A.

CHAPTER 6: CORPORATE LEVEL STRATEGY

What is Corporate Level Strategy?
Corporate Level strategy specifies actions the firm takes to gain competitive advantage by selecting and managing
different group of businesses competing in different types of product market.

Corporate Level strategy is focused on two key issues:

1. In what product markets and businesses the firm should compete.
2. How corporate headquarters should manage those businesses.

What are the five categories of business based on Levels of Diversification

1. Low Levels of diversification
 Single business – 95% of the sales revenue comes from the core business. Example Bakery produces
excellent cakes.
 Dominant business – 70% to 95% of the sales revenues are generated within a single business.
Example United Parcel Services -60% of its revenue coming from package delivery business, 22%
from international package and the other 18% from the non-package business.

2. Moderate to High Level of diversification

 Related Constrained – Less than 70% of the sales revenue comes from the dominant business.
There are links between businesses (shared product, technology and distribution). Example Proctor
and Gamble
 Related Linked (mixed related and unrelated) – Less than 70% of the firm’s revenue comes from
the dominant business and there are limited links between businesses. Linked businesses share fewer
resources and assets and concentrate on transferring of knowledge and core competencies. Example
General Electronics

3. Very high level of diversification.

 Unrelated – less than 70% of the sales revenue comes from the dominant businesses and there are
no links between businesses. Example Samsung and Westfarmers.

Explain three Primary reasons why firms diversify

1. Value Creating Diversification
 Economies of Scope – cost savings
 Operational relatedness – sharing of activities such as inventory delivery system.
 Corporate relatedness – transferring of core competencies such as knowledge, experience and
expertise.

 Market Power – exists when a firm is able to sell its products/services above the existing competitive
level or to reduce cost of its primary and support activities below competitive level or above.
(sell products & services with low costs) - - Blocking competitors through multipoint competition

 Financial Economies – the improved allocation of financial resources based on investment inside or
outside the firm.
o Efficient internal capital allocation
o Business restructuring

2. Value Neutral Diversification – incentives/encouragement to diversify comes from both the external and
internal environment. This involves with a firm go for changes or expand its businesses to new ones in
order to solve/reduce weaknesses from its old businesses.
 External Incentives – include anti-trust laws and taxation laws, high currency, low tariff fees, low
labour costs, etc.
 Internal incentives – low performance, uncertain cash flows and synergy and firm risk reduction.
 3. Value Reducing Diversification – top level executives may diversify in order to diversity their own
employment risks as long as profitability does not suffer excessively.
 Diversification add benefits for top-level managers but not shareholders.
 Diversification concern for one’s reputation.

Describe how firms create value using Related Diversification strategy

1. Operational relatedness (sharing of activities)
 Firms can create operational relatedness by sharing their tangible resources either a primary activity
such as inventory delivery system or a support activity such as purchasing practice. Example of this
is P&G Paper Towel business and Nappy business, both use paper products as their primary inputs
to the manufacturing process. The Firm’s paper production plant produces inputs to both businesses
and is an example of shared activity.

2. Corporate relatedness (transferring of core competencies)

 The firm’s intangible assets such as its know-how become the foundation of the core competencies.
This involves the ability to share intangible assets such as the ability to create effective advertising
and also by moving key personnel people into new management position. This involves with
transferring of knowledge, expertise and experienced.

Explain two WAYS value can be created with Unrelated Diversification

1. Efficient internal capital market allocation – lead to financial economies and reduce risk among the
firm’s businesses.
2. Restructuring of acquired firm – the diversified firm buys another company, restructures that company
assets in ways that allow it to operate more profitably and then sell out that company for profit in the
external market.

Describe MOTIVES that encourage managers to over-diversify (Value-Reducing Diversification)

1. Diversification provides additional benefits to top level managers that shareholders do not enjoy.
Research evidence shows that diversification and firm size are linked and as the firm size increases, so
does the executive compensation. This is because large firms are complex, difficult to manage, top level
managers commonly receive substantial level of compensation to lead them. (firm size increased, too
large, difficult to manage)
2. If a positive reputation facilitates development and use of managerial power, a poor reputation may reduce
it. Likewise, a strong external market for managerial talent may prevent managers from pursuing
appropriate diversification.
B. CHAPTER 7: ACQUISTION AND RESTRUCTURING STRATEGIES
What is Acquisition, Mergers and Take-over?
1. Acquisition – one firm buys a controlling interest in another firm with the intent of making the acquired
firm a subsidiary business within its portfolio.
2. Mergers – two firms agree to integrate their operations on a relatively co-equal basis.
3. Take-over – special type of acquisition wherein the target firm does not solicit firm’s bid. Hostile take-
over is an unfriendly take-over that is undesired by the target firm.

