery

6) uebaLes
CpporLunlsm v lndlvlduallsm/CollecLlvlsm
o CpporLunlsm ls a ma[or source of uncerLalnLy
! CollecLlvlsLs are more collaboraLlve only wlLh ln-group" (l.e: lndlv /flrms regarded
as us") members Anu dlscrlmlnaLe wlLh ouL-group" (aka noL us") members ->
opposlLe for lndlvlduallsLs.
! uS = lndlvlduallsL, Chlne = collecLlvlsL
CulLural ulsLance v lnsLlLuLlonal ulsLance
o roblem sLaLemenL: can [olnL lnLernaLlonal venLures be declded on malnly based on
culLural dlsLance?
o CulLural dlsLance : dlfference b/w Lwo culLures along some ldenLlflable dlmenslons
! llrms ln general prefer Lo do buslness w/ culLurally close counLrles due Lo smaller
culLural dlsLance" -> le: !apan-uS worse Lhan !apan-!apan
! CrlLlcs: 1) uS-!apan ouLperforms oLher more culLurally close [olnL venLures 2) muL
also conslder organlzaLlonal culLures 3) should be complemenLed by lnsLlLuLlonal
dlsLance
o lnsLlLuLlonal dlsLance exLenL of slmllarlLy b/w regulaLory, normaLlve, and cognlLlve
lnsLlLuLlons of Lwo counLrles
o 1akeaway: should be comblned when decldlng Lo commlL Lo a [olnL lnLernaLlonal
venLures, long culLural dlsLance shouldn'L be Lhe reason Lo noL parLlclpaLe ln [olnL
venLure, no one-Lo-one guaranLee whaL wlll/won'L work -> musL plan/analyze
8ad Apples" v 8ad 8arrels"
o roblem sLaLemenL: WhaL ls Lhe rooL cause of uneLhlcal behavlour?
o 8ad apples: people have eLhlcal/uneLhlcal predlsposlLlons before [olnlng flrms -> eLhlcs
resldes ln Lhe lndlvldual
o 8ad barrels: people commlL uneLhlcal behavlour only because Lhe flrm glves opporLunlLy Lo
do so and/or condones Lhe uneLhlcal behavlour -> eLhlcs resldes ln Lhe rules, regulaLlons,
pollcles, culLure of an organlzaLlon
o LxLenslon of Lhe naLure vs nurLure argumenL -> are we who we are and how we behave
based on our genes or our envlronmenLs
! MosL sLudles show we are a resulL of boLh -> good apples may even Lurn lnLo bad
barrels (or vlce-versa), eLhlcal predlsposlLlons wlll lnfluence behavlour, however
Lhe lnsLlLuLlonal envlronmenL may have a profound lmpacL on Lhls

7) key 1akeaways
- SLraLegy ls abouL cholces -> oLher opLlons exlsL oLher Lhan baslng sLraL declslons on lndusLry
sLrucLures and flrm-speclflc capablllLles, Lhose aforemenLloned do noL Lake lnLo accounL 2'(%"3%
o CLher opLlon Lo conslder: lnsLlLuLlon-based vlew whlch emphaslzes Lhe lmporLance of
lnsLlLuLlons, culLures, and eLhlcs as basls for maklng sLraLeglc cholces
- lan before enLerlng a new counLry -> sLrengLhen cross-culLural lnLelllgence
o uon'L [usL when ln 8ome do as Lhe 8omans do" -> deLermlne why" 8omans do Lhlngs a
cerLaln way, you may noL agree w/ cerLaln values of culLure, buL developlng an
undersLandlng of Lhem wlll go a long way
- lnLegraLe eLhlcal declslon-maklng as parL of core flrm sLraLegy/ sLraLegy maklng process
o 8esL managers expecL norms Lo shlfL over Llme, consLanLly prepare for changes Lo Lhe
rules of Lhe game" -> ex: green shlfL wlLhln flrms and accounLablllLy are currenLly vlLal
!"#$%"&#'("&) +,-'"$-- .#%&#$/0 1 23&4#$% 5
!"#$%&' )*#+$, -',#%$.
/$0%'%,%"'.
LlablllLy of forelgnness
o 1he lnherenL dlsadvanLage forelgn flrms experlence ln hosL counLrles because of
Lhelr non-naLlve sLaLus.
ulssemlnaLlon rlsks
o 1he rlsks assoclaLed wlLh unauLhorlzed dlffuslon of flrm-speclflc asseLs
8egulaLory rlsks
o 8lsks assoclaLed wlLh unfavourable governmenL regulaLlons
Cbsolesclng bargaln
o A deal sLruck by an MnL wlLh a hosL governmenL, whlch changes Lhe requlremenLs
afLer Lhe enLry of Lhe MnL.
LxproprlaLlon
o ConflscaLlon of forelgn asseLs lnvesLed ln one counLry
Sunk cosLs
o lrrevocable cosLs lncurred and lnvesLmenLs made
1rade barrlers
o 8arrlers blocklng lnLernaLlonal Lrade
1arlff barrlers
o 1axes levled on lmporLs
nonLarlff barrlers
o 1rade and lnvesLmenL barrlers LhaL do noL enLall Larlffs
Local conLenL requlremenLs
o CovernmenL requlremenLs LhaL cerLaln producLs be sub[ecL Lo hlgher lmporL Larlffs
and Laxes unless a glven percenLage of Lhelr value ls produced domesLlcally
Currency rlsks
o 8lsks sLemmlng from exposure Lo unfavourable movemenLs of Lhe currencles
Currency hedglng
o A LransacLlon LhaL proLecLs Lraders and lnvesLors from exposure Lo Lhe flucLuaLlons
of Lhe spoL raLe
SLraLeglc hedglng
o Spreadlng ouL acLlvlLles ln a number of counLrles ln dlfferenL currency zones Lo
offseL any currency losses ln one reglons Lhrough galns ln oLher reglons
LocaLlon-speclflc advanLages
o AdvanLages assoclaLed wlLh operaLlng ln a speclflc locaLlon
AgglomeraLlon
o ClusLerlng economlc acLlvlLles ln cerLaln locaLlons.
llrsL-mover advanLages
o 1he advanLages LhaL flrsL movers en[oy and alLer movers do noL
LaLe-mover advanLages
o AdvanLages assoclaLed wlLh belng a laLer mover (also known as flrsL-mover
dlsadvanLages)
Scale of enLry
o 1he amounL of resources commlLLed Lo forelgn markeL enLry
non-equlLy modes (nLM)
o Modes of forelgn markeL enLrles LhaL do noL lnvolve Lhe use of equlLy
LqulLy modes
o Modes of forelgn markeL enLry LhaL lnvolve Lhe use of equlLy
Cwnershlp advanLage
o AdvanLage assoclaLed wlLh dlrecLly ownlng asseLs overseas, whlch ls one of Lhe Lhree
key advanLages of belng a mulLlnaLlonal enLerprlse (Lhe oLher Lwo are locaLlon and
lnLernallzaLlon advanLages)
lnLernallzaLlon
o 1he process of replaclng a markeL relaLlonshlp wlLh a slngle mulLlnaLlonal
organlzaLlon spannlng boLh counLrles
lnLernaLlonallzaLlon advanLage
o 1he advanLage assoclaLed wlLh lnLernallzaLlon, whlch ls one of Lhe Lhree key
advanLage of belng a mulLlnaLlonal enLerprlse (Lhe oLher Lwo are ownershlp and
locaLlon advanLages)
CLl advanLages
o Cwnershlp, LocaLlon and lnLernallzaLlon advanLages, whlch are Lyplcally assoclaLed
wlLh MnLs
1urnkey pro[ecLs
o ro[ecLs ln whlch cllenLs pay conLracLors Lo deslgn and consLrucL new faclllLles and
Lraln personnel
8ulld-operaLe-Lransfer agreemenL
o A speclal klnd of Lurnkey pro[ecL ln whlch conLracLors flrsL bulld faclllLles, Lhen
operaLe Lhem for a perlod of Llme, Lhen Lransfer Lhem back Lo cllenLs
8esearch and developmenL conLracLs
o CuLsourclng agreemenLs ln 8&u beLween flrms (1haL ls, flrm Aagrees Lo perform
cerLaln 8&u work for flrm 8)
Co-markeLlng
o AgreemenLs among a number of flrms Lo [olnLly markeL Lhelr producLs and servlces
!olnL venLure (!v)
o A 'corporaLe chlld' LhaL ls a new enLlLy glven blrLh and [olnLly owned by Lwo or more
parenL companles
Wholly owned subsldlary (WCS)
o Subsldlary locaLed ln a forelgn counLry LhaL ls enLlrely owned by Lhe MnL
Creenfleld operaLlon
o 8ulldlng facLorles and offlces from scraLch
CounLry-of-orlgln effecL
o 1he poslLlve or negaLlve percepLlon of flrms and producLs from a cerLaln counLry
LLL advanLages
o Llnkage, leverage, and learnlng advanLages, whlch are Lyplcally assoclaLed wlLh
MnLs from emerglng economles

1'"23$4&$ 567$8,%9$.

1. undersLand Lhe necesslLy Lo overcome Lhe llablllLy of forelgnness
a. When enLerlng forelgn markeLs, flrms confronL a llablllLy of forelgnness (Lol)
l. Lol ls Lhe dlsadvanLage forelgn flrms experlence ln hosL counLrles because
of Lhelr non-naLlve sLaLus. 1hls lncludes boLh Lhe facL LhaL whlLe people haLe
people who aren'L whlLe, buL also because Lhe forelgn company ls sLlll
learnlng rules of Lhe game ln Lhe new counLry whlle esLabllshed flrms are
wrecklng Lhem ln sales.
b. 1he propenslLy Lo lnLernaLlonallze dlffers among flrms of dlfferenL slzes and
dlfferenL home markeL slzes
l. 1l,dr: huge as balls flrms ln huge as balls markeLs Lend Lo lnLernaLlonallse
slower because Lhey don'L really see a need Lo. 1lny flrms ln huge markeLs
wlll occaslonally lnLernaLlonallze, buL Lhey also don'L really see a need Lo.
8aslcally flrms ln Lhe unlLed SLaLes/Luropean unlon have Lhls way of
Lhlnklng.
ll. Puge as balls flrms ln Llny markeLs ball ASA: see lkLA booklng lL ouL of
Sweden lnLo Lhe resL of Lhe world: huge producL, Llny markeL. 1lny flrms ln
Llny markeLs are known as follower lnLernaLlonallzers, as Lhey wlll follow
oLher flrms lf Lhey see LhaL Lhey're golng global.

