LU3 - Transnational Media Corporations And Global Competition Flashcards Preview

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Flashcards in LU3 - Transnational Media Corporations And Global Competition Deck (16):
1

Define transnational media corporation.

- transnational corporation is an organised strategic system largely based on economic goals and efficiencies
- transnational media corporation (TNMC) - main commodity = information and entertainment
- TNCs = necessary component of global capitalism (they provide informational and ideological environment that enables international free market trade to occur)

2

Explain "Free Market Capitalism."

- you're free to come up with goods, products and services
- rewards those that create new, innovative products
- private sector is the primary engine of growth
- adhere to principles of deregulation and privatization
- aim: promote increased domestic competition
- rules of free market trade extend internationally
- not all countries adhere to free market trade rules in the same way (some tailor the rules in trade agreements)

3

List why companies engage in foreign direct investment

- proprietary and physical assets
- foreign market penetration
- production and distribution efficiencies
- overcoming regulatory barriers to entry
- empire building

4

Explain "proprietary and physical assets" as a reason for companies to engage in foreign direct investment.

- some TNCs invest abroad to obtain specific proprietary and physical assets
- ownership of talent/specialized expertise = proprietary asset
- physical asset = item of commercial/exchange value
- e.g. Sony corporation's purchase of CBS records and Columbia Pictures (means they now own copyright to dome films )

5

Explain "foreign market penetration" as a reason for companies to engage in foreign direct investment.

- may invest abroad to enter a foreign market and serve it from that location
- the market may exist or may have to be developed
- ability to buy an existing media property is the easiest and most direct method for market entry
- includes:
Construction of or investment in foreign facilities
Mergers and acquisitions
Foreign joint venture

6

Explain "production and distribution efficiencies" as a reason for companies to engage in foreign direct investment.

- cost of labour and production are NB factors in choosing foreign locations
- some countries offer significant advantages i.e. Low labour costs, tax relief...
- depending on country, products and services can be produced for less costs and increased efficiency
- this is one reason for shooting on location where production costs are less expensive than Hollywood

7

Explain "overcoming regulatory barriers to entry" as a reason for companies to engage in foreign direct investment.

- some TNCs invest abroad for the purpose of entering into a heavily tariffed market
- it's not uncommon for nations to engage in various protectionist policies designed to protect local industry
- such protectionist policies usually take the form of tariffs or import quotas

8

Explain "empire building" as a reason for companies to engage in foreign direct investment.

- CEO = responsible for shaping beliefs, motivations and expectations for the org as a whole
- CEO = NB for formulation of business strategy
- there is a certain amount of personal competitiveness and business gamesmanship that goes along with manage a major company
- success is measured in ways that go beyond profitability
- a high premium is placed on successful deal making and new project ventures

9

Explain risks involved in FDI.

- TNC is subject to laws and regulations of host country
- also vulnerable to host country's politics and business policies
- political instability (including wars, revolutions and coups)
- changes stemming from elections of socialist/nationalist governments
- changes in labour conditions and wage requirements are also relevant
- foreign governments may impose laws concerning taxes, currency, convertibility and/or technology transfer

10

Differentiate between mergers, acquisitions and strategic alliances.

MERGERS
- 2 companies are