Global Business Test (8-10)

Why are mergers risky?

A significant amount of capital may be needed to acquire and upgrade foreign facilities

Mission statement

A written statement of why a company exists and what it will plan to accomplish

Who is an example of a defender?

Altria Corporation. They will focus on making its existing companies as efficient and profitable as possible.

functional structure

An organizational structure composed of all the departments that an organization requires to produce its goods or services.

Who is an example of a prospector?

Andarko Petroleum Corporation. If they want to explore for oil in different parts of the world, they will begin by prospecting.

What is a challenge strategic alliance face?

Any member could prematurely quit the alliance, thereby negatively affecting some of all of the other partners

high growth markets

BRICS

What is the order or the degree of risk and return?

Export/Import, Lincensing, franchising, strategic alliances, joint ventures, foreign acquisitions, and wholly owned foreign subsidiaries (ELFSJFW)

What is an example of an analyzer?

Hershey they want to expand business but to it by protecting their company. Bc Milton Hershey the founder had no kids, he established a school.

What are most MNE'S?

Large corporations with significant amounts of resources at their disposal

Who came up with the four part typology to engage in strategy implementation?

Raymond E Miles and Charles C Snow

Location or country specific advantages

Relate to the economic, political, and social systems of a particular country Examples are the costs of production factors as well as the political environment

What are the advantages of Foreign Acquisitions?

Since an existing firm may already have a well established production, by merging the strengths of the home company with those of the host country firm, the new firm will become more competitive internationally.

What is an example of a strategic alliance?

Star Alliance, an airline.

What is an example of reactors?

Target trying to compete with Walmart's low prices.

absorptive capacity

The ability of an organization to recognize, assimilate, and utilize new knowledge.

In franchising, the parents company's objective is?

To make sure that when a customer visits its franchises in any country, the quality of products and services provided are similar.

Stable high income economies

United States, Japan, and Canada, as well as regions such as the European union

Reaching to exchange rate movements

When the currency of a particular country is expected to strengthen overtime, FDI many flow into that country to buy assets at current, relatively inexpensive places now

What entry strategy has the highest risk and highest return?

Wholly Owned Foreign Subsidiaries

international joint ventures

a business that is jointly owned and operated by two or more firms (usually one from the host country and the other from another country) that pool their resources (labor, capital, technology, and management) to penetrate host country markets, generate and split profits, and share commercial risk

stateless corporation

a new phase in the evolution of the multinational corporation, where work is sourced wherever it is most efficient and the corporation transcends nationality altogether

Export/Import Business

a relatively low-risk business operation that involves penetrating foreign markets (by exporting) or importing merchandise (of all kinds) at competitive prices for domestic consumption

Diversification

a strategy of increasing sales by introducing new products into new markets

Product Life Cycle Theory

a theory that suggests that patterns of trade change over time as production shifts and as the product moves from new to maturing to standardized stages

Strategic alliance

an agreement between two or more firms that do not involve the creation of a separate entity with joint ownership and in which the firms stand to gain revenues and maximize profits through cooperation for a given period of time

Economies of scale in production

as the firm continues to increase output, the average cost per unit will decrease until it reaches an optimum level because the firm will be using it's fixed assets most efficiently

Monopolistic market structure

cases where there are fewer players in a particular industry in a country

Reactors

companies that do not follow a consistent adaptive strategy but instead react to changes in the external environment after they occur. They respond to strategic actions that are initiated by competitors

defenders

companies using an adaptive strategy aimed at defending strategic positions by seeking moderate, steady growth and by offering a limited range of high-quality products and services to a well-defined set of customers. often existing operations or generally defending their home turf

prospectors

companies using an adaptive strategy that seeks fast growth by searching for new market opportunities, encouraging risk taking, and being the first to bring innovative new products to market

Analyzers

companies using an adaptive strategy that seeks to minimize risk and maximize profits by following or imitating the proven successes of prospectors.

Benefits of Foreign Direct Investment

creates new jobs, allows access to the new technologies, and facilitates the transfer of important management skills

Governance

describes how countries exercise authority and how efficiently they deliver basic infrastructure services like water, sanitation, roads, electricity, security, and the like for public as well as private firms

the early stages of a company's process toward becoming globalized are represented by

export departments and international divisions

What is the lowest risk and lowest return?

export/imports

Multinational Enterprise (MNE)

firms that are headquartered in one country, but own and control manufacturing, services, research and development facilities, or other business entities on foreign soil

Internalization advantages

for example a firm may conclude that the only way it can operate abroad will be through full control of its foreign operations

Correlation of returns

identifying overseas projects that have performance level that are not highly correlated to domestic cash flows or project returns over time

ownership or firm-specific advantages

internal to the firm that can be transferred at a very low cost within a MNE regardless of location examples would be brand-name, trademark, or patent

explicit knowledge

knowledge that is easily communicated and available to everyone

tacit knowledge

knowledge that is informal in nature and difficult to communicate

Impediments to Coordination

legal, political, and economic risks can be an obstacle of coordinating your strategy and implementing it.

Wholly Owned Subsidiaries

new facilities built and operated overseas that require large investment of capital because these new establishments are tailored to the exact needs of the home country firm

tactical plans

plans created and implemented by middle managers that specify how the company will use resources, budgets, and people over the next six months to two years to accomplish specific goals within its mission

Foreign acquisitions

purchase of established firms abroad with the goal of using the existing production, marketing, and distribution networks and of having instant access to foreign markets that fit the purchasing firm's global strategy

How do strategic alliances and joint ventures differ from one another?

strategic alliances involve non-equity arrangements meaning they do not involve the creation of a separate entity with joint ownership

stakeholder model of strategy formulation

strategy formulation model that believes businesses exist to benefit not just their shareholders, but also all the various groups such as employees and customers that have a meaningful stake in their operations

shareholder model of strategy formulation

strategy formulation model that operates from the premise that the key strategic purpose of a business is to maximize financial returns for its owners/shareholders

bureaucratic controls

systems of rules and regulations promulgated within a global business

Trade finance

the exporter is assured payment will be received soon after the importer receives the stated merchandise in good condition

The greater the risk entrepreneurs are willing to take

the greater the rewards they are likely to reap

knowledge management

the implementing of systems and practices to increase the sharing of knowledge and information throughout an organization

Licensing and Franchising typically leads to?

the penetration of international markets without significant capital investment abroad by the parent company

risk profile

the potential financial loss that entrepreneurs are willing to take in a business

Licensing

the practice in which a company or individual provides the foreign partner with the technology (patented technology, copyright, process, trademark, etc.) to manufacture and sell products or services in a target country for an annual license fee

Franchising

the practice in which the parent firm is obligated to provide specialized equipment and/or service and sometimes to fund some startup costs, to franchisees in return for an annual fee

Dunning's eclectic theory

three key economic advantages that firm should have for FDI to occur 1) ownership advantages or firm specific advantages 2) location advantages or country specific advantages 3) internalization advantages

maximize shareholder wealth

to maximize the net present value of future cash flows of foreign investment adjusted for exchange rate movements or to maximize profits so that shareholders could receive larger dividends and see their share prices rise over time

Minimizing factor input cost

unit cost factors like land, labor, capital and technology vary from country to country; ex. business move to other country to lower labor costs

operational plans

very short-term plans that specify what actions individuals, work groups, or departments need to accomplish in order to achieve the tactical plan and ultimately the strategic plan