Jas's Concept Check 3
2. cultural relativism
belief that ethics is a reflection of cultural reflection; should follow cultural aspects of that country
corporate social responsibility
business people should consider social consequences for economic actions
1. Friedman doctrine
the social responsibility for a company to only raise profits and let shareholders decide anything else
Cost of FDI concerning Host Country
- Adverse Effect on Competition: Subsidiaries are too strong for local competitors (monopoly) - Adverse Effects on Balance of Payments: inflow of capital must have an outflow, don't want too many imports - Possible Effects on National Sovereignty Autnomoy: Concern that the host country will not have control
Promotion
- Advertising - personal selling - Sales Promotion
Non-Equity Modes of Entry
- Contractual agreements and alliances (R&D contract) - Turnkey Project (foreign firm paid to design/construct facilities and train personnel) - Build operate and transfer (BOT; firm operates for a certain time) - Licensing/Franchising
Market Entry
- Cultural Similarity with target market - nature of information sought - possible target region
What are the 2 entry modes
- Equity - Non-Equity
Non-Equity Mode
- Exports and contractual agreements - less costly - potential for gradual international learning
Equity Modes of Entry
- Greenfield -Joint Venture - Acquisition
Encourage Outward FDI
- Insurance policies - special funds/banks for FDI - Number of different countries to choose
Equity Mode
- Jv's and Wholly owned Subsidiaries - strategic commitment to certain markets - local customers and suppliers - deters potential entrants
Disadvantages of L/F
- May lose control - potential competitor - not full benefit from sales
When it comes to Corruption firms should...
- Outlaw of bribes - allowances of facilitating payments
Benefits from Alliances
- Reduce cost, risk, and uncertainty - help resource dependency - reduce transportation cost - complementary assets
Product
- Standardized vs Customized - Design considerations - Branding
Restricting FDI
- balance of payments - limited capital - tax rules - political reasons
Home Country Benefits:
- balance of payments benefit from inflow - positive employment - valuable skills learned
How do managers make international business decisions ethically?
- favor hiring well-grounded people - build a culture and organization based on high values and good ethics - have an ethics officer - have achievable strategies - develop moral courage - decision making should consider ethics
Limitation of Licensing
- firm gives up valuable information to potential competitors - there's no tight control over product, marketing, and profit - not efficient enough to produce/sell unlike themselves
When it comes to Human Rights firms should...
- freedom of speech - freedom of assembly - freedom of movement
Not Attractive to Export
- high tariffs - high transportation costs - agents not willing to work - lower cost manufacture already exists
Firms that Should avoid licensing:
- high tech companies - global oligopolies - tight control firms
Problems of Utilitarianism
- how do we measure benefit vs cost - consideration of justice
Managers Face Uncertainty
- lack of local knowledge - lack of international experience - risk of dealing with foreign partners
Attractions of Exporting
- less costly - experience curve economies
Advantages of L/F
- lower cost - less transportation cost - share resources - lower production cost
Reasons why Managers have Unethical behavior
- personal ethics - societal culture - leadership - unrealistic performance goals - organization culture - decision making process
Standardized Advantages
- reduce marketing cost - centtralized control of marketing - efficiency in R&D - economies of scale produce - reflect globalization trends - country of origin effect
Customized Advantages
- reflect different conditions of product use - acknowledge local legal differences - sees difference in buyers patterns - account for other differences in market
Establishing a overseas operation can be difficult because
- registration - licensing - taxation - reporting - inspections
Benefits of Inward FDI
- resource-transfer effect: supply, capital, etc - Employment effects: brings Jobs - Balance of Payment Effects: track payments and receipts; current account - effect on competition and economic growth: increase number of firms which means more consumer choice
Restricting Inward FDI
- restraints - performance requirements
When it comes to employment practices firms should...
- set minimum standards with basic rights for employee - audit foreign subsidiaries - take corrective actions
When it comes to Moral Obligations firms should...
- social responsibility: managers should consider social consequences when to making economic business decisions - give money back to people who helped in business succes
Success from alliances comes from ...
- stable environment - transfer knowledge - alliance experience
Encouraging Inward FDI
- tax incentives, low interest rates - new infrastructure
Limitation of Exporting
- transportation cost - trade barriers *FDI's look better*
Firms vs Gov't negotiations:
- value and what each other has to offer - comparable alternatives for each side - each party's deadline for time
Rapid internationalization can be successful if:
- venture capital is available - strong ownership advantages can be exploited - first mover advantages exist
Pragmatic Nationalism
- view that FDI has benefits and costs - FDI should be allowed as long as benefits outweigh the cost - Give national investors a reason to come such as tax breaks
When it comes to Envir. Regulations firms should...