2. ArLlculaLe a comprehenslve model of forelgn markeL enLrles
a. 1he lndusLry-based vlew suggesLs LhaL lndusLry dynamlsm ln a hosL counLry cannoL
be lgnored.
l. 8aslcally look aL orLer's 3 and deLermlne wheLher lLs worLh enLerlng.
b. 1he resource-based vlew calls for Lhe developmenL of capablllLles along Lhe v8lC
dlmenslons.
l. llrms face lmlLablllLy and dlssemlnaLlon rlsk by enLerlng a new markeL -
worLh welghlng up Lhe rlsk vs beneflL before enLerlng.
c. 1he lnsLlLuLlon-based vlew focuses on lnsLlLuLlonal consLralnLs LhaL forelgn enLranLs
musL confronL.
l. 8un lnLo regulaLory rlsks such as governmenLs dlcklng flrms for Lhelr
lnLellecLual roperLy rlghLs (l)
ll. 1rade barrlers can also dlck flrms
1. 1arlffs, eLc
lll. Currency rlsk ls also a blLch
1. Currencles flucLuaLe -> flrms geL dlcked
3. MaLch Lhe quesL for locaLlon-speclflc advanLages wlLh sLraLeglc goals (where Lo enLer)
a. Where Lo enLer depends on cerLaln forelgn counLrles' locaLlon-speclflc advanLages
and flrms' sLraLeglc goals, such as seeklng naLural resources, markeL, efflclency, and
lnnovaLlon
l. naLural resources: Lhey puL up wlLh bullshlL from venezuela and 8ussla
because lLs beLLer Lhan havlng Lo deal wlLh Lhe arabs
ll. MarkeL: Lveryone's golng Lo Chlna
lll. Lfflclency Seeklng: Lveryone's golng Lo Chlna. 8uL only because Lhey make
LvL8?1PlnC, so you don'L have Lo source a screen for your lapLop from
lndla - everyLhlng ls ln Lhe same place.
lv. lnnovaLlon: Lveryone goes Lo where-ever-Lhe-fuck all Lhe flrms are. AuLo
lndusLry: Chlna. l1: Slllcon valley.
4. Compare and conLrasL flrsL-mover and laLe-mover advanLages (when Lo enLer)
a. Lach has pros and cons, and Lhere ls no concluslve evldence polnLlng Lo one
dlrecLlon.
l. lL really doesn'L maLLer - on Lhe one hand, dlcks llke kleenex and xerox now
have verbs named afLer Lhelr companles. 8uL on Lhe oLher hand, flrms llke
Clsco geL dlcked when Lrlcsson can come ln from underneaLh Lhem and geL
a deal 20 cheaper Lhan Clsco.
3. lollow a declslon model LhaL ouLllnes speclflc sLeps for forelgn markeL enLrles (how Lo enLer)
a. Pow Lo enLer depends on Lhe scale of enLry: Large-scale versus small-scale enLrles
l. Cn Lhe one hand, you go ln Loo small, you rlsk noLhlng buL locals don'L LrusL
your commlLmenL. Cn Lhe oLher hand, you go Loo large, you rlsk belng
dlcked by Lhe markeL, buL locals LrusL your commlLmenL.
b. A declslon model flrsL focuses on Lhe equlLy (ownershlp) lssue.
l. Cn Lhe one hand, lf you own everyLhlng ln your value chaln (as an oll
producer): you don'L have Lo walL for anyone, you do everyLhlng !usL ln 1lme
(!l1). l.e.: you don'L have Lankers slLLlng ln Lhe waLer walLlng Lo dellver oll,
you [usL send Lhem when you need Lhem.
ll. Cbvlously Lhls ls dlfferenL for dlfferenL lndusLrles. l1 flrms would honesLly
noL glve a fuck abouL ownlng a !v LhaL supplled servers Lo Lhelr back-end
operaLlons, Lhey [usL need lL Lo exlsL as lLs noL a core-compeLency.
c. 1he second sLep makes Lhe acLual selecLlon, such as exporLs, conLracLual
agreemenLs, !vs, and WCS (Wholly owned subsldlary)
l. 1ypes of shlL Lhey can do:
ll. 1urnkey pro[ecLs
1. CllenLs pay conLracLors Lo bulld shlL, Lraln personnel. AL end of
perlod Lhe cllenLs glve conLracLors Lhe 'key' Lo Lhe premlses
lll. 8ulld-operaLe-Lransfer agreemenL
1. 8aslcally when a prlvaLe flrm bullds a Lunnel/road and Lolls lL for x
years, and hands lL over Lo Lhe sLaLe governmenL afLer x years.
lv. 8esearch and developmenL conLracLs
1. When a flrm ouLsources 8&u work
v. Co-markeLlng
1. When flrms llke Mcuonalds adverLlse for movles by puLLlng Loys ln
Pappy Meals
vl. !olnL-venLures
1. When Lwo flrms love each oLher very much and puL a cerLaln
amounL of equlLy LogeLher, Lhey form a new legal enLlLy.
vll. Wholly-owned-subsldlary
1. Creenfleld operaLlons
a. l.e. new block of land ln a forelgn counLry wlLh shlL on lL
2. AcqulslLlon
a. l.e. buylng a whole company ln a forelgn counLry
6. arLlclpaLe ln Lhree leadlng debaLes concernlng forelgn markeL enLrles
a. LlablllLy vs asseL of forelgnness
l. uebaLe: WheLher or noL forelgnness ls a llablllLy or an asseL.
ll. 1he Lwo vlews are LhaL elLher a flrm ls hlndered by Lhe facL lLs from Chlna &
looks cheap and nasLy, or lLs beneflLLed by Lhe facL LhaL lLs from Cermany &
looks hlgh quallLy machlned and shlL
lll. 1hen Lhere are assholes llke Cuccl who blend Lhe dlsLlncLlon by belng an
lLallan flrm based ln 1he neLherlands, whlch sells lrench fashlon.
b. Clobal vs reglonal geographlc dlverslflcaLlon
l. 8andom bullshlL abouL Lhe deflnlLlon of belng a global MnL
ll. AL leasL 20 of sales ln each of Lhe Lhree reglons of Lhe 1rlad conslsLlng of
Asla, Lurope and norLh Amerlca, buL less Lhan 30 ln any one reglon"
lll. 8aslcally don'L use global" unless Lhey flL LhaL crlLerla (9 flrms worldwlde
do), use reglonal lnsLead.
c. Cld-llne versus emerglng mulLlnaLlonals
l. CLl = Cwnershlp, LocaLlon, lnLernallzaLlon
ll. SLraLegy of huge ass companles llke Shell/8 where Lhey own every parL of
Lhelr value chaln, ln varlous geographlc locaLlons, and lL's all-lnLernal.
lll. LLL = Llnkage, leverage and learnlng
lv. SLraLegy Lyplcally lmplemenLed by flrms ln Chlna who wanL Lo hlde Lhe facL
LhaL Lhey're from chlna. 8ook example: Chlnese flrm buys a Cerman brand =
Llnkage, Leverage ls when Lhe flrm explolLs lLs unlque resources and
capablllLles - such as reglon speclflc search englnes such as ?andex, 8aldu
and naver, whlch have unlque lnformaLlon abouL Lhe demographlc LhaL
Coogle has yeL Lo peneLraLe. Learnlng ls when companles aren'L assholes,
buL go abroad Lo learn. 1yplcally MnL's from emerglng economles such as
Lhe 88lCs wlll do Lhls.
7. uraw sLraLeglc lmpllcaLlons for acLlon
a. Crasp Lhe dynamlsm underlylng Lhe lndusLry ln a hosL counLry LhaL you are looklng
lnLo
b. uevelop overwhelmlng resources and capablllLles Lo offseL Lhe llablllLy of
forelgnness.
c. undersLand Lhe rules of Lhe game governlng compeLlLlon ln forelgn markeLs.
d. MaLch efforLs ln markeL enLry and geographlc dlverslflcaLlon wlLh sLraLeglc goals.

!"#$%"&#'("&) +,-'"$-- .#%&#$/0 ! !"#$%&' !
!"# %&'(#)(#&#*(+,- .+(/
0#1+&+'+2&3
Small anu meuium sizeu enteipiise (SNE)
o Fiim with <Suu people in the 0SA, <2Su people in the E0
Entiepieneuiship
o The iuentification anu exploiation of pieviously unexploieu oppoitunities
Entiepieneui
o Peison who uoes this
Inteinational Entiepieneuiship
o A combination of innovative, pioactive anu iisk seeking behavioui that ciosses
boiueis anu is intenueu to cieate wealth in oiganizations
Liability of newness
o The inheient uisauvantage that entiepieneuiial fiims expeiience as new
entiants
Stiong ties
o Noie uuiable, ieliable anu tiustwoithy ielationships cultivateu ovei a long
peiiou of time
Weak ties
o Relationships that aie chaiacteiizeu by infiequent inteiaction anu low intimacy
ventuie capitalist (vC)
o An investoi who invests capital in eaily-stage, high-potential stait-ups
Niciofinance
o A piactice to pioviue micioloans to stait small businesses with the intention of
ultimately lifting the entiepieneuis out of poveity
Initial public offeiing (IP0)
o The fiist iounu of public tiauing of company stock
Boin global fiim (inteinational new ventuie)
o A stait-up company that attempts to uo business abioau fiom inception
Biiect expoits
o Biiectly selling piouucts maue in the home countiy to customeis in othei
countiies
Licensing
o FIRN A's agieement to give Fiim B the iights to use A's piopiietaiy technology,
oi tiauemaik foi a ioyalty fee paiu to A by B. This teim is typically useu in
manufactuiing inuustiies
Fianchising
o Same as Licensing, but usually foi seivice inuustiies
Inuiiect expoits
o Expoiting inuiiectly thiough uomestic-baseu expoit inteimeuiaiies
Expoit inteimeuiaiy
o A fiim that peifoims an impoitant miuuleman function by linking uomestic
selleis anu foieign buyeis that otheiwise woulu not have been connecteu
Seiial entiepieneui
o An entiepieneui who staits, giows, anu sells seveial businesses thioughout
hishei caieei
Stage mouel
o Nouel that suggests fiims inteinationalize by going thiough pieuictable stages
fiom simple steps to complex opeiations
4&25-#67# 89:#;'+<#3
1. Befine entiepieneuiship, entiepieneuis, anu entiepieneuiial fiims
a. Entiepieneuiship is the iuentification anu exploiation of pieviously unexploieu
oppoitunities
i. Finuing ways to make bank, pieviously unexploiteu
b. Entiepieneuis may be founueis of new businesses oi manageis of existing fiims
i. Bicks who uo this aie entiepieneuis.
c. Entiepieneuiial fiims in this chaptei aie uefineu as SNEs
i. Fiims that uo this aie calleu entiepieneuiial fiims.
ii. SNEs aie 9S% of all total fiims, anu pioviue Su% total value auueu,
geneiate 6u-9u% of employment (countiy uepenuent)
2. Aiticulate a compiehensive mouel of entiepieneuiship
a. Five foices of an inuustiy shape entiepieneuiship associateu with this inuustiy.
i. Shit like inteifiim iivaliy uiiectly affects whethei entiepieneuiial fiims
succeeu.
ii. Whethei uicks like Niciosoft exist in the inuustiy, too
iii. Entiepieneuis who can ieuuce baigaining powei of buyeis can make
bank. i.e. how amazon maue it haiuei foi tiauitional book stoies to get
goou ueals on books.
b. Resouices anu capabilities laigely ueteimine entiepieneuiial success anu failuie
i. Cieate value.
1. Fiims such as Ryanaii uo this thiough having an ungouly
quantity of aiipoits, cheap flights, being on time etc
ii. Be iaie.
1. The ieason Niciosoft uominateu the 199us is because it was the
only fiim that uiu what it coulu uo.
iii. Be Inimitable
1. The ieason uoogle still owns eveiything on the Inteinet is
because of its PageRank algoiithm, which no fiim has
successfully copieu 1uu%
iv. Be 0iganizationally Embeuueu
1. Shit has to be tight in youi fiim.
2. Things like being able to tiack logistics of piouucts, etc.
S. Basically not being a leaky boat of a company.
c. Institutions enable anu constiain entiepieneuiship aiounu the woilu
S. Iuentify five stiategies that chaiacteiize a giowing entiepieneuiial fiim
a. uiowth
i. Nake moie than the yeai befoie.
ii. !"##$ utilising iesouices anu capabilities
b. Innovation
i. Nake iiuiculous inventions that make bank
ii. i.e. Isiaeli uefence fiims making ciazy guns that can tiack anu uestioy
missiles, to Isiaeli bianch of Intel which inventeu the Pentium chip
(uisiupting all CP0 business fiom ANB foi AuES)
c. Netwoik
i. Know people
ii. Entiepieneuis face the liability of newness, anu can oveicome this by
knowing big playeis in inuustiy who put theii name on the fiim
u. Financinguoveinance
i. All stait-ups neeu capital - just uon't be stupiu anu take out a loan to
make youi own business.
e. Baivestexit
i. Sell the fiim, like InstagiamSnapchatWhatsApp
4. Biffeientiate inteinational stiategies that entei foieign maikets anu that stay in
uomestic maikets
a. Entiepieneuiial fiims can inteinationalize by enteiing foieign maikets, thiough
entiy moues such as uiiect expoits, licensingfianchising anu FBI.
b. Entiepieneuiial fiims can also inteinationalize without ventuiing abioau, by
expoiting inuiiectly, supplying foieign fiims, becoming licenseesfianchisees of
foieign fiims, joining foieign entiants as alliance paitneis, anu haivesting anu
exiting thiough sell-offs to foieign entiants.
S. Paiticipate in thiee leauing uebates conceining entiepieneuiship
a. Tiaits vs Institutions
i. The two points of view:
1. Eithei entiepieneuis aie boin with the tiaits to make businesses
succeeu
2. 0i it's the goveinmentsociety which puts measuies in place to
ensuie people aie willing to take iisks to make bank
b. Slow vs iapiu inteinationalization
i. Eithei fiims slowly expanu, using stageu mouels such as Ikea which took
2u yeais to ueciue to leave Sweuen
ii. 0i fiims uo it fiom the stait - such as new stait-up "0ne-Plus", which
went global a month ago selling the highest spec Anuioiu fiim woilu-
wiue to become insta-famous
c. Anti-failuie biases veisus entiepieneui-fiienuly bankiuptcy laws.
i. Eithei make capital stupiuly easy to get, see: ulobal Financial Ciisis
ii. 0i make it stupiuly haiu foi entiepieneuis to stait businesses, see:
Englanu in the 1Suus wheie fiim failuie usually meant the
owneiopeiatoi was violently punisheu
6. Biaw stiategic implications foi action
a. Establish an intimate unueistanuing of youi inuustiy to iuentify gaps anu
oppoitunities
b. Leveiage entiepieneuiial iesouices anu capabilities
c. Push foi institutions that facilitate entiepieneuiship uevelopment
u. When inteinationalizing, be bolu, but not too bolu
!"#$%&' ) * +%'#%&,-. /00-#1.&2 3 4&%56'72
ueflnlLlons
SLraLeglc alllance
o A volunLary agreemenL of cooperaLlon beLween flrms
ConLracLual (non-equlLy) alllance
o A sLraLeglc alllance LhaL ls based on conLracLs and does noL lnvolve sharlng of
ownershlp
LqulLy-based alllance
o A sLraLeglc alllance LhaL lnvolves use of equlLy
SLraLeglc lnvesLmenL
o Cne parLner lnvesLs ln anoLher as a sLraLeglc lnvesLor
Cross-shareholdlng
o 8oLh parLners lnvesL ln each oLher Lo become cross-shareholders
SLraLeglc neLwork
o A sLraLeglc alllance formed by mulLlple flrms Lo compeLe agalnsL oLher such groups
and agalnsL LradlLlonal slngle flrms (also known as a consLellaLlon)
ConsLellaLlon
o A mulLl-parLner sLraLeglc alllance
PorlzonLal alllance
o A sLraLeglc alllance formed by compeLlLors
upsLream verLlcal alllance
o A sLraLeglc alllance wlLh flrms on Lhe supply slde
uownsLream verLlcal alllance
o A sLraLeglc alllance wlLh flrms ln dlsLrlbuLlon
8eal opLlon
o An opLlon lnvesLmenL wlLh real operaLlons as opposed Lo flnanclal caplLal
Learnlng race
o A race ln whlch alllance parLners alm Lo ouLrun each oLher by learnlng Lhe 'Lrlcks'
from Lhe oLher slde as fasL as posslble
8elaLlonal (collaboraLlve) capablllLles
o 1he capablllLles Lo successfully manage lnLerflrm relaLlonshlps
arLner rarlLy
o 1he dlfflculLy Lo locaLe parLners wlLh deslrable aLLrlbuLes
neLwork cenLrallLy
o 1he exLenL Lo whlch a flrm's poslLlon ls plvoLal wlLh respecL Lo oLhers ln Lhe
lnLerflrm neLwork.
uue dlllgence
o lnvesLlgaLlon prlor Lo slgnlng conLracLs
Learnlng by dolng
o A way of learnlng noL by readlng books buL by engaglng ln hands-on acLlvlLles
LxplolLaLlon
o AcLlons capLured by Lerms such as reflnemenL, cholce, producLlon, efflclency,
selecLlon and execuLlon
LxploraLlon
o AcLlons capLured by Lerms such as search, varlaLlon, rlsk Laklng, experlmenLaLlon,
play, flexlblllLy, dlscovery and lnnovaLlon

