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![Feedback: Discussion Questions #4
Chapter 12: The Strategy of International Business
[1] In a world of zero transportation costs, no trade barriers, and nontrivial
differences between nations with regard to factor conditions, firms must
expand internationally if they are to survive. Discuss.
Comments:
The theory of comparative advantage suggests that activities should take place in
the countries that can perform them most efficiently, given that different countries
are endowed with different factors of production. If there are no barriers or costs
to trade, then it is likely that many industries will be based out of the countries that
provide the best set of factor endowments. Given location economies, a company
can develop a global web of value-creation activities to take advantage of differing
factor endowments in differing locations.
For firms already located in the countries with the most favorable factor
endowments for their industry, however, there may not be a need to expand
internationally at a certain point in time. As factor endowments evolve, the firm
may want to disperse its value-creating activities to those markets that offer
comparative advantages. If the firm is in a competitive market, it will benefit from
international expansion that includes its value-creating activities because of the
cost position and product differentiation opportunities such expansion can confer.
A firm may be able to survive in a local market without international expansion, as
long as the local market is not targeted by competitors who have taken advantage
of the economies offered by dispersing their value-creation activities
internationally. An example is an inefficient, high-priced locally-owned
supermarket that has not yet faced the entry of Wal-Mart in its market.](https://image.slidesharecdn.com/104247intlbusiness8-140930064516-phpapp01/85/international-business-1-320.jpg)
![[2] What do you see as the main organizational problems that are likely to be
associated with implementation of a transnational strategy?
Comments:
This is a judgment question. Implementation difficulties include communication
issues, trust issues, multiple roles, flexibility and culture issues, among many
others. For example, with GM, some European operations may need to collaborate
with operations in Latin America. Actions related to such a loss of autonomy
might function as a hurdle to implementation.](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
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- 1. Feedback: Discussion Questions #4 Chapter 12: The Strategy of International Business [1] In a world of zero transportation costs, no trade barriers, and nontrivial differences between nations with regard to factor conditions, firms must expand internationally if they are to survive. Discuss. Comments: The theory of comparative advantage suggests that activities should take place in the countries that can perform them most efficiently, given that different countries are endowed with different factors of production. If there are no barriers or costs to trade, then it is likely that many industries will be based out of the countries that provide the best set of factor endowments. Given location economies, a company can develop a global web of value-creation activities to take advantage of differing factor endowments in differing locations. For firms already located in the countries with the most favorable factor endowments for their industry, however, there may not be a need to expand internationally at a certain point in time. As factor endowments evolve, the firm may want to disperse its value-creating activities to those markets that offer comparative advantages. If the firm is in a competitive market, it will benefit from international expansion that includes its value-creating activities because of the cost position and product differentiation opportunities such expansion can confer. A firm may be able to survive in a local market without international expansion, as long as the local market is not targeted by competitors who have taken advantage of the economies offered by dispersing their value-creation activities internationally. An example is an inefficient, high-priced locally-owned supermarket that has not yet faced the entry of Wal-Mart in its market.
- 2. [2] What do you see as the main organizational problems that are likely to be associated with implementation of a transnational strategy? Comments: This is a judgment question. Implementation difficulties include communication issues, trust issues, multiple roles, flexibility and culture issues, among many others. For example, with GM, some European operations may need to collaborate with operations in Latin America. Actions related to such a loss of autonomy might function as a hurdle to implementation.