Discuss 7 REASONS why firms use Acquisition strategy to achieve strategic competitiveness.
1. Increased market power – factors that increase market power include the ability to sell product/service
above the competitive level, cheaper primary or support activities than competitors, size of the firm,
resources and capabilities to compete in the marketplace and purchase of a competitor, supplier,
distributor or business in a highly related industry. (sell products/services with low costs)

Market power increased by three factors:

 Horizontal acquisition – the acquisition of other firms in the same industry. It increases market
power by exploiting cost-based synergy (reduce/eliminate unnecessary expenses in the business)
and revenue-based synergy (able to generate more sales than its competitor). It results in higher
performance when the firms have similar characteristics such as strategy, managerial styles and
resource allocation patterns.
 Vertical acquisition – acquisition of suppliers and distributors of the acquiring firm. In this strategy,
the newly formed firm controls additional parts (supplier or distributor) of the value chain.
o Example, Triple Tee Enterprises paid Trust Japanese Vehicles Company its services to
make partnership and block its competitors in order to gain competitive advantages.
 Related acquisition – acquisition of firms in related industries. In this strategy, firms seek to create
value through the synergy that can be generated by integrating some of their resources and
capabilities. Example Amazon.

 Forward Integration – is a strategy where a firms gain ownership or increased control over
its previous customers (distributors or retailers)
 Backward integration – is a strategy where a firms gain ownership or increased control
over its previous supplier.

2. Overcoming entry barriers – Firm can overcome barriers to entry and gain immediate access to market
with an established product that has consumer loyalty.

3. Cost of new product development and increased speed to market – developing new products and
ventures internally can be very costly and time consuming without any guarantee of success. Acquisition
can reduce this risk. For increased speed to market, acquisition offer a much quicker path than internal
development to enter a new market.

4. Lower risk compared to developing new product – avoid internal ventures which managers perceive
it to be highly risky. Acquisition may become a substitution of innovation and this should always be
strategic rather than defensive in nature.

5. Increased diversification – Firms can diversify their product lines or business lines that are new in
market more easily through acquisition. The more related to the acquired firm the greater is the probability
that the acquisition will be successful.

6. Reshaping the firm’s competitive scope – reduce the negative effect of an internal intense rivalry on a
firm’s financial performance and can also reduce firm’s dependence on specific market changes the firms
competitive advantage.
 7. Learning and developing new capabilities – reduce inertia/inaction and gain capabilities that it does
not currently possess such as special technological capability and a broader knowledge base. Firm should
acquire other firms with different but related and complementary capabilities in order to build their
knowledge base.

Describe and discuss PROBLEMS in achieving successful acquisition.

1. Integrate difficulties – difficult to integrate because of the differences in corporate culture, financial and
control system, management styles and the status of executives in the combined firm.
2. Inadequate evaluation of target – acquirers that fail to complete the due-diligence/carefulness are
likely to develop incorrect evaluations of the target firm’s value.
3. Large or extraordinary debt – High debt may preclude the type of investments required in the long
term success.
4. Inability to achieve synergy/interaction – acquiring firm often prepare inaccurate estimates of synergy
potential.
5. Too much diversification – acquisition may create a firm that is too diversified given it core
competencies and environmental opportunities. Waste resources, unmanageable and costly.
6. Managers overly focused on acquisition – acquisition often create an internal environment in which
managers dedicate most of their time and energy to analyse and complete additional acquisitions. This
will result in choosing to avoid decisions that have a long bearing on the long term performance of the
firm.
7. Too large – acquisition may lead to a combined firm that is too large which require extensive use of
bureaucratic controls rather than strategic controls.

Discuss ATTRIBUTES of Effective Acquisition

1. Acquired firm has assets or resources that are complementary to the acquiring firm’s core business
2. Acquisition is friendly – faster and more effective integration and possibly lower premiums.
3. Acquiring firm conducts effective due-diligence/carefulness to select target firms and evaluate the target
firm’s health.
4. Acquiring firm has financial slack (cash or a favourable debt position). Financing (debt or equity) is
easier and less costly to obtain.
5. Merged firm maintains low-to-moderate debt positions – lower financing cost, lower risk (e.g
bankruptcy and avoidance of trade-offs that are associated with high debt.
6. Acquiring firm has sustained and consistent emphasis on Research and Development and Innovation.
7. Acquiring firm manages change well and is flexible and adaptable. (Faster and more effective
integration facilitates achievement strategy.)

