Chapter 8 Flashcards
(22 cards)
What are the two dimensions to evaluate the HQ-Subsidiary relationship?
Risk and control
Competitive risk arises when…
Competitive structures are unstable
New entrants
New and sub. products
New tech
Economic risk arises when…
Infrastructure systems are poor, government systems are poor, or resources/labor/tech aren’t easily accessible
Political risk arises when…
War/terror occurs, subsidiary’s assets are confiscated
Technology risk arises when…
Product tech is stolen, poor systems to manage, technological knowledge are lacking
What are the four types of risk?
Competitive, economic, political, technological
The president is due to increase tariffs on products imported from Asia. What type of risk is this?
Economic
France begins increasing subsidies on parts for Airbus, putting them at unfair competition against Boeing. what type of risk is this?
Economic.
Apple opens a second HQ in Tennessee and cannot find enough skilled people to hire. What type of risk is this?
Economic
Airbnb grows and threatens to displace Marriott’s market share. What type of risk is this?
Competitive.
As mobile gaming rises, Nintendo sees a drop in sales. What type of risk is this?
Competitive. It is about tech but the threat is a competing product.
What type of risk is causing businesses to move out of Catalan?
Political risk due to the independence revolution. Economic risk due to leaving the EU, thereby increasing tariffs.
If Amazon opened a subsidiary in Spain, what would be some of the government’s biggest concerns?
Brain drain. Hire local talent and move them out! Also taking profits and moving them out. Lobby politics.
What sort of control structure does Coca Cola have on its subsidiaries?
Highly centralized. Most major decisions are probably made at HQ in Atlanta
What are the four control models classified by Bartlett and Ghoshal (1989)?
Global, Multinational, International, Transnational
Global control (Bartlett Ghostal 1989)
Centralizes key functions (MK, Finance, R&D…). Specific local needs tend to be ignored.
Multinational control (Bartlett Ghostal 1989)
Decides financial strategy – Considerable autonomy for subsidiary (every country is different)
International control (Bartlett Ghostal 1989)
Considerable control over the subsidiary’s management systems and MK policy, but less so than in the GC.
Transnational control (Bartlett Ghostal 1989)
Combo of GC, MC, and IC. Product is designed to be globally competitive and adapted to local subsidiares to meet local market demands.
Expropriation
When gov. confiscates assets from one or a few firms in an industry. Ex. If China’s Comac was private, the forced takeover from Chinese gov. would be considered expropriation.
Nationalization
When confiscation affects all firms in an industry. Ex. Kind of what happened in 2008.
What does Harzing’s study suggest? (2001)
Expatriates were more common in a subsidiary whose HQ was in a country with relatively high uncertainty avoidance. Ex. Denmark doesn’t trust the Spanish labor force, they send Danes!!!
