1. Which are the archetypes does Verbeke distinguish? Draw the figures associated with these archetypes. Verbeke distguish between 4 types of archetypes and they are the following: Centralized exporter: Home country managed firm. Firm specific advantage in its final products. Standardized products manufactured at home. Only the transferable firm specific advantages are taken to the host country, meaning that they try to make exporting successful in international markets. No development of location bound firm specific advantages.
International projector: Clones home operations into host countries. Knowledge based firm specific advantages are replicated from home country. Only the internationally transferable firm specific advantages are taken to the host country. No development of location bound firm’s specific advantages. The international projector MNE seeks international expansion by projecting its home country success recipes abroad.
International coordinator: Its main firm specific advantage is that it can coordinate location advantages (e.g., production capacity to access abundant natural resources) present in multiple countries. International operations are specialized in specific value-added activities across borders. Use internationally transferable firm specific advantages in each host country to develop location-bound firm specific advantages that fit the host country location factors.
Multi-centered MNE: Each host county develops own location bound firm specific advantages, only transfers core routines (e.g., financial management). A set of entrepreneurial subsidiaries go abroad, to acquire knowledge for future firm specific advantage development. Local adaptation is the foundation of the international strategy.
2. Is there one best model? Why or why not?
There is no best model because these models all depend on the firm specific advantages that an organization has its power on, and also on the host countries appeal for business. Firm specific advantages in the home country can be a success, but the question is if those firm specific advantages are also a success in the host country?
3. Do you consider a centralized exporter a true multinational?
A centralized exporter can be a true multinational if it derives a quarter of its revenue from operations outside of its home country and also if it operates in different host countries, and its managed by a core headquarter in the home country. Warner Bros. Pictures, a major US motion picture studio is a multinational which is operational through exporting its motion pictures. Most of its revenue is attained from its exports and of course from its home country the US.
4. What does it mean that the FSA is embodied in the product in case of an international projector?
A product that has embodied a firm specific advantage means that the product contains in it a feature that makes the company with greater success than its former competitors. This firm specific advantage cannot be seen as a stand-alone component in the organization, in order to leverage success it can only be seen as a firm specific advantage within its final product. So this firm specific advantage is not from its operations such as great employee relationship, but only through the final product. This is seen in the centralized exporter. In the international projector this is not the case because they replicate their firm specific advantages to go abroad and use them, such as an advanced technology or secret recipe like Coca cola has one. A good example is Ford, which cloned its American operations into Canada and Europe. Europe was a challenge for Ford due to a widespread prejudice against American cars sold in Europe.
5. Does the firm develop FSAs in the host country in case of the international projector?
No the firm which uses the archetype of international projector as a strategy does not develop firm specific advantages in the host country, what this
organization do is cloning their home country firm specific advantages to the host countries, so in other words just using success firm specific advantages from home country to the host country.
6. Why is the international coordinator an example of global value chain?
The international coordinator archetype is an example of global value chain because it can coordinate different location advantage operations in a wide variety of different geographies in the same period. Global value chains now contain activities that are tightly integrated. This means that firms and workers in widely separated locations affect one another more than they have in the past. So for example BP an international coordinator, when there where oil spills in the Gulf of Mexico, it suddenly affected all other BP operations, because their branding image was looked in a worse way, decreasing its organization reputation.
7. Why is a multi-centered MNE characterized by maximum local responsiveness?
A multi-centered MNE is characterized by maximum local responsiveness because the foundation of a multi-centered archetype is local adaptation. This local responsiveness is evaluated and analyzed by different entrepreneurial subsidiaries from the organization that go abroad, so that new firm specific advantages can be developed. This newly firm specific advantage in the host country will conform with its host customers and through those means a good local adaptation can be attained.
8. The FSA is also framed in terms of core competences. That is the FSA is strongly related to the core competences of a firm. What key characteristics does Verbeke list for these core competences?
There are 4 key characteristics of core competences:
– Be difficult for competitors to imitate in terms of achieving the required internal coordination and learning.
– Provide potential access to a wide variety of markets
– Make a significant contribution to customer needs.
– The loss of a core competence would have an important negative effect on the firm’s present and future performance, in terms of value creation.
9. What critique does Verbeke have on the concept of core competences?
Core competencies are the company’s most important FSAs: its vital routines and recombination abilities. Recombination abilities are Locating resources, especially knowledge, as response to differences between national and foreign environments, and to satisfy new stakeholders’ demands. Verbeke has a few critiques regarding the concept of core competences and they are the following: Core competences of organizations in industries may differ. Prahalad & Hamel don’t include country factors in their analysis. Their theory overestimates the role of strategic management. Strategic management role is to develop strategic architecture. Develop a road map for the future which identifies core competencies to build the required technologies. In the other side their theory underestimates the role of host country location factors. Another critique from Verbeke is that core competences are historically driven.
10. What are the five forces Porter distinguishes? Explain these in your own words. The five forces Porter distinguishes is about how location advantages that affect firm competitiveness and firm specific advantage development. -Factor conditions: This is a force which is related to production factors such as capital, labor, infrastructure, scientific knowledge, technology. It gives improvement to problematic issues through innovation and continuous learning. A good example from the book is: In case of Japan, firms in several industries such as steel, shipbuilding and automobiles developed technological and design expertise to overcome a lack of natural resources and the just-in-time production process was pioneered in response to lack of affordable warehousing space. -Demand conditions: If customers increase their demand increasing external pressures to firms, then it gives the firm a good competitive advantage. So in order to gain this demand to customers the firm has to innovate and respond to the customer sophistication by adapting its technology and design features.
This is good for future global expansion, because the firm already gains early insights into future needs of customers or in other words buyer sophistication. -Related and supported industries: High quality home based suppliers which have great insight into international competition. These suppliers with good know how innovate through more efficient inputs, and spill knowledge between other suppliers within the firm through exchange of ideas, and different ways of communication. This is great for international competition. -Firm strategy, industry structure and rivalry: Domestic rivalry is good for international competitiveness. This forces firms to focus on firm specific advantages development beyond their home location advantages. This helps the firm become an international rival. So this is a well-functioning industry. -Government and chance: Luck plays a role, for example, a lucky innovation process that was coincidentally created and a valuable product with good technology or process knowledge was attained. This is often a long-term consequence. Government are the general governments of which are not corrupt.
11. How does Porter’s model fit in figure 1.2? Where does it belong?
Porters fit model fit in figure 1.2 because the model is all about how to use location advantages to increase competition and force its firm to develop a firm specific advantage in order to go across the international border and use it as a competitive advantage abroad. This firm specific advantage can get them access into the development of a location bound firm specific advantage across borders. I think Porters model fits in the location advantages section at home country triangle and then it moves across to all the other host sections according to its force.
12. What is the big problem of Porters model when applied in the context of international business?
Each industry has its own characteristics leading to different patterns of international competitiveness. According to Verbeke’s critique, firm specific advantages are home market determined, and Porters model has too much focus on the home market. In international business you need to take account both markets, so the home market as well as the host country. International business is about how to succeed abroad, and only having emphasis on the home market that is not very attainable. Firms only go abroad if they can establish a match between their firm specific advantages and the location advantages to the host markets.