Define Restructuring strategy and its common forms

1. Restructuring strategy – a strategy through which a firm changes its set of businesses or financial
structures. Three types of restructuring strategies:
 Downsizing – reduction in the number of firm’s employees and in the number of operation
units but it does not change the essence of the business.
 Downscoping – refers to divestiture, spin-off or some other means of eliminating business that
are unrelated to the core business.
 Leveraged/Control buyout – refers to the purchase of all of the asset of a business, financed
largely with debt and takes the firm private. (Think before you make acquisition strategy.)
C. CHAPTER 8: INTERNATIONAL STRATEGY
What is International Strategy?
International strategy is a strategy in which the firm sells its products and services outside its domestic market.
(Marketing internationally)

Discuss three CRITERIA/BENEFITS firm use to identify international opportunities

1. Increased market size – Firm expands their potential market by using an international strategy to establish
stronger positions in market outside their domestic markets. The rationales behind the increasing of
market size is due to:
 Domestic may lack the size to support efficient scale manufacturing facilities
 Large international markets offer higher potential returns and pose less risks for firm than
smaller markets.
2. Economies of scale and learning – Firms able to standardise the process used to produce, sell, distribute
and service their products across country borders enhance their ability to learn how to continuously reduce
costs while hopefully increasing the value their products create for customers. In this dimension, firms
also be able to exploit core competencies through resource and knowledge sharing between units and
network partners across country borders.
3. Location advantage – locating facilities in markets outside domestic market can sometimes help firms
reduce cost. This is in the sense that it provides easier access to lower-cost labour, energy and other
natural resources. Other advantages include access to critical suppliers and customers.

What are the FOUR FACTORS identified in MICHAEL PORTER’s model of the competitive advantage?
1. Factors of production – this factor refers to inputs necessary for a firm to compete in any industry.
Example include labour, land, natural resources, capital and infrastructure. Other factors/examples
generalized and specialised (skilled personnel in a specific industry).
2. Demand conditions – characterised by the nature and size of customer’s needs in the home market for
the product’s firms competing in an industry produce. Meeting demand generated by a larger number
of customer creates conditions through which a firm can develop scale-efficient facilities and refine
capabilities and perhaps core competencies required to use those facilities.
3. Related and support activities – emphasize the characteristics of a specific economy that contribute to
some degree to national advantage and that influence the firm’s selection of an international business
level.
4. Firm strategy, structure and rivalry – this foster a strong emphasis on continues product and process
improvements.

Identify and describe the THREE INTERNATIONAL CORPORATE LEVEL STRATEGIES

1. Multi-domestic strategy
Key points:
- aims to maximize benefits of meeting local market needs through extensive
customisation
- (high pressure for local responsiveness and low pressure for global responsiveness)
- Strategic and operating decision making decentralized
- local businesses treated as separate businesses strategies for each country.

2. Global strategy
Key Points:
- Plans that a company develops to target growth on a global level for sales of goods and
services.
- Taking advantages of the various differences in factor markets across countries.
- Modifying the current business model so it is successful in a foreign environment.
- Finding similarities in national markets and producing a standardised products for them.
- highly centralized
- focus on efficiency (economies of scale)
- little sharing of expertise locally
 - Standardized products.
- (High pressure for global responsiveness and low pressure for local responsiveness).

3. Transnational strategy
Key Points:
- aim is to maximize local responsiveness but also gain benefits from global integration
- (high pressure for local responsiveness and high pressure for global responsiveness)
- complex to achieve
- Wide sharing of expertise, technology, staff, etc.
D. CHAPTER 9: COOPERATIVE STRATEGY
What is Cooperative Strategy?
Cooperative strategy is a strategy in which firms work together to achieve a shared objective.

What are the types of Cooperative strategies exist?

1. Strategic alliance – Firms combine some of their resources and capabilities to create a competitive
advantage.
2. Business Level Cooperative strategy – help the firm improve its performance in individual product
market.
3. Corporate Level cooperative strategy – help the firm to diversify products offered or markets served or
both.
4. International cooperative strategy – Firms with headquarters in different countries decide to combine
some of their resources and capabilities for the purpose of creating a competitive advantage.
5. Network cooperative strategy – several firms agree to form multiple partnership to achieve shared
objectives.

