MANA 4321 1nd Edition Exam 3 Study Guide Lectures 8 11 14 21 Lecture 8 September 30 PROTECTIONISM FORMS Import tariffs Quotas Voluntary Export Restraints VER Domestic content legislation Monetary barriers Stringent standards Subsidies Buy national programs Boycott Embargo Lecture 9 October 2 WHY PROTECTIONISM Promote domestic production save jobs Help strategic industries Protect infant industry Old industry argument Level playing field combating unfair competition National security reasons Political reasons POLITICAL RISK TYPES Transfer risk o Change in ease of transfer of capital goods technology and people in and out of the country Operational risk o Impact on operations caused by changes in government s policies Ownership risk o Change in the proportion of equity owned by a company in a foreign subsidiary POLITICAL RISKS MACRO Causes o o o o Competing political philosophies Civil wars armed conflicts Social unrest and disorders New international alliances Form Outcomes o Confiscation expropriation or nationalization o Damage to property persons o Loss of transfer freedoms POLITICAL RISKS MICRO Causes o Changing social values o Unstable economic conditions o Vested interests o Quasi political o Local business o Latent hostility towards foreigners o Form Outcomes o High inflation increased taxation currency instability o Breach revision of contracts o Discrimination o Mandatory labor benefits Operating restrictions POLITICAL RISK DEFENSIVE STRATEGIES Stay ahead technical and managerial capabilities Multiple sourcing of products Raise political costs of intervention JVs with politically connected local companies Lecture 10 October 7 Maximize debt investment from local sources Significant exports Good citizen public services Hedging via insurance e g OPIC MIGA Lecture 11 October 09 HOFSTEDE S MODEL OF NATIONAL CULTURE POWER DISTANCE Inequality is fundamentally good Most people should depend on a leader The powerful are entitled to privileges Everyone has a place some are high UNCERTAINTY AVOIDANCE Conflict should be avoided Laws rules are very important and should be followed Experts and authorities are usually correct Consensus is important MASCULINITY Gender roles should be clearly distinguished People especially men should be decisive Work take priority over other duties including family Advancement success and money important INDIVIDUALISM People are responsible for themselves Individual achievement is ideal People need not be emotionally dependent on organizations or groups NATIONAL CULTURE FIFTH DIMENSION LONG TERM ORIENTATION Recently added o Society embraces long term devotion to traditional forward thinking values o Country prescribes to the values of long term commitments and respect a for tradition o Strong work ethic where long term rewards are expected as a result of today s hard work Lecture 14 October 21 PROTECTING PROPERTY RIGHTS Enforcement o Likely to be short lived if demand is high Education o Educating IPR law enforcement officials o General public on the perils of counterfeits External pressures o Confronting host governments carefully o Explaining cost of non enforcement Economic growth o Growth and home grown brands FACTOR ENDOWMENTS Basic factors o Natural resources o Climate o Geographic location o Demographics Advanced factors Result of investment by people companies government o Communications o Skilled labor o Research technology o Education DEMAND CONDITIONS Demand o creates capabilities o creates sophisticated and demanding consumers Demand impacts quality and innovation RELATED AND SUPPORTING INDUSTRIES Creates clusters of supporting industries that are internationally competitive Must also meet requirements of other parts of the Diamond FIRM STRATEGY STRUCTURE AND RIVALRY Long term corporate vision is a determinant of success Management ideology and structure of the firm can either help or hurt you Presence of domestic rivalry improves a company s competitiveness Lecture 15 October 23 FOUR DIMENSIONS OF DISTANCE CULTURAL o Different languages ethnicities social networks religions and social norms ADMINISTRATIVE o Absence of shared monetary or political association political hostility government policies institutional weaknesses GEOGRAPHIC o Physical remoteness lack of common border size of country weak transportation or communication links differences in climates Lecture 16 October 28 ECONOMIC o Differences in consumer incomes differences in costs and quality of natural financial human knowledge resources INTERNATIONAL STRATEGY EVOLUTION MULTINATIONAL LOCALIZATION STRATEGY o Customized product o Countries selected in their stand alone potential o Units independent o Low coordination high dispersion o Few inter subsidiary transfers MULTINATIONAL LOCALIZATION STRATEGY Competitive advantage o Local responsiveness o Goodwill local government customers o Lower costs avoiding shipping costs and tariffs o Lower coordination costs o Quick response to changing local market situations Lecture 17 October 30 GLOBAL STANDARDIZATION STRATEGY o Central control over country operations o Central surveillance of resource allocation and performance o Standardized products o Extensive transshipments o Cross subsidization GLOBAL STRATEGY COMPETITIVE ADVANTAGE o Lower cost structure Economies of scale Less duplication of activities Lower inventories o Improved quality o Enhanced customer preference o Increased competitive leverage o Greater bargaining power o Quick response R D concentration FORCES AGAINST GLOBAL STRATEGY o Consumers demanding something different o Government demands o Risks economic political resource o New manufacturing technology o Organizational limitations o Managerial resistance Lecture 18 November 13 TRANSNATIONAL STRATEGY Global Efficiency Multinational Flexibility Worldwide Learning Greater emphasis on differentiated products than in pure global industries Greater demand for global efficiency and lower costs than in pure multinational industries Greater sensitivity to governmental demands Units coordinate activities with HQ and with one another Units may adapt to special circumstances only they face TRANSNATIONAL STRATEGY ISSUES TO CONSIDER Adapting to Local Market Differences o Distinction between attributes where customers truly value adaptation and where they are neutral or averse o For attributes where adaptation adds value how much is the customer willing to pay Exploiting Economies of Global Scale o Distinction between activities that