CBA 300 FINAL EXAM
Why generalizations about TNCs are difficult
(Third-Country Nationals are employees who are citizens of neither the parent company nor the host country) TCNs establish their status in many different ways, they may be foreigners hired in the home country and sent to a host-country subsidiary either because they have had previous experience there or because that country's culture is similar to their own (pg 436)
Manufacturing rationalization
(like how different parts of a computer are made in different countries). division of production among a number of production units, thus enabling each to produce only a limited number of components for all of a firm's assembly plants.
Offshoring and trade theory models
(page 40): Locating activities in another nation
knowing the host country's language is a strong indicator of his/her ability to adjust within the host country
.
Reasons for the development of hybrid organizations
... often the result of a regionally organized company having introduced a new and different product line that management believes can best be handled by a worldwide product division. An acquired company with distinct products and a functioning marketing network may be incorporated as a product division even though the rest of the firm is organized on a regional basis. A mixed structure may also result from the firm's selling to a sizable, homogeneous class of customers.
Proportion of women expatriates (in percent)
21% today versus the historical average of 15% (pg 437)
treat third country nationals the same as home country expatriates in terms of compensation plans
A
Licensing (page 328)
A contractual arrangement in which one firm grants access to its patents, trade secrets, or technology to another for a fee
Strategic alliances (page 333)
A partnership between or among competitors, customers, or suppliers that may take one or more of various forms, both equity and nonequity
Relationship between global sourcing and ownership of global sources
A strong relationship exists between global sourcing and ownership of global sources. Interfirm trade account for 30 to 40% of exports and 35 to 45% of imports in the U.S.
Where (HQ or sub) should decisions to standardize product and equipment be made-
Affiliates must follow company policy, but representatives from affiliates may have the opportunity to take part in the product design. Going by the PLC, new products are introduced in the home market. After production has stabilized, specifications are sent to affiliates (second markets) for local production, where adaptations can be made if the local managements deem them necessary for their markets. In a firm without global product policy, the preference of the operations management people in the home office has always been to standardize the product or at least the production process in as many overseas plants as possible. If however any subsidiary can demonstrate that the profit potential is greater for a product tailored for its own market than standardization, the subsidiary ordinarily is allowed to proceed. Still, decisions to standardize products and equipment is cooperative in that the parent company has the power to veto or override its subsidiary's decision. PRODUCT AND EQUIPMENT For product and equipment- affiliates have to follow company policy. The new products then have to be introduced in the home market, and after production stabilization the specifications are sent to the affiliates.
Decision making practices in JVs
All the reasons for making decisions at IC headquarters, at subsidiary headquarters, or cooperatively apply equally in joint venture situations. However, headquarters will almost never have as much freedom of action and flexibility in a joint venture as it has with subsidiaries that are 100 percent owned.
Promotional mix elements with the most similarities worldwide
Among all the promotional mix elements, advertising may be the one with the greatest similarities worldwide. This is the case because much advertising is based on American practices. U.S. ad agencies have followed their corporate customers into the global realm through wholly owned subsidiaries, joint ventures, and working agreements with local agencies
Broad (major) elements of the GLED model
Antecedents: Individual characteristics, cultural exposure, global education, and project novelty. Transformational process: Multiplicity of experience, encounters, decisions, and challenges that vary in degree of complexity, development significance and intensity of emotional affect. Level of expertise (high to low): Cognitive processes, global knowledge, intercultural competence, and global organizing expertise.
Percentage of products currently on the market that were not available five years ago
At least 50% of products currently on the market were not available five years ago.
Unintended effects when hiring and training local, host-country people
Best people maybe pirated by other firms.
Know three largest markets for American exports
Canada, Mexico and China
Problems with the matrix structure
Causes decision making to be much slower. Hard to please two bosses with different perspectives. Leads to less than optimum compromises, delayed responses, and power politics in which more attention is paid to the process than to the problem. When mgrs cannot agree, the problem goes higher in the organization and takes top mgmt away from its duties. Dow Chemical company on pg. 262 is an example.