Discuss THREE TYPES of STRATEGIC ALLIANCE

1. Joint Venture – two or more firms create a legally independent company to share some of their
resources and capabilities to develop a competitive advantage.
2. Equity strategic alliance – two or more firms own different percentage of the company they have
formed by combining some of their resources and capabilities to create a competitive advantage.
3. Non-Equity strategic alliance – two or more firms develop a contractual relationship to share some of
their unique resources and capabilities to create a competitive advantage.

Discuss TWO REASONS why firm develop strategic alliance

1. It allows partners to create value that they couldn’t develop by acting independently and to enter market
more quickly and with greater market penetration possibilities.
2. Most firm lack the full set of resources and capabilities need to reach their objectives which indicates that
partnering others will increased the probability of reaching specific performance objectives.

Discuss the RATIONALES/Justification for using Strategic alliance in the three types of basic market
1. Slow cycle market – (a market in which resources are shielded, company maintains monopoly and
unable to penetrate market) Firm often use strategic alliance to enter restricted market or to establish
franchise in new markets. Maintain market stability (e.g. establishing standards).
2. Standard cycle market – (firm’s competitive advantage are moderately shielded from imitation which
that imitation is also moderately costly to imitate) Firm gain market power and access to complementary
resources, establish better economies of scale, overcome trade barriers, meet competitive challenges from
other competitors etc… Examples the alliance between airlines.
3. Fast cycle market – (varying the rates of competitive speed in different markets on the behaviours of
all competitors) used by firm to speed up the development of new goods/services, speed up new market
entry, maintain market leadership, form an industry technology standard and share risky research and
development expenses and overcome uncertainty.

Discuss the 4 TYPES of BUSINESS LEVEL COOPERATIVE STRATEGIES and describe their use
1. Complementary strategic alliance – firms share some of their resources and capabilities in
complementary ways to develop competitive advantages.
 Vertical – formed to adapt to environmental changes but sometimes changes represent
opportunities for partnering firms to innovate while adapting.
 Horizontal – focus on joint long term product development and distribution opportunities.
2. Competition response strategy – used at the business level to respond to competitor’s attack. Since it
difficult to reverse and expensive to operate, strategic alliances are primarily formed to take strategic
rather than tactical to respond to competitor’s actions.
 3. Uncertainty-reducing strategy – used to hedge against risk and uncertainty. These alliances are most
noticed in fast cycle markets. Risk & Uncertainty is reduced by combining knowledge and
capabilities.
4. Competition reducing strategy – used to reduce competition. Collusive strategy differ from strategic
alliance in that collusive strategies are often illegal type of cooperative strategy to reduce competition.
 Explicit collusion – is a direct negotiation among the firms to establish output levels and
pricing agreements.
 Tacit collusion – is the indirect coordination of producing and pricing decisions by several
firms.

Explain Cooperative Strategies RISKS

1. Inadequate contracts – false perception / firm may act in opportunistic manner cause by contract failure
2. Misrepresentation of competencies – contribution is prohibited in some of the intangible resources.
3. Partners fail to use their complementary resources – failure to contribute needed resources and
capabilities in the alliance.
4. Holding alliance partner’s specific investment hostage – one firm may make the investment while the
other partner does not.

Discuss 2 APPROACHES to manage Cooperative strategy

1. Cost Minimisation - Firms develop contract with its partners. The contract specifies how the
cooperative strategy is to be monitored and how partner behaviour is to be controlled. The goal of this
approach is to minimize the cooperative strategy’s cost and to prevent opportunistic/cunning behaviour
by a partner.
2. Opportunity Maximisation – Partners are prepared to take advantage of unexpected opportunities to
learn from each other and to explore additional marketplace opportunities. The value of trust, respect and
transparency is indeed basic necessities to facilitate opportunity.
E. CHAPTER 10: CORPORATE GOVERNANCE
Define CORPORATE GOVERNANCE and explain why it is used to monitor and control top-level
manager decision.
1. Corporate Governance is the set of mechanisms used to manage the relationship among stakeholders that
is used to determine and control the strategic direction and performance of organisations.
2. Purpose of Corporate governance:
 Identify ways to ensure that decisions are made effectively and that they facilitate a firm’s
efforts to achieve strategic competitiveness
 Establish and maintain harmony between parties (owners and managers) who interests may
conflict.
 Ensure that top-level manager’s interests are aligned with other stakeholders interest,
particularly those of shareholders.
 Act as oversight/mistakes in areas where owners, managers and board directors may have
conflict of interest. Example the election of board of directors, supervision of CEO pay and
corporation’s overall strategic operations.

