I.B. Flashcards

Question

Module 1: Webinar: Interpret/translator assistance

Answer 1

1. Brief them in advance: complicated material should be studied beforehand to note potential translation challenges. - Provide written material as far before the meeting as possible 2. Provide additional breaks: it is very tiring, alertness requires more rest - Provide double the number of breaks as normal 3. Write difficult to interpret info: clarity is critical - small errors (numbers, dates, times) can be very costly - Write the information in an explicit and complete format 4. Use extra care when joking - may be offensive across cultures / not translate well Keep your sense of humor but avoid sensitive topics (ex. Politics, religion) 5. Do not talk excessively: overwhelms interpreter and undermines your ability to build a relationship with your counterpart - Have the interpreter stand behind you and speak directly to your counterpart 6. Check quality of their work: even the best translation will not always be perfect - Use back-translation to check quality

Answer 2

1. Translator A independently translates a document 2. Translator B independently translates the new version back into original language 3. Compare original and back-translated to note differences and agree on wording

Answer 3

Low/High Context, direct/indirect, informal/formal, task/relationship

Answer 4

Peach: friendly with strangers - smile, use names, share info, but hard to dive deep (pit) Lead people to believe they want to be friends, which is disappointing Can be offensive if too personal Coconut: guarded with strangers, ask less questions or share, less smiling (hard exterior but long lasting relationships) Can come across as rude/cold

Answer 5

HONEYMOON (First 3 months): Enthusiasm and fascination abroad; friendly but superficial contact with locals. CULTURE SHOCK (4-6 Months) - Frustration and fear from language, values and behavioral differences; ending contract is sought - Culture Shock term implies something immediate and sudden, but it is not. ADJUSTMENT (after 6 months) Improvement of language skills, dealing with environment, attitude towards local culture MASTERY (varies) Acceptance of local culture and customs

Answer 6

Often experience the greatest culture shock because they immerse themselves in the local culture but they effectively manage it.

Answer 7

1. Understand the differences - Minimize parochialism - understand preferences/practices of the other cultures 2. Build Bonds: have social events 3. Establish Trust: most important for team success - Team purpose and access (all info and resources) - Team membership: culturally intelligent, and needed skills for the task - Team protocols and norms (from all cultures) 4. Actively Learn and Teach (about other cultures) - be culturally sensitive and open 5. Be Inclusive 6. Elicit Ideas (different comfort levels, establish norms to make it easy) 7. Address and Be Creative with Conflict 8. Be confident and positive 9. Do not obsess over culture

Answer 8

Culturally diverse teams have the potential to be more effective than single culture teams Allows for creativity due to existence of divergent ideas and ability to avoid groupthink

Answer 9

Groupthink: striving for consensus while setting aside personal beliefs to adopt others opinion of others. Symptoms: - Overestimating the teams power and morality - Close mindedness - Pressures towards uniformity

Answer 10

Team Effectiveness is most dependant upon: team management and task type. - Routine tasks: repetition - done in same way every time (ex. Assembly line) - Innovative tasks: creativity (designing a new product) Degree of Team Effectiveness: - LOW: poor managed cultural teams with routine tasks - LOW - MED: poorly managed single culture teams with innovative tasks - MED-HIGH: well managed single culture teams with routine tasks - HIGH: well managed culturally diverse teams with innovative tasks Culturally diverse teams are most effective well managed with innovative tasks - Single culture is better at routine so cultural diversity does not always mean better - The diversity should fit the task at hand and be well managed.

Answer 11

Identify 2+ cultural translators - An assignee with lots of experience in the host country. A effective guide and can introduce you to others, which can enhance your local credibility. - A native with lots of experience working with assignees. These individuals have insight and connects and understand what and who you would need to know. Develop and Share an Entry Plan - With 1. Local HR staff, 2. Host country boss, 3. Home boss. - All 3 people must understand your goals in the host context so they can best assist you Go to the front lines right away - Get out of the office - important for those that you might not meet/see on a regular basis. - Shows you are interested in them/working with them, makes them take you seriously. Ask questions, avoid statement - Be open and eager to learn. Locals do not expect you to be an expert on local issues. - Lessens the chance of appearing ethnocentric. - You must comprehend local context before you can apply your knowledge there Focus on the positive (not the problems) - Stops you from appearing ethnocentric while encouraging others to engage with you and share insight. - You do not know everything / the savior of all

Answer 12

2nd Year Commerce Student vs. the Average Canadian Much more collectivistic (moderately high) Higher power distance (moderate) Higher uncertainty avoidance (moderately high) About same competitiveness (high) More long-term oriented (moderate to high) Much higher context (dead centre) Even more doing (very high)

Answer 13

Career Advancement: To what extent will the assignment benefit or hinder your career? Compensation: What are the financial benefits and costs of the assignment to you? Job Characteristics: Do you find the job that you will hold during the assignment interesting? Living and Working Abroad Interest: Are you interested in living and working abroad? Host Country and Culture Interest: Are you interested in and likely a good fit for the host country and culture? (living, distance, etc) Family’s View and Fit: Are your accompanying family members interested in and do they fit w the host country and culture? (ex. Schools, jobs, socially, etc) Others: existence of cultural translator/bridge in assigned country, safety

Answer 14

Stability Zones - Example: home themed pubs or familiar locations. They provide home country’s food, opportunities to speak your language, view the sports teams, etc. - Purpose: provide a feeling or sense of home and in doing so provide a temporary escape to deal with the stresses of the local culture Language Study - Example: informal and formal; daily use beyond textbook (slang)) - Purpose: Helps to better manage daily activities by enhancing their communication with locals and ability to identify cultural differences. Stress Reduction tactics - Example: exercise, yoga, meditation, art classes, or others to help stress - Purpose: by reducing culture shock-driven stressors one is better able to manage those on a continual basis Journal Keeping - Example: recording one’s experiences and feelings upon which they can reflect on and observe their progress. - Purpose: provides insight to you and future assignee's which enhances their ability to anticipate and deal with differences that might cause culture shock. Problem Solving Tactics - Example: Actively develop tactics to handle the cultural differences and challenges that exist to use going forward proactively. - Purpose: Helps anticipate potential problems and reduce culture shock. Compatriot Use - Example: interacting with others in host country that are from your home country. Experienced assignees are very helpful and should be sought after. - Purpose: Provides valuable opportunity to gain insight, guidance, and support to manage culture shock.

Answer 15

Key Practices and Characteristics - Home and host country mentors are a key driver of international assignment success. - Both can offer insight, knowledge, and support. Home Country Mentor - Validation: Find suitable post-position that fits with their career trajectory and interests. - Evaluated: on their performance as a mentor (take it seriously) - Communicate: Keep them informed of home country changes while abroad - Be senior: Has confidence, power and capital to stand up for assignee. Helps when finding a new position after they return. - Represent: Voice the assignees interests (prevents “out of sight, out of mind”) - should constantly touch base to know what they want communicated Host Country Mentor: - Validation: Aid with local difficulties. Formally responsible for directing/assisting as official part of job description - Evaluated: Be evaluated on performance as a mentor (makes them take it seriously - Communicate: Keep assignee informed of local initiatives (in and out of office)

Answer 16

International Assignee Selection Criteria Emotional Intelligence: identify, assess, and control emotions of self, others and groups. - 5 components: empathy, self-awareness, motivation, social skills, self-regulation Culturally Intelligence: Degree you function effectively across variety of cultural contexts - 4 components: drive, knowledge, strategy, action Candidates Motivation - Beyond career orientation and compensation - Interest in the culture, country and job is critical International Experience - Breadth (number of countries) and depth (number of years) of experience Family’s View and Fit - Partners view of the assignment and location; family’s ability to adjust Host Country Language Proficiency - Not just textbook, but everyday use (slang) knowledge and serious about learing - Does candidate already have working knowledge of the local language? If no, are they serious around learning?