Which markets/countries companies typically raise debt in (home or local)
Debt markets are the other source of capital for the firm, and increasingly the tendency is to tap local markets first
In general, characteristics of the leadership development process
Either candidates are just "born global," with a special set of skills and attributes that makes them effective in global leadership contexts, or do these capabilities get developed over time as a result of some interplay among personal attributes, experience, and other factors? More experts in the field tend toward the latter notion, that global leadership effectiveness is the result of a developmental process rather than innate capability. Development of global leadership skills is a nonlinear process comprised of a set of diverse experiences.
Know differences between ethnocentric, polycentric, regiocentric and geocentric staffing approaches
Ethnocentric is related to hiring and promoting employees on the basis of the specific local context in which the subsidiary operates. Companies with a primiarily international strategic orientation use this. In this approach, most decisions are made at headquarters, using the home country's frame of reference. pg. 431. Polycentric is related to hiring and promoting employees on the basis of the specific local context in which the subsidiary operates. When the company's primary strategic orientation is multidomestic, with low pressures for cost reduction and high pressures for local responsiveness, a polycentric approach may be used. Pg. 433. Regiocentric-related to hiring and promoting employees on the basis of the specific regional context in which the subsidiary operates. Companies with a regional strategic approach (with slightly higher pressures for cost reduction and slightly lower pressures for local responsiveness than the multidomestic strategy) can employ a regiocentric staffing approach. Geocentric-related to hiring and promoting employee on the basis of ability and experience without considering race or citizenship. Companies with a transnational strategic orientation, driven simultaneously by high pressures for cost reduction and high pressures for local responsiveness, follow a geocentric staffing policy. pg. 434.
Changes in an IC strategy may require changes in the organization's design, but not the reverse.
False, changes in ICs strategy will require changes in the org's design and the reverse
Why international firms need to move money around between subsidiaries and HQs
Firms move funds for many reasons, among them dividends, royalties, and fees from the subsidiary to the parent company; loans from the parent to the subsidiary or among subsidiaries; and transfer pricing of sales between subsidiaries and the parent company. Dividends result from the parent company's equity interest in the subsidiary, while royalties and fees are payments made for the use of company assets such as trade names, technology, consulting, and management systems.
Characteristics: of global teams, of virtual communication
Global teams are characterized by high levels of diversity, geographic dispersion, and virtual rather than face-to-face interaction. Virtual communication, even with video content, lacks the richness of face-to-face communication. Research suggests that initial face-to-face meetings for teams that plan to subsequently work virtually are a good way to build trust among team members
Differentiate between policy continuity and government stability and their importance to business (page 162)
Government stability is a government's ability to maintain itself in power, or the stability or permanence of a government's policies. Business prospers most when there is a stable government with policy continuity. An unstable government cannot maintain itself in power or makes sudden, unpredictable or radical policy changes (ie. Non-continuous policy)
Outsourcing
Hiring others to perform some of the noncore activities and decision making in a company's value chain, rather than having the company and its employees continue to perform those activities.
Where does interdependence influencing global leaders come from?
Interdependence arises from the very core of globalization and involves economic interdependence, interdependence along the value chain, and interdependence in alliances.
Cost of importing a foreign-sourced product as percent of the cost of the product
International freight, insurance, and packing may add 10 to 12 % to the quoted price, depending on the sales terms. Import duties, customhouse broker's fees, cost of letters of credit, cost of inventory in the pipeline, and international travel are some of the other added costs.
Primary reason for trade (page 48)
International trade occurs primarily because of relative price differences among nations. The differences stem from differences in production costs, resulting from (1) Difference in the endowments of the factors of production (2) Differences in the levels of technology that determine the factor intensities used (3) Differences in the efficiencies with which these factor intensities are utilized (4) Foreign exchange rates
Over the wall approach
Involves a sequential approach to design: an initial step in which the designer prepare the product's design, followed by sending the newly created design to the companys manufacturing engineers, who must then address the production-related problems that often result from their exclusion from the initial design activity.