Learnlng Cb[ecLlves
1) ueflne SLraLeglc Alllances and neLworks (212)
SLraLeglc alllances: volunLary agreemenLs of cooperaLlon b/w flrms
o LqulLy-based alllance: alllance based on use of equlLy, esLabllshes new flrm whose equlLy ls spllL
b/w parLners
! Lx: sLraLeglc lnvesLmenL -> one parLner lnvesLs ln Lhe oLher, cross-shareholdlng -> boLh
lnvesL ln each oLher
o non-equlLy (conLracLual) based alllance: alllance based on conLracLs and no shared ownershlp
! Lx: co-markeLlng, 8&u, sLraLeglc suppllers/dlsLrlbuLers
SLraLeglc neLworks: sLraLeglc alllances formed by !"#$%&#' flrms
o Lx: alr lndusLry has mulLlple alllances lncludlng: SLar Alllance, Sky1eam, CneWorld

2) ArLlculaLe comprehenslve model of sLraLeglc alllances and neLworks (213-222)
8ackbones of comprehenslve model:
o A) lndusLry-based -> flrms are lndependenL players who max. Lhelr own perf.
! PorlzonLal alllance: formed b/w compeLlLors -> Lo scale hlgh enLry barrlers, reduce
lnnovaLlon cosLs
! upsLream alllance: b/w supply-slde flrms
! uownsLream alllance: b/w dlsLrlbuLlon flrms ex: alllance b/w 8yannalr and PerLz
o 8) 8esource-based -> (v8lC)
! 1) vALuL, alllances musL creaLe value, value musL ouLwelgh cosLs
a. 8eal opLlon: opLlon (rlghL Lo Lake acLlon ln Lhe fuLure) lnvesLmenL ln real
operaLlons as opposed Lo flnanclal caplLal
! 2) 8A8l1?, relaLlonal capablllLles and deslrables parLners are rare
a. 8elaLlonal capablllLy rarlLy: capablllLles Lo manage successful lnLer-flrm
relaLlonshlps
l. Soclal, psychologlcal, emoLlonal arrangemenL dlfflculL Lo maLch lnLer-flrm
b. arLner rarlLy: dlfflculLy Lo locaLe parLners w/ cerLaln aLLrlbuLes
l. SLems from llmlLed # of flrms wlLhln lndusLry, neLwork poslLlon of flrms
! 3) lMl1A8lLl1?, LrusL/undersLandlng amongsL parLners/chemlsLry (alllance-level),
repllcaLlon of buslness pracLlces (flrm-level)
! 4) C8CAnlZA1lCn, sLrucLure of organlzaLlons posL-alllance, prevenLlng lmlLablllLy
o C) lnsLlLuLlon-based -> (formal/lnformal)
! 1) ()*!+# lnsLlLuLlons supporLed by *',"#+$)*- plllar
a. AnLl-LrusL concerns
l. AnLl-LrusL auLhorlLles more llkely Lo approve alllance raLher Lhan merger
b. LnLry mode requlremenLs
l. CovernmenLs use proLecLlonlsm Lo promoLe domesLlc lndusLrles/flrms
! 2) %.()*!+# lnsLlLuLlons supporLed by .)*!+$%/' 1 2),.%$%/' plllar
a. normaLlve -> flrms sLrlve Lo galn leglLlmacy, alllances wlLh cerLaln lndusLry
players (wheLher geographlcally or mkL share/power relaLed) can be way of
galnlng leglLlmacy wlLhln lndusLry
b. CognlLlve -> lnLernallzed/Laken for granLed values and bellefs LhaL gulde flrm
behavlour
l. ALWA?S perform uuL ulLlCLnCL**
Auv and ulSAuv of SLraLeglc Alllances and neLworks
o 345: 1) reduce cosLs, rlsks, uncerLalnLles 2) access Lo complemenLary asseLs 3) learnlng from
dlfferenL parLners
o 467345: 1) chooslng wrong parLner 2) cosLs of negoLlaLlon and coordlnaLlon 3) rlsk of helplng
nurLure Lhe compeLlLlon (learnlng race) 4) parLner opporLunlsm

3) undersLand Lhe declslon process behlnd Lhe formaLlon of alllances and neLworks (222-224)
rlnclple phases ln formlng alllances/neLworks:
o SLage 1) CorporaLe or noL?
! Can flrm achleve growLh Lhrough markeL LransacLlons or acqulslLlons/mergers or alllances?
o SLage 2) ursue conLracLual or equlLy modes?
! ConLracLual when: dlrecL monlLorlng/conLrol nC1 lmporLanL
! LqulLy when: harder Lo descrlbe/codlfy capablllLles (more LaclL)
! CLher drlvlng forces: C) poLenLlal as real opLlons Anu u) lnfluence of formal lnsLlLuLlons
(boLh PlCP)
CpposlLe of examples glven relaLe Lo Lhe opposlLe mode (easy Lo descrlbe
capablllLles = conLracLual)
o SLage 3) oslLlonlng of relaLlonshlp?
! Llkely LhaL flrms have mulLlple lnLer-flrm relaLlonshlps wlLh MnLs, musL be assess very
carefully Lhe lmpacL of each lndlvldual relaLlonshlp prlor Lo lLs formaLlon on Lhe flrm's
oLher relaLlonshlps -> my frlend's enemy ls my enemy"

4) Caln lnslghLs lnLo Lhe evoluLlon of alllances and neLworks (223-228)
3 aspecLs of evoluLlon:
o 1) combaLlng opporLunlsm
! A) walllng off crlLlcal capablllLles -> akln Lo a prenupLlal agreemenL buL for flrms
! 8) swapplng crlLlcal capablllLles w/ credlble commlLmenLs hosLage-Laklng" -> opposlLe
of flrsL approach, Lhey each llcense a crlLlcal capablllLy of Lhelr own Lo each oLher, holdlng
each oLher hosLage"
o 2) evolvlng from sLrong Lo weak Lles
! SLrong Lles -> more durable, rellable, LrusLworLhy, used for exchange of hlgher quallLy
lnformaLlon, combaL opporLunlsm, Lake a long Llme Lo forge,
! Weak Lles -> relaLlonshlps w/ lnfrequenL lnLeracLlon and low lnLlmacy, llkely Lo provlde
more opporLunlsm, less cosLly Lo lnlLlaLe/malnLaln, good for connecLlng w/ dlsLanL flrms
w/ unlque lnformaLlon (ex: cuLLlng-edge Lech)
o 3) corporaLe marrlages Lo corporaLe dlvorces
! lnlLlaLlon > Colng ubllc > uncoupllng > AfLermaLh > new relaLlonshlp

3) ldenLlfy Lhe drlvers behlnd Lhe performance of alllances and neLworks (228-230)
lacLors affecLlng alllance/neLwork performance aL Lhe alllance/neLwork level:
o 1) LqulLy: greaLer equlLy sLake = greaLer commlLmenL llkely Lo lncrease performance
o 2) Learnlng and experlence: generally Lhe more Lhe beLLer however Lhls ls very ob[ecLlve, polnL
of dlmlnlshlng reLurns no sLrong llnear correlaLlon w/ perf.
o 3) naLlonallLy: more slmllar backgrounds = greaLer chance of performlng beLLer
o 4) 8aLlonal capablllLles: flrm-speclflc and dlfflculL Lo measure
! noL cookle-cuLLer, comblnaLlon of Lhese facLors wlll make or break an alllance

6) uebaLes (230 -233)
Ma[orlLy !vs as conLrol mechanlsms versus MlnorlLy !vs as real opLlons
o WhaL ls Lhe approprlaLe level of equlLy ln [olnL venLures (!vs)? -> whlch flrm has more
mgmL. conLrol ln Lhe relaLlonshlp?
! noL as sLralghLforward as lL appears, very dlfflculL Lo conducL successfully
o Pavlng one flrm ln power can easlly lrrlLaLe Lhe oLher parLy even when [usLlfled (especlally
ln emerg econ and wesLern flrms as emerg econ resenL Lhe domlnance of wesL)
o MlnorlLy Auv: low cosL, less demand on managerlal resources, beLLer ln more uncerLaln
scenarlos, consldered Lo be Loehold" lnvesLmenLs as Lhey are a sLepplng sLone for uLure
relaLlonshlp
Alllances v Mergers/AcqulslLlons
8&',&'2 /.9:-2-%-612
8'9)"*2' %.$'*:'&'.:'.2' Low Plgh
8+$%) )( 9)($;<+*: +99'$9 Plgh Low
7)"*2' )( /+#"' 2*'+$%). Comblne compllmenLary
resources
LllmlnaLlon redundanL
resources
='/'# )( ".2'*$+%.$- Plgh Low

o 8ules aren'L rockeL sclence -> few companles are dlsclpllned enough Lo adhere Lhem
! Alllances should be seen as a good flrsL sLep Lowards acqulslLlon.
Acqulrlng v noL Acqulrlng sLraLeglc parLners
o l) alllance parLner flrms ln emerglng economles experlence more rapld-flre" acqulslLlons
o ll) flrms from developed economles need Lo speed up parLner acqulslLlon process when
compeLlng ln emerglng economles

7) key 1akeaways (233-233)
- lmprove relaLlonal (collaboraLlve) capablllLles
- undersLand and masLer Lhe rules of Lhe game governlng alllances and neLworks globally
- Carefully welgh Lhe pros and cons of alllances vls a vls Lhose of acqulslLlons
!"#$%"&#'("&) +,-'"$-- .#%&#$/0 ! !"#$%&' !
!"#$%" '#()*+,+,-* ./0%(,12
.*3,0,+,#02
1. Competitive uynamics:
a. Actions anu iesponses unueitaken by competing fiims
2. Competitoi analysis
a. The piocess of anticipating iivals' actions in oiuei to both ievise a fiim's plan
anu piepaie to ueal with iivals' iesponses.
S. Nultimaiket competition
a. Fiims engage the same iivals in multiple maikets.
4. Nutual foibeaiance
a. Nultimaiket fiims iespect theii iivals' spheies of influence in ceitain maikets
anu theii iivals iecipiocate, leauing to tacit collusion.
S. Collusion
a. Collective attempts between competing fiims to ieuuce competition
6. Tacit collusion
a. Fiims inuiiectly cooiuinate actions to ieuuce competition by signalling to otheis
theii intention to ieuuce output anu maintain piicing above competitive levels.
7. Explicit collusion
a. Fiims uiiectly negotiate output, fix piicing anu uiviue maikets
8. Caitels
a. An entity that engages in output- anu piice-fixing, involving multiple
competitois. Also known as a tiust.
9. Antitiust laws
a. Laws that attempt to cuitail anticompetitive business piactices such as caitels
anu tiusts.
1u. Piisoneis' uilemma
a. In game theoiy, a type of game in which the outcome uepenus on two paities
ueciuing whethei to coopeiate oi to uefect.
11. uame theoiy
a. A theoiy that focuses on competitive anu coopeiative inteiaction
12. Concentiation iatio
a. The peicentage of total inuustiy sales accounteu foi by the top foui, eight oi 2u
fiims.
1S. Piice leauei
a. A fiim that has a uominant maiket shaie anu sets 'acceptable' piices anu
maigins in the inuustiy.
14. Capacity to punish
a. Baving sufficient iesouices to uetei anu combat uefection
1S. Naiket commonality
a. The uegiee to which two competitois' maikets oveilap
16. Cioss-maiket ietaliation
a. Retaliation in othei maikets when one maiket is attackeu by iivals.
17. Resouice similaiity
a. The extent to which a given competitoi possesses stiategic enuowments
compaiable to those of the focal fiim
18. Competition policy
a. Policy goveining the iules of the game in competition, which ueteimine the
institutional mix of competition anu coopeiation that gives iise to the maiket
system.
19. Antitiust policy
a. Competition policy uesigneu to combat monopolies, caitels anu tiust
2u. Collusive piice setting
a. Nonopolists oi collusion paities setting piices at a level highei than the
competitive level.
21. Pieuatoiy piicing
a. Setting piices below costs in the shoit iun to uestioy iivals anu
b. Intenuing to iaise piices to covei losses in the long iun aftei eliminating iivals
22. Extiateiiitoiiality
a. The ieach of one countiy's laws to othei countiies
2S. Bumping
a. An expoitei selling below cost abioau anu planning to aiise piices aftei
eliminating local iivals
24. Anti-uumping laws
a. Laws that punish foieign companies that engage in uumping in a uomestic
maiket
2S. Attack
a. An initial set of actions to gain competitive auvantage
26. Counteiattack
a. A set of actions in iesponse to attack
27. Blue ocean stiategy
a. A stiategy that focuses on ueveloping new maikets (oi "blue ocean") anu avoius
attacking coie maikets uefenueu by iivals, which is likely to iesult in a bloouy
piice wai (oi "ieu ocean")
40#5"*67* 8$9*1+,-*2