Answer 17

High tolerance for and ability to manage stress. Regardless of destination and assignment, it always has challenges and stress.

Answer 18

Subjectivity - Use objective measures (tests, scales), subjectivity clouds judgement and appoint based on fondness not fit Soft Skills - Don’t overly emphasize technical skills and home country performance - Often soft skills determine IB success, superstar at home does not guarantee same abroad.

Answer 19

Meetings with repats: multiple meetings before the assignment. - Initial meetings should be supervised by HR staff to ensure that key issues are discussed. Mentors: suitable home and host mentors before assignment - Provides a connected and informed support team Host Country Visit: if justified, send spouse and assignee to country to assess fit and make preparations - Justification factor: length of assignment - Helps them make an informed decision and lower stress levels Language Training - mandatory to be fully completed (tied to job performance) - Goes towards establishing goodwill with locals and managing culture shock Cross-Cultural training - mandatory for most involved - Includes assignee, partners, and host country staff. - P&G sends assignee and partner to Beijing for 2 months for training!

Answer 20

18th century - all economies were poor and based on agriculture GDP growth 0.05% for millennia, 1% in 19th century, 2% in 20th century Initial growth in UK and related countries After WW2 most countries had economic and political independence High growth rates in China, Brazil and India have reduced poverty Economic growth happens with structural changes Poor countries are unable to get away from agriculture and traditional goods into manufacturing and other modern activities.

Answer 21

Favoured lands by European settlers fell behind economically - The marginal economic gain in North America vs. Caribbean/South America Barbados and Cuba had much higher incomes than North America Divergence occurred in industrialization - North America pulled ahead Economists and historians have not been able to know why

Answer 22

Matthew Perry completed a treaty with Japan and USA that unlocked 2 trade ports Perry forced them to trade but they decided to fight back and industrialize Political rebellion - Meiji Restoration - took place fighting for Japan to catch up with the economic, tech, and military powers of the West Tech, banking, university systems, railroads, communications were imported Japan took what they needed but maintained their culture The Meiji efforts worked - Japan was the first non-western nation to industrialize By WW2 Japan’s industrial and tech capabilities matched Europe so their defeat was further motivation After the war they wanted economy moving ASAP and all of the energy into the war was put into the economy

Answer 23

China will be the dominant economy, India and USA tied for 2nd then Indonesia, Brazil - All are current emerging markets The tUK down to 10th, France out of top 10, Italy out of top 20 The rise of emerging markets presents opportunity and challenges

Answer 24

Rest of the world such as India and China have unfulfilled demand, growth, large populations (size matters in business) Industrialized nations (North America, Western Europe, Australia, Japan) account for about 15% of the world's population Most populated countries: China, India, US, Indonesia, Brazil, Pakistan, Nigeria, Bangladesh, Russia, Mexico

Answer 25

West vs. the Rest - Western countries were wealthy ---> UK (most powerful!), Canada, Germany, France, USA The beginning of Japan’s Meiji Restoration India and China were wealthy before the 1800’s In 1800’s Western World got ahead because of: - Industrialization - using energy for power, mass production, move away from manual labour and agriculture - Colonization - Age of Discovery (of the new world)

Answer 26

India life expectancy goes down (war), overall life expectancy goes up Europe knew a lot about Asia (silk trade) Christopher Columbus went West to find Asia for a trade route and found N. America There was no labour there which led to slave imports from Africa New World (USA, Canada, Argentina) emerges New World gave wheat and beef to Europe for industrialized goods

Answer 27

The US emerges as a leader, surge of Germany and Japan Meiji Revolution in Japan started when they were forced by Michael Perry to trade and decided to industrialize and then invade and take colonies Eve of WW2 - Germany invades Poland 1939

Answer 28

Progress in Asia, Latin America, Middle East Japan continues to rise The decline of Argentina: have good land but fail to industrialize Rest begin to catch up to the West

Answer 29

- Political (gov) - Economic (structure and system) - Cultural

Answer 30

Overview: - Law of comp. Advantage says that if all international trade barriers were removed countries will gravitate towards their comp. ad. And everyone will be better off - Assumes that workers are mobile across industries which is false - Globalization (free trade) is unpopular in developed countries because of the comp. Ad. workers will do well but the other industries will face hardship Import Substitution: - The decade after 1929 was bad (Black Tuesday, Great Depression, raised tariffs). Latin American countries exports of agriculture demand declined due to tariffs. - Raul Prebisch - LDC (less developed) have an advantage in primary sectors and would be confined to this and dependant industrialized nations for manufactured goods so the economic gap would never close - Import substitution would promote industrialization and development by putting high barriers on imports so internal manufacturing would occur but FAILED Export-Led Industrialization: - Used in East Asia and led by Japan helped countries focus on their advantages as well as with economies of scale they were cost-effective globally - Countries in the East Asia region would make low-high valued items based on their developmental stages and labour costs New Structural Economics: - The NEW school of thought headed up Justin Lin (World Bank) - Even though LDC must promote industrialization away from primary sectors to manufacturing/modern ignoring comp. Advantages have a heavy cost - Indivisible hand of market forces must be allowed for resource allocation during the transformation. - Gov. should encourage industrialization and diversification but should focus on its advantage industries.

Answer 31

Absolute advantage: the country that requires least inputs to produce one unit of output - Does not account for opportunity costs Comparative Advantage: the country that has a lower opportunity cost per unit of output - Countries only have a certain amount of resources so they face trade-offs - Divide the outputs by each other - how much of B could you make instead of one unit of A? Compare the countries. - Impossible to have a comparative advantage in all goods - Opp cost of one good is the inverse of the other Specialization: with dif. Opp. costs they can profit from specialization and trade - If both produce their comparative advantage combined output will increase Benefits of Trade: additional output can be traded but not everyone will be left better off

Answer 32

After WW2 in Latin America, “Import Substitution” was intended to help developing countries industrialize and reduce costly imports - Dependency Theory: Prebish said free trade hurt “Rest” who depended on selling raw goods to West who sold manufactured goods back at inflated prices - Import Substitution countries relied even more on imports as their goods were worse quality and not competitive globally 1930 Argentina was top 10 wealthiest, now 87th USA admin - wants to raise trade barriers to favour USA industries and increase jobs - The new type of “Dependency Theory” however the US gain a lot from imports - By importing basic goods the USA can focus on innovation

Answer 33

1992 Japan thinks and plans long-term Wants to integrate Asian economies with an economic flock - Japan at the head then Four Dragons (Hong Kong, Singapore, S Korea, Taiwan) then ASEAN (Indonesia, Malaysia, Philippines, Thailand), China, India, Vietnam and Bangladesh. Japan has leadership and valued products and domination of investment Four dragons have rising wages so higher valued items are more profitable ASEAN are primary suppliers of basic materials and make low-value products New Asian Industrial Development Plan: Japan moved high value (cars) to high wage places, low value (labour intensive) to low wages Japan aids in all areas, infrastructure, management, production, tech, marketing, R&D, etc to improve Asian economics to boost Japanese investments The USA is far behind Japan in their trades with other Asian countries Taiwan became a very advanced industrialized nation