-Tragedy of the commons -legal vs ethical behavior
global market opportunities
1) Decide which market to enter 2) Screen countries to identify target markets 3) Entry based off potential and assessment of -Size and Growth rate - consumer buying power - Country's receptivity to imports - Infrastructure - Economic freedoms and Country Risk
5 most common ethical issues
1. Employment Practices 2. Human Rights 3. Envir. Regulations 4. Moral Obligations 5. Corruption
3 Marketing mix Approaches
1. Ethnocentric (STANDARDIZED) 2. Polycentric (CUSTOMIZED) 3. Geocentric (STANDARDIZED)
6 total modes of entry
1. Exporting 2. JV's 3. Turnkey 3. Wholly Owned Subsidiaries 4. Licensing 5. Franchising
what are the 4 approaches to business ethics
1. Friedman's doctrine 2. cultural relativism 3. the righteous moralist 4. naive immoralist
4 Element of the Marketing Mix
1. Product 2. Promotion 3. Price 4. Place
Sullivan Principle
1. companies should not obey apartheid 2. companies should promote to abolish apartheid
under the veil of ignorance: everyone is the exact same
1. everyone has maximum liberty 2. Inequalities are allowed if it benefits everyone(difference principle)
Ethnocentric Approach
Adopt the domestic marketing mix for global markets
Stock FDI
Amount of foreign owned assets accumulated over time
Home Country Costs
Balance of payment may suffer due to... - outflow to finance FDI - Low-cost production (loss of jobs) - Substitute for exports
Dow Corning
Code of conduct: local businesses dictate payments practices but must by documented
CPI BPI
Corruption perception index Bribe payers Index
Place
Distribution
Christopher Bartlett and Sumantra Ghoshal
Emerging countries have to enter foreign market to become global players
Offshore Production
FDI taken to serve home market
FDI takes 2 forms:
Greenfield and acquisition/merging
Born Global Strategies
If you wait too long, miss the window of opportunity ...Leaving you 'stuck' where you are
3 Business Strategies
JV's Licensing Company Owned Operations
Oligopoly
Knickerbocker's concept that FDI's will have an effect on each other with each action - industry with limited number of large firms
Franchising
Offers total business method
Hewlett-Packard
Set values as HP way; an ethical component that responds to confidence and respect for people
Ethical Dilemmas
Situation where non of the available alternative solutions seem ethical
Global Marketing
Social and Managerial process by which individuals and groups attain what they need and want creating and exchanging value with other globally
Price
Standard pricing vs differential pricing
International Business Development
Strategy to adopt different marketing strategies to access local needs and requirements
Country of Orgin Effect
The positive or negative feeling you can have from a product or company
Garret Hardin
Tragedy of the Commons
Multipoint Connection
When two or more enterprises encounter each other in a different regional market
4. naive immoralist
a manager feels like he does not need to follow rules because firms in the host nation also break rules
Foreign Corrupt Practices Act
act to outlaw bribes to govt officials
John Rawls
all economic goods and services should be distributed equally expect when unequally distribution is needed
Acquisition/Mergers
collaborating with existing firm in a foreign country - Mergers and acquisitions are faster than greenfield - foreign firms are already established so it makes easy to acquire - merger believe they can improve efficiency
Principle of Cumulative Attraction
competing and complementary companies will locate next to each other to pull with each other
Pioneer Cost
cost that early entrants has to bear that latter entrant can avoid
Polycentric Approach
customize the firm's marketing mix for each market
Inflows of FDI
flow of FDI into the country
Outflows of FDI
flow of FDI out of the country
3. the righteous moralist
following the ethics placed in the home country even if that might differ (application of rules)
Licensing
granting rights to intangible property for royalty fee
Noblesse Oblige
honorable and benevolent behavior considered the responsibility of people with high class birth
Greenfield investing:
involves new establishment of new operations in foreign country
Facilitating Payments
known as speed or grease money
Eclectic Paradigm by John Dunning
location specific advantages arise from foreign resources, endowments, assets
Immanuel Kant
made the kantian ethics: people should treated nicely and humanly
Sustainable strategies
make profit, don't harm environment, while regarding stakeholders
Cultures with high individualism and uncertainty avoidance
more ethically inclined
Cultures with high masculinity and power distances
more unethically inclined
Just Distribution
one that is considered fair and equitable
Flow of FDI
refers to the amount of FDI undertaken over given time period
Geocentric Approach
standardized a global marketing mix for global market
Eclectic Paradigm
takes best aspects of theories and combines into a single explanation
Utilitarian approaches to ethics
the consequences determine moral worth of actions or practices - maximize good, minimize harm