IBUS Final
naive immoralist
asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either
establishing overseas operations
can be complex due to regulations: registration, licensing, taxation, reporting, inspections ....
differential pricing
charging different prices to different buyers for the same quality and quantity of product e. Toys R Us
oligopoly
is an industry composed of a limited number of large firms - interdependence of the major players
franchising
is basically a specialized form of licensing in which the franchiser not only sells intangible property to the franchisee but also insists that the franchisee agree to abide by strict rules as to how it does business - franchiser will often assists franchisee to run the business
just distribution
is one that is considered fair and equitable
marketing mix
is the set of choices the firm offers to its targeted markets
predatory pricing
is the use of price as a competitive weapon to drive weaker competitors out of a national market
Friedman Doctrine
the only social responsibility of business is to increase profits, so long as the company stays within the rules of law
indirect export
the use of another person or company to sell your goods in other countries
localized advertising
the use of promotions that are customized for various target markets ex. mural advertisement for San Miguel in Spain
Branding: Modified Trademarked Brands
- Corona Beer is Coronita in Spain - Target retailer in Australia - Coca-Cola Light vs. Diet Coke
market entry specific considerations:
- Cultural similarity with target market - Nature of information sought (varies with product and industry) - Possibly target a region
Branding: New Brand Names
- Proctor & Gamble's Fairy (Dreft) dishwashing detergent - Unilever's Rexona (Degree) deodorant
most likely to offer bribes
- Russia - China - Taiwan - South Korea
managers face considerable uncertainty in overseas operations
- lack of local market knowledge - lack of international experience - perceptions of risk in dealing with foreign business partners
standardized product advantages
- same product design across all international markets - industrial products have a tendency to be standardized
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'
transparency international
-Global Corruption Barometer -Corruption Perception Index (CPI) -Bribe Payers Index (BPI)
product design: infrastructure needs
-electrical current--> plug outlets -side of the road to drive
firms should:
-establish minimal acceptable standards that safeguard the basic rights and dignity of employees -audit foreign subsidiaries and subcontractors regularly to ensure they are meeting the standards -take corrective action as necessary
wholly owned subsidiary
-firms owns 100 percent of the stock -foreign subsidiary that is totally owned and controlled by an organization
Exporting is attractive because
-it is relatively low cost -firms may achieve experience curve economies
exporting is 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
customized product advantages
-product localized for each international market -consumer products have a tendency to be customized
stardized marketing mix advantages
-reduced marketing costs -faciliatates centralized control of marketing -promotes efficiency of R&D -results in ecoconomies of scale production -reflects globalization trends -country of origin effect
customized marketing mix advantages
-reflects different conditions of product use -acknowledges local legal differences -accounts for differences in buyer patterns -accounts for other differences in markets
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
employment practices standards
1) Righteous Moralist: home country standards 2) Cultural Relativism: host country standards
basic rights are taken for granted in developed countries
1) freedom of speech 2) freedom of assembly 3) freedom of movement
product design considerations
1) infrastructure needs 2) culture 3) legal requirements 4) religious customs 5) economic development level
unethical behavior
1) unrealistic performance goals 2) organization culture 3) decision making process 4) personal ethics 5) societal culture 6) leadership
Least corrupt countries
1. Denmark 2. New Zealand 3. Finland 4. Sweden
Most corrupt countries
1. Somalia 2. North Korea 3. Afghanistan 4. Sudan 5. South Sudan
when does an alliance perform well?
1. When the environment is stable 2. When both partners transfer a lot of knowledge 3. When both partners have lots of alliance experience = "relational capabilities"
most common ethical issues
1. employment practices 2. human rights 3. environmental regulations 4. moral obligation of multinational companies corruption
Liability vs. Asset of Foreignness
A contrasting view to liability of foreignness argues that under certain circumstances, being foreign can be an asset (that is, a comparative advantage)
externalities
AKA knowledge spillovers that firms can benefit rom by locating close to their source
ethnocentric approach
Adopt the domestic marketing mix for global markets (Standardized)
standardized advertising
Always Coca-Cola Levi 501 Jeans United Colors of Benetton
Eclectic Paradigm
Argument that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI; it requires the firm to establish production facilities where those foreign assets or resource endowments are located.