Answer 34

For less developed countries, this law prevents them from industrializing/gaining wealth

Answer 35

2-3 decades after WW2 was the 2nd wave of industrialization (L. America, S/E Asia, some Africa) Globalization is unpopular in the Western World - Job loss is painful and concentrated in certain areas (Midwest) - The benefits of products at lower prices (from China) is widely shared and taken for granted Best way to transform structurally: - Move from agrarian to industrialized - Developing globally competitive modern sectors that follow closely the nation's comparative advantage

Answer 36

Import Substitution (ISI): replace imports of industrial products with domestic production by imposing high tariffs - Incurring very high costs of production, experience high opportunity cost - Used by most Latin America and most other LDC - 1945-1970’s - worked for a bit, GDP increased - 1980’s CRISIS - ISI countries experienced so much debt that could not repay - 1980-2003 - GDP declines

Answer 37

Export-led industrialization: export goods where a nation has a comparative advantage - 1945-present (East Asia) - DO NOT start with capital-intensive industry where you borrow money - Start with labour intensive to use your low wages - Necessary Conditions: cost advantage, capital (infrastructure and goods), expertise (for production tech and foreign market) - East Asian Path: 1. began with labour-intensive sectors 2. Mobilize domestic sources of capital 3. Flying Geese Paradigm (welcome foreign capital) - --> Japan forced the countries with the threat of war and takeover - --> Over time as countries advance they move up a level of sophistication and innovation and reallocate the previous industries to a less developed country

Answer 38

Water transportation between US ports must be on US flag, constructed and owned by US citizens, and a primarily American crew Makes shipping from USA VERY expensive, most US import from other countries even when their own has the product Creates lots of truck and road traffic Was to protect USA shipping but they are now one of the worst in the world Protectionism has unintended consequences

Answer 39

Qing dynasty - 1/3 of the world economy was in China 19th century and on, China struggled and population created lack of jobs and land After the Cultural Revolution, Mao in China banned foreign and private companies from operating in China and controlled production and distribution. Deng Xiaoping - moved China to a modern prosperous market economy Farms and factories used to have yearly production targets, Xiaoping allowed them to sell the surplus on the open market while some were not allowed. Farmers were up before dawn now that they could keep their surplus, efficiency soared Private sector firms could produce what they liked, the unemployed became entrepreneurs China slowly industrialized from the coast inwards China finally harnessed its strengths: cheap, plentiful labour and high savings rate

Answer 40

Western democracy - delivered general prosperity, rising standard of living, respect as a person, and personal dignity through your opinion. Argued that democracy is necessary for human desire for recognition Since 1980’s non democratic China has made use progress in GDP and life expectancy The driver has been collective national dignity - wanting China to get more respect, unlike in West where the respect is your individual opinion China authoritarians can target/manage growth and share benefits and can plan long-term China is growing industrially, but also with environmental sustainability. Trump’s pitch was very pragmatic authoritarian - delivering collective dignity. Democratic politics restrict these pragmatic abilities to create better equality As citizens find less personal dignity in politics and politicians become less able to manage prosperity, democracy becomes less attractive. China model has no personal dignity, with a temptation to extend the policy to express choice China monitors and manages social networks

Answer 41

In China, you can scan QR code by phone to pay at small vendors or big businesses You can pay rent, utilities, buy food, hail taxis, etc. They skipped credit cards and just pay with their phones Government monitors and sensors mobile apps including the ones for payment

Answer 42

1839 - China stopped opium, lost war against British for HK and opened trade ports 1939-1949 - Eve of Humiliation for China as they were carved up by other countries

Answer 43

Communist leadership in China Rapid industrialization (ISI) - self-sufficient Gov. banned foreign investment and took over all businesses - “Centrally planned” economy - state-owned enterprises (SOE) - State tells you where to work, controls income Very successfully, did not improve GDP but massively improved life expectancy and social society - Gov. invested in resources - education, healthcare

Answer 44

“Dengism” leader Deng Xiaoping came into power - A mix of capitalism and communism Followed Export-Led industrialization model - Has cost advantage but missing capital and expertise - Too poor to join flying geese - Needed infrastructure but had no money! 1. 5 Child Policy - Helps families save as well as government on health and education - Saved 5% of GDP Special Economic Zones - The 5% GDP would not be enough to update all of China, so they strategically chose zones close/across shore from other more developed countries (HK, Macau, Taiwan) - Very successful! China received lots of foreign Direct investment - FIF’s helped transfer manufacturing technology to China Helped distribute Chinese exports to western buyers State-Owned Businesses - Xiaoping got rid of lots of SOE and laid off many employees - Allowed private enterprises who hired these people - Private Sector boomed - Could now join Flying Geese! Flying Geese in 1980’s: - China was able to join the flying geese with their FDI and infrastructure - Overtime they moved up in level of sophistication in their products Now: - One of the most developed road infrastructure - 7/10 of the top 10 shipping ports are in China - GDP increased by 20x!

Answer 45

Low-cost Chinese products allow other countries to get extra spending Investments into China are now very valuable Low-Cost Chinese imports allowed other countries to focus on innovation Leader in drone market - DJI has 70% of market! A Chinese dairy processor is building a development in Kingston

Answer 46

The top 1% class equates to Hong Kong, next 9% to Europe Next 40% is equal to poor neighbors - Bangladesh/Pakistan then rest with Africa ``` Large firms believe there is middle class prosperity in India There is growing inequality between their classes - high earners are multiplying, low are barely increasing ``` Reasons: - Unproductive workforce due to poor quality education - Turning small businesses into productive larger one is impossible due to bureaucracy - Less than a quarter of women work which is declining - Manufacturing jobs are limited due to automation India does not have a rich middle class - companies need to stop hoping they will buy their products which they can not afford Ex. Netflix subscription costs a weeks income Companies must adjust their prices for india! Find “enablers” products that allow Indians to access more goods (Ex. phones for streaming) Businesses hoping the Indian middle class will provide a growth spurt are wrong

Answer 47

Past: India used to prosperous, higher living standards and leading manufacturing 25% of world's output in 1700, 4% after independence Brits forced India to deindustrialize (cottom, jute) and import manufactured goods Indians were not given any technological developments PM Jawaharlal Nehru believed that foreign trade and investment led to their poverty Pessimistic about india's ability to compete globally - closed economy Import substitution Gov. owned economic sectors (air, rail, post, TV) Stopped large companies from competing in small scale industries So many regulations - “license raj” 1990 CRISIS - half percentage of world trade, rising oil prices Finance Minister Manmohan Singh: cuts in gov. Spending and revalued rupee. - IMF and World Band pledged billions in new loans - OPened Indian economy by getting foreign investment (FOrd, IBM) - Slashed import duties, encouraged exports, timmed license raj Success! Economy grew, stock market boomed, GDP and exports quadrupled Singh became PM and did not do much… economy stalled Current Government: Modi became PM - growth in 2015, GDP increased, inflation halved, good stock market India's large young population will be in workforce for coming decades, gov. Must implement reforms to take advantage of that. India's competing politics make it very hard to make changes GDP growth was due to productivity not investments like China India lags in manufacturing and infrastructure, needs investment in both for incoming young, low-skilled workers and more education Infrastructure is a mess - Modi promises 52 billion to fix this but not enough State owned companies begin to get privatized Infrastructure is slowly improving Labor ministry working on relaxing policies and simplify Tax. “Makde in India” campaign is good but unlikely to be successful

