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