MANA 4321 1nd EditionExam # 3 Study Guide Lectures: 8 – 11/14-21Lecture 8 (September 30)PROTECTIONISM: FORMS- Import tariffs- Quotas- Voluntary Export Restraints (VER)- Domestic content legislation- Monetary barriers- Stringent standards- Subsidies/ “Buy national” programs- Boycott/EmbargoLecture 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 reasonsPOLITICAL RISK: TYPES- Transfer risko Change in ease of transfer of capital, goods, technology and people in and out of the country- Operational risko Impact on operations caused by changes in government’s policies- Ownership risko Change in the proportion of equity owned by a company in a foreign subsidiaryPOLITICAL RISKS -- MACRO- Causeso Competing political philosophieso Civil wars, armed conflicts o Social unrest and disorderso New international alliances- Form/Outcomeso Confiscation, expropriation or nationalizationo Damage to property, personso Loss of transfer freedomsPOLITICAL RISKS – MICRO- Causeso Changing social valueso Unstable economic conditionso Vested interestso Quasi-politicalo Local businesso Latent hostility towards foreignerso- Form/Outcomeso High inflation, increased taxation, currency instabilityo Breach/revision of contractso Discriminationo Mandatory labor benefits, Operating restrictionsPOLITICAL RISK -- DEFENSIVE STRATEGIES- Stay ahead -- technical and managerial capabilities- Multiple sourcing of products- Raise political costs of intervention- JVs with politically connected local companiesLecture 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 CULTUREPOWER DISTANCE- Inequality is fundamentally good- Most people should depend on a leader- The powerful are entitled to privileges- Everyone has a place; some are highUNCERTAINTY AVOIDANCE- Conflict should be avoided- Laws/rules are very important and should be followed- Experts and authorities are usually correct- Consensus is importantMASCULINITY- Gender roles should be clearly distinguished- People, especially men should be decisive - Work take priority over other duties, including family- Advancement, success and money importantINDIVIDUALISM- People are responsible for themselves- Individual achievement is ideal- People need not be emotionally dependent on organizations or groupsNATIONAL CULTURE: FIFTH DIMENSION- LONG TERM ORIENTATION (Recently added)o Society embraces long-term devotion to traditional, forward thinking valueso Country prescribes to the values of long-term commitments and respect a for traditiono Strong work ethic where long-term rewards are expected as a result of today's hard workLecture 14 (October 21)PROTECTING PROPERTY RIGHTS- Enforcemento Likely to be short-lived if demand is high- Educationo Educating IPR law enforcement officialso General public on the perils of counterfeits- External pressureso Confronting host governments (carefully)o Explaining cost of non-enforcement- Economic growtho Growth and home grown brandsFACTOR ENDOWMENTS- Basic factorso Natural resourceso Climateo Geographic locationo Demographics- Advanced factors: Result of investment by people, companies, governmento Communicationso Skilled laboro Research/technologyo EducationDEMAND CONDITIONS- Demand:o creates capabilitieso creates sophisticated and demanding consumers- Demand impacts quality and innovationRELATED AND SUPPORTING INDUSTRIES- Creates clusters of supporting industries that are internationally competitive- Must also meet requirements of other parts of the DiamondFIRM 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 competitivenessLecture 15(October 23)FOUR DIMENSIONS OF DISTANCE- CULTURALo Different languages, ethnicities, social networks, religions and social norms- ADMINISTRATIVEo Absence of shared monetary or political association, political hostility, government policies, institutional weaknesses- GEOGRAPHICo Physical remoteness, lack of common border, size of country, weak transportation orcommunication links, differences in climatesLecture 16 (October 28)- ECONOMICo Differences in consumer incomes, differences in costs and quality of natural, financial, human, knowledge resourcesINTERNATIONAL STRATEGY: EVOLUTION- MULTINATIONAL (LOCALIZATION) STRATEGYo Customized producto Countries—selected in their stand-alone potentialo Units independento Low coordination; high dispersiono Few inter-subsidiary transfers - MULTINATIONAL (LOCALIZATION) STRATEGY (Competitive advantage)o Local responsivenesso Goodwill -- local government, customerso Lower costs -- avoiding shipping costs and tariffso Lower coordination costso Quick response to changing local market situationsLecture 17 (October 30)- GLOBAL STANDARDIZATION STRATEGYo Central control over country operationso Central surveillance of resource allocation and performanceo Standardized productso Extensive transshipments o Cross-subsidization- GLOBAL STRATEGY:COMPETITIVE ADVANTAGEo Lower cost structure »Economies of scale »Less duplication of activities »Lower inventorieso Improved qualityo Enhanced customer preferenceo Increased competitive leverageo Greater bargaining powero Quick response -- R&D concentration- FORCES AGAINST GLOBAL STRATEGYo Consumers demanding something “different” o Government demands o Risks (economic, political, resource)o New manufacturing technologyo Organizational limitationso Managerial resistanceLecture 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 faceTRANSNATIONAL STRATEGY ISSUES TO CONSIDER- Adapting to Local Market Differenceso Distinction between attributes where customers truly value