Answer 48

Brazilian land is transformed Dry bush and shrubs have been cut and leveled for farming - Some rainforest was cut, but most is cerrado This will help the poverty parts of Brazil's backland. Turned itself from food importer to worlds great breadbasket and caught up with the big five grain exporters (US, Can, Aus, Arg. Europe) First tropical food giant Increased beef export, largest exporter of poultry, sugar cane and ethanol. Done without gov. Subsidy More spare farmland and water than any other country which is important for increasing population Embrapa - Brazilian Agricultural Corp. did research about tropical farming - Breeds new foods (seeds, cattle), makes wrapping, technology, etc. - Wants to turn cerrado (dry areas - bad nutrients) green for farming - Didn't just plow the land, it made the land for farming! - Continuing to make improvements Brazil had rain in the cerrado, expertise, and cattle - All interventions worked together - they want to help Africa

Answer 49

1947 - 1964 First PM of India (followed by Daughter and Grandson) Self-sufficient (ISI), Centrally-Planned economy (state control of key sectors) - Private sectors heavily regulated by License Raj Did not nationalize the whole economy (like China did) 1991 - Now Indian economy did not do well - very slow growth “Hindu Rate of Growth” Start of India’s Economic Liberation Program 2017: India is the top IT-BPM outsourcing (55% of total share) - Employed 4 million Indians - Contributed to 7.7% of GDP ``` Post 1991 (Economic Liberalization Program) - China vs. India: Automation took away manufacturing jobs from India ``` Official Indian language is english which was a big advantage over China China has high literacy due to Mao enforcing that India has much higher university enrollment than China until 2000 After 2000 China massively increased their university enrollment 2017: China GDP (Purchasing power) is 2.5x India, or 4.7x without PPP 1st 26 years of Economic Reform for China vs. India - China grew at 6.43%, India at 5.19% - India is forecasted to grow faster than China moving forward

Answer 50

- China is 1st followed by USA then India | - India's GDP for purchasing power will not surpass that of China

Answer 51

China has large upper class, medium middle class, small poverty - They have MASSIVELY reduced poverty level India has small upper class and very large middle and poverty - Poverty has declined, however not significantly - Have trouble breaking people into middle class - Small part of economy is IT who have university education - ---> Small industry, won’t be able to employ the masses anyways - Rest are low-skilled (good for manufacturing), but there are few of these jobs available due to automation Global Wealth Distribution (2017) - China has huge share of middle class - India has huge share of the poorest Annual Job Creation - China: 13 million, India: 1 million

Answer 52

India wants firms to make products in India Does not have enough infrastructure to exports goods efficiently - Rail - takes almost 4x as long due to sped - Power supply, internet issues - Transportation costs by road are very high due to time constraints - Modi gov. Is pushing to improve infrastructure Regulations and policy limit investment - Labor laws make it difficult to make low-skilled manufacturing - Very small factories in informal sector - Advanced manufacturing - ----> Use more automation than labour due to regulations - -----> Hurts the population as it increases unemployment

Answer 53

Building and constantly upgrading a robust manufacturing sector during early stages of development

Answer 54

Cultural Factors Economic Factors - Economic structure - proportions of various economic sectors (agriculture vs. industry) - Economic System: system or production, resource allocation, distribution of goods (market economy vs. command vs. mixed) Political Factors: - The system of gov. (democracy vs. autocracy) The political economy is made up of economic and political factors

Answer 55

Brazil is the world's farm They rapidly increased their output in many areas In 1973 Nixon admin in USA limited soybean export to Japan - Japan was mad at USA since they imported 3 tons of Soybeans - Japan massively invested in Brazil’s agricultural sector 2017: Trump admin put tariffs on soybean exports so China bought soybeans from Brazil which increased their market share further

Answer 56

Resource curse: countries with lots of natural resources tend to have less economic growth than countries with fewer natural resources (fossil fuels/minerals) Ex. Venezuela, many African countries Poor Stewardship of National Resource Wealth: - Extracting has become a large part of developing country economies - 2003-2012 Commodity Super Cycle: prices of oil, metals, food surged - They should have used proceeds for investment in infrastructure and human capital as savings - They spent crazy amounts on social benefits, subsidies, low taxes, etc. - This makes the politicians popular but impossible to maintain - Some developing countries do manage this wealth wisely and are less impacted by external shocks (Botswana) Lack of Economic Diversification: - Law of comp. Ad. encouraged resource-based countries to focus on that and rely on industrialized nations for manufactured goods - Lacked structural transformation to diversify the economy beyond resource exports - Does not generate as many good jobs/economic returns as manufacturing - Exception if a country has an insane level of these resources GDP will rise. - Diversification is always wise in case of commodity price fluctuation or dwindling demand - Very hard to alter economic structure - Chile has and Sub Saharan Africa is trying to.

Answer 57

Brazilians can retire at 55 with 70% salary earnings (⅓ of gov. spending) This pension is unsustainable and contributes to their economic struggles President Temer promised to help but did nothing except scandals - Tried to set min. Retirement age at 65 for men, 52 for women. - Currently, there is no min. Age requirement - Put a military intervention in Brazil which prevents legal changes being made - He did not have the votes or court opinion to approve the reform - He was embarrassed to lose in court Brazilians are angry - they paid into it and don't want it taken away The rich get the most of the pension, poor get the least

Answer 58

Could run out by 2050 despite Gov. Optimism Trying to diversify by polishing and cutting instead of exporting rough diamonds Reduced diamond demand led to the closing of companies and jobs in Botswana 2014 There are by productivity and cost issues that led to a decline in Botswana African companies struggle competing with India (low-cost high skill labour) The government needs to help with policy and - Currently launched tax breaks - Companies based on Botswana are eligible for a higher allocation from De Beers - Imposes no mandatory commitment on companies to add value to the country - Companies trade there but do not put down roots China producing factory diamonds are entering the market Should Botswana focus on education, agriculture and also retain mineral value? Botswana advantage - knows diamonds last in the future and can plan in advance

Answer 59

Buffalo bikes are investing in Ethiopia - would create 100+ manufacturing jobs Manufacturing has been steady 10-14% in Africa and industrial output is the world's fastest-growing continent H&M sources from Ethiopia, General Electric is building a plant in Nigeria, Chocolatier is adding workers to Madagascar plant, Kenyan firm is building a cheap durable car for rough African road Domestic manufacturing is growing too - mobile phones, fashion, handbags, etc. Retail shops encourage light industry and many goods are made locally (expensive to transport) Construction boom leads to power, mobile phones and banking to minimize supplier costs Human Capital through education is booming in Africa Chinese workers are investing in African manufacturing by working on mining and infrastructure projects World Bank says many Asian manufacturing jobs could migrate to Africa (low labour costs and high productivity, infrastructure improves, trade barriers decrease 1990s Asian manufacturing hurt African firms and could not compete with low-cost Asia Gov. had neglected industry needs for roads and electricity but it is now trying to industrialize (infrastructure, business climate, urbanization, emerging middle class) Kenya won't become the next South Korea, Africa will follow a diverse path from the growth of small and medium firms and will generate jobs and wealth than in manufacturing

Answer 60

Poor stewardship of national resource wealth - Lack of plans for commodity price volatility Over-reliance of raw material export - The production of raw material typically does not command as high a return as mid stream or downstream activities - The price of raw material is more volatile than processed goods - A raw material resources can face depletion

Answer 61

Establish a well-managed national stabilization fund (or sovereign wealth fund) - Save during periods of commodity boom (avoid long-term liability) - Make an investment in long-term growth (infrastructure) Transition into a more diversified economy - Invest in physical and human capital to enable the transition - Attract foreign expertise to facilitate the transition Diversify into midstream and/or downstream business - Bring mid/downstream businesses into the country - Invest in these businesses - Ex. Diamond polishing in Botswana (should negotiate higher rough diamond price and let India do the polishing, they are wasting human capital)

Answer 62

The Boom-Year Resource Wealth went to the pension fund Most of Brazil’s population is still very young, when they get older they will use up all of the pension and the country will go bankrupt. Brazil desperately needs infrastructure but did not invest in it China wants to import Soybean from Brazil but the infrastructure is so bad so the Chinese are investing in Brazil infrastructure themselves and building a port

Answer 63

Economic and Socialization Stability Fund: uses the money from their resource wealth to save and invest in this fund Exports copper and grapes - WINE is a great downstream export for Chile!

