International Management

PLAN FOR THE DAY
Part 1: Discuss the different types of resources and the nature of firm capabilities
Relate resources and capabilities to the value chain
Part 2: Barney’s VRIO framework for analyzing resources and capabilities’ potential for improving firm performance
Part 3: Domestic vs International capabilities
To offshore or not offshore

PART 1:
RESOURCES AND CAPABILITIES AND
THE VALUE CHAIN

Resource-based View (RBV) of the Firm
Tangible and intangible resources/ assets
Tangibility implies we can observe or quantify (measure/ count)
Intangibility implies that the resource/ asset is not observable and difficult if not impossible to quantify
Capabilities
These are the things the firm is able to do as a result of combining resources (and capabilities) together to perform a specific task
How useful is it to try and separate resources and capabilities from one another, when they interact to such a great degree?

Resources, Capabilities and the Value Chain
Value chain = the vertical activities that create value
Upstream (sourcing/ manufacturing) to down stream (selling)
Primary and secondary areas of activity in the value chain

The Airbus A380 Value Chain?
Source: http://www.flightglobal.com/airspace/media/cutawayposters/airbus-a380-microcutaway-14474.aspx

Outsourcing and the Apple iPhone?
Sources: http://www.economist.com/node/21525685
http://www.economist.com/node/21543174

What does Apple Keep In-House?
Apple Campus 2 Project
Amsterdam Apple Store

Example of a Value Chain with Outsourcing
From the example companies that are included, which could be described as onshore and which offshore?

Outsourcing vs In-House Activities
O = turning over an organizational activity to an outside supplier that will perform the activity on behalf of the focal firm.

In-house, Onshoring and Offshoring

PART 2:
Jay Barney’s VRIO Framework

VRIO and (Sustained) Competitive Advantage
Source: Barney J.B. (1995) Looking Inside for Competitive Advantage. Academy of Management Executive, 9(4): 49-61.
Barney, Jay. 1991. Firm Resources and Sustained Competitive Advantage. Journal of Management 17(1): 99-120.

Core Assumptions of the VRIO Framework
These are the two foundation assumptions for the resource-based view of the firm and strategic management
Firm Resource Heterogeneity
Firm Resource Immobility

Resource Attributes for Achieving Sustained Competitive Advantage
Not all resources will give a firm a SCA
A resource must have four attributes to provide a SCA
It must be valuable
It must be rare
It must be imperfectly imitable
The firm needs to be organized to exploit the resource

When is a Resource Valuable?
A resource is valuable only when it enables strategies that improve firm efficiency and effectiveness.
“The traditional ‘strengths-weaknesses-opportunities-threats’ model of firm performance suggests that firms are able to improve their performance only when their strategies exploit opportunities or neutralize threats” (Barney, 1991; p.106).

When is a Resource Rare?
A resource (or bundle of resources) is rare when it is not possessed by many competing firms
Can you think how conditions that would prevent many firms gaining access to a particular resource or resource bundle?

When is a Resource Imperfectly Imitable?
For a resource to give a firm a SCA it must however not only be valuable and rare, it must also be difficult to imitate or obtain
Three sources of resource imperfect imitability are:
Historical dependence
Causally ambiguity
Social complexity

When is a Firm Organized to Exploit a Resource?
Organization of the firm is concerned with (amongst other things):
The development of new resource(s) / capabilities
The exploitation of current resource(s) / capabilities
Exploration vs exploitation and the multinational enterprise?

“Value-created is the difference between the value that resides in the product and the value of the inputs that are sacrificed to make that product”
The Concept of Value Created

Describing Performance Outcomes
Comparison of value created (VC) with a given resource bundle to the expected value (EV) to be obtained (by the owners of these resources):
Below-Normal Performance: VC < EV
Normal Performance: VC = EV
Above-Normal Performance: VC > EV
This provides a relative conceptualization of how well a firm has performed with a given set of resources.

PART 3:
DEBATE 1: DOMESTIC VS INTERNATIONAL CAPABILITIES

RBV of Multinational Management
International diversification (Dess et al., 1995)
Subsidiary capability development (Birkinshaw & Hood, 1998; Luo & Peng, 1999)
International strategic human resource management (ISHRM) (Schuler, Dowling & Decieri, 1993; Beechlor and Napier, 1996)
Exploitation vs Exploration?

RBV of Market Entry Decisions

RBV of Strategic Alliances
Since the 1980s, both the corporate world and the academic fields of IB and strategy have experienced an “alliance revolution” (Dunning, 1995).
While strategic alliances is a multi-faceted phenomenon, the RBV focuses on organizational learning.
RBV advances a core proposition that capabilities to learn from partners may be a tacit resource underlying a firm’s competitive advantage (Hamel, 1991).
For MNCs, the intensity and diversity of learning from local partners facilitate local knowledge acquisition and strengthen firm performance in host countries (Luo & Peng, 1999; Makino & Delios, 1996).
For local firms, learning from MNC parents is likely to enhance survivability and performance (Fahy et al., 2000; Lyles & Salk, 1996).

RBV of International Entrepreneurship
Historically, IB research focuses on large MNCs, and entrepreneurship studies concentrate on small and medium-sized enterprises (SMEs) within a domestic context.
How can some SMEs succeed abroad rapidly without going through different stages suggested by the “stage” model?
The answer typically boils down to the superb tacit knowledge about global opportunities (Peng, Hill & Wang, 2000)

RBV of Emerging Market Strategies
Emerging markets represent a unique institutional environment
Emerging market MNEs (EM-MNEs)
Developing capabilities constitutes “one of the most important SOE strategies during the transitions” (Peng, 2000, p. 100)
Privatized firms
Entrepreneurial start-ups
Conglomerates

PART 3:
DEBATE 2: TO OFFSHORE OR NOT TO OFFSHORE

Survey by Offshoring Research Network (ORN)
Study tracking the adoption of offshoring administrative and technical functions every six months and over several years
Source: Lewin, A.Y. & Peeters, C. (2006) Offshoring Work: Business Hype or the Onset of Fundamental Transformation? Long Range Planning 39:221-239

Survey by Offshoring Research Network
Selected Findings
Source: Lewin, A.Y. & Peeters, C. (2006) Offshoring Work: Business Hype or the Onset of Fundamental Transformation? Long Range Planning 39:221-239

Survey by Offshoring Research Network
Selected Findings
Source: Lewin, A.Y. & Peeters, C. (2006) Offshoring Work: Business Hype or the Onset of Fundamental Transformation? Long Range Planning 39:221-239

Survey by Offshoring Research Network
Selected Findings
Source: Lewin, A.Y. & Peeters, C. (2006) Offshoring Work: Business Hype or the Onset of Fundamental Transformation? Long Range Planning 39:221-239

Survey by Offshoring Research Network
Selected Findings
Source: Lewin, A.Y. & Peeters, C. (2006) Offshoring Work: Business Hype or the Onset of Fundamental Transformation? Long Range Planning 39:221-239

Survey by Offshoring Research Network
Selected Findings
Source: Lewin, A.Y. & Peeters, C. (2006) Offshoring Work: Business Hype or the Onset of Fundamental Transformation? Long Range Planning 39:221-239