Business 187 - Global Dimensions of Business

Review for second midtermProf. Wood

The midterm …

25-28 multiple-choice questions A choice of one of two essays

(handed out ahead of time)

Bring Scantron (Form 882-E – the small style)

Blue book (small is OK)

Multiple choice questions will cover …

assigned reading in Chapters 1, 8, 11, 9, 13, and 16

From the first third of the course, only Ch. 1 will be included

Also, the Porter article “The Competitive Advantage of Nations”

Use these slides and the class review discussion as guides Study…

the text your notes the original slides available on the class web

page Memorizing stuff from the slides is not enough!

Make sure you understand each concept on the slides

Have slides, your notes, and text open all at once All midterm topics are mentioned on slides, but

the slides themselves cannot provide full detail

Key issues in Chap. 1: International Business - An Overview

Why has international business grown? Government policies (freer trade) New technology New institutions

Modes of international business Importing and exporting merchandise Service “exports and imports” Investment:

direct investment and portfolio investment

What is a “multinational enterprise?” Two basic multinational strategies

Multi-domestic (locally responsive) company Globally integrated company

Price competition, rapid change, better communication favor global integrated strategy

Ethical dilemmas – How to think about right and wrong Normativism Relativism

Key issues in Chaps. 8 and 11: Foreign Direct Investment (FDI)

Definition of foreign direct investment Why firms do foreign direct investment

Be able to think about under what circumstances a firm would produce abroad

Why not just license your tech to a local firm? Acquisitions vs. do-it-yourself Most FDI is to and from developed countries,

but investment in developing countries is growing

Hopes and fears of developing (poor) countries

What developing countries want

What they fear from investing companies

Key issues in Chap 9: Foreign exchange

What are money? foreign exchange? exchange rate?

How to find out a currency’s value (on line or in newspaper)

Dollar as most widely used/traded London as site of most trade

Fixed vs. “floating” exchange rates

Trading terms: bid, offer, spread Fully convertible (hard) currency vs.

“soft” currencies Key issues of “fundamental analysis”

in predicting change in a currency’s value

Note: Text of Ch. 9 is confusing and difficult. Download the slides

Sessions 8-10:Global Corporate Strategy

What goes into the big decisions

Porter’s Competitive Advantage of Nations

Understand what Porter means by the competitive advantage of an industry

Understand the four determinants Factor conditions (specialized factors) Demand conditions Related and supporting industries Firm strategy, structure, and rivalry

Understand what Porter means by each Importance of pressure on firms

Key issues in Global Sourcing (Country Evaluation and Selection)

How location decisions should be influenced by Porter’s theories

Scanning and initial decision techniques Know some key criteria

Size Growth rate Stability Spillovers

Limitations of scanning Dangers in using standard data sources

What causes firms to eliminate proposals from countries

Diversification vs. Concentration strategies

Differences between new and reinvestment/harvest decisions

Key issues in Chapter 16: Marketing

Product policy choices Production orientation Sales orientation Customer orientation Strategic marketing orientation

Forecasting for countries where you currently have little or no sales

“Gap” analysis (where you have sales)

Reasons products have to be altered from country to country Standardize basic elements to control

costs

Complexities of pricing Distribution systems

“Distribution” is “the course – physical path or legal title – that goods take between production and consumption.”

Includes both shipping and the process by which the product is sold

Price escalation Need to work with distributors

Promotion Push vs. Pull marketing

Push marketing: sell through direct sales techniques

Pull marketing: You encourage demand through techniques such as advertising

Complex distribution systems encourage push Differences in media Benefits and difficulties of standardizing

marketing message globally

Info in slides from here are not required

Conclusions from the Dental News case

Dental News exists because There are few distributors of dental

equipment in poorer countries Communications media from rich countries

don’t tell dentists in poorer nations what they can get and how…

So it’s hard to be a dentist in these nations

Not required:Key points from Chap. 15: Control Strategies

What is control? planning, evaluation, and correction to

ensure the organization meets its objectives Why is control important? Control difficulties abroad

Distance Diversity Uncontrollables Extra uncertainties (government instabilities,

etc.)

Location of decision-making

Globally integrated strategy – more centralized

Multidomestic strategy – decentralized

Be able to describe how the choice of strategy will affect what a firm does

Control mechanisms

don’t memorize a list of mechanisms, but know that …

Strategic intent is the big shared mission that everyone knows they are pursuing

Corporate culture is shared values that produce similar behavior in different countries

Not requiredKey points in Chap. 17: Export and Import Strategies (Micro view)

Ch. 16 covered the macro, strategic view of marketing

Ch. 17 deals with specific details of exporting Characteristics of exporters

Probability of being an exporter increases with company size (revenues)

Export intensity, the % of revenues coming from exports, is not correlated with size

U.S. Government help: Export Assistance Centers of the International Trade Administration (ITA)

U.S. embassies in other countries

Intermediaries in distribution Sales representatives (“reps”) do not take title Distributors actually buy your goods from you Export management companies

handle everything, but rare in U.S.

Famous kinds of Asian intermediaries Sogo shosha - Japanese general trading company

Chaebol - Big Korean group with trading company

Other intermediaries in U.S. Freight forwarder (exporting) Customs broker (for importing)

Export Documentation

Key export documents Pro forma invoice – like a “letter of intent” Commercial invoice – an actual bill (describes

goods and payment terms) Bill of lading – receipt for goods from the

carrier (airline, shipping line) Export license – required for some

tech goods Certificate of origin – proof goods came

from a particular place

17-11

Getting paid

Letter of credit – document that obligates buyer’s bank to pay when goods shipped (usually very reliable)

Open account – the seller just sends a bill (often very dangerous)