Answer 64

They export Cocoa beans but have never tried the chocolate They are very poor yet export ⅓ of world cocoa beans Proves raw material exports do not get a good return

Answer 65

Supply - New supply sources - OPEC Production Quota - The geopolitical tension surrounding major oil-producing nations Demand - Price Swings - Alternative energy sources - Economic cycle Africa Growth: - Kenya, Tanzania, Ethiopia --> growing rapidly!

Answer 66

The flying geese (FG) model intends to explain the catching-up process of industrialization of latecomer economies from the following three aspects: Relevant aspect envisioned a regional division of labor in East Asia based on the law of comparative advantage East asia could catch up with the west by forming regional hierchy where the production of export products would move from more advanced countries to less advanced ones, through capital and tech. transfer Countries would upgrade from making low value-added products to making high value- added products in the order of their different developmental stages East asia followed this in general Japan’s Flying Geese - Goal: integrate the Asian economies into an economic flock, with Japan at the head followed by Ho Kong, Singapore, South Korea, and Taiwan, Indonesia, Malaysia, Philippines and Thailand   - Japan provides leadership and direction and produces the highest value added products   - The 4 Asian dragons are following Japan's lead by expanding in higher value added items  - This means that if the US wants to prosper, it must continue to export and Japan's domination of investment in Asia makes Japan more formidable competitor on world market 

Answer 67

What drives oil prices - most investors usually follow WTI (west Texas Intermediate) or Brent Crude to monitor the flow of oil prices Brent Crude : refers to oil from the North Sea, used as international bench mark for oil prices WTI: one type of light crude thats drilled in the US, Benchmark for US prices In general - oil prices are influenced by 3 major factors: Supply (how much available) , Demand (how much people want it), and Geopolitics Supply: determined by OPEC (organization of the Petroleum Exporting countries). now American's are playing a bigger role due to American Shale fields More oil than the market needed - oil prices crash (OPEC was blamed, but it was really shale fields) 1973 Oil embargo against the US to cut back productions (now, demand was so high and supply was so low) renewable energy: still more expensive than hydrocarbons Geopolitics: if theres tension (war) could through off supply of oil - changes price (raise), risk of supply being disrupted or transportation of oil - Trump pulled out of Iran nuclear deal (hit high's)

Answer 68

China’s growth used their labour and wages increased, income is rapidly increasing They should relocate labour intensive industries to low-income countries (Africa) China has lots of foreign direct investment in Africa (manufacturing, mining) China is building economic and trade cooperation zones and many African countries By moving up on the industry chain, China is opening great opportunities for countries to produce the labour intensive manufacturing goodes Africa even though it is further is the only one who will be able to absorb all of China’s manufacturing due to this large population Africa needs to address poor infrastructure and business environment to attract China

Answer 69

Beijing Summit: China becomes a key African partner for finance, investment and trade Debate if China’s loans to African countries are sustainable which leaves questionable long term benefits Concerns: countries are heavilty reliant on these Chinese loans (could lead to sovereignty and falling under Chinese power - Sri Lankan had to give China a port for debt) Kenya shows that relying on sovereign bonds is a bigger threat to sustainability (more expensive) Chinese trade w Africa grew rapidly until 2014 then declined due to downturn in imports because of pommodity price trends but are now rising again Chinas interest in Africa is due to self-interest as they need commodities and export finished goods, however China does not want power over them and Africa also benefits USA protectionism will deepen the Africa-China partnership

Answer 70

Chinese leader - Xi Jinping called it “Project of Century” aka Belt and Road initative Goal was to build infrastructure that are needed in countries in Asia, Africa, and Europe Chinese moeny and expertise could help spread wealth and prosperity to anyone who joins Wants to help Central Asian countries prosper and avoid Islamist Terrorism Concers: people rarely say bad things about it making mistakes likely, will Chinese cash come with power or corruption? BRI countries end up with lots of debt - is this so China gets power over them? Security risks: what if Chinese navy wants to attack countries with these roads and belts? Many Asian and Western countries are very worried, but even if it is a political tool to beat Western influence china will face issues with debt repayment and reputation If all countries, world bank and IMF contribute to this will help it be successful and fair If USA stays engaged then many of the dangers and risks of BRI are mitagted and more people will benefit

Answer 71

Countries are forging close partnerships with Africa because they see openings for trade and investment as well as reducing harmful threats Like China, many countries believe Africa is important for economic, security and political goals The influx of partnerships and resources have reshaped Africas lanscape USA is stepping back while everyone else is leaning in which reduces opportunities for USA trade and investment as well as reduces their say in the outcomes of this region Countries are opening up dozens of new forign embarassies in Africa These partnership are due to trade and investment, getting security cooperation and military sales in African countries, getting diplomatic engagement (new embassies, changing African polocies) Economic Opportunties in Africa - Growing Consumer base (population is rapidly increasing) - Mineral Wealth (energy resources, oil, gas, battery, cobalt) - Telecommunications: this industry is booming in Africa Global Food Industry - growing population in Africa will buy basic agricultural products and processed foods. African farmers struggle to increase output. - Also an outlet for excess capacity and could absorb some labor intensive manufacturing and infrastructure sectors. Security Threats Rising - Terrorism - countries are worried African countries will get taken over my terrorist and IS brances - Piracy and Dug Trade: many attacks and kidnappings as well as peristant drug traffiking problem in Africa brings issues into surrounding Countries - Global Health: Ebola epidemic is concerning, world wants to help prevent disease in Africa to protect their own people - Irregular migration: many migrate to other countries who want to help Africa be better so these people stay Gloabl Influences: - Being on good terms with Africa increases political sway in the UN - Winning over African votes is important to make changes in UN - These partnerships are excellerating African economic growth and they also help humanitarian issues and security Challenges: high potential for disputes, the more countries invest financial, diplomatic, and military resources in Africa the more likely disagreement will occur - The USA is cutting foreign assiance (miltary) and reduced trade and investment Recommndations? - USA must step up doplomacy and communicate their objectives in Africa - Start talking to everyone - broaden partnerships with other countries - Serve as an honest broker: USA could referee disagreements to protect their own interests - Define USA strategic advances: USA has lots of service, finance, energy… they could take on defense and strengthen logistical capacity in Africa - Establish a Division of Labor: has finite resources to spend in Africa so by embracing new countries they could invest new reoucres into fighting criminality and bring different skillsets, talents and experiences to prevent local African problems from becoming a global crisis.

