Firm-Specific Advantages – Lecture 1 Important definitions
Strategy (Volberda et al., 2010)
= A consistent way to exploit core competencies, to gain a competitive advantage
= the roots of the organization, what your firm does better, the base. e.g. your ability to
more efficiently production or ability to design. Competitive advantage in 2 ways:
- Sell the same way but for higher price > Coca Cola, why? Branding.
- Lower production costs > more profitable because more efficient
Strategic management (Lamb, 1984)
= constantly, understanding your competences and those of current & potential
competitors. Built strategies and goals to meet existing and potential competitors. Why do consumers come to Albert Heijn and not to Jumbo, and reverse? > evaluate all.
Till 2019 Bol.com no competitor > then Amazon. Had to identify what strategy if they would
enter. International Strategic Management (Lassare, 2010)
= expand abroad and compete internationally
Expanding to Germany = international strategic issues. International Business Configurations
Why bother internationalizing?
1. Domestic configuration
= all supply chain in 1 country. Produced, consumed and sold.
Value generated by:
- Consumer surplus
- Producer surplus
Market dependence, small market > try to spread risks.
2. Export configuration
= Differential in price (China willing to pay more to make profitable) that create
Search for demand/price differential (supply the niche for demand).
Define market attractiveness for the IBManager > (for beer) define measure: market size,
consumption, or in general alcohol?
Disadvantage: transportation costs.
3. Multinational configuration
= replicate the operations in all countries you want to go. All operations in China e.g.
Low transportation costs
IBM > define the entire set up, organizational and managing staff.
Disadvantage: Copying the organization & processes in multiple countries is inefficient.
Everything varies per region, labor costs, resources etc.
4. Global configuration
= exploit regional differences, split up the entire supply chain. Where each aspect
Value maximized across the supply chain.
IBM> how to circulate staff and managers? Only within moving across countries? Or go
higher in rank? Globalization caused by 4 factors.
- Political = Free trade, deregulation, FDI, free-market economic schools (free-trade
creates the most gains).
- Technological = reduction in costs from multiple perspectives; production, time,
communication. Enabled people and firms to communicate. Speed up development
products and services.
- Social = Linguistic standards. Advertising and tastes. Cultural convergence.
- Competitive = Pushed to compete and lower costs (more efficient when splitting up).
Key questions: significant advantages internationalizing Cost benefits:
- Lower production costs
- Lower transportation costs
- Bigger markets with more consumers
- Learn from international failures
- Learn from the host country
- Resources priced differently in different parts in the world.
Internationalize = cost not much and use them where expensive is an advantage
4 critical things:
1. Liability of foreignness
Stranger is a strange land (language, culture, institution). Why should Indonesian do
business with outsiders?
Set of costs for a Dutch firm to go abroad. Stranger. Some investments to concur these
2. Localization advantages
Lose flexibility to respond to consumer wants, proximity, quick response abilities.
You have when choose to sell clothes in Groningen, lose averaging the Dutch/EU/global
These advantages come from :
Cultural factors > (tastes, attitudes, behavior, norms) some don’t travel well.
Commercial factors > energy for Groningers. A need/demand in this region to supply local
power to consumers. Supplying in the NL? Loses these advantages and connection to
Technical factors > standards vary per country = opportunities. What allowed to sell?
Legal factors > regulation > national security law? Key industry so protection?
3. Creation of disadvantage
Us wanted to negotiate with China. Tiktok
Threat of discrimination effort.
4. Location-bound advantages
What is the firms competitive advantage? Is this location bound?
Why do you consume at AH? History. Location. Institution. Location-bound when:
-Immobile resources > available in 1 country
-Local market reputation or knowledge > know the Dutch consumer Non-location bound competitive advantages are a necessary but not sufficient condition for
Just because you are the best in the US, does not mean you will be the best in Germany:
Walmart example. Determine what forces are dominating? Always an opportunity to either localize or expand. Internationalization Theory – Lecture 2 Why and how enter markets?
2. Entry mode theory Internationalization : why?
Location advantages (Dunning & Porter).
= Advantages from being present at specific (geographic) location.
Home country location advantages
= By being born in home country as opposed to other country.
Netherlands: history of water, so advanced technology. A Dutch firm has advantages in this
because born here.
Japan: high competition car companies, could otherwise easily dominate in less competitive