Know costing models used to analyze purchasing decisions
Life -cycle costing analyzes purchasing decisions though the life of the purchased item, including trade-in or future estimated slavage value. Full costing ensures that all costs such as transportation, insurance, and increased inventory levels are recognized when making purchases.
Logistics
Managerial functions associated with the movement of materials such as raw materials, work in progress, or finished goods.
Type of products that are most insensitive to the foreign environment
Many industrial products and luxury goods can be sold unchanged worldwide (insensitive to the foreign environment).
Know elements of MBI model
Map, bridge, and integrate. Mapping is to discuss the differences and similarities, that is, to map the relevant characteristics of team members. In bridging, team members communicate with each other about the differences and establish how the team members will work with one another. Bridging involves decentering - seeing the other person's point of view - and avoiding blame. Effective bridging also enables integration, which is the process of managing the various differences so that the team members begin to understand the expectations and assumptions of their team members, as well as their backgrounds and skills.
Trade theory models (pages 37-40)
Mercantilism: An economic philosophy based on the belief that (1) a nation's wealth depends on accumulated treasure, usually precious metals such as gold and silver, and (2) to increase wealth, government policies should promote exports and discourage imports · Absolute advantage: See definition above · Comparative advantage: Theory that a nation having absolute disadvantages in the production of two goods with respect to another nation has a comparative or relative advantage in the production of the good in which its absolute disadvantage is less.
Definitions: organizational structure, strategic business units
Organizational structure: The way that an organization formally arranges its various domestic and international units and activities and the relationships among these organizational components. Strategic business units: Business entity with a clearly defined market, specific competitors, the ability to carry out its business mission, and a size appropriate for control by a single manager.
Relationship between quality control and production equipment
P 413 When it is standardize then it is easier to manage quality control & production equipment. When production equipment is similar, home office control of quality in foreign affiliates is less difficult because management can expect all plants to adhere to the same standard. Periodic reports that all affiliates submit & quickly spot deviations from the norm that require remedial action. The same machinery should produce at the same rate of output & have the same frequency of maintenance no matter where it is located. The maintenance experience of other production units in regard to the frequency of overhauls & the stock of required spare parts will help plants avoid costly, unforeseen stoppages from sudden breakdowns.
Relationship between corporate strategy and approach to human resources management.
P. 431 The pressure to achieve global integration & reduce costs & the pressure to respond to local differentiation determine which of 4 alternative competitive strategies[home replication, multidomestic, global, or transnational] a company should adopt. A company's competitive strategy should, in turn, drive the organization's approach to international human resource management [IHRM]. Heenan & Perlmutter developed a model that considers these 4 competitive strategies to determine whether the organization's approach to IHRM should be ethnocentric, polycentric, regiocentric, or geocentric. Further, along w/this decision, the employees used in the organization may be classified into 1 of 3 categories. 1) home-country nationals or parent-country nationals, 2) host-country nationals, or 3) third-country nationals.
Relationship between expatriate and home company salary portion of compensation
Paying home country nationals the same salaries as their domestic counterparts permits worldwide consistency for part of their compensation package.
Components of the marketing mix
Product, promotion, pricing and distribution (place)
Know arguments against protection of infant industries: (Slide 13)
Protect new industries till they gain comparative advantage Protect new industries against lower cost imports Protect smooth transition of dying industry's resources to other sectors
Why recruiting of sales people in foreign countries may be difficult
Recruiting salespeople in foreign countries is at times more difficult than recruiting them at home because sales managers may have to cope with the stigma attached to selling that exists in some areas. There is also the need to hire salespeople who are culturally acceptable to customers and channel members. This can be difficult and costly in an already small market that is further subdivided into several distinct cultures with different customs and languages.