pioneering costs
Costs an early entrant bears that later entrants avoid, such as the time and effort in learning the rules, failure due to ignorance, and the liability of being a foreigner.
born global strategies
If you wait too long, miss the window of opportunity ...Leaving you 'stuck' where you are
equity mode
JVs and wholly owned subsidiaries -demonstrate strategic commitment to certain markets, local customers and suppliers -deters potential entrants
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)
Acquisition
Mittal acquires Arcelor
R&D contract
Outsourcing agreement in R&D between firms.
product design: legal requirements
Prescription medications Fuel content Labeling requirements Product recycling (potential)
product design: economic considerations
Size: Smaller cars in Europe Location: Costco in Japan Design: Gillette in India
geocentric approach
Standardize a global marketing mix for global market (standardized)
Moral Imagination
Standing in the shoes of a stakeholder and asking how a proposed decision will affect that stakeholder.
ethical relavance to curruption
The Foreign Corrupt Practices Act outlawed the practice of paying bribes to foreign government officials to gain business - amended to follow facilitating payments - Two parts of the law: 1) making bribes directly 2) bribes paid by intermediaries
country of origin effect
The positive or negative perception of firms and products from a certain country.
Rapid internationalization can be successful if:
Venture capital is present Strong ownership "O" advantages can be exploited First mover advantages exist
principle of cumulative attraction
a cluster of similar and complementary retailing activities will have greater drawing power ex. Burger King next to McDonalds
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
location specific advantages
advantages that arise from utlizing resource endowments or assets that are tires to a particular foreign location and that the firm finds valuable to combine with its own unique assets ex. tech, marketing, or management capabilities
Promotional Mix
advertising personal selling sales promotion
external stakeholders
all other individuals or groups that have some direct of indirect claim on the firm
joint venture
an agreement between two or more companies to share a business project Ex. LG/Philips or Sony/Ericsson or Starbucks/Tata
Stakeholders
are individuals or groups that have an interest, claim, or stake in the company
internal stakeholders
are individuals or groups who work or own the business
business ethics
are the accepted principles of right or wrong governing the conduct of businesspeople
multipoint competition
arises when two or more enterprises encounter each other in different regional markets, or industries - firms will try to match each other's moves in different markets to try to hold each other in check
righteous moralist
claims that a multinational's home country standards of ethics are appropriate ones for companies to follow in foreign countries ex. typically associated with managers from developed nations
direct export
company sells directly to customer in another country
industry characteristics
consumer-oriented; positioning and differentiation difficult to establish as an outsider
polycentric approach
customize the firm's marketing mix for each market (Customized)
pull strategy
depends more on mass media advertising to communicate the marketing message to potential consumers
exclusive distribution channel
difficult for outsiders to access ex. difficult for new firm to get access to shelf space in supermarkets
Place (Distribution)
direct marketing direct exporting using an intermediary FDI
first mover disadvantages
disadvantages associated with entering a foreign market before international businesses
push strategy
emphasizes personal selling rather than mass media advertising in the promotional mix
joint venture
entails establishing a firm that is jointly owned by two or more otherwise independent firms - 50-50 venture where two parties contribute a team of managers to share operating control
greenfield venture
establishes a foreign subsidiary by building an entirely new operation in a foreign country Ex. HP's new plant in China
marketing mix approach
ethnocentric, polycentric, geocentric
non-equity mode
exports and contractual agreements -less costly -potential for gradual organizational learning
country of origin effects
extent to which the place of manufacturing influences product evaluations ex. positive source effects: French wine, Italian clothes, or German cars vs. negative source effects: firm must use promotional messaging to stress the positive performance attributes of product
concentrated retail system
few retailers supply most of the market
inflow of FDI
flow of FDI into a country
outflow of FDI
flow of FDI out of a country
turnkey project
foreign firms is paid to design and construct new facilities and train personnel
code of ethics
formal statement of the ethical priorities a business adheres to
ethical relavance to moral obligations
give something back to the societies that have made their success possible
promotion: advertising
global vs local (message and medium) -can be advertising the same everywhere or must it be tailored to each local market?
