Flashcards in COSC 7311 : Learning Unit 3 Transnational Media Corporations and Globalisation Deck (16):
Define a transnational media corporation using a relevant example ( 3 marks)
An organised , strategic system that aims to achieve financial/operational goals across local and international borders . Example Disney
Explain the concept of free market capitalism with reference to a South African situation (3 marks ?)
Free market capitalism is the dominant world economic system . It aims to encourage foreign direct investment . Example : South African government accepting a trade deal with Russia .
List 5 reasons for companies to engage in foreign direct investment ( 5 marks )
Foreign Market penetration
Overcoming barriers to entry
Physical assets , discuss in more detail (2 to 3 marks)
Refers to specific physical goods like coal , oil etc (or talent etc)
Foreign market peneration (3 marks)
TNC invests in a location in order to try ans establish a foothold in that market . The easiest way to do this is by purchasing a media house already located in the place that the TNC wants to expand to
Production efficiency ( 3 marks)
Labour costs become a big part of costs for a TNC . Thus they look for then expand into states that offers favourable conditions for businesses and/or lower wages for employees . eg Hollywood v Bollywood .
Overcoming barriers to entry 2 marks
TNC's expand purely into foreign territories purely to avoid high tariffs . This could potentially lead to protectionist policy .
Empire building (3 marks)
CEO's are looking to expand the business into a global empire . This means that the TNC is looking beyond profit and more into becoming "famous" . This is usually a high risk .
Explain the risks of foreign direct invest ments . (4marks)
*Strict laws in foreign states
*Possible socialist elections leading to pro-worker regulation being passed .
*Fluctuations in required working conditions within the state being extended into .
*Tech/media/tax specific laws
Differentiate between mergers, acquisitions , and strategic alliances , using South African exmaples (6-9 marks)
*Merger : two companies become one , assuming assets and liabilities of both . eg: Engen and SA Oil refinery
Acquisitions : Purchase of one company by another , to enhance the buying companies production capacity . example : Advitech and Capsicum
Strategic alliances : Relationship between two companies that is beneficial to both . Doesn't involve any purchasing of shares etc eg : Vodacom and Super Rugby to make Vodacom Super Rugby
List why mergers and acquisitions can sometimes fail . 4 marks
*Lack of compelling strategic rationale
*Failure to perform due diligence
*Post merger planning and integration failure
*Financing/excessive debt .
Lack of strategic compelling rationale 2-3 marks
Expectations are unrealistic for the merger
*Strengths are overestimated and problems/weaknesses are underestimated
Failure to perform due diligence (2 marks)
*In the rush to completer the merger , one/both parties fail to be through
*The acquiring company then finds out later that the acquired company can't meet the set objectives .
Post merger planning (2/3marks)
*One/both companies have little to no plan as to how to smoothen the transition .
*The resulting confusion leads to frustration , divisions and sometimes even failed mergers .
Financial problems / excessive debts ( about 3 marks-ish )
*Acquiring company takes on large debt to finance the merger .
*Pressure them mounts to make sufficient profits to cover the loans .
*Failure to do so could lead to forced selling of assets/entire divisions/shares to raise capital . If the problem persists the company will default on payments .