Dimensions of global complexity
Scholars have identified four overlapping dimensions of complexity that are relevant to globalization and the challenge confronting global leaders. 1-Multiplicity (the geometric growth in the volume and nature of issues that must be dealt with by global leaders), 2-interdependence (although dispersed geographically, the different units of the company are systematically linked to each other rather than being isolated and are increasingly dependent on external organizations), 3-ambiguity (the challenge of dealing with information that lacks clarity and incorporates both quantitative and qualitative dimensions, hindering the understanding of cause-and-effect relationships), and 4-dynamism (the international system itself is constantly changing).
Three main team leadership activities
Scholars recognize three main activities that are common to most team leadership: establishing teams, coaching team members, and setting team norms. 289-290
WTO definition of dumping (page 167)
Selling a product abroad for less than (1) the average cost of production in the exporting nation (2) the market price in the exporting nation (3) the price to third countries
Direct exporting (page 326)
The exporting of goods and services by the firm that produces them
Indirect exporting (page 325
The exporting of goods and services through various types of home country-based exporters
Definition: Pyramid Model of Global Leadership
The five-level Pyramid Model of Global Leadership attempts to identify a progression of skills required for effective global leadership. Level 1 (base): Global Knowledge, Level 2: Threshold traits, Level 3: Attitude and orientations, Level 4: Interpersonal skills, Level 5 (peak): System skills.
Culture and team rewards
The individualism-collectivism dimension of the cultures needs to be considered. High levels of team rewards are appropriate for teams whose members are from collectivist cultures, and high levels of individual rewards are appropriate for teams whose members are from more individualist cultures. With high levels of cultural diversity, the team should be involved in the development of the reward system.
Know differences between leader and manager according to Bennis
The leader innovates; the manager administrates. The leader develops; the manager maintains. The leader challenges the status quo; the manager accepts it. The leader has a long-range perspective; the manager has a short-term perspective. The leader asks what and why; the manager asks how and when. The leader originates; the manager imitates. The leader inspires; the manager controls.
Primary motivation of tariffs (page 170)
The primary purpose of tariffs is to raise their selling price in the importing nation's market to reduce competition for domestic producers.
What is FASB and what does it do
The private organization that establishes accounting standards in the U.S.is the Financial Accounting Standards Board, whose standards are the generally accepted accounting principles. The FASB is the designated organization in the private sector for establishing standards of financial accounting that govern the preparation of financial reports by nongovernmental entities.
In general, structural changes with increased globalization
The rapidly changing business environment caused by increased global competition, customer preference for custom-made rather than mass-produced products, and faster technological change is pressuring companies to step up their search for organizational forms that will enable them to act more quickly, reduce costs, and improve the quality of product offerings. The ability to maintain alignment between the organization and its global hypercompetitive environment has become a fundamental determinant of many organizations' ability to merely survive. As a result, change in organizational form has become an almost constant process. Not only are companies mixing older, established forms of organization; they are also changing to different forms, many of which are modified versions of long-established forms with new names.
When a regionalized structure is used
The regionalized organization appears to be popular with companies that manufacture products with a rather low, or at least stable, technological content that require strong marketing ability. It is also favored by firms with diverse products, each having different product requirements, competitive environments, and political risks. Many producers of consumer products, such as prepared foods, pharmaceuticals, and household products, employ this type of organization
Purpose of multilateral netting
The transfer of funds has a cost attached to it, the transaction cost, and at the same time, the funds while in transit present an opportunity cost: they are not working for the company. In addition, FX costs are incurred. By reducing the transfer transactions, there is less inactive time for funds, the actual transfer costs are reduced, and there are fewer FX transactions, as well
Two key accounting issues when operating in foreign currency
There are only two points at which operating in a foreign currency raises issues from an accounting perspective: when transactions are made in foreign currencies and when branches and subsidiaries operate in foreign currencies and their results need to be made a part of the parent company's financial reports.