Answer 72

China is number one infrastructure financer for Africa Japan was resource hungry - they offered China a line of credit (to build infrastructure, expertise, manufactured goods, etc) in return for their resources - Chinas rise was not possible without Japan Later, China did the same thing to Africa - China’s intentions were out of self-interest however it is not malicious - Africa benefits greatly from this partnership Africa needed capital (infrastructure and capital goods) but it was very hard to mobilize domestic sources of capital - yay foreign capital - BUT hard to get foreign capital because Western firms were wary

Answer 73

China’s economic involvement has helped Africa overcome capital shortage and make necessary investments in infrastructure & industrial technology - Increased revenue from commodity export - China has a HIGH demand for these resources - Increased private-sector savings by providing low priced consumer goods - ------> Africa wants cell phones but can’t afford it, Chinese give them Transsion - -------> This is selling very well in less developed countries (cheap & functional) - --------> These savings can be diverted to investment! Decreased cost for capital goods and infrastructure resulting from the involvement of low-cost Chinese firms - Huawei updated internet cables underground along the African coast Fund infusion through Chinese loan/aid for infrastructure, etc. - China spends $4bil. To fund a railway that will reach -landlocked Ethiopia - Helped improve expertise in construction and manufacturing

Answer 74

Create Partnerships with as many countries as possible Use Brazilian expertise to convert Mozambique’s subsistence agriculture into commercial agriculture - Brazil successfully developed their agriculture business, Africa wants help! - Form alliance with other African countries (African union) - Pan-African Free Trade Agreement - ------> Too many countries were small and landlocked, this gives equal opp. Ethiopia (2011) became a shoe manufacturer, showed leadership, vision, and willingness to change - They did not want money, they wanted expertise and guidance African development will improve global market and security

Answer 75

Factor Proportions Theory (Heckschner-Ohlin Theory) - Countries specialize in production/exports where they have abundance and import where they have a short supply. - Factor proportions theory show that other factors beyond simply endowment of a country (land, capital, etc) but also be considered - Ex. of other factors: technology, government, transportation, scale, etc. Product Life Cycle Theory - New innovations from industrialized nations are exported, eventually, they get copied and exported by less industrialized countries at a lower price - Consistent in 1960-70’s when the USA dominated but less relevant now as firms globally innovate rapidly New Trade Theory: - Extends Factor Proportions by considering the other production factors

Answer 76

Forefront of as entrepreneurs who completed military service bring back expertise Many high tech startups (WAZE) - Strong eng and tech university programs Israel's education gets lots of participation and eagerness to learn as kids and university Mandatory military service drives high achievement, risk acceptance, and rights to ideas Many international companies are coming to Israel

Answer 77

Innovator for fragrance and cosmetics (1/10 companies come from this region) Cosvapex: a project to increase collaboration/pool logistics resources for the cosmetic valley Is a key base for R&D (LVMH Research expanded here) Japanese (Shiseido) took advantage of collaboration here and became a member The government and post-secondary support and encourage cosmetic innovation and offer many specialized training programs to stimulate development

Answer 78

Clusters: geographic concentrations f firms focused on a particular industry, field or sector (across the supply chain vertically and horizontally to complementary industries) - Includes that develop specific skills for industries in that area Competition: Porter 1998 - Increase productivity of firms in the cluster - Drive direction and pace of innovation - Stimulate new related businesses (thus strengthening the cluster) Productivity: - Benefits: access, trend awareness, complementaries ( for wine but also eat cheese), reputation, benchmarking and comp. Motivation - Clusters give access to: - ----> The talent pool, supplies (close by), specialized info, public goods (gov. Investment and specialized infrastructure) Innovation benefits: - Capacity to react quickly to market pressure with collective resources - Pressure from sophisticated customers near the cluster - Can experiment at low cost - Knowledge synergies - close proximity brings R&D ease and collaboration between firms, education, etc. New Business Formation with clusters: - Easy to see gaps (in the market or value chain) where a new business can help - Low barriers to entry - necessary inputs are plentiful and high quality

Answer 79

Helps firm understand home nation advantages, sources of competitor advantages, and where to conduct different aspects of your business based on this Helps execute strategic choice in location for business segments or functions - Ex. Intel and Apple R&D centers are in Israel, Beauty in France, etc.

Answer 80

1. Factor Conditions 2. Demand Conditions 3. Related and Supporting Industries 4. Firm Strategy, Structure and Rivalry * * Added factors 5. Government 6. Culture

Answer 81

1. Factor Conditions - skilled, engineering programs 2. Demand Conditions - (limited space), compact machines, integrated/multi-purpose tech, accuracy in replication (language characters) 3. Culture - formal communication, hierarchical structure, respect for elders, more handwritten (more personal/respectful/indicates intelligence) 4. Firm Strategy, Structure and Rivalry - rivalry, increased gov. investment in R&D, vertically integrated

Answer 82

It does matter to some extent - clusters What if the industry does not have a geographical cluster? - National “disadvantage” in a particular industry Example: beer in Japan: Transitioned into the pharmaceutical industry There was a biotechnology revolution where technology is used for biology Weak factor conditions: weak focus on life sciences in Japanese universities Strong related and supporting industries: strong pharmaceutical and chemical firms looking to absorb new scientific discoveries Invested in a knowledge cluster (San Diego) - Acquired US biotech firms, LT joint ventures w these firms, establish Gemini Science (new name!), created non-profit in San Diego - Exposed their scientists to the inner workings of San Diego to bring the knowledge and experience back home - Knowledge and cultural spillover from San Diego to Japan Kirin

Answer 83

``` Old world (Italy, France, Spain) vs. New World (Chile, USA, Australia and NOW China) The old world is constrained by traditions and regulations ``` A new world has developed new innovations to meet changing tastes and demands

Answer 84

Roman Empire wine was for peasants and religious purposes than a nobility in Middles Ages The bulk wine was distributed but very expensive cross borders making wine a luxury item New innovations in France (good bottles and corks) made it easier to age and transport Government regulations were put into place to control winemaking and classifications Producers and customers liked the rules due to a belief of quality but that was not always the case A disease broke out in France in 1885 devastating stock so they exported to California

Answer 85

Wine drinking was not common in the New World until more recently American wines began competing successfully with Old World Changes in consumer tastes, consolidation, distribution and laws were opportunities for New World to address

Answer 86

Innovative technologies developed in Australia (drop irrigation - forbidden in France) Sunny climate in AUS doubled density and new fertilizers improved quality and flavour AUS has lots of inexpensive large tracts of land, new barrels, etc. AUS developed wine in a box, plastic corks and screw caps (cheaper and less spoilage) Marketed towards unsophisticated wine consumers and simple palates Most wine companies controlled the whole value chain, unlike France who had crazy laws - this increased control, quality, less inventory, bargaining power, etc. Was much cheaper as AUS grapes were much cheaper

Answer 87

Used to be low consumption in China, now increasing after easing Communist rule in 1978, GDP and household wealth increased Vineyards in China focused on volume, not quality and imported bulk from AUS and Chile to fix the flavour France began exporting to Hong Kong but lack of experience caused lots of wine to spoil China also had an uneducated consumer base and poor brand recognition = high markups and counterfeits China improved this AUS invested in wine education in China as they began exporting Chinese economy slowed in 2012 and stopped importing wine, fine wine prices dropped, entry-level consumers now looked for mid-priced wines

Answer 88

Consumption decreased in France so they exported to China who was growing in affluence Chinese producers invested in French wineries to gain knowledge and reputation French Bordeaux winemakers invest in Napa Valley French and AUS wine industries partner with tourism to attract Chinese tourists Climate change threatens winemaking, AUS is investing in climate change research

Answer 89

AUS low-middle market is challenged with increasingly more low-cost producers in other The Chinese market is central to AUS Wine industry Why is Bordeaux investing in Napa? - Learn the technologies - Regulations in the USA are different so they will learn these strategies in case regulations shift - Close to the US market (for shipping and meeting needs/wants) - Variety of sourcing (different soil) - Scale (land is tight in France, more available in Napa) - Diversifying risk (especially climate risk) Key Trends: - Diversify risk (different climate locations) - Invest in technology to improve drought resistance of grapes - Use aerial photography to match grape varieties with optimal climate (Isreal) - AUS makes major investments at the industry level (cluster) on climate change impact on wine research

Answer 90

National Competitive Advantage over time: - Advantages based on quality and reputation will persist longer than based on cost (ex. France vs. AUS) Importance of Continued Investment in the National Diamond - Ex. Partnering with related and supporting industries, factor conditions (university programs), etc.

Answer 91