1. Aiticulate the 'stiategy as action' peispective
a. 0nueipinning the 'stiategy as action' peispective, competitive uynamics iefeis
to actions anu iesponses unueitaken by competing fiims.
i. While militaiies fight ovei teiiitoiies, fiims compete in maikets along
piouuct uimensions anu geogiaphic uimensions. Nulti-maiket
competition occuis as a iesult.
2. 0nueistanu the inuustiy conuitions conuucive foi coopeiation anu collusion
a. Such inuustiies tenu to have
i. A small numbei of iivals
1. The highei the concentiation iatio of the top 482u fiims, the
easiei it is to colluue
ii. A piice leauei
1. The fiim with uominant maiket shaie sets acceptable piices anu
maigins helps maintain oiuei anu stability neeueu foi collusion.
Neeus to be big enough to punish fiims that tiy to uefect fiom the
caitel.
iii. Bomogenous piouucts
1. Piouucts neeu to be similai enough that consumeis woulun't tell
the uiffeience between them - to keep competition at a steauy
iate
iv. Bigh entiy baiiieis
1. New fiims coming into the maiket woulu iuin the collusion, as
they typically come in with low piices to tiy gain customeis
v. Bigh maiket commonality (mutual foibeaiance)
1. Nulti-maiket fiims iespect iivals' spheies of influence in ceitain
maikets, anu iivals might iecipiocate - leauing to collusion
S. Explain how iesouices anu capabilities influence competitive uynamics
a. Resouice similaiity anu maiket commonality can yielu a poweiful fiamewoik
foi competitoi analysis
i. v - can cieate value when engaging iivals via patenting & maiket
uominance. These cieate stiong spheies of influence, which pose thieats
to iivals, who now know the fiim will vigoiously uefenu the maiket
they'ie uominant in.
ii. R - Ceitain assets aie iaie. With Singapoie aiilines - they've got one of
the best locations in the woilu foi stopoveis flying to Euiope, anu they'ie
iateu the best aiiline. This allows them to chaige highei anu equip
themselves with the latest technology.
iii. I - Nost slow moving fiims tiy anu imitate theii iivals but continuously
fail to uo so - which is why fiims like Ryanaii aie so uominant in theii
competitive stiategy
iv. 0 - The fiim's oiganization may make it bettei foi competition, foi
puiposes such as answeiing attacks tit-foi-tat. Aggiessive new fiims
such as Accentuie have maue hell foi olu, slowei moving fiims like IBN
because of theii inability to change tactics quickly.
4. 0utline how foimal institutions affect uomestic anu inteinational competition
a. Bomestically, antitiust laws focus on collusion anu pieuatoiy piicing.
i. (until 1982), In the 0S, if the top-foui fiims concentiation iatio exceeus
2u%, it woulu automatically tiiggei an antitiust investigation
ii. Nainly because the 0S consiueieu collusion moie likely to occui wheie
the concentiation iatio was highest
iii. Anu pieuatoiy piicing was uefineu above - anu stupiuly haiu to piove in
couit.
b. Inteinationally, antiuumping laws uisciiminate against foieign fiims anu piotect
uomestic fiims.
i. Stupiuly imbalanceu laws - if a fiim fiom anothei state of the 0S comes
in cheap anu challenges a 0S fiim - theie is no way to piove uumping
ii. But if an Inuian fiim comes in cheapei - ANB shows the lawyeis all uata
etc, the piice setting of the Inuian fiim will be consiueieu unfaii
(lanumaik case wheie Spanish costs of woikeis weie useu to ueteimine
'faiiness', iesulting in Chinese fish being taiiff'u at the boiuei by 11u-
12S%)
S. Iuentify the uiiveis foi attacks, counteiattacks, anu signalling
a. Thiee main types of attacks aie
i. Thiust
1. The classic fiontal attack with biute foice. ;)
ii. Feint
1. A fiim's attack on a local aiena impoitant to a competitoi, but not
the attackei's tiue taiget aiea
a. Example: By blinu-siuing a iival cigaiette bianu,
Nailboio was able to seize the Cential & Eastein
Euiopean maikets. It uiu this by announcing a 2u% off on
its cigaiettes in the 0S while simultaneously ieleasing its
piouuct in Euiope - the iival bianu was unable to
compete on both fionts.
iii. uambit
1. A fiim's withuiawal fiom a low-value maiket to attiact iival
fiims to uiveit iesouices into the low-value maiket so that the
oiiginal withuiawing fiim can captuie a high-value maiket
b. Countei attacks aie uiiven by
i. Awaieness
ii. Notivation
iii. Capability
c. Without talking uiiectly to competitois, fiims can signal to iivals thiough
vaiious means.
i. Like piess ieleaseu to the meuia - Toyota openly tolu uN it woulu lowei
competition in the wake of the uFC, by telling the meuia (which is legal,
appaiently) in a piess ielease, iathei than uiiectly talking to uN (which
is illegal)
6. Biscuss how local fiims fight NNEs
a. When confionting NNEs, local fiims can choose a vaiiety of stiategic choices
i. Befenuei
1. A stiategy that leveiages local assets in aieas which NNEs aie
weak.
a. I.e. Isiaeli beauty fiim specialiseu on ueau sea piouucts
which aie only souiceu by Isiaeli fiims, giving it a
sustainable (ish) competitive auvantage ovei NNE's,
which uon't have access to the iesouice.
ii. Extenuei
1. A stiategy that centeis on leveiaging home-giown competencies
abioau by expanuing into similai maikets
a. I.e. paint company foi ueveloping countiies uses its coie
competencies of piofitable, but low enu paint to expanu
oveiseas, wheie customeis can't affoiu to puichase most
tiauitional NNE's piouucts
iii. Bougei
1. A stiategy that centeis on coopeiating thiough joint ventuies
with NNEs anuoi sell-offs to NNEs
a. Woulun't ieally call it a stiategy, the local fiim can't beat
the NNE so it just joins it
iv. Contenuei
1. A stiategy that centeis on iapiu leaining anu then expanuing
oveiseas
b. They may not be as weak as many people believe.
7. Paiticipate in two leauing uebates conceining competitive uynamics
a. Stiategy veisus I0 economics anu antitiust policy
i. Aigument1: antitiust laws weie cieateu in iesponse foi olu iealities of
uomestic competition in the 0S - they weie wiitten in 189u, anu still
holu touay.
ii. Aigument2: actions accuseu to be anticompetitive may actually be highly
competitive, oi hypeicompetitive
iii. If a managei askeu you to voluntaiily help a iival fiim in setting up theii
competition against you, theie is no way in hell you'll uo it
iv. Yet antitiust lawsuits effectively ask uominant fiims to uo this
v. AigumentS: 0S antitiust laws aien't black anu white - fiims that cleaily
violateu them uiu not face consequences, anu fiims that baiely
oveisteppeu the maik got uickeu.
b. Competition veisus antiuumping
i. It is veiy uifficult foi a couit to ueteimine the uiffeience between
competition anu uumping.
ii. When enteiing a new maiket, most fiims make a loss, at least foi yeai 1 -
so how uo you know if the fiim is unueicutting an incumbent to iun it
out of business oi just getting customeis the noimal way
iii. Solution in some countiies is to consiuei foieign fiims as locals, so
insteau of chaiging them foi uumping, the local goveinment chaiges
them on pieuatoiy piicing laws
8. Biaw stiategic implications foi action
a. Thoioughly unueistanu the natuie of youi inuustiy that may facilitate
competition oi coopeiation.
b. Stiengthen iesouices anu capabilities to compete anuoi coopeiate moie
effectively.
c. 0nueistanu the iules of the game goveining uomestic anu inteinational
competition aiounu the woilu.