Define an AGENCY RELATIONSHIP and MANAGERIAL OPPORTUNISM.

1. Agency relationship – exists when one or more persons (principal) hire another person (agent) as decision
making specialist to perform a service.
 Implication – separation between ownership and managerial can be problematic. This is due to
their differences in their interest (btw manager and owner). Also shareholder may lack direct
control and agents may make decisions that result in pursuing goals that conflict with those of
principals.
2. Managerial opportunism – is the seeking of self-interest with guile (cunning/dishonesty). Opportunism
is both an attitude and set of behaviours.
 Implication – principal do not know whether or not agent will act or not act opportunistically.
Opportunistic can be observed once agent recruited.

Explain why OWNERSHIP is largely separated from MANAGERIAL CONTROL in organisations and
discuss its effects.
1. Historically, firms were managed by founder or owners and their descendants/children. Thus, corporate
ownership and control mechanisms are vested in the same person(s).
2. As the firm grew larger, they may not have access to all of the skills needed to effectively manage the
firm and maximise returns for family. Therefore, outsiders may be required to facilitate and improve
the management. Also as they grew up, they may need to seek outside capital and this give up some of
their ownership especially when using the debt financing and equity financing for its capital.

Define three INTERNAL CORPORATE GOVERNANCE MECHANISM and how they may be used to
control and monitor managerial decisions.
1. Ownership Concentration – refers to both the number of large-block shareholders and the total
percentage of their shares they own. Ownership concentration has received considerable interest because
large-block shareholders are increasingly active in their demands that firms adapt effective governance
mechanism to control managerial decisions so that they will best represent owner’s interest.

2. Board of Directors – a group of elected individuals whose primary responsibility is to act in the owner’s
interests by formally monitoring and controlling the corporation’s top-level executives. The board of
directors can influence the performance of a firm by:
 Overseeing manager’s to ensure the company is operated in ways that will best serve
shareholder’s interests.
 Directing the affairs of the organisation and to reward and discipline top-level managers.
 Protecting shareholders rights and interests
 Protecting owners from managerial opportunism/cunning.
3. Executive Compensation – is another governance mechanism that seeks to align the interest of the
managers and owners through the payment of salaries, bonuses and long-term incentive compensation
such as stock awards and options. Executive compensation is used to motivate decisions that best serve
shareholder’s interest but they are imperfect in their ability to monitor and control managers. It also aim
to increase firm value in line with shareholders expectations but is subject to managerial manipulation to
maximise managerial interest.
F. CHAPTER 11: ORGANISATIONAL STRUCTURE AND CONTROL
Define ORGANISATIONAL STRUCTURE. Why is organisation structure a critical component of
effective strategy implementation process?
1. Organisation structure specifies the firm’s formal reporting relationship, procedures, controls and
authority and decision making process.

2. Organisational structure considered a critical component of effective strategy implementation because of

the following reasons: Why?
 Provides stability a firm needs to successfully implement its strategies and maintain its current
competitive advantages while simultaneously providing the flexibility to develop advantages it
will need in the future.
 Structural stability – provides the capacity the firm requires to consistently and predictably
manage its daily work routines.
 Structural flexibility – provides the opportunity to explore competitive possibilities and then
allocate resources to activities that will shape the competitive advantages the firm will need to be
successful in the future.
 Allows the firm to exploit current competitive advantages while developing new ones that can
potentially be used in the future.

Define ORGANISATIONAL CONTROLS. Why are Organisation controls important

1. Organisational control guides the use of strategy, indicate how to compare actual results with expected
results and suggest corrective actions take when the difference is unacceptable.
2. Importance of Organisation control: Firms use both strategic control and financial control to support
the implementation of their strategies
 Strategic controls – are largely subjective criteria intended to verify that the firm is using
appropriate strategies for the conditions in the external environment and the company’s
competitive advantages.
 Financial controls – are largely objective criteria used to measure the firm’s performance against
previously established quantitative standards.

Describe the DOMINANT PATH OF EVOLUTION OF A FIRM’S STRUCTURE.

