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Globalising business

6 important questions on Globalising business

What are demand conditions?

Home location advantage is strong if domestic demand (market size) is large and sophisticated, as it forces firms to innovate. There may be demand heterogeneity though

What are the good and bad aspects of globalisation from an economic perspective?

+ local producers can sell their products with same ease and speed abroad as in home country
+ Money flows easily across local and national borders
+ Easy access to external capital (credit) and rising leverage

- New risks due to high degree of integration of domestic/local markets (unpredictable demand etc.)
- Intensification of competition
- High degree of imitation
- Price and profit swings business and product destruction

What is a foreign subsidiary?

An MNE unit located in a host country

What are firm structure, strategy and rivalry?

Home location advantage is strong if managerial practices fit with the requirements of the industry.

What are the origins of liability of outsidership?

1. Distant origins
2. Lack of local experience
3. Lack of nearby experience
leads to
1. Lack of familiarity, networks and legitimacy in the local context
leads to
liability of outsidership

What are the 3 approaches to national culture?

1. Context approach - Underlying background upon which which interaction takes place (low vs. high-context cultures)
2. Cluster approach - groups countries into clusters
3. Dimension approach - describing national cultures along various dimensions