Characteristics of firms that choose the functional structure
They believe worldwide functional expertise is more significant to the firm than is a product or area knowledge. In this type of organization, those reporting to the CEO might be the senior executives responsible for each functional area (marketing, production, finance, and so on). The commonality among the users of the functional form is a narrow and highly integrated product mix, such as that of aircraft manufacturers or oil refining companies.
Preferences of host governments regarding labor versus capital intensive manufacturing processes (paradox)
They(political forces of a country) want jobs, but the only jobs available are labor intensive jobs which they don't want because they want capital intensive jobs. Although the country desperately needs new job creation, which favors labor intensive processes, govern'tment officials often insist on the most modern equipment. Local pride may be the cause, or it may be that these officials, wishing to see the new firm export, believe that only a factory with advanced technology can compete in world markets. Local Paradox: }Country needs new jobs favoring labor-intensive processes }Government insists on most modern equipment to compete globally }Low-productivity technology will keep local country dependent on industrialized countries }Laws banning import of used machinery
Reasons for preferring global standardization in the marketing mix
Top management would prefer to standardize the marketing mix globally; that is, the strategic decision makers would prefer to use the same marketing mix in all of the firm's markets because standardization can produce significant cost savings. If the product sold in the domestic market can be exported, regardless of where the product is made, there can be longer production runs, which lower manufacturing costs. In addition to these economies of scale, the longer experience curve, or learning curve, can create economies as well: the more experience we have doing something, the better we get at that activity, usually. Both of these economies, scale and experience, apply to marketing. A standardized approach can result in significant savings
Relationship between culture and leadership traits:
Understanding of team (family, tribe) Possible need for hierarchy (high PD) Leadership role (Shared-feminine cultures) Communication norms Role of conflict mapping, bridging, and integration
Relationship between strategy and organizational structure
Used interchangeably to fit the organizational strategic goals. Changes in an international company's strategy may require changes in the organization, but the reverse is also true. Strategic planning and organizing are so closely related that usually management treats the structure of the organization as an integral part of the strategic planning process. Design concerns that need to be addressed are 1)product and technical expertise 2)geographic, 3)customer, and 4)functional.
Purpose of team coaching in global teams
When faced with diversity, coworkers, if unfamiliar with the work of their group member, tend to expect that person to perform poorly. Such expectations tend to occur regardless of that person's actual skill level. The team leader can confront this bias by publicizing the strengths of team members. Motivational coaching is also important as the team begins their task, and strategic coaching may be valuable when strategic choices come into play, further along in the team's evolution.
General preferences of firms making foreign direct investments - i.e. wholly owned versus other forms (pages 331 - 333)
Wholly owned subsidiary: when a company wants to own a foreign subsidiary outright and start by (1) building a new plant in a foreign location (2) acquire a going concern. Historically, firms making a foreign direct investment have generally preferred the "wholly owned" option, and in the United States, we have preferred the "acquire a going concern" option. Other options for foreign direct investment are Joint venture, which is a cooperative effort among two or more organizations that share a common interest in a business enterprise or undertaking; and Strategic alliance (see definition above)
Backward vertical integration
a firm buying a supplier. manufacturing capacity to produce essential inputs will be included in the plant design even though it would be preferable from an economic standpoint to purchase those materials from outside.
the common characteristics of multinationals that are organized by function at the upper level is a narrow...
and highly integrated product mix
Perks
are symbols of rank in the corporate hierarchy and are used to compensate executives while minimizing taxes.. the most common perks are: cars, pension plans, retirement plans, life insurance, etc.. (pg 447)
Percentage of expatriate failures due to family
as many as 9 out of 10 expatriates' failures are family related, and 81% of the employees who declined relocations in a recent study cited family concerns as the basis for their education
Price and profit allocation decisions are usually best made:
at the IC headquarters
social loafing
discouraged thru a mixture of individual and team-based rewards.