``` Market Growth Driver: market push (current market too saturated, needs to find new markets abroad to increase sales/growth) and pull (rapidly growing demand needs) ``` Cost Driver: internationalization brings two cost benefits - Lower input costs (land/ labour) - aka Arbitrage strategy - Economies of scale - increased market/production lowers overall costs Competition driver: may be reactive if others are entering a certain market, or they could enter it first to get an advantage - You have quicker market sensing skills to the needs of foreign customers when you have globalized value chains - Globalizing brings market growth, economies of scale, cost arbitrage which might eliminate competitors who do not do this Government Driver: home and host gov regulations and support (taxes, financing, rules) Resource Driver: natural resources especially but also labour resources - move where there is an abundance of a resource you need! Knowledge Drivers: certain regains gain an advantage in industries - Knowledge and innovation advantage in countries human resources, firms, specialized education and research are important to tap into if home country does not have the same level

Answer 92

Joint venture with Thai partner to build a factory and import French equipment French company would supply cost saving advanced tech and train the cheap Thai workforce Thailand brought a good distribution system and local knowledge/gov. Connections Polytex already has operations in Europe and Latin America Polytex was decentralized with lots of middle management responsibility, Yipsoon in Textiles was a small family-owned company with strop top-down leadership Yipsoon was successful with Japanese and German partners

Answer 93

Positioned for affordable, fast fashion in a convenient shopping environment (Loblaws) Entered the US market in 2011 in New York through JC Penny but closed down New York in 2016 They underestimated the intensity of fast fashion market competition, chose the wrong partner and did not understand the differences between US and CAN consumers Now expanding to South Korea and Philippines then Africa, Asia, Middle East and Europe

Answer 94

Companies overestimate the attractiveness of foreign markets (underestimate costs) CPA (country portfolio analysis) focuses on national GDP and consumers while ignoring costs and risks of new markets and other distances (CAGE) ** CAGE = Cultural, Administrative, Geographic and Economic differences)

Answer 95

Understanding and managing the impact of “distance” CAGE framework of the concept of distance or country differences CAGE analysis will influence decisions of which markets to enter, how to enter, impacts on a market entrance/internal operations/products, necessary adaptations to chain Cultural Distance - Languages, ethnicities, religions, social norms, beliefs - Influences the choices between substitutes because of preferences for features (ex. Colors have different meanings in each culture) - Ex. Lays in China needed to develop a hygienic/clean package Administrative Distance - Political hostility, shared monetary association, colonial ties, shared currency, policies and enforcement Geographic Distance - Remoteness, common border, sea/river access, country size, transportation lines, different climates/topography - Ex. Nestle - baking changes at different altitudes so they opened an R&D firm in Ecuador Economic Distance - Consumer income, cost and quality of (resources, finances, human resources, infrastructure, info/knowledge) - Ex. Unilever in India - consumers wash more by hand

Answer 96

1. Strategic Importance of the Market: Market potential: market size and growth expectation for a line of business Learning potential: - Presence of sophisticated and demanding consumers for a product/service: - -----> Puts pressure on the firm to raise standards for quality, the speed of development, cost competitiveness, etc. - ------> Forces constant innovation and the development of competitive skills - The pace of relevant technology development - ------> Includes strength of research institutions/universities - ------> Competitor involvement in tech development enhances learning potential 2. Ability to Exploit the Market Market Distance Barriers: CAGE - Height of entry barriers - distance between home and target market on CAGE - The specific knowledge and capabilities of the firm can affect these barriers The intensity of Local Competition - Both local firms and established global competitors in the market Key Take-Away: In international market selection decisions the relative weight of the strategic importance of the market vs. the ability to exploit the market is shaped by many factors including: - Size, experience, capital, resources of the firm - Number of international market entries being considered - Risk propensity of decision makers (make sure you have diverse group!) Framework: Ignore for now (low strategic, low ability to exploit the market) ``` Opportunistic entry (low strategic, high ability to exploit the market) - Shorter term, steady revenue to fund more strategic entries ``` Phased-in entry (high strategic, low ability to exploit the market) - Focus on a smaller subset of the market and expand over time Rapid entry (high strategic, high ability to exploit the market)

Answer 97

Australia: - Demanding high quality, healthier FAST food - Easy to source ingredients in AUS due to massive land and 3 dif. Sub-climates allow for lots of agriculture and animals - Transportation is also well developed with low costs - Restaurants are highly regulated - licenses, etc. - Large distance between iQ headquarters in TO and AUS so they would need to get a new supply chain and expand their menu - There is lots of competition in AUS so they need to grow venues and develop their brand name. Germany - Health is becoming very popular and consume lots of organic foods - No local healthy fast food competition but bakeries are starting to try - GER has the climate to grow the necessary agriculture over importing - Have heavy gov. Policy about starting new firms (high taxes) Hong Kong - Dense, high dining exposure, REALLY likes sustainable/nutritious products - High return on investment due to population - Small land mass but good for organic farming however would be hard for iQ Food to source ingredients locally - Industry is highly competitive with local and global chains - Local restaurants use english/western brands/names to leverage credibility making iQ Food less unique in HK United Arab Emirates - Large affluent population who like premium quality and healthy food - High Diabetes rates locally but also has lots of tourists - iQ Foods does not offer much meat which is good for Halal, but there are some tensions between Can and UAE gov but that might not be a concern - Ingredients can be sourced locally! - Very highly competitive and saturated industry

Answer 98

Arms Length Modes - do not involve foreign direct investment - Exporting - sale of goods and services in another country than where produced - Licensing - rights to intangible property to another entity for a royalty fee (ex. Disney licenses rights to use Mickey Mouse on clothing) - Franchising: licensing but has strict rules about how to run the operation - Manufacturing or Service Contract: outsourcing activities Foreign Direct Investment Modes: involves ownership of international operations - Wholly Owned Subsidiary: firm owns 100% of of foreign operations through: - ----> Greenfield: starting from scratch in new market (new facilities, employees) - ------> Acquisition: establish foreign subsidiary by purchasing an existing firm for their physical and intangible assets (knowledge, people) - Joint Venture - establish new firm that is owned by 2+ independent firms (parents) - ------> Equity can be split a variety of ways

