MARKET IMPERFECTION/ INTERNALIZATION
LOCATION SPECIFIC ADVANTAGES
VERNON’S LIFE CYCLE MODEL
Global JV/ Alliances
A global JV will be successful if the entry mode is eclectic paradigm when product advantage presents: Product or company specific advantages must exist in order for a successful Global JV.
Study shows that a Joint Venture is often seen as a viable business in imperfect market. Studies show a failure rate of 30-61%, and that 60% failed to start or faded away within 5 years (Osborn, 2003). And that is when the allocation of goods and services by a market is not efficient. Location specific advantages
are when the company derives greater benefit through a foreign establishment such as Global JV.
The use of joint ventures stems from theories on how strategic behavior influences competitive positioning of the firm. According to Alan Rugman the motivations to joint venture for strategic reasons are numerous.
Vernon suggests a Joint Venture should happen after the initial stages of a product life cycle. If a global Joint Venture happens in initial stages the chances of unsuccessful transfer may occur. Global Car Manufacturing
An example to this theory would be Saab’s car company acquired by General Motors, which many of its loyal customer wrung their collective hands over the perceived loss of Swedish ingenuity. This theory provides a framework to manufacturer industries as to when determining if it is beneficial to pursue. By By Brian Douglas, Special to AsianWeek, May 30, 2003
The market imperfection in global car manufacturing falls in majority times specially in Asia due to cultural differences, as was the case with the alliance between Renault, a French car company, and Nissan
I have a very interesting example. This one is my own experience and knowledge. For example in Iran all the Automobile parts are provided by western European countries however; all the assembly lines are completed in Iran. This is due to the location specific advantage because of the cheap Plant costs, cheaper fixed assets, as well as cheaper labors. But all the parts are made in mostly “France”.
One main example for strategic behavior in Auto Industry would be the top Auto manufacturers come up with Hybrid cars. This idea is revolutionary and other manufacturers will imitate the original design.
The Automobile’s life cycle has certainly shortened. However; The usage life cycle may have been shortened on the other hand the life cycle for the research and analysis for the same automobile may have been longer than before. In general automobile life cycle like many other industries has been shortened. Global Oligopolies
Global Oligopoly can be defined in Eclectic Paradigm when an oligopoly organization has company specific advantages, such as a comparative advantage over other companies. A very unique example could be OPEC. OPEC are a few nations that are trying to control the production and price of the oil.
One imperfection that comes to mind when it comes to Global Oligopolies is; where competitive interdependence requires that multinational firms maintain tight control over foreign operations so they have the capability to launch attack against their global competitors (as Kodak has done with Fuji).
Advantages (natural and created) that are available only or primarily in a particular place. Global Oligopoly location is very uneven in the world since most MNE’s headquartered in developed countries.
One strategic behavior or innovativeness for global oligopolies in our era is either to merge with one another or buying out the smaller competitors.
The product life cycle of a product in global oligopolies depends on the industry. For example ipod and iphone by Apple! Apple and other tech manufacturers are in the global oligopoly as not many of...
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