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