!"#$%&' ) * +,-&'.,/,0#%,12 3 4056,.,%,12.
ueflnlLlons
ulverslflcaLlon
o Addlng new buslnesses Lo Lhe flrm LhaL are dlsLlncL from lLs exlsLlng operaLlons
roducL dlverslflcaLlon
o LnLrles lnLo new producL markeLs and/or buslness acLlvlLles LhaL are relaLed Lo a
flrm's exlsLlng markeLs and/or acLlvlLles
Ceographlc dlverslflcaLlon
o LnLrles lnLo new geographlc markeLs
Slngle buslness sLraLegy
o A sLraLegy LhaL focuses on a slngle producL or servlce wlLh llLLle dlverslflcaLlon
roducL-relaLed dlverslflcaLlon
o LnLrles lnLo new producL markeLs and/or buslness acLlvlLles LhaL are relaLed Lo a
flrm's exlsLlng markeLs and/or acLlvlLles
CperaLlonal synergy
o Synergy derlved from havlng shared acLlvlLles, personnel, and Lechnologles
Scale economles (economles of scale)
o 8educLlons ln per unlL cosLs by lncreaslng Lhe scale of producLlon
roducL unrelaLed dlverslflcaLlon
o LnLrles lnLo lndusLrles LhaL have no obvlous producL relaLed connecLlons Lo Lhe
flrm's currenL llnes of buslness
ConglomeraLe
o roducL unrelaLed dlverslfler
ConglomeraLlon
o A sLraLegy of producL-unrelaLed dlverslflcaLlon
llnanclal synergy
o 1he lncrease ln compeLlLlveness for each lndlvldual unlL LhaL ls flnanclally
conLrolled by Lhe corporaLe headquarLers beyond whaL can be achleved by each
unlL compeLlng lndependenLly as sLandalone flrms.
Scope economles (economles of scope)
o 8educLlon ln per unlL cosLs and lncreases ln compeLlLlveness by enlarglng Lhe
scope of Lhe flrm
lnLernal caplLal markeL
o A Lerm used Lo descrlbe Lhe lnLernal managemenL mechanlsms of a producL-
unrelaLed dlverslfled flrm (conglomeraLe) LhaL operaLe as a caplLal markeL lnslde
Lhe flrm
ulverslflcaLlon premlum
o lncreased levels of performance because of assoclaLlon wlLh a producL-dlverslfled
flrm (aka conglomeraLe advanLage)
ulverslflcaLlon dlscounL
o 8educed levels of performance because of assoclaLlon wlLh a conglomeraLe (aka
conglomeraLe dlscounL)
lnLernaLlonal dlverslflcaLlon
o 1he number and dlverslLy of counLrles ln whlch a flrm compeLes
Anchored repllcaLor
o A flrm LhaL seeks Lo repllcaLe a seL of acLlvlLles ln relaLed lndusLrles ln a small
number of counLrles anchored by Lhe home counLry
MulLlnaLlonal repllcaLor
o A flrm LhaL engages ln producL-relaLed dlverslflcaLlon on Lhe one hand and far-
flung mulLlnaLlonal expanslon on Lhe oLher hand
lar-flung conglomeraLe
o A conglomeraLe flrm LhaL pursues boLh exLenslve producL-unrelaLed dlverslflcaLlon
and exLenslve geographlc dlverslflcaLlon
Classlc conglomeraLe
o A flrm LhaL engages ln producL-unrelaLed dlverslflcaLlon wlLhln a small seL of
counLrles cenLered on Lhe home counLry
SLraLeglc conLrol (behavlour conLrol)
o ConLrolllng subsldlary/unlL operaLlons based on wheLher Lhey engage ln deslrable
sLraLeglc behavlour (Such as cooperaLlon)
llnanclal conLrol (ouLpuL conLrol)
o ConLrolllng subsldlary/unlL operaLlons sLrlcLly based on wheLher Lhey meeL
flnanclal/ouL crlLerla
8uslness group
o A Lerm Lo descrlbe a conglomeraLe, whlch ls ofLen used ln emerglng economles
Lconomlc beneflLs
o 8eneflLs broughL by Lhe varlous forms of synergy ln Lhe conLexL of dlverslflcaLlon
8ureaucraLlc cosLs
o 1he addlLlonal cosLs assoclaLed wlLh a larger, more dlverslfled flrm
Marglnal economlc beneflLs (ML8)
o 1he economlc beneflLs of Lhe lasL unlL of growLh (such as Lhe lasL acqulslLlon)
Marglnal bureaucraLlc cosLs
o 1he bureaucraLlc cosLs of Lhe lasL unlL of organlzaLlonal expanslon (such as Lhe lasL
subsldlary esLabllshed)
Merger and acqulslLlon
o Merglng wlLh or acqulrlng oLher flrms
AcqulslLlon
o 1he Lransfer of conLrol of asseLs, operaLlons and managemenL form one flrm Lo
anoLher.
Merger
o 1he comblnaLlon of asseLs, operaLlons and managemenL of Lwo flrms Lo esLabllsh
a new legal enLlLy
PorlzonLal M&A
o An MA deal lnvolvlng compeLlng flrms ln Lhe same lndusLry
verLlcal M&A
o An MA deal lnvolvlng suppllers and buyers
ConglomeraLe M&A
o An MA deal lnvolvlng flrms ln producL unrelaLed lndusLrles
lrlendly M&A
o An MA deal ln whlch Lhe board and managemenL of a LargeL flrm agree Lo Lhe
LransacLlon (AlLhough Lhey may lnlLlally reslsL)
PosLlle M&A
o A MA deal underLaken agalnsL Lhe wlshes of Lhe LargeL flrm's board and
managemenL
Pubrls
o Manager's overconfldence ln Lhelr capablllLles
AcqulslLlon premlum
o 1he dlfference beLween Lhe acqulslLlon prlce and Lhe markeL value of LargeL flrms
SLraLeglc flL
o 1he complemenLarlLy of parLner flrms' hard" skllls and resources, sch as
Lechnology, caplLal, and dlsLrlbuLlon channels
CrganlzaLlonal flL
o 1he complemenLarlLy of parLner flrms' sofL" organlzaLlonal LralLs, such as goals,
experlences, behavlours, LhaL faclllLaLe cooperaLlon
8esLrucLurlng
o Ad[usLlng flrm slze and scope Lhrough elLher dlverslflcaLlon, dlvesLlLure, or boLh
o 8educlng flrm slze and scope
uownslzlng
o 8educlng Lhe number of employees Lhrough lay-offs, early reLlremenLs and
ouLsourclng
uownscoplng
o 8educlng Lhe scope of Lhe flrm Lhrough dlvesLlLures and spln-offs
8efocuslng
o narrowlng Lhe scope of Lhe flrm Lo focus on a few areas
uomlnanL loglc
o A common underlylng Lheme LhaL connecLs varlous buslnesses ln a dlverslfled flrm
lnsLlLuLlonal relaLedness
o A flrm's lnformal llnkages wlLh domlnanL lnsLlLuLlons ln Lhe envlronmenL LhaL
confer resources and leglLlmacy.
Learnlng Cb[ecLlves
1) ueflne roducL ulverslflcaLlon and geographlc dlverslflcaLlon (313-319)
ulverslflcaLlon: addlng new buslnesses Lo Lhe flrm LhaL are dlsLlncL from lLs exlsLlng operaLlons
o MosL researched Loplc ln corporaLe sLraLegy
roducL dlverslflcaLlon: enLrles lnLo new producL markeLs/buslness acLlvlLles relaLed Lo a flrm's exlsLlng
mkLs/acLlvlLles (313-317)
MosL flrms sLarL smack and have a slngle buslness sLraLegy (sLraL focuses on slngle producL/servlce
w/ llLLle dlverslflcaLlon
roducL relaLed dlverslflcaLlon -> enLrles lnLo new producL markeLs/buslness acLlvlLles relaLed Lo a
flrm's exlsLlng mkLs/acLlvlLles
o focuses on operaLlonal synergy/economles of scale, Lhlnk: 2+2 = 3 Lhrough Lech, mkLlng, mfn
roducL-unrelaLed dlverslflcaLlon (conglomeraLlon) -> enLrles lnLo dlfferenL lndusLrles LhaL have no
obvlous producL-relaLed connecLlons Lo Lhe flrm's currenL llnes of buslness
o focuses on flnanclal synergy/economles of scope -> lncreases ln compeLlLlveness by enlarglng
scope of Lhe flrm whlle also reduclng per unlL cosLs
o dlverslflcaLlon premlum (dlscounL): lncreased (reduced) lvls of perf b/c of assoc w/ producL-
dlverslfled flrm aka conglomeraLe advanLage (dlscounL)
producL dlverslflcaLlon and performance
o perf may lncrease swlLchlng from slngle blz sLraL Lo dlverslflcaLlon sLraL
! all eggs ln one baskeL" ls a rlsky approach, dlverslflcaLlon reduces rlsk/uncerLalnLy
o 8u1 perf usually decreases when flrms change from producL-relaLed Lo producL-unrelaLed
! unrelaLed = puLLlng eggs ln dlfferenL baskeLs" so requlres much organlzaLlon
capablllLles Lo be successful, relaLed puLLlng eggs ln slmllar baskeLs" so reduclng
rlsks whlle leveraglng synergy
Ceographlcally dlverslfled flrms: -> llmlLed or exLenslve lnLl scope/ # of counLrles flrm compeLes (317-319)
LlmlLed versus exLenslve lnL'l scope
o LlmlLed -> ex: uS flrm focuslng on nAl1A counLrles, Spanlsh ln LaLln Amerlca
o LxLenslve -> subsLanLlal presence beyond geographlcally and culLurally nelghbourlng counLrles
Ceographlc dlverslflcaLlon and performance (see flgure 9.2 p.318)
o 1hlnk of lL as an S curve (fllpped 90degrees clockwlse)
! LlmlLed -> sLarLs off well, maLures and decreases
! lnLermedlaLe -> sLeadlly lncreaslng unLll.
! LxLenslve -> lncreases unLll scope ls Loo large Lhen goes down
Comblnlng producL and geographlc dlverslflcaLlon
1akeaway: MosL flrms pursue producL and geographlc dlverslflcaLlon slmulLaneously
lour opLlons (see flgure 9.3 p.319):
o 1) anchored repllcaLor: flrm repllcaLes acLlvlLles ln relaLed lndusLrles ln a small # of counLrles
anchored by home counLry -> Ceo: llmlLed, roducL: relaLed
o 2) mulLlnaLlonal repllcaLor: producL-relaLed dlverslflcaLlon and far-reachlng mulLlnaLlonal
expanslon -> Ceo: exLenslve, roducL: relaLed
o 3) far-flung conglomeraLe: exLenslve producL-unrelaLed dlverslflcaLlon and exLenslve
geographlc dlverslflcaLlon -> Ceo: exLenslve, roducL: unrelaLed
o 4) classlc conglomeraLe: producL-unrelaLed dlverslflcaLlon wlLhln small seL of counLrles
cenLered on home counLry -> Ceo: llmlLed, roducL: unrelaLed
Successful flrms can be found ln all 4 opLlons!

2) ArLlculaLe comprehenslve model of dlverslflcaLlon -> Lrlpod sLraLegy (319-330)
1) lndusLry-based:
o CrowLh wlLhln Lhe lndusLry (le: bloLechnology versus sunseL" lndusLry llke LypewrlLers)
o SLrucLural aLLracLlveness (3 lorces)
2) resource-based:
o value (rlsk reducLlon and core compeLencles), 8arlLy, lmlLablllLy, CrganlzaLlon
! SLL llgure 9.1 p.323
3) lnsLlLuLlon-based:
o lormal lnsLlLuLlons -> emerglng economles prefer conglomeraLes due Lo local proLecLlonlsL
pollcles, uS anLl-LrusL Lrles Lo dlsmanLle conglomeraLes buL promoLe core compeLencles
o lnformal lnsLlLuLlons
! normaLlve -> managers seeks ways noL Lo be noLlced, Lherefore Lhey slmply follow Lhe
norm (wheLher LhaL ls Lo engage ln conglomeraLlon or noL.)
! CognlLlve -> managerlal moLlves lnclude: l) reducLlon of manager's employmenL rlsk ll)
pursulL of power/presLlge/lncome
LvoluLlon of scope of Lhe flrm (see flgures 9.3-7 p.328-330)
o Lconomlc beneflLs: beneflLs from varlous forms of synergy ln conLexL of dlverslflcaLlon
o 8ureaucraLlc cosLs: addlLlonal cosLs assoclaLed wlLh a larger org
o Marglnal Lconomlc 8eneflL (ML8): economlc beneflLs of Lhe lasL unlL of growLh (le: lasL acqulslLlon
o Marglnal 8ureaucraLlc CosLs (M8C): bureaucraLlc cosLs of Lhe lasL unlL of org expanslon (lasL
subsldlary esLabllshed)
! erform cosL/beneflL analysls -> beneflL > cosL = dlverslflcaLlon

3) Caln lnslghLs lnLo Lhe moLlves and performance of acqulslLlons (330-336)
MosL M&As are acqulslLlons
o AcqulslLlon: Lransfer of conLrol of asseLs, operaLlons, and mgmL. from one flrm (LargeL) Lo
anoLher (acqulrer), LargeL flrm becomes a unlL of acqulrer
o Merger: comblnaLlon of asseLs, operaLlons, mgmL. Lo esLabllsh new legal enLlLy
o Can be horlzonLal, verLlcal, conglomeraLe, frlendly (board and mgmL. agree Lo LransacLlon),
hosLlle (board and mgmL. re[ecL M&A offer, LransacLlon sLlll goes Lhrough)
MoLlves for M&As are drlven by:
o 1) synerglsLlc -> reduce rlsks, leverage scope economles (lndusLry-based), leverage
managerlal capablllLles, access Lo compllmenLary resources (resource-based), respond Lo
lnformal and formal lnsLlLuLlons, Lake Auv of globallzaLlon (lnsLlLuLlon-based)
o 2) hubrls: manager's overconfldence ln Lhelr ablllLles, ofLen acL ln herd behavlour"
! Acqulrers always pay acqulslLlon premlum: dlff. b/w acqulslLlon prlce and Lhe
markeL value of LargeL flrms
o 3) managerlal moLlvaLlons -> self-lnLeresLed acLlons (ex: emplre" bulldlng gulded by
lnformal norms and cognlLlons llke guL-feellngs"
erformance of M&A
roblems normally occur pre-acqulslLlon or posL-acqulslLlon
o re-acqulslLlon -> overpaymenL of LargeLs (lnadequaLe pre-screenlng and famlllarlLy w/
forelgn culLure)
o osL-acqulslLlon -> fallure ln lnLegraLlon (poor org flL, clash of org. culLures)
Lack of sLraLeglc flL or organlzaLlonal flL
o SLraLeglc: compllmenLary of parLner flrm's hard skllls" (l.e resources, Lechnology, caplLal)
o CrganlzaLlonal: sofL skllls" (l.e goals, experlences, behavlour, culLure eLc)
SLakeholder concerns (flgure9.9 p.333)

4) undersLand resLrucLurlng (336-337)
8esLrucLurlng: ad[usLlng flrm slze and scope Lhrough -> dlverslflcaLlon (expanslon or enLry),
dlvesLure (conLracLlon or exlL)
3 prlnclples of resLrucLurlng:
o 1) downslzlng: reduclng # of employees (lay-offs, early reLlremenLs, ouLsourclng)
o 2) downscoplng: reduclng scope Lhrough dlvesLures and spln-offs
o 3) refocuslng: narrowlng scope Lo focus on new areas
MoLlves for resLrucLurlng
o lndusLry-based -> Lrlggered by rlslng level of comp wlLhln lndusLry
o 8esource-based -> slgnlflcanL cosL arlse (org. chaos, anxleLy, low morale)
o lnsLlLuLlon-based -> corporaLe resLrlcLlng noL wldely embraced around Lhe world

3) uebaLes (337-338)
roducL relaLedness vS oLher forms of relaLedness
o Why are producLs deemed Lo be relaLed? roducLlon/dlsLrlbuLlon/caLegory/consumer
preferences?
o uomlnanL loglc: common underlylng Lheme LhaL connecLs varlous buslnesses ln a
dlverslfled flrm
o lnsLlLuLlonal relaLedness: flrm's lnformal llnkages w/ domlnanL lnsLlLuLlons ln Lhe
envlronmenL LhaL confer resources and leglLlmacy
AcqulslLlons vS alllances
o LacklusLre performance of acqulslLlons has led Lo merger manla", many flrms fall Lo
lnclude alllances" wlLhln Lhelr M&A" deparLmenLs. leads Lo poor acqulslLlons ->
alllances can be sLepplng sLone Lo full blown acqulslLlon/merger