leadership traits viewed unacceptable are
egocentric, loner, and dictatorial
Allowances
employee compensation payments added to base salaries because of higher expenses encountered when living abroad.. made to compensate expatriates for the extra costs they must incur to live as well abroad as they did in the home country, most common are for housing, cost of living, tax differentials, education, and moving. (pg 443)
globalization increases the complexity of the external but not the internal context of the company
false
supply chains are an integral part of global quality and cost management initiatives, since a typical company's supply chain costs can represent over 80% of assets
false
the influence of organizational culture on change efforts is stronger than the influence of national culture
false
the level of urbanization is higher in developing nations, which have been urbanizing at a rate four times faster than developed countries from 1975 to 2009
false
indirect procurement includes items like maintenance, repair, raw materials and components, office equipment, and other services and supplies
false, no raw materials!
types of info an IC needs to have reported by subsidiaries include
financial, technological, market opportunities, political and economic events
Know the typical evolutionary path in the stages model
international structural stages model. On pg. 259. It shows that as your sales increase, so does your foreign product diversity. Both curves culminate for a company that's like a global matrix. It may be vary based on product diversity. Pg. 259. Companies often enter foreign markets first by exporting and then, as sales increase, by forming overseas sales companies and eventually setting up manufacturing facilities. As the firm's foreign involvement changes, its organization frequently changes as well. It might first have no one responsible for international business; the firm's marketing department might fill the export orders. Next, an export department might be created, possibly in the marketing department; and when the company begins to invest in various overseas locations, it could form an international division to take charge of all overseas involvement. As overseas operations increase in importance and scope, most managers feel the need to eliminate international divisions and establish worldwide organizations based on (1) product, (2) region, (3) function, or (4) customer classes. At the secondary, tertiary, and lower levels, these four dimensions, plus (1) process, (2) national subsidiary, and (3) international or domestic, provide a basis for subdivisions. The initial choice of organizational structure after discarding the international division is usually based on either global product or global geographic factors. These alternatives paths for design and evolution of the international company are presented in the International Structural Stages Model. Summarily: International market penetration through export As sales increase -> form overseas sales companies Set up manufacturing facilities Firm's foreign involvement changes -> organizational structure changes Company begins investing overseas -> form international divisions Overseas operations increase in importance and scope -> eliminate international divisions and establish worldwide organizations
Ultimate goal of effective supply chain management:
reduce inventory
Offshoring
relocating some or all of a business's activities or processes to a foreign location.
the trend in diverse global teams is
suppress differences and focus on commonalities.
executive compensation packages sometimes include payments called perks that are extras and are:
symbols of rank in the company hierarchy.
Recommendations on training and development of candidates for expatriate assignments
talks about home-parent company nationals need different preparations than subsidiary-companies because subsidiaries need to tknow the comapny policies. Nevertheless, foreign language skill has been shown to be a critical factor influencing effective adjustment of expatriates and their family members within the host country. When you are trying to sell to potential customers, it is much better to speak their language. In recognition of expatriate family issues, some companies have begun to prepare and assist these families (which may take the form of realistic job previews for expatriates, training in the culture and language of the host country, assistance in finding suitable schools or medical specialists, or even arranging for long-distance care for elderly relatives or parents while the family is living abroad.Pg. 440
A hybrid organizations may result from...
the firm's acquiring a company with distinct products and distribution channels.
