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Ghemawat Summary

Summary of International Strategy reading of Reconceptualizing International Strategy and Organization

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Monika Gee
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120 views3 pages

Ghemawat Summary

Summary of International Strategy reading of Reconceptualizing International Strategy and Organization

Uploaded by

Monika Gee
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Reconceptualizing

international strategy and


organization
1 The integrationresponsiveness
tradeof

2 AAA strategies for dealing with


diferences
Arbitrage is the simultaneous purchase and sale of an asset to profit from a difference in the
price. It is a trade that profits by exploiting the price differences of identical or similar
financial instruments on different markets or in different forms. Arbitrage exists as a result of
market inefficiencies.

One reason that diverse contributions by subsidiaries are distinguishable from the
diffusion and adaptation of a central stock of knowledge is that in the former case,
the differences between countries can be a source of rather than a constraint on
value creation, i.e. arbitrage is possible. With that broad framing, knowledge
arbitrage is far from the only type of arbitrage that stands out:
1. Labour arbitrage is prominent, for instance, in two of the three industries
studied by Bartlett and Ghoshal. Consumer electronics has seen a massive
shift of production to countries with low labour costs, imports from which now
amount to more than 60 percent of the total US market
2. Capital arbitrage can apply to real or financial capital. In terms of real capital,
one survey indicates that plant and infrastructure can cost 4050 percent less
in low labour cost countries
3. Tax arbitrage has long been common and has been shown to exert a large
influence on firms investment and financing decisions (Desai et al., 2006).
And its incidence may be increasing: a survey of 120 MNCs in 2006 indicated
that 62 percent were planning to move assets or functions to low-cost
regimes, partly because of crackdowns on tax planning in western countries
(KPMG, 2006).
4. many additional forms of economic arbitrage (e.g. taking advantage of
international variation in the availability of specialized inputs or in
willingnessto-pay) and administrative arbitrage (e.g. exploiting differences in
environmental laws or membership in different regional trading agreements)
as well as instances of cultural arbitrage (e.g. country-of-origin effects such
as Frances prestige in beauty and fashion) and geographic arbitrage (e.g. the
international flower and fresh fruit businesses, enabled by the declining costs
of air transportation).

The AAA Triangle Strategy

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