6) key 1akeaways (338-339)
- undersLand naLure of lndusLry -> may call for dlverslflcaLlons, acqulslLlons, resLrucLurlng
- uevelop capablllLles Lo faclllLaLe successful acqulslLlons and resLrucLurlng
- MasLer rules of Lhe game governlng acqulslLlons and resLrucLurlng around Lhe world
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!"#$%&'$%(&'# *$+'$,-%,./ *$+"0$"+,./ '&1 2,'+&%&-
3,4%&%$%(&.
Integiation-iesponsiveness fiamewoik
o A fiamewoik of NNE management on how to simultaneously ueal with two sets
of piessuies foi global integiation anu local iesponsiveness
Local iesponsiveness
o The necessity to be iesponsive to uiffeient customei piefeiences aiounu the
woilu
Bome ieplication stiategy
o A stiategy that emphasizes the inteinational ieplication of home countiy-baseu
competencies such as piouuction scales, uistiibution efficiencies anu bianu
powei.
Localization (multi-uomestic) stiategy
o An NNE stiategy that focuses on a numbei of foieign countiiesiegions, each of
which is iegaiueu as a stanualone local (uomestic) maiket woithy of significant
attention anu auaptation.
ulobal stanuaiuization stiategy
o An NNE stiategy that ielies on the uevelopment anu uistiibution of stanuaiuizeu
piouucts woiluwiue to ieap the maximum benefits fiom low-cost auvantages.
Centei of excellences
o NNE subsiuiaiies explicitly iecognizeu as a souice of impoitant capabilities,
with the intention that these capabilities be leveiageu by anuoi uisseminateu to
othei subsiuiaiies.
Woiluwiue (global) manuate
o The chaitei to be iesponsible foi one NNE function thioughout the woilu.
Tiansnational stiategy
o An NNE stiategy that enueavois to be cost efficient, locally iesponsive anu
leaining uiiven simultaneously.
Inteinational Bivision
o An oiganizational stiuctuie typically set up when fiims initially expanu abioau,
often engaging in a home ieplication stiategy
ueogiaphic aiea stiuctuie
o An oiganizational stiuctuie that oiganizes the NNE accoiuing to uiffeient
countiies anu iegions anu is the most appiopiiate stiuctuie foi a multiuomestic
stiategy
Countiy (iegional) managei
o The business leauei in chaige of a specific countiy (oi iegion) foi an NNE.
ulobal Piouuct uivision
o An oiganizational stiuctuie that assigns global iesponsibilities to each piouuct
uivision.
ulobal matiix
o An oiganizational stiuctuie often useu to alleviate the uisauvantages associateu
with both geogiaphic aiea anu global piouuct uivision stiuctuies, especially foi
NNEs auopting a tiansnational stiategy.
0iganizational cultuie
o The collective piogiamming of the minu that uistinguishes membeis of one
oiganization fiom anothei
Knowleuge management
o The stiuctuies, piocesses, anu systems that actively uevelop, leveiage anu
tiansfei knowleuge.
Explicit knowleuge
o Knowleuge that is couifiable (That is, can be wiitten uown anu tiansfeiieu
without losing much of its iichness)
Tacit knowleuge
o Knowleuge that is not couifiable
o i.e. You can 'leain' to uiive a cai by ieauing the ioau safety hanubook, but
without expeiience you uon't ieally know how to uiive it piopeily
o It's like ingiaineu knowleuge
0pen innovation
o The use of puiposive inflows anu outflows of knowleuge to acceleiate inteinal
innovation anu expanu the maikets foi exteinal use of innovation
ulobal viitual teams
o Teams whose membeis aie physically uispeiseu in multiple locations in the
woilu. They coopeiate on a viitual basis
Absoiptive capacity
o The ability to absoib new knowleuge by iecognising the value of new
infoimation, assimilating it, anu applying it.
Social capital
o The infoimal benefits inuiviuuals anu oiganizations ueiive fiom theii social
stiuctuies anu netwoiks
Nicio-macio link
o The link between micio, infoimal inteipeisonal ielationships among manageis
of vaiious units, anu macio, intei-oiganizational coopeiation among vaiious
units.
Subsiuiaiy initiative
o The pioactive anu uelibeiate puisuit of new business oppoitunities by an NNE's
subsiuiaiy to expanu its scope of iesponsibility
ulobal account stiuctuie
o A customei-focuseu stiuctuie that supplies customeis (often othei NNEs) in a
cooiuinateu anu consistent way acioss vaiious countiies.
Solutions-baseu stiuctuie
o An NNE oiganizational stiuctuie that cateis to the neeus of pioviuing solutions
foi customeis' pioblems


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1. 0nueistanu the foui basic configuiations of multinational stiategies anu stiuctuies
a. uoveining multinational stiategy anu stiuctuie is an integiation-iesponsiveness
fiamewoik
i. Allows manageis to ueal with global integiation anu local
iesponsiveness
ii. Cost piessuie calls foi global integiation, while local iesponsiveness
pushes fiims to act locally. The two objectives aie in conflict as acting
local means piouuct uiffeientiation, pei maiket. i.e., expensive.
b. Theie aie foui stiategystiuctuie paiis:
i. Bome ieplication stiategyinteinational uivision stiuctuie
1. Basic bitch stiategy. Take youi existing company, copy paste it
oveiseas. Bon't bothei mouifying anything to the local maiket.
Walmait uiu this tiying to stait up Biazil, to the extent wheie
they even kept the Ameiican footballs in the spoits section. In
Biazil.
2. Stiuctuie:
a. Inteinational uivision is useu when fiims go oveiseas foi
the fiist time, typically in a home ieplication stiategy
b. The inteinational uivision typically is sepaiate fiom the
iest of the fiim, anu as such isn't cooiuinateu with othei
NNE functions
ii. Localization stiategygeogiaphic aiea stiuctuie
1. Each geogiaphic aiea is tieateu as its own significant unit, uoes a
similai thing to the home countiy, but tailoieu to the new local
maiket.
2. Bisauvantage of this is ieuunuancy. i.e. insteau of making one
stanuaiu Tv show foi the woilu, NTv woulu tailoi make the Tv
show foi each iegion it was in.
S. If each subsiuiaiy gets too much autonomy, you might iun into
powei stiuggle issues if the heau company is tiying to
stanuaiuize changes acioss all subsiuiaiies.
4. Stiuctuie
a. Splits the company uown by iegion
b. Each iegional managei caiiies a lot of powei ielative to
the inteinational uivision stiuctuie
c. Both stiengths anu weaknesses of this stiuctuie lies in its
gieat local iesponsiveness. Though it can iesponu to the
local maiket easily, the sepaiateu uivisions can tuin the
NNE into sepaiate teiiitoiies contiolleu by powei
hungiy manageis
iii. ulobal stanuaiuization stiategyglobal piouuct uivision stiuctuie
1. Stanuaiuize youi piouucts woiluwiue, so that eveiyone gets the
same thing. To laige extent, Apple uoes this with pietty much all
of its piouucts. IKEA too, though it uoes make biochuies anu
auveitising countiy specific.
2. This stiategy saciifices local iesponsiveness.
S. But it makes sense in inuustiies wheie piessuies foi cost
ieuuctions aie paiamount, but piessuies local iesponsiveness
aie minoi (like companies that make ioau tyies)
4. Stiuctuie:
a. This stiuctuie tieats each uivision as a stanu-alone entity,
in chaige of its piouuct. Foi example the Aiibus uivision
of EABS is basically its own company.
b. The stiuctuie ieuuces inefficient uuplication, anu is gieat
foi cost efficiency.
c. The uisauvantage is that local iesponsiveness suffeis.
iv. Tiansnational stiategyglobal matiix stiuctuie
1. Piomotes global leaining anu uiffusion of innovations in both
ways, fiom home to subsiuiaiy, anu back.
2. Bisauvantage of this is that it's oiganizationally complex anu
uifficult to implement. Laige amount of knowleuge shaiing anu
cooiuination may slow uown uecision-making. Tiying to achieve
cost efficiencies anu local iesponsiveness puts contiauictoiy
piessuies on the NNE.
S. Stiuctuie:
a. Basically, think of a spieausheet, with iegions being the X
axis anu piouucts being the Y axis.
b. So foi the iegion of Asia, anu Piouuct 1 uivision - the
}apanese managei has to iepoit to two sepaiate
manageis who coulu hate each othei, oi coulu woik
togethei fine. A uisauvantage of this stiuctuie. It also
auus layeis of management, slows uown uecision speeu
anu incieases costs while not showing significant
peifoimance impiovement.
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2. Aiticulate a compiehensive mouel of multinational stiategy, stiuctuie anu leaining
a. Inuustiy baseu consiueiations uiive a numbei of uecisions affecting stiategy,
stiuctuie, anu leaining
i. Entiy baiiieis shape NNE stiategy, stiuctuie anu leaining
ii. Foi example, smallei suboptimal-scale piouuction facilities, scatteieu in
a vaiiety of countiies aie not effective ueteiients against potential
entiants. So companies make huge complexes, like Foxconn's Suu
thousanu woikei ueath camp in Shenzhen.
b. Nanagement of NNE stiategy, stiuctuie anu leaining neeus to take into account
its vRI0
i. Befoie an NNE picks SSL, it neeus to consiuei wheie it's value cieating.
The uiffeience between an innovatoi anu a piofitable innovatoi is that
the lattei not only has goou iueas but lots of complementaiy assets to
auu value
ii. Nust also be iaie. Employing an ERP solution to manage youi SSL is
gieat, but eveiyone else in the inuustiy can look at you anu uo the exact
same thing.
iii. Nust be haiu to imitate. Which is why infoimal, matiix style stiuctuies
aie in fashion now. "Is less a stiuctuial classification than a bioau
oiganizational concept oi philosophy, manifesteu in oiganizational
capability anu management mentality" - It's a bit haiuei to imitate
someone's way of thinking than a iigiu oiganizational concept.
c. NNEs aie goveineu by exteinal anu inteinal iules of the game aiounu the woilu
i. Exteinally, home-countiy anu theii goveinments tiy anu piotect
themselves fiom the NNE by taxing foieign eainings of the NNE at a
highei iate than uomestic eainings (incentive to keep jobs local). Bome-
countiy goveinments may uiscouiageban NE opeiations abioau foi
political ieasons too. Foi example aftei the colu wai Lockheeu maitin
was not alloweu to use Russian iocket scientists foi mission ciitical R&B.
ii. Bost-countiies, on the othei hanu, tiy haiu to get NNEs in. They use
combinations of tax incentives anu thieats to block maiket access to
attiact NNE investments in highei value-auueu aieas.
iii. Locally, fiims also face infoimal institutional piessuies with going
oveiseas, such as the backlash fiom jobs inevitably going oveiseas with
offshoiing.
iv. Bost countiies also have infoimal institutions NNEs must ueal with. The
way a company tieats the supplieis fiom a countiy may ueteimine how
likely buyeis fiom that countiy tieat the company.
v. The way NNEs aie goveineu inteinally is also ueteimineu by vaiious
foimal anu infoimal iules of the game
1. Foi example - uoes an NNE appoint a local in a new oveiseas
subsiuiaiy. 0i uoes it go foi the home countiy expat. 0i peihaps
a thiiu nationality.
S. 0utline the challenges associateu with leaining, innovation anu knowleuge management
a. Knowleuge management piimaiily focuses on tacit knowleuge.
i. Nany manageis iegaiu knowleuge management as simply infoimation
management. Taken to an extieme, 'such a peispective can iesult in
piofounuly mistaken belief that the installation of sophisticateu IT
infiastiuctuie is the be-all anu enu-all of knowleuge management'
b. ulobalization of R&B calls foi capabilities to combat a numbei of pioblems
associateu with knowleuge cieation, ietention, outflow, tiansmission anu inflow.
c. Pioblems in Knowleuge Nanagement
i. Foi laige fiims R&B offeis uiminishing ietuins. So thiowing moie people
at a pioblem uoesn't help. What most fiims uo is set up seveial R&B
facilities in many countiies, anu get them to inuiviuually use uiffeient
local peispectives to solve pioblems. This howevei cieates the following
pioblems when it comes to uisseminating the infoimation:
Elements of Knowleuge Nanagement Common Pioblems
Knowleuge acquisition Failuie to shaie anu integiate exteinal
knowleuge
Knowleuge ietention Employee tuinovei anu knowleuge leakage
Knowleuge outflow "Bow uoes it help me." synuiome anu
"knowleuge is powei" mentality
Knowleuge tiansmission Inappiopiiate channels
Knowleuge inflow "Not inventeu heie" synuiome anu absoiptive
capacity

