Concept Check 3 Terms

Stage 4

Foreign Production

Corruption and Business

Gatekeepers to critical services - Gatekeepers to licenses and registration (permission to operate) - Cost of operations - Inability to operate

McDonalds

the og franchisor

Ethnocentric Approach

- Adopt the domestic marketing mix for global markets - Standardized

Elements of Promotion

- Advertising - Personal Selling - Sales Promotion

Branding

- Corona Beer is Corinita in Spain - Target Retailer in AU - Coca-cola Light vs. Diet Coke

Market Entry Considerations

- Cultural similarity with target market - Nature of information sought (varies with product and industry) - Possibly target a region

Place (Distribution)

- Direct Marketing - Direct Exporting - Using an intermediary - FDI

Key Ethical Issues

- Employment Practices - Human rights - Environments - Moral Obligations to MNEs - Corruption

Firms Should Employ

- Establish minimally acceptable standards that safeguard the basic rights and dignity of employees - audit foreign subsidiaries and subcontractors regularly to ensure they are meeting standards - take correct action as necessary

Marketing Mix approaches

- Ethnocentric - Polycentric - Geocentric

Basic Human Rights

- Freedom of Speech - Freedom of Assembly - Freedom of Movement

Transparency International

- Global Corruption Barometer - Corruption Perception Index (CPI) - Bribe Payers Index (BPI) - - Propensity to pay bribes aborad -- 21 leading export countries --Most likely to offer bribes: ---Russia ---China ---Taiwan ---South Korea

Equity Based Modes of Entry

- Greenfield - JV - Acquisition

Uncertainty in Global Operations

- Lack of Local Market Knowledge - Lack of International Experience - Perceptions of Risk in Dealing with Foreign Business Partners

Advantages of Licensing/Franchising

- Lower costs (vs. FDI) - Less transportation costs - Share resources from licensee/franchisee - Lower production costs (vs. export)

Disadvantages of Licensing/Franchising

- May lose control of IP - May lose control of product/service quality - May create potential competitor - Not realizing full benefit of sales (vs. FDI)

Entry Modes

- Nonequity (Exports, and Contracts, Licensing/Franchising, Turnkey) - Equity (JVs, Subsidiaries)

Why do managers behave unethically

- Personal ethics - Societal culture - Leadership - Unrealistic performance goals - Organization culture - Decision-Making Process

Legal Requirements

- Prescription medications - Fuel Content - Labeling Requirments - Product Recycling (potential)

Product Customized

- Product Localized for each international market - Consumer products have a tendency to be customized

Overseas Regulatiosn

- Registration - Licensing - Taxation - Reporting - Inspections

Product Standarized

- Same Product Design across all intl. markets - Industrial projects have a tendency to be standarized

Economic Considerations

- Size: Smaller cars in Europe - Location: Costco in Japan - Design: Gillette in India

Geocentric Approach

- Standardize a global marketing mix for a global market - Standardized

Pricing Policies

- Standardized Pricing: Wal-Mart - Differential pricing: Toys R Us

Alliance Success

- When the environment is stable - When both partners transfer a lot of knowledge - When both partners have lots of alliance expiernece = "relational capabilities"

Religion

- Women's apparel in te Middle East - Vegetarian McDonalds in India

Polycentric Approach

- customize the firm's markeitng mix for each market - Customized

Culture

- packaging and labeling: - Frito-Lay (flavors)

Benefits of Alliances

-Create value by reducing costs, risks, and uncertainty -Can help in the case of 'resource dependency', e.g. through connection to governments -Reduce transaction costs by establishing mutual tolerance -Enable knowledge transfer from both partners - combo of best 'complementary assets'

Infrastructure Needs

-electrical current--> plug outlets -side of the road to drive

Global Market Opportunities

1) Decide which market to enter 2) Screen countries to identify target markets 3) Identify candidate countries by assessing each based on -Size and Growth rate - Market Intensity - Country's receptivity to imports - Economic freedoms and Country Risk

How can managers make ethical decisions?

1) Hire and promote people with a well grounded sense of personal ethics 2) Build an organizational culture that places a high value on ethical behavior 3) Make sure that leaders within the business articulate the rhetoric of ethical behavior and act in a manner that is consistent with that rhetoric 4) Put decision making processes in place that require people to consider the ethical dimensions of business decisions 5) Develop moral courage

Product Design Considerations

1. Infrastructure needs 2. Culture 3. Legal Requirment 4. Relgious Customs 5. Economic Development Level

Standardized Advantages

1. Reduces marketing costs 2. Facilitates centralized control of marketing 3. Promotes efficiency in R&D 4. Results in economies of scale—production 5. Reflects globalization trends 6. Country of origin effect

Customized Advantages

1. Reflects different conditions of product use 2. Acknowledges local legal differences 3. Accounts for differences in buyer behavior patterns 4. Accounts for other differences in markets

Joint Venture

A business partnership between two or more companies, typically from different countries, to jointly own and operate a business venture, sharing risks, costs, and profits. For example, Sony and Ericsson formed a joint venture called Sony Ericsson to develop and market mobile phones.