theory of absolute advantage
theory that a nation has absolute advantage when it can produce a larger amount of a good or service for the same amount of inputs as can another country or when it can produce the same amount of a good or service using fewer inputs than could another country
monopolistic advantage theory
theory that foreign direct investment is made by firms in oligopolistic industries possessing technical and other advantages over indigenous firms
What are control activities and how should they be conducted
to put plans into effect, evaluate their effectiveness, make desirable corrections, and evaluate and reward or correct executive performance. Subsidiaries/Affiliates (100% ownerships) Find out where decisions should be made Three possibilities: (1) all at HQ; (2) some at HQ and some at subsidiary; (3) cooperative. Five determinant variables: (1) questions of standardization of product and equipment; (2) competence of subsidiary management and reliance on that management by HQ; (3) the size of the IC and how long it has been one; (4) the detriment of a subsidiary for the benefit of the enterprise; (5) subsidiary frustration at loss of power, so subsidiary should have as much decision-making power as reasonably possible. Joint Ventures and Subsidiaries (less than 100% owned): All reasons for making decisions at IC HQ, subsidiary HQ, or cooperatively apply equally to this situation. However HQ will almost never have as much freedom of action and flexibility in a joint venture. Methods of maintain control where less than 50 percent ownership is present: A management contract, control of the finances, control of the technology, and putting people from the IC in important executive positions. For controls to be effective, all operating units of an IC must provide headquarters with timely, accurate and complete reports. Among the types of reporting required are financial, technological, market opportunity, and political and economic changes.
the GLED model suggests that some individual characteristics are antecedent to the development process
true
w/ less than 50% of the voting stock, or even with no voting stock, an IC can still have control
true
when a company's primary orientation is multidomestic, an ethnocentric orientation is appropriate
true
the horizontal organization has been characterized as anti-organization because its designers try to remove the constraints imposed by the conventional organizational structure.
true!
problems with the matrix structure include...
two or more managers must agree on decisions, which can lead to slow decision-making.
for expatriate employees, the salary portion of the compensation package is...
usually within the range of the employees at the same level in the home company
When planning for an expatriate's return should begin
well before the overseas assignment even begins. Challenges of repatriation should be discussed even before departure and a mentor program should be considered b/t the expat and a mentor back home. pg. 440
Issues related to women versus men in expatriate assignments.
women in dual-career relationships would experience problems with international assignments, that gender-based prejudice would limit women's performance in many challenging countries or cultures, that women might feel lonely and isolated in an international assignment or be subjected to sexual harassment, or that the men making selection decisions regarding international assignments were themselves biased by traditional views and stereotypes regarding the appropriateness of assigning women to expatriate positions. Women are just as eager to go abroad as are men, sometime more so. See team exercise #5.
Distinguish nationalization and privatization (page 158)
· Nationalization: Government ownership of business. Firms are nationalized because (1) to extract more money from firms (2) profitability-govt believes it can run the firms more efficiently and make more money (3) ideology (4) job preservation (5) because the govt has pumped money into a firm/industry and control usually follows money (6) happenstance (as with the nationalization after WWII of German-owned firms in Europe · Privatization: The transfer of public sector assets to the private sector, the transfer of management of state activities through contracts and leases, and the contracting out of activities previously conducted by the state Private companies often complain that govt-owned companies have unfair advantages such as (1) govt-owned firms can cut prices unfairly because they don't have to make profits (2) they get cheaper financing (3) they get govt contracts (4) they get export assistance (5) they can hold down wages with govt assistance
Benefits of exporting (page 324-325):
· To serve markets where the firm has no or limited production facilities. · To satisfy a host govt's requirement that the local subsidiary have exports. · To remain price competitive in the home market. · To test foreign markets and foreign competition inexpensively. · To meet actual or prospective customer requests for the firm to export. · To offset cyclical sales in the domestic market · To achieve additional sales, which will allow the firm to use excess production capacity to lower per-unit fixed costs · To extend a product's life cycle by exporting to currently unserved markets where the product will be at the introduction stage of the life cycle · To respond strategically to foreign competitors that are in the firm's home market by entering their home market · To achieve the success the firm's mgt has seen others achieve by exporting · To improve the efficiency of manufacturing equipment, which usually works better at or near full capacity.