strategic pricing
has three aspects: predatory pricing, multipoint pricing, and experience curve pricing
Kantian Ethics
holds that people should be treated as ends and never purely as means to the ends of others -people have dignity and need to be respected as much
licensing
involves granting a foreign entity (licensee) the right to product and sell the firm's product in return for a royalty fee on every unit
greenfield investment
involves the establishment of a new operation in a foreign country
firm characteristic
large firm, looking for rapid expansion but needs local product knowledge and societal approval
non-equity modes of entry- licensing
licensor grants the rights to intangible property to licensee for a royalty fee Ex. Hello Kitty
Build-operate-transfer (BOT) agreement
like turnkey but foreign firms operates for a set period
international business ethics
moral principles that define right or wrong behavior in conducting business in a global environment.
utilitarian approach to ethics
moral worth of actions or practices is determined by their consequences - weight carefully all the social benefits and costs of a business action and to pursue only those actions where the benefits outweigh the costs
non equity modes of entry - franchising
offers a total business method ex. McDonalds
product design: culture
packaging and labeling: Frito-Lay (flavors): paprika-flavored chips: Hungary and Poland; shrimp-flavored chips: South Korea; squid-peanut snack food: SE Asia
Licensing and Franchising
producing/marketing on the licensor/franchisor's behalf
country characteristics
rapid growth markets (BRICS); high levels of cultural distance
rights theories
recognize that human beings have the fundamental rights and privileges that transcend national boundaries and cultures -rights establish a minimum level or morally acceptable behavior
offshore production
refers to FDI undertaken to serve the home market ex. US automobile companies investing into auto parts production facilities in Mexico
market segmentation
refers to identifying distinct groups of consumers whose needs, wants, and purchasing behavior differ from others in important ways ex. geography, demography, sociocultural, and psychological
sustainable strategies
refers to strategies that not only help the multinational firm make profits, but that also do so without harming the environment while simultaneously ensuring that the corporation acts in a socially responsible manner with regard to stakeholders
flow of FDI
refers to the amount of FDI undertaken over a given time period
channel quality
refers to the expertise, competencies, and skills of established retailers in a nation and their ability to sell and support the products of international businesses - lack of thereof may impede market entry
Mulitpoint pricing
refers to the fact that a firm's pricing strategy in one market may have an impact on its rivals' pricing strategy in another market
Corporate Social Responsibility (CSR)
refers to the idea that businesspeople should consider the social consequences of economic actions when making business decisions and that there should be a presumption in favor of decisions that have both good economic and social consequences
social responsibility
refers to the idea that managers should consider the social consequences of economic actions when making business decisions
channel length
refers to the number of intermediaries between the producer and the consumer
noise
refers to the number of other messages competing for a potential consumer's attention, and this varies from country to country ex. developed countries have extremely high noise
stock of FDI
refers to the total accumulated value of foreign-owned assets at a given time.
organizational culture
refers to the values and norms that are shared among employees of an organization
internalization theory
seeks to explain why firms often prefer direct investment over licensing as a strategy for entering foreign markets. AKA market imperfections approach
ethical dilemma
situations in which none of the available alternatives seems ethically acceptable
ethical relevance to environmental regulations
some parts of the environment are a public good that no one owns, but anyone can spoil
intermarket segment
spans multiple countries, transcending national borders
The "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
experience curve pricing
strategy on an international scale will price low worldwide in attempting to build global sales volume as rapidly as possible, even if this means large losses initially - attempts to create cost advantage over its less aggressive competitors
first-mover advantage
the advantages frequently associated with entering a market early
turnkey project
the contractor agrees to handle every detail of the project for a foreign client, including the training of operating personal - exporting process technology to other counties ex. chemical, pharmaceutical, petroleum refining, metal refining, all of which use complex, expensive production technologies
fragmented retail system
there are many retailers, none of which has a major share of the market
balace-of-payments accounts
track both its payments to and its receipts from other countries
current account
tracks the export and import of goods and services
standardized pricing
uniform price worldwide ex. Walmart
inelastic
when a large change in prices produces only a small change in demand
elastic
when a small change in price produces only a large change in demand
source effects
when the receiver of the message evaluates the message on the basis of status of image of the sender - can be damaging for an international business when potential consumers in a target country have a bias against foreign firms
cultural relativism
which is the belief that ethics are nothing more than the reflection of a culture-all ethics are culturally determined - and that accordingly, a firm should adopt the ethics of the culture in which it is operating
product design: religion
woman's apparel in the Middle East vegetarian McDonald's in India