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1 Article 1 Brandenburger, A., & Stuart, H. (1996). Value-Based Business Strategy. Journal of Economics and Management Strategy 5 (1): 5–24 --- The value added by the firm is done through their suppliers and buyers. When firms achieve asymmetries between one another, the value added can be created. There are four strategies that create such asymmetries. This is a macroeconomic concept, it also is a concept that’s related to bargaining, game theory. Any given firm has form one side a buyer and form the other side a supplier. Brandenburger argues that each part of the network (buyer, supplier, and the firm itself) wants to get their value. The firm has an opportunity cost which is the cost of the services, and they want a willingness of an eventual buyer to pay, ultimately generating their value. The latter argument is a simplistic form of value based stategy. In reality, an economy has a complex web of multiple firms, suppliers and buyers that can take a multitude of forms. The network as a whole is the boundary for the economic concept. In addition, there is a maximum value that each entity (i.e. firm) can achieve within the current network. In other words, the upper limit for that is equal to the decrease in the total value generated less the value of a given entity leaving the network. Which in turn constitutes the added value to the whole network. On another hand, the lower limit constitutes the value that an entity could generate by going to another given network. Each given firm has a couple of decisions they can make regarding their resources and capabilities within their industry (i.e. network). The first being competitive intent that is about a value that is added to a pre-existing network or an alternative one. The second is persuasive intent; that is extracting value from other members within the same network. For instance, increasing switching costs for buyers (e.g. competition with rivals, create close relationships with clients such as in commercial banking.) There are approaches that firms can take to pursue value-based strategies that involve being rere and valuable or redefining the whole value chain. Namely: Guardian of quality concerns firms that create a strong brand image and resonance, for instance Shimano, a bike part manufacturer or Intel, a computer chip manufacturer that has an omnipresence in all computer components, whether if it is Windows or Apple. These firms make sure they don’t risk distorting their brand image by making sure of maintaining product quality. Becoming irreplaceable which concerns firms that have a certain eco-system around building their products that interlink with each other. As a consequence, buyers become a part of their product and the firm makes sure they don’t easily switch their products (e.g. Commercial banks as being part of the value chain. Clients need to secure their money and valuables in commercial banks as long as services banks sell such as insurance and mortgages, Apple, Samsung) Taking advantage of changing consumer needs by giving up a classical consuming experience for a newer one. Some firms jumped on this opportunity and created newer ecosystems. A prominent example is Uber Eats, Grab Hub, where consumers no longer need to physically go to the restaurant, or even call and order food. Thus, trading cost and convenience with another new experience and a newer need that once was met differently. Redefine the value chain leading to undertaking a whole range of operations and redefining it. A good example is Ikea, where the customer goes and buys a material that they have to assemble themselves instead of getting it already assembled form the distributer. The customers choose their product from the show room (Ikea store) then take the product straight from the manufacturing process without being assembled (i.e., accepting slight lower quality and price with an acceptable design). Article 2 Buckley, P., & Casson, M. (1998). Analyzing Foreign Market Entry Strategies: Extending the Internalization Approach. Journal of International Business Studies. 29. 539-561. 10.1057/palgrave.jibs.8490006. --- Any given business goes through form major steps for their international expansion strategy, which it can use interdependently or separately depending on host market opportunities (and/or issues). Exporting directly to international customers, which constitutes relatively lower risks due to the minimal involvement in the host market. Exporting constitutes the most popular method as well due to the ever-easier means of doing business, namely disrupting technologies for means of foreign business. One of the main challenges could be the potential issues due to entry barriers to the host country such as tariffs, bureaucracy (i.e. corruption, institutional issues), culture etc. Exporting has a least amount of control, foreign licensing is contractually controlled by the host enterprise, while FDI has most control. Selling through international representatives, in other words, international agents/distributors. This constitutes an increased involvement in direct investment at the host market. It allows agents to gain increasing knowledge of the overall host market as well as customer base nature of the market. This strategy can also be cost effective due to the knowledge gained and can help mitigate the risk that is related to trade barriers. It also can accelerate international sales and presence, instead of solely exporting to the host market. However, companies opting for such strategy can still lose profit margin and is unlikely to secure exclusive arrangements. It is also challenging to manage customer service quality due to the relatively low customer/agent relationship. Opening overseas operations or partnering through M&As JVs and portfolio investment, shows an increasingly advanced involvement of the business