Answer 99

You must determine how to enter the country/market of choice. Consider: Decision 1: Extent of local production - production vs. exporting in parts or full products Decision 2: Extent of ownership: licensing, franchising, partial, or full

Answer 100

more is good when: 1. Size of local market is larger than min. Efficient scale of production 2. Shipping to target costs are higher than the benefit of producing in the home country 3. Taxes on exporting to target market are higher than benefit of producing at home 4. Input costs are sufficiently lower in target than at home 5. Need for local customization of product is high - being local allows you to respond to market needs accurately/efficiently! 6. Strict local content requirements - some countries require a percentage of a products content to come from local sources

Answer 101

Full ownership gives greater control/profit but more costs/risk Arms length - lower cost/risk of expansion but low control/less profit Partial - shared costs/risks, added knowledge, connections, reputation but hard to manage/high conflict risk Find alliance when: 1. CAGE distance is high - would benefit from a local partner’s knowledge/networks 2. Firm is short of capital 3. New foreign subsidiary will have low integration with the rest of the multinational operations - If they are tightly integrated all their subsidiaries/HQ must constantly align goals/activities which is hard with many partners 4. Low risk of asymmetric learning between partners - Each brings complementary skills and distinct knowledge - if one learns faster than the other it might dissolve partnership which is less likely if both constantly evolve and add value 5. Government regulations require local equity participation

Answer 102

Greenfield: gives freedom to implement management, culture, operations from scratch - Cons: lower speed of entry and increased local competition, expensive and lengthy process to start everything from scratch Acquisition: quicker entry and gets the assets, human capital and knowledge of local market. Also removes a competitor from the market. - Cons: post-merger cultural and operational integration can take a long time, often pay a huge premium - Other reasons: product diversification (Nestle & pet food), positioning in a specific market, supply chain integration (vertical), knowledge/position acquisition The role of finance changes based on the circumstances so you must evaluate Greenfield is better when the following occurs otherwise acquisition is: 1. Company culture is unique or operations are very specific - The more unique processes are the more they will want to have greater control 2. When market growth rate is high or competition is low - If demand is growing there is less concern with adding new capacity

Answer 103

Starbucks Case: originally focusing on North America and then internationally in the 2000’s USA - Organic Growth Model - Offered new value prop so was not able to fuel expansion with acquisitions - Centralization and full control was key to maintain uniform practices - They were very patient with waiting for great locations that would make more in the long run Japan - Joint Venture - Attractive market and taste for coffee but Starbucks lacked local knowledge and human resources in Japan. - Operating costs were double, shipping coffee from Seattle to Japan was expensive, retail space is 3x as expensive - Joint venture with Sazaby - Starbucks had full decision power for brand, product, ads, communication, Sazaby dealt with real estate, operative and human resources - Decision cons: shared profits - Today? - Product adaptation (to local tastes and niches), learning potential (sophisticated trend focused consumers), move to full ownership (recently bought out Sazaby) United Kingdom - Acquisition (Seattle Coffee Company) - Culture, language, gov., management, economics, etc. were similar in UK to what Starbucks already had - Seattle Coffee was good because of its focus, small market cap. And existing locations - UK competition was strong but it used a similar organic growth strategy in UK as USA - Decision pros: low CAGE, eliminated competition, quick entry - Today? Failed to innovate for UK, not all USA practices translated, need to carefully introduce USA innovations as they are not always well-received China - Licensing - Untapped market but risky culture and politics, concerns with operations and staff - Sending recruits to USA for training helped attract qualified people which is essential to maintain the uniform customer experience and coffee quality - Increased equity ownership in China - Decision pros: low risk entry, high risk environment - Today? aggressive market growth, HR adaptation, strategic resource opportunity Australia - Company Owned Stores - Existing coffee culture, high competition with a preference for local small cafe’s over chains - Starbucks opened and did not customize product enough or target an already sophisticated coffee drinker and they struggled to stay afloat - Problem: launched too rapidly, too many locations, no organic growth, underestimated barriers to entry and local competition (specifically consumer preference for cafe’s) Global Challenges for Starbucks: - Forced to compete in international market and was not a first mover like it was in the US - It was initially very successful in Japan as it reached an untapped coffee market but then Japanese coffee drinkers began going to other stores whos taste better suited preferences - Many of their entries were joint ventures which bring lower profits and uncontrollable costs regardless of the increased local knowledge and lowered risk.

Answer 104

Every MNC faces: pressure for global integration but also local responsiveness - Different industries and developmental stages of a firm are impacted differently by these pressures (ex. Food vs. util.) Forces for global integration: pressure to coordinate international activities - Pressure to lower costs / increase efficiencies through communication across activities - When following this firms view the world as a single unified market and focus on standardization of products, services, and operations Forces for local responsiveness: pressure to respond to the unique needs and conditions of each market and the CAGE differences of the entire country - When following this strategy, firms view all country markets independently and focus on local adaptation - Localization of product attributes (consumer behavior), service (hiring), promotion Administrative Heritage: one of the many factors that shape which pressure they follow - Social/political era when the firm internationalized - Home country of firm (size, location, culture, etc) - Values of the founders and early management

Answer 105

Multinational Organizational Model: Firm views each market as an independent business High local responsiveness - strategy of adaptation Assets, responsibilities and decisions are decentralized to foreign subsidiaries (high autonomy and power) High use of local managers who know local culture Ex. TV programming Pros: economies of scale, efficiency, coordination, sharing knowledge Cons: responding to consumer needs, locally relevant management, using local knowledge, innovating for the local market

Answer 106

Global organization model: Firm views foreign operations as implementers of their strategies / one big global market Focus on standardization, aggregation, economies of scale - strategy of aggregation Centralized hub: tight control of assets, responsibilities and decisions from headquarters of operations and culture High use of expatriate managers who know culture of home country Ex. Commodities, Automotive Pros: economies of scale, bringing new innovations quickly to global markets Cons: responding to local market needs, innovation at subsidiary level

Answer 107

Transnational Organization Model: Treats all markets as equal players to contribute to local and corporate goals Worldwide learning: using cost differences, knowledge and capabilities to benefit entire firm (knowledge developed jointly and shared worldwide) Integrated network structure: assets, decisions and power is specialized, geographically distributed Power balance between HQ and subsidiaries, high communication and coordination across all locations/functions Global and local perspective and culture in HQ and each subsidiary Many firms are moving towards this approach Ex. consumer packaged goods

Answer 108

Frederik Philips: shared leadership with his brother (eng and commerce) - Specialized in lightbulbs vs. diversifying like others - Used physics and chem labs to solve many scientific problems - Export manager - sold in global markets and used joint ventures Konosuke Matsushita - Over 5000 products - Employees get “7 Spirits” based on cultural and spiritual training - Goal was to supply high quality & quantity at low prices

Answer 109

MNC strategy is influenced by Admin. Heritage: Factors: socio-political era when internationalized, home country demographics, founders and early management Admin Heritage reinforces certain organizational capabilities and constraints others

Answer 110

Global powerhouse in appliances and tech centre in Silicon Valley 15 years ago Chinese appliance industry was bad - Used flying geese paradigm - product development in a country grows from: - ---------> Import, domestic production, export phases China WTO: - Few competitive domestic firms - foreign firms take advantage of low input costs - Domestic appliance firms begin to emerge - International firms increase presence in china - scale economies! - ------> Led to domestic price battle, local firms struggled and internationalized

I.B. Flashcards

(134 cards)