4. Paiticipate in thiee leauing uebates on multinational stiuctuie, leaining anu innovation
a. 0ne multinational veisus many national companies
i. Aigument is that - Theie is technically no such thing as a laige
multinational, since companies aie only iegisteieu on a pei-countiy
basis.
ii. CASE:
1. PwC Inuia auuiteu a guy anu enuoiseu the company, uespite $1
billion in cash that uiu not exist, but was on the books
2. Some shaieholueis sueu PwC Inteinational
S. PwC Inteinational claims that PwC Inuia is just a membei of the
PwC membeiship oiganization, anu is in no way affiliateu with its
actions
iii. Thus couits finu it uifficult to iuentify fiims as "ulobal" coipoiations, but
aie iathei inuiviuual national companies.
b. Coipoiate contiols veisus subsiuiaiy initiatives
i. Aigument is to what extent shoulu a coipoiation iein in its subsiuiaiies.
ii. "Let chaos ieign, then iein in chaos - iepeateuly" - Anuy uiove, foimei
CE0 Intel
iii. Subsiuiaiies like to iun theii own things, so they uelibeiately puisue new
oppoitunities, being all 'entiepieneuiial' anu whatnot.
iv. Bowevei, fiom BQ's point of view, it's haiu to uistinguish initiative anu
empiie builuing of subsiuiaiies.
c. Customei-focuseu uimensions veisus integiation, iesponsiveness anu leaining.
i. Baving to juggle integiation, iesponsiveness anu leaining has been a
challenge foi NNEs. Bowevei, insteau of simplifying, some NNEs auu
even moie layeis. By auuing customei-focuseu uimensions of stiuctuie,
you enu up with a foui oi five uimension matiix
ii. Two piimaiy types of customei focuseu uimensions:
iii. ulobal account stiuctuie
1. To supply (usually othei NNEs), with the same piouuct in a
cooiuinateu anu consistent way acioss vaiious countiies
2. Contiact manufactuieis who uon't caiiy theii own bianus (such
as the makeis of Xbox anu Nike) uo this. Foi example, Flextionics
Text
in Singapoie has global accounts foi Sony, Bell anu Palm to make
theii piouucts
iv. Solutions baseu stiuctuie
1. Rathei than selling a piouuct, they'ie selling a solution - soit of
what PwC uoes sometimes in consulting. Foi example, IBN will
sell a combination of haiuwaie, softwaie anu seivices - whethei
they maue them oi not.
S. Biaw stiategic implications foi action
a. 0nueistanu the evolution of youi inuustiy to come up with the iight stiategy-
stiuctuie configuiations
b. Bevelop leaining anu innovation capabilities aiounu the woilu - "Think global,
act local"
c. Nastei the exteinal iules of the game fiom homehost countiy enviionments.
u. Be piepaieu to change the inteinal iules of the game goveining NNEs.
!"#$%&' )) * !+'$+'#%& ,+-&'.#./&
ueflnlLlons
Chlef execuLlve offlcer
o 1he Lop execuLlve ln charge of Lhe sLraLegy and operaLlons of a flrm
CorporaLe governance
o 1he relaLlonshlp among varlous parLlclpanLs ln deLermlnlng Lhe dlrecLlon and
performance of corporaLlons
ConcenLraLed ownershlp and conLrol
o Cwnershlp and conLrol rlghLs concenLraLed ln Lhe hands of owners
ulffused ownershlp
o An ownershlp paLLern lnvolvlng numerous small shareholders, none of whom has
a domlnanL level of conLrol
SeparaLlon of ownershlp and conLrol
o 1he dlspersal of ownershlp among many small shareholders, wlLh conLrol of Lhe
flrm largely concenLraLed ln Lhe hands of salarled, professlonal mangers who own
llLLle or no equlLy
SLaLe-owned enLerprlse
o A flrm owned and conLrolled by Lhe sLaLe
Agency relaLlonshlp
o Lhe relaLlonshlp beLween prlnclpals and agenLs
rlnclpals
o ersons who delegaLe auLhorlLy
AgenLs
o ersons Lo whom auLhorlLy ls delegaLed
Agency Lheory
o 1he Lheory abouL prlnclpal-agenL relaLlonshlps
rlnclpal-agenL confllcLs
o ConfllcLs of lnLeresLs beLween prlnclpals and agenLs
Agency cosLs
o 1he cosLs assoclaLed wlLh prlnclpal-agenL relaLlonshlps. 1hey are Lhe sum of
! 1he prlnclpals' cosLs of monlLorlng and conLrolllng Lhe agenLs
! 1he agenLs' cosL of bondlng
lnformaLlon asymmeLrles
o AsymmeLrlc dlsLrlbuLlon of lnformaLlon beLween Lwo sldes
rlnclpal-prlnclpal confllcLs
o ConfllcLs of lnLeresL beLween Lwo classes of prlnclpals: conLrolllng shareholders
and mlnorlLy shareholders
LxproprlaLlon
o AcLlvlLles LhaL enrlch Lhe conLrolllng shareholders aL Lhe expense of mlnorlLy
shareholders
1unnelllng
o AcLlvlLles of managers from Lhe conLrolllng famlly of a corporaLlon Lo dlverL
resources from Lhe flrm for personal or famlly use
8elaLed LransacLlon
o ConLrolllng owners sell flrm asseLs Lo anoLher flrm Lhey own aL below markeL
prlces or spln off Lhe mosL proflLable parL of a publlc flrm and merge lL wlLh
anoLher of Lhelr prlvaLe flrms
lnslde dlrecLor
o A dlrecLor servlng on a corporaLe bard who ls also a full-Llme manager of Lhe
company
CuLslde dlrecLor
o A non-managemenL member of Lhe board
CLC duallLy
o 1he CLC doubles as chalrman of Lhe board
lnLerlocklng dlrecLoraLe
o 1wo or more flrms share one dlrecLor on Lhelr boards
volce-based mechanlsms
o CorporaLe governance mechanlsms LhaL focus on shareholders' wllllngness Lo
work wlLh managers, usually Lhrough Lhe board of dlrecLors, by volclng" Lhelr
concerns
LxlL-based mechanlsms
o CorporaLe governance mechanlsms LhaL focus on exlL, lndlcaLlng LhaL shareholders
no longer have paLlence and are wllllng Lo exlL" by selllng Lhelr shares
rlvaLe equlLy
o LqulLy caplLal lnvesLed ln prlvaLe companles
Leveraged buyouL
o A means by whlch prlvaLe lnvesLors, ofLen ln parLnershlp wlLh lncumbenL
managers, lssue bonds and use Lhe cash ralsed Lo buy Lhe flrm's sLock
Shareholder caplLallsm
o A vlew of caplLallsm LhaL suggesLs LhaL Lhe mosL fundamenLal purpose for flrms Lo
exlsL ls Lo serve Lhe economlc lnLeresLs of shareholders
Managerlal human caplLal
o 1he skllls and ablllLles acqulred by Lop managers
lorelgn porLfollo lnvesLmenL
o lorelgners' purchase of sLocks and bonds ln one counLry
SLewardshlp Lheory
o A Lheory LhaL suggesLs LhaL managers should be regarded as sLewards of owners'
lnLeresLs
Cross-llsLlng
o llrms llsL Lhelr shares on forelgn sLock exchanges
WashlngLon Consensus
o A vlew cenLered on Lhe unquesLloned bellef ln Lhe superlorlLy of prlvaLe
ownershlp over sLaLe ownershlp ln economlc pollcy maklng, whlch ls ofLen
spearheaded by Lwo WashlngLon-based lnLernaLlonal organlzaLlons: Lhe lMl and
Lhe World bank
Moral hazard
o 8ecklessness when people and organlzaLlons (lncludlng flrms and governmenLs) do
noL have Lo face Lhe full consequences of Lhelr acLlons
8el[lng Consensus
o A vlew LhaL quesLlons WashlngLon Consensus bellef ln Lhe superlorlLy of prlvaLe
ownershlp over sLaLe ownershlp ln economlc pollcy maklng whlch s ofLen
assoclaLed wlLh Lhe poslLlon held by Lhe Chlnese governmenL
Soverelgn wealLh fund (SWl)
o A sLaLe-owned lnvesLmenL fund composed of flnanclal asseLs such as sLocks,
bonds, real esLaLe or oLher flnanclal lnsLrumenLs funded by forelgn exchange
asseLs.
Learnlng Cb[ecLlves
1) ulfferenLlaLe b/w ownershlp paLLerns -> CWnL8S
CorporaLe governance: Lhe relLn among varlous parLlclpanLs ln deLermlnlng Lhe dlrecLlon of
corporaLlons -> maln parLlclpanLs: A) Cwners, 8) Managers, C) 8Cu
A) ConcenLraLed/dlffused -> concenLraLed: ownershlp and conLrol concenLraLed ln hands of owner,
dlffused: ln hands of numerous small shareholders, Lhere ls a separaLlon of ownershlp and conLrol
(ownershlp=many small SP, conLrol = professlonal managers of flrm)
o ln uS, uk -> flrms w/ separaLlon of ownershlp and conLrol domlnaLe
o Llsewhere -> flrms w/ concenLraLed ownershlp and conLrol are ln hands of famlly or gov'L
8) lamlly -> beLLer lncenLlve Lo focus on long-Lerm performance, may lead Lo selecLlon of less Lhan
quallfled members, desLrucLlon of value Lhrough famlly confllcLs eLc
C) SLaLe ownershlp (sLaLe-owned enLerprlse) -> suffer from Lhe lncenLlve problem: gov'L wlll fund Lhe
company regardless of performance and managers don'L beneflL from lncreased performance
(normally goes back Lo Lhe people), has been used loLs Lo proLecL Lhe solvency/prevenL bankrupLcy of
lmporLanL flrms wlLhln cerLaln counLrles

2) ArLlculaLe role of managers ln prlnclpal-agenL and prlnclpal-prlnclpal confllcLs -> MAnACL8S
llgure 11.2 explalns Lhe Lwo klnds of confllcLs, 11.1 descrlbes lmporLanL facLors (386-387)
Agency confllcL: relaLlonshlp b/w prlnclpals and agenLs
o rlnclpals: people who delegaLe auLhorlLy (ex: owners, 8Cu, CLC)
o AgenLs: people Lo whom auLhorlLy ls delegaLed (ex: managers)
! Agency Lheory: prlnclpal-agenL confllcLs wlll exlsL whenever Lhere ls noL a compleLe overlap
of personal lnLeresLs of prlnclpal and agenL
! 1hese confllcLs resulL ln agency cosLs (le: cosLs of prlnclpals monlLorlng/conLrolllng agenL,
agenLs cosL of bondlng)
a. Agency confllcLs can nLvL8 be fully ellmlnaLed buL CAn be reduced
! lnformaLlon asymmeLry: prlmary reason why agency confllcLs perslsL -> managers know
more abouL Lhe properLy more Lhan owners do, prlnclpal can'L always observe/monlLor Lhe
agenLs behavlours eLc
-A confllcL = llrms wlLh separaLlon of ownershlp and conLrol, prlmary confllcL (large corporaLlons)
o Agency Lheory: prlnclpal-agenL confllcLs wlll exlsL whenever Lhere ls nC1 a compleLe overlap of
personal lnLeresLs of prlnclpal and agenL
o 1hese confllcLs resulL ln agency cosLs (le: cosLs of prlnclpals monlLorlng/conLrolllng agenL, agenLs
cosL of bondlng)
! Agency confllcLs can nLvL8 be fully ellmlnaLed buL CAn be reduced
o lnformaLlon asymmeLry: prlmary reason why agency confllcLs perslsL -> ex: managers know
more abouL Lhe backend operaLlons Lhan owners do, prlnclpal can'L always observe/monlLor
Lhe agenLs behavlours eLc
- confllcL = llrms w/ concenLraLed ownershlp
o - confllcL: confllcLs of lnLeresL b/w Lwo classes of prlnclpals: conLrolllng/ma[orlLy shareholders
(SP) and mlnorlLy SPs
o Largely occurs wlLh concenLraLed/famlly ownershlp -> one of Lhe leadlng confllcLs ls caused by Lhe
appolnLmenL of famlly members Lo hlgh execuLlve poslLlons even when Lhey are less quallfled Lo
do so whlch can lnfurlaLe mlnorlLy SPs
! Lx: news Corp. -> Murdoch famlly ma[orlLy SPs who kepL all execuLlve poslLlons wlLhln Lhe
famlly even when all Lhe oLher SPs (mlnorlLy SPs) dldn'L approve of Lhelr appolnLmenL
a. LxproprlaLlon: acLlvlLles LhaL enrlch Lhe conLrolllng SPs aL Lhe expense of mlnorlLy SPs
b. 1unnellng: acLlons of managers w/ conLrolllng famlly Lo dlverL resources away from
flrm for personal/famlly use
c. 8elaLed LransacLlon: conLrolllng owners sell flrm asseLs Lo anoLher flrm Lhey own aL
below markeL prlces or spln-off Lhe mosL proflLable parL of a publlc flrm and merge lL
wlLh anoLher one of Lhelr prlvaLe flrms

3) Lxplaln Lhe role of Lhe 8oard of ulrecLors (8Cu) -> 8Cu
8Cu serve as lnLermedlary b/w owners and managers, oversee and raLlfy sLraLeglc declslons,
evaluaLes/rewards/penallzes Lop managers
Around Lhe world 8Cus dlffer ln A) composlLlon 8) leadershlp sLrucLure C) lnLerlocks
8oard composlLlon -> Lhe mlx of lnslders and ouLslders wlLhln Lhe 8Cu, lnslde = full-Llme manager
wlLhln Lhe company, ouLslde/lndependenL = non-managemenL member of 8Cu
o Ceneral LhoughL ls LhaL ouLslders are more lndependenL/lack blas -> no emplrlcal evldence,
generally have some sorL of afflllaLlon wlLh Lhose on Lhe lnslde"
Leadershlp sLrucLure -> lmporLanL polnL ls wheLher CLC duallLy exlsLs le: does Lhe CLC also double as
Lhe Chalrman of Lhe board?
o 8oard ls supposed Lo supervlse execuLlves lncludlng Lhe CLC and should be lndependenL 8u1
a flrm w/ Lwo Lop leaders may lack unlLy and coordlnaLlon and lead Lo Lop-level confllcLs
! uS favors duallLy, resL of Lhe world favors Lwo Lop-leaders
8oard lnLerlocks -> dlrecLors Lend Lo be economlc and soclal ellLes, flrms ofLen esLabllsh relaLlonshlps
Lhrough board appolnLmenLs
o lnLerlocklng dlrecLoraLe: Lwo or more flrms share one dlrecLor on Lhelr boards -> Lrend posL-
Lnron Lo avold havlng ulrecLors slL on many boards
ulrecLlng sLraLeglcally -> one of mosL demandlng [obs, requlres nose-ln hands-off" approach
o SeparaLlon of ownershlp/conLrol -> 8Cu sLraLegy focuses on CCn18CL
o PealLhy board = (balance of ouLslde and lnslde ulrecLors) + (focus on sLraLeglc conLrol)
! SLraLeglc conLrol: noL [usL sklmmlng Lhrough numbers, undersLand Lhe managerlal
acLlons whlch lead Lo Lhese numbers
8ole of 8oard of ulrecLors:
o 1) ConLrol -> ouLslders = more conLrol
! LffecLlvely conLrolllng managers depends on how lndependenL dlrecLors are
! Lack of deLerrence on parL of ulrecLors lf Lhey fall Lo proLecL shareholder lnLeresLs
! ulrecLors who confronL CLC Lend Lo be frozen ouL of 8oard meeLlngs
o 2) Servlce -> rlmarlly lnvolves advlslng Lhe CLC
o 3) 8esource acqulslLlon -> generally Lhrough board lnLerlocks

4) ldenLlfy volce-based and exlL-based governance mechanlsms and Lhelr comblnaLlon
lnLernal volce-based mechanlsms and exLernal exlL-based mechanlsms comblne as a package Lo
deLermlne corporaLe governance effecLlveness
volce-based/ ln1L8nAL mechanlsms: corporaLe governance mechanlsm focuses on SPs wllllngness Lo
work w/ managers Lhrough 8Cu by volclng" Lhelr concerns
o Mechanlsms lnclude A) carroLs and 8) sLlcks
o A) carroLs -> lncreaslng compensaLlon Lo moLlvaLe managers (ex: sLok opLlons) -> many drawbacks
whlch requlre sLrlngenL lnLernal conLrol sysLems (l.e forglng #s Lo galn bonus)
o 8) sLlcks -> LhreaL of belng flred and noL employed as CLC ever agaln (rare Lo be CLC of mulLlple
flrms), 8Cus are more Lrlgger happy laLely
LxlL-based/ Lx1L8nAL mechanlsms: focus on exlLlng l.e SPs no longer have paLlence and exlL vla
selllng shares
o 1he A) markeL for corporaLe conLrol and Lhe 8) markeL for prlvaLe equlLy are Lwo prlmary exLernal
mechanlsms
o A) markeL for corporaLe conLrol (aka Lake-over markeL)-> lasL dlLch efforL afLer all lnLernal
governance mechanlsms fall
! When managers Lake self-lnLeresLed acLlons, lnLernal governance falls, sLock wlll be
undervalued by lnvesLors -> oLher flrms swoop ln and acqulre flrm whlle value ls low
Much execuLlve level Lurnovers posL M&A, SPs of LargeL (acqulrer) experlence much
galns (sllghL losses) posL M&A
o 8) markeL for prlvaLe equlLy (aka golng prlvaLe) -> prlvaLe: lnvesLlng caplLal ln non-publlc
companles, prlmarlly based on L8Cs
! Leveraged buyouL (L8C): prlvaLe lnvesLors w/ help of lncumbenL managers lssue bonds and
use cash Lo buy Lhe flrms sLock
L8Cs provlde managers wlLh large equlLy sLake, hlgh amounL of debL = need for greaLer
flnanclal dlsclpllne
o Covernance ackage = lnLernal + LxLernal Mechanlsms
o Shareholder caplLallsm: mosL fundamenLal purpose of flrms Lo exlsL ls Lo serve Lhe economlc
lnLeresLs of SPs

3) Acqulre a global perspecLlve on how governance mechanlsms vary around Lhe world (
ulfferenL combos of lnLernal and exLernal governance lead Lo four maln groups
! L = exLernal mechanlsms, l = lnLernal mechanlsms -> flg.11.3 p.393
o 1) SLrong L, SLrong l -> Canada 2)Weak L, SLrong l -> !apan
o 3) Weak L, Weak l -> sLaLe-owned flrms 4) SLrong L, Weak l -> unlLed SLaLes
rlvaLlzaLlon around Lhe world represenLs efforLs Lo enhance governance effecLlveness

6) Comprehenslve model of corporaLe governance (
lndusLry-based -> governance pracLlces musL Lake lnLo accounL flL wlLh Lhe naLure of Lhe lndusLry
o CuLslde dlrecLors -> more = performance enhanclng as lL lncreases lndependence 8u1 musL
Lake lnLo accounL lndusLry dlfferences
o lnslde ownershlp -> hlgh-growLh LurbulenL lndusLrles = lnslde ownershlp lncreases perf.
o CLC duallLy -> hlgh LurbulenL lndusLrles (ones w/ much Lurnover) = duallLy ls beLLer
8esource-based:
o value, 8arlLy, lmlLablllLy, CrganlzaLlonal CapablllLles (v8lC)
o MosL valuable flrm-speclflc asseL-> skllls and ablllLles of Lop managers (aka managerlal human
caplLal)
lnsLlLuLlon-based:
o lormal: fundamenLal dlfference ls Lhe separaLlon of ownershlp/conLrol ln Anglo-Amerlcan
flrms and Lhe concenLraLlon of ownershlp ln Lhe resL of Lhe world
! Why Lhe dlfference: beLLer legal rlghLs for mlnorlLy SP ln Anglo-amerlca, Lhe weaker
Lhe laws for mlnorlLy SPs, Lhe more concenLraLed ownershlp/conLrol
! Cnly exLreme evenLs wlll cause shlfL ln laws/regulaLlon -> le: specLacular corporaLe
scandals llke Lnrol broughL abouL SCx AcL
o lnformal: shareholder caplLallsm ls spreadlng! -> ldea LhaL of flrms Lo exlsL ls Lo serve Lhe
economlc lnLeresLs of SPs
! Why? l) 1he rlse of caplLallsm globally ll) Lhe lmpacL of globallzaLlon (ex: forelgn
porLfollo lnvesLmenL: forelgners purchaslng sLocks and bonds) lll) global dlffuslon of
besL pracLlces ln formlng corporaLe governance codes

7) uebaLes (399-402)
CpporLunlsLlc agenLs vS managerlal sLewards
o Agency Lheory -> conLra-managemenL" as lL assumes managers wlll acL ln Lhelr own self-
lnLeresLs lf noL monlLored properly
o SLewardshlp Lheory -> pro-managemenL" as lL assumes managers can be vlewed as sLewards
of owner's lnLeresLs, managers are llkely Lo be honesL and LrusLworLhy
! Agency Lheory may acLually lnduce behavlour do Lo LlghL-leesh" effecL
Clobal convergence vS ulvergence of corporaLe governance
o Convergence -> globallzaLlon brlngs ouL survlval of Lhe flLLesL" aka adopL Lhe besL pracLlces
from Anglo-Amerlcan flrms
o ulvergenL -> based on varylng concenLraLlon of ownershlps across Lhe world
o Cross-llsLlng: becomlng very popular, flrms llsL Lhelr shares on forelgn sLock exchanges
SLaLe ownershlp vS rlvaLe ownershlp
o uepends on mulLlple facLors lncludlng: Cb[ecLlve of flrm, esLabllshmenL, flnanclng, llquldaLlon,
compensaLlon of mgmL.
! lull Lable llsLed on p.400

8) key 1akeaways (404-403)
- undersLand Lhe naLure of prlnclpal-agenL and prlnclpal-prlnclpal confllcLs
- uevelop flrm-speclflc capablllLles Lo dlfferenLlaLe on corporaLe governance dlmenslons
- MasLer Lhe rules affecLlng corporaLe governance and anLlclpaLe changes
!"#$%"&#'("&) +,-'"$-- .#%&#$/0 ! !"#$%&' !"
!"#$"#%&' )"*+%, -'.$"/.+0+,+&1
2'3+/+&+"/.
Coipoiate social iesponsibility
o The social iesponsibility of coipoiations. It peitains to consiueiation of, anu
iesponse to, issues beyonu the naiiow economic, technical anu legal
iequiiements of the fiim to accomplish social benefits along with tiauitional
economic gains that the fiim seeks.
ulobal sustainability
o The ability to meet the neeus of the piesent without compiomising the ability of
futuie geneiations to meet theii neeus
Piimaiy stakeholuei gioups
o Constituents on which the fiim ielies on foi its continuous suivival anu
piospeiity
Seconuaiy stakeholuei gioups
o Stakeholueis who influence oi affect, oi aie influenceu oi affecteu by, the
coipoiation, but they aie not essential foi its suivival
Social issue paiticipation
o Fiims' paiticipation in social causes not uiiectly ielateu to managing piimaiy
stakeholueis
Reactive stiategy
o A stiategy that is passive about CSR. Fiims uo not act in the absence of uisasteis
anu outciies. When pioblems aiise, uenial is usually the fiist line of uefence.
Befensive stiategy
o A stiategy that is uefensive in natuie. Fiims aumit iesponsibility, but often fight
it
Accommouative stiategy
o A stiategy that tiies to accommouate CSR consiueiations into uecision making
Pioactive stiategy
o A stiategy that focuses on pioactive engagement in CSR

4/"5,'67' 809'*&+:'.

1. Aiticulate what a stakeholuei view of the fiim is
a. A stakeholuei view of the fiim uiges companies to puisue a moie balanceu tiiple
bottom line, consisting of economic, social anu enviionmental peifoimance.
i. A key goal foi CSR is 'global sustainability'
1. The ability to meet the neeus of the piesent without
compiomising the ability of futuie geneiations to meet theii
neeus
ii. Piimaiy anu seconuaiy stakeholueis
1. Piimaiy stakeholueis aie those who the fiim ielies on foi its
continuous suivival. Shaieholueis, manageis, employees,
supplieis, customeis anu goveinmentscommunities
2. Seconuaiy stakeholueis aie uefineu as 'those who influence oi
affect, oi aie influenceu oi affecteu by the coipoiation, but they
aie not engageu in tiansactions with the coipoiation anu aie not
essential foi its suivival'
a. So typically uieenpeace anu shit
b. Bespite the fieice uefence of the fiee maiket school, especially its shaieholuei
capitalism vaiiant, the CSR movement has now become a moie cential pait of
stiategy uiscussions aiounu the globe.
2. Bevelop a compiehensive mouel of CSR
a. The inuustiy-baseu view aigues that the natuie of uiffeient inuustiies uiives
uiffeient CSR stiategies
i. No seiiously - it uepenus
1. Automotive inuustiy foi example aie a piime example of just
uigging theii feet in, yelling at goveinments foi iaising emission
stanuaius because theii R&B sucks (anu then Nissan came out of
nowheie with the Leaf)
2. Then theie aie uicks like uoogle who iun entiie uata-centies on
colu mountain aii. Buge CSR initiative.
ii. Then theie's stuff like baigaining powei of buyeis which uiives
companies not to be uicks to the buyeis
1. Example: Shell wanteu to sink an oil platfoim in the Noith Sea to
get iiu of it. Then uieenpeace founu out, wiote some auveitising
about it, anu ovei a month Shell's petiol sales fell 11%. Long
stoiy shoit, Shell enueu up manually taking the platfoim apait
on-shoie.
iii. Anu thieat of substitutes too:
1. uiven the option of two piouucts - same piice, but one was maue
using petiol anu the othei using winu powei, which woulu you
use.
a. Cleanei substitutes can guiue CSR
b. The iesouice-baseu view posits that not all CSR activities satisfy the vRI0
iequiiements
i. Bo CSR meet EACB vRI0 iequiiement inuiviuually. If so, then they pass
the vRI0 test foi sustainable competitive auvantage.
1. If the CSR uoesn't pass ALL iequiiements, it'll still leau to a
competitive auvantage, it just won't last
c. The institution-baseu view suggests that when confionting CSR piessuies, fiims
may employ ieactive, uefensive, accommouative anu pioactive measuies.
i. Reactive: fiims uo not feel compelleu to act in the absence of uisasteis
anu outciies
ii. Befensive: Law is maue: company iefuse to comply
iii. Accommouative: uoing above the law, Coues of Conuucts etc
iv. Pioactive: Constantly anticipating iesponsibility anu enueavouiing to uo
moie than is iequiieu.
S. Paiticipate in thiee leauing uebates conceining CSR
a. Bomestic vs oveiseas social iesponsibility
i. Ciux of the aigument: Resouices aie limiteu - senuing CSR oveiseas
limits CSR activity possible uomestically
ii. Consiuei: Bomestic employees anu communities. By expanuing oveiseas
into emeiging economics, it may not only inciease coipoiate piofits anu
shaieholuei ietuins, but also pioviue employment to host countiies anu
uevelop economies 'at the base of the pyiamiu' (Chaptei 1) - Bowevei,
all this is at the cost of uomestic employees anu communities.
1. Thus the point is: uomestic employees become unemployeu
(finite iesouice - money being spent oveiseas is money not spent
uomestically) anu seek welfaie. They'ie being uickeu by
companies who engage CSR oveiseas.
iii. In the enu, shaieholueis win. When confionteu with cost cutting anu
iestiuctuiing, woik enus up oveiseas.
b. Active vs inactive CSR engagement oveiseas
i. Companies that uon't have active CSR aie ciiticizeu by Nu0s.
ii. CSR becomes a question of whethei you shoulu inteivene in a foieign
countiy's politics if it affects youi company's values. i.e BP unueimineu
the South Afiican goveinments authoiity by ignoiing apaitheiu laws in
its woikfoice.
iii. But then again, you have uisciimination in almost eveiy foim in places
like Noith Ameiica, fiom homosexuality to being inuigenous - with little
inteivention fiom companies. So whethei a company botheis speaking
up against injustice oi not is the ciux of this aigument.
c. Race to the bottom vs iace to the top
i. NNE's have been moving theii pollution heavy inuustiy to countiies
wheie the iegulations aie moie ielaxeu. So countiies become pait of a
'iace to the bottom' by incieasingly ielaxing these iegulations to attiact
FBI. 0n the othei hanu, NNE's voluntaiily auheie to bettei
enviionmental stanuaius than those in local countiies (no mattei how
shit they aie) - so local fiims pollute moie than NNE's, anu NNE's aie in
a iace to the top. 0nueilying motivations foi this aie: woiluwiue CSR
piessuies in geneial, CSR uemanus maue by customeis in uevelopeu
economies, anu iequiiements of NNE heauquaiteis foi woiluwiue
compliance of highei CSR stanuaius (such as IS0 14uu1)
4. Biaw stiategic implications foi action
a. Integiate CSR as pait of the coie activities anu piocesses of the fiim
b. Pick youi CSR battles caiefully - uon't blinuly imitate othei fiims' CSR activities
c. 0nueistanu the iules of the game, anticipate changes, anu seek to influence such
changes.