Delhi Metro Turnkey Project

A comprehensive transport infrastructure project in Delhi, India, where the Delhi Metro Rail Corporation (DMRC) awards a contract to a contractor for the entire process of designing, building, testing, and commissioning the Delhi Metro rail network system.

Enron's Energy Facility in Turkey

A contractual arrangement where Enron was responsible for the design, construction, and operation of an energy facility in Turkey for a specified period. Upon completion of the contract, ownership of the facility would be transferred to the Turkish government. During the contract period, Enron had the right to collect revenue from the facility's operations to recoup its investment and earn a profit.

Global Marketing

A social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging value with others in a global environment

Indirect Exports

A way to reach overseas customers by exporting through domestic-based export intermediaries

Firms and Moral Obligations

Advocates argue that businesses need to recognize that honorable and benevolent behavior is the responsibility of successful companies. - Give back to their societies - or if not, Friedman Doctrine

When to Export

Attractive because: - Relatively low cost - firms may not experience curve economies

Facilitating Payments

But, is it permissible for multinationals to pay government officials facilitating payments if doing so creates local income and jobs? is it ok to do a little evil in order to do a greater good? does grease money actually improve efficiency and help growth?

Non Equity Modes of Entry

Contactual Agreements and Aliances - R&D contract - Turnkey Project - BOT - Licensing/Franchising

Stage 3

Direct Export

Greenfield

Establishing a new business operation in a foreign country from the ground up, often involving building facilities, hiring staff, and acquiring resources. For example, when Starbucks opened its first store in China, it built a new coffee shop from scratch, hired local staff, and sourced materials locally.

Stages Model

Expansion as a process of organizational learning Stage 1: Home market only Stage 2: Indirect export Stage 3: Direct export Stage 4: Foreign production

Nonequity Modes

Exports and contractural agreements that are less costly and hae the potential for gradual organizational learning.

New Brand Names

Fairy v. Dreft Rexona v. Degree

Advertising

Global vs. Local Message and Medium - Can ads be the same everywhere or tailered.

Stage 1

Home Market Only

Born Global Strategies

If you wait too long, miss the window of opportunity ...Leaving you 'stuck' where you are

Stage 2

Indirect Export

Equity Mods

JVs and wholly owned subsidiaries. These demonstrate stategic committment to certain markets, local customers and suppliers, and can deter potential entrants.

Hello Kitty

Licensed by Sanrio

International Business Ethics

Moral principle that define right and wrong behavior in conducting business in a global environment.

Localized Ads

Mural Advertisement for Fresca

When to not export

Not attractive when - lower-cost manufacturing locations exist - transport costs are high - tariff barriers are high - foreign agents fail to work in the exporter's best interest.

Starbucks Intl. Strategy

Our development stratgy adapts to different markets addressing local needs and requirements. We currently use three business strategies: joint ventures, licenses, and company-owned operations.

R&D Contract

Outsourcing agreement in R&D between firms.

4Ps

Product, Price, Place, Promotion

Social Responsibility

Refers to the idea tha tmanagers shoould consider the social consequences of their actions, when making business decisions.

Firms Should Enviro

Some parts of the environemnt are a public good that none one owns, but anyone can spoil. Is it persmissiable for MNEs to pollute in developing cuntries simply because there are no regulations against it? Legal versus ethical behavior

Promotion

Standarized or Localized

Gradual Internationalization

Step-by-step progress toward internationalization as risk and commitment increase and entrepreneurs acquire more knowledge through experience

Principle of Cumulative Attraction

Stores of similiar focus gather together. Ex: Gas stations and fast food

Rapid Internationalization

Successful if: -Venture capital present -Strong ownership advantages can be exploited -First mover advantages exist

Employment Practices

Suppose work conditions in a host nation are clearly inferior to those in the multinational's home nation Which standards should apply? - Home Country (Righteous Moralist) - Host Country (Cultural Relativisim) - Something-In-Between (Hybrid)

Positive CoO Effect

Swiss Chocolate

Direct Exports

Taking orders in home market and shipping them direct to customers in a new market

Firms and Corruption

The US Foreign Corrupt Practices Act outlawed the practice of paying bribes to foreign government officials in order to gain business The law also pertains to foriegn nationals tht work for a U.S. firm. - Amended to allow for facilitating payments (grease payments) - Tw parts of the law - - Making bribes directly - - Bribes paid by intermediaries

Country of Origin Effect

The positive or negative perception of firms and products from a certain country.

Acquisition

The process of one company purchasing another company, often to gain access to new markets, products, or technologies, and integrating the acquired company into its existing operations. For example, Facebook's acquisition of Instagram in 2012 for $1 billion was aimed at expanding Facebook's reach in the mobile photo-sharing market.

Negative CoO Effect

US Chocolate

Turnkey Project

foreign firm is paid to design and construct new facilities and train personnel.

Build Operate and Transfer (BOT)

like turnkey but foreign firm operates for a set period

Licensing/Franchising

producing/marketing on the licensor/franchisor's behalf

Tragedy of the Commons

situation in which people acting individually and in their own interest use up commonly available but limited resources, creating disaster for the entire community