MANA 4321 1nd Edition Exam 2 Study Guide Lectures 8 17 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 Any company with exposure to foreign markets needs early accurate information on political developments International markets are more interconnected The world has become a much more volatile place and that has changed risk calculations everywhere Offshoring results in shifting of operations to countries with potential for unrest Increased dependence for energy on states troubled by considerable political risk 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 Competing political philosophies o Civil wars armed conflicts o Social unrest and disorders o 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 RATING AGENCIES Business Environment Risk Intelligence BERI Index Business Monitor International Economist Intelligence Unit EIU Country Risk Ratings OECD Country Risk Classification PRS Group LLC Institutional Investor Country Credit Ratings 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 LEVELS OF ECONOMIC INTGEGRATION Free Trade Area FTA Member countries eliminate trade barriers on trade among member countries o NAFTA US Canada and Mexico Customs Union FTA plus a common external trade policy o MERCUSOR Argentina Brazil Paraguay Uruguay o ANDEAN PACT Argentina Brazil Paraguay Uruguay Common Market Customs Union that also allows free movement of factors such as labor and capital o EU European Union Economic Union Common Market wherein national economic policies of member countries are also harmonized CASE FOR INTEGRATION Economic o Stimulates economic growth in countries o Countries specialize in those goods and services efficiently produce o Additional gains from free trade beyond the international agreements such as GATT and WTO Political o Economic interdependence creates incentives for political cooperation Reduces potential for violent confrontation o Together the countries have more economic clout to enhance trade with other countries or trading blocs Lecture 11 October 09 WHAT IS CULTURE A system of values and norms that are shared among a group of people and that when taken together constitute a design for living Hofstede Namenwirth and Weber CULTURAL ENVIRONMENT Language o Verbal o Non Verbal Attitudes and beliefs o Time o Directness and drive o Deadlines o Achievement and work o Wealth material Possessions Morals and etiquette Religion Social structure Norms and value systems CULTURAL DIMENSIONS Power distance Uncertainty avoidance Individualism Masculinity 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 12 October 14 IMPACT OF CULTURAL DIFFERENCES Policies and procedures o and standardization Systems and controls o Structure o Planning systems o Reward systems Information and communication o Openness and informality Decision making o Who makes decision o Level of participation CULTURAL ISSUES CULTURAL BARRIERS o ETHNOCENTRISM Concluding that new culture is bad stupid or ineffective simply because it is different o LACK OF CULTURAL EMPATHY Inability to view things from the perspective of the host culture CULTURAL CHANGE o Culture evolves over time o Changes can be painful for society o Is not unidirectional Lecture 13 October 16 DEMOGRAPHIC ENVIRONMENT Population growth Education and literacy Age distribution and changes Population and population shifts LEGAL ENVIRONMENT Tariffs quotas and trade barriers Restrictive trade practices legislation Taxation Product safety and liability Intellectual property o Patent o Trademark o Copyright laws Labor laws Laws governing business practices LOSS FROM PIRACY Loss of sales in the copycat country Loss of sales in third countries where it is forced to compete with pirated products Reputation as a producer of quality products and service suffers Dominant share by pirating company prevents entry 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