1. Research suggests that most firms experience certain patter of relationships between strategy and
structure. Firms tend to grow in somewhat predictable patterns. They initially grow by volume, then by
geography, integration and finally through product/business diversification.
2. Firms choose from among three major types of organisation SIMPLE, FUNCTIONAL and MULTI-
DIVISIONAL structure to implement strategies. Across time, successful firms move from the simple
structure to the functional and then to multi-divisional to support changes in their growth strategies.
 Simple structure – a structure in which the owner/manager makes all major decisions and
monitors all activities while staff serve as an extension of the manager’s supervisory authority.
 Functional structure – consist of a chief-executive and a limited corporate staff with
functional line managers in dominant organisational areas such as production, accounting,
marketing, research and development, engineering and human resource. (like the family tree
structure)
 Multi-divisional structure – consist of operating divisions, each representing a separate business
or profit centre in which the top corporate officer delegates responsibilities for day to day
operations and business-unit strategy to division managers.
G. CHAPTER 12: STRATEGIC LEADERSHIP
What is STRATEGIC LEADERSHIP and how important are top-level managers as an organisation
resource?
1. Strategic leadership – is the ability to anticipate, envision, maintain flexibility and empower others to
create strategic change as necessary.
2. Importance of Top-Level Managers – top level managers are charged to make certain that their firm is
able to effectively formulate and implement strategies.
 Their strategic decisions influence how the firm is designed and how goals will be achieved.
 They help the firm gain a competitive advantage
 They develop a firm’s organisational structure and reward system
 Top-level manager is the critical element of organisational success is having a top management
team with superior managerial skills.

What is MANAGERIAL DISCRETION and what determines the amount of managerial discretion?
1. Managerial discretion – is the latitude of actions available to managers which it relates to their freedom
to make decision within the limitations of their authority and applying caution in what they say or do.
2. Factors determine the amount of managerial discretion:
 External environmental sources such as the industry structure, the rate of market growth in the
firm’s primary industry and the degree to which products can be differentiated.
 Organisational characteristics – refers to the size, age, resources and culture of the organisation.
 Manager’s characteristics – commitment to the firm and its strategic outcomes, tolerance for
ambiguity, skills in working with different people and aspiration levels.

Discuss the COMPLEXITY OF CEO DUALITY.

1. CEO duality is defined as when the CEO and the Chairperson of the board are the same. CEO duality has
been quite common in the United States. Even though, CEO duality is still quite common in the United
States, there are evidences of criticism coming from US analysts and corporate watchdogs claiming that
the practice of duality has some limitations such as it can lead to poor performance and slow responses
to change, partly because the board engages in less monitoring of the CEO’s decisions and actions. The
possibility of opportunistic behaviours, conflict of interest and perhaps corruption is likely to happen
given improper monitoring of this practice.

Top management team members and CEOs who have long tenure on the team and in the organisation
have a greater influence on board decisions. CEOs with greater influence may take actions in their own
interest and so the outcome of which increase their compensation from the company.
H. CHAPTER 13: STRATEGIC ENTREPRENEURSHIP
Define the THREE TYPES of INNOVATIVE ACTIVITY
1. Invention – the act of creating or developing a new product or process.
2. Innovation – the process of creating a commercial product from an invention.
3. Imitation – the adoption of an innovation by similar firms.

What is ENTREPRENEUR? What is ENTREPRENEURIAL MIND-SET?

1. Entrepreneur – are individuals who are acting independently or as part of the organisation who see an
entrepreneurial opportunity and then take risks to develop an innovation to purse it.
2. Entrepreneurial mind-set – is the person who values uncertainty in the marketplace and seeks to
continuously identify opportunities with the potential to lead to important innovations.

Discuss the RISKS of INTERNATIONAL ENTREPRENEURSHIP? Why are there differences in the rates
of entrepreneurship among different
1. Decision makers recognise that the decision to internationalise exposes firms to various risks such as :
 Unstable foreign currencies – fluctuation of the currency rates lead to the surplus or
depreciation.
 Problems with market efficiencies – e.g. market price do not always accurately reflect its true
value
 Insufficient infrastructure to support business – poor infrastructure to facilitate growth of the
business operation. E.g. no ship, road conditions, less frequent flights etc…
 Limitation on market size – E.g. customers are limited, products/services are expensive etc…
2. Culture is one of the reasons as to why the rates of entrepreneurship among countries are different.
International entrepreneurship often requires team with unique skills and resources especially in the
cultures that highly value Individualism and Collectivism. With globalisation, a greater number of new
ventures have been born-global which increase their learning of new technological knowledge and
thereby enhance their performance. International entrepreneurship also generally encourages
internationally diversified firms to become innovative.