in the host market. Such strategy allows increasing local contact with customers and suppliers, gain market experience, and have a direct control over quality and customer service. As well as avoiding eventual protectionist measures argued above (i.e. tariffs & quotas). On the other hand, once companies opt for such investments (greenfield, brownfield), it significantly increases costs and management time. In addition, it can potentially add higher investment costs and demands more cultural and institutional involvement in the host market. However, when transaction costs for intermediate outputs are high, vertical integration of production and distribution is favored. Along with the nature of the internationalization decision that the companies take, Buckley and Casson argued that companies also make similar decisions about the control over their valuable assets (i.e. internalization theory). For instance, a tech company might chose to go for green investment in a market and internalize their know how through internal channels that are going to guarantee protecting their core product manufacturing technology and management skills. Whereas another company (e.g. Coca-Cola) might integrate the market differently through licensing their product. To sum up, the main ideas of the study are the following: · Enhancing the internalization theory by developing a model to analyze the foreign market entry decision as it pertains to exporting, licensing, joint ventures, and wholly owned foreign investment. · Allowing a direct comparison between any of the entry modes. The choice between Greenfield Investment and acquisition is analyzed, from the perspective of the interaction between the market entrant and the host country rivals · Assuming rational behavior and the existence of the endogenous (growth and profitability) and exogenous variables that can be specific to the firm, industry, or country. · Putting a significant amount of strategy in licensing towards market entry which involved decisions on control and location interdependently. Article 3 Hamel, G., & Prahalad, C. K. (2014, August 01). Do You Really Have a Global Strategy? Harvard Business Review. https://hbr.org/1985/07/do-you-really-have-a-global-strategy --- Main premise of the article Multinational companies need a global strategic perspective and shift away from a country-based strategy. The study identifies and highlights four main categories of analysis: Markets, Operations scope, Resources, and Geography The study combines between of OLI framework and Vernon’s product life cycle theory, since operations can be analyzed on a process or a life cycle fashion. Main ideas of the article - Firms should not focus on the intermediate tactics of the global competitors but they should think beyond the competitive advantages and know about the long run strategic intentions of rival firms - Global competition starts with a sequence of action & reaction. - The importance to distinguish between global competition (which is the previously described, cross-subsidized quest for market share to establish a global brand) and global business (which is based on the notion of scale benefits that cannot be realized solely in the home country) - Global competition cannot be addressed by a global business, low-cost manufacturing strategy. - Global competitors predominantly have three different strategic intents: (1) Build a global presence, (2) defend a domestic decision, (3) overcome national fragmentation. - Subsidiaries are an important element of strategic competition, they can provide the headquarters with competitive intelligence and can react to (local) competition - Instead of allocating resources to particular strategic business units, a complex global strategy demands that the resources are allocated for different subsystems, applying different criteria, and time horizons. - Different markets offer different competitive opportunities, they differentiate between low cost sources minimum scale, national profit base, retaliation against a global competitor, benchmarking products and technology in a state-of-the-art market. All must be contextualized within the institutional framework of the host country. Article 4 Porter, M. E. (2008). Competing Across Locations. In On competition (Updated ed.). Boston (MA): Harvard Business School Publishing. --- Main premise of the article - The role that a business location plays are fundamental for an effective competitive advantage. - The paper distinguishes between global (where the firm’s competitive position in one country affect the position in another) and multi-domestic (where competition takes place in a country by country basis) industries. - Activities are thus the foundation of competitive advantage (either through cost leadership or differentiation) Main ideas of the article - To create a competitive advantage, the global strategy must integrate location with the global network of activities. - Firm performance within an industry is derived from the firm’s competitive advantage (based either on lower costs or the ability to differentiate) compared to its rivals. - The value chain can be used as a tool to emphasize strategy issues unique to a global strategy - One reason to locate an activity is the realization of a comparative advantage (e.g. a location with a cost-effective availability of raw material). Another reason is the competitive or productivity advantage, where activities are located in the most attractive environments for innovation and productivity growth - Coordinating activities across locations can contribute to the creation of competitive advantage through the ability to respond to comparative advantage. - Firms that pursue a multi-domestic strategy are thus assumed to perform the entire value chain in one country, whereas for global strategy activities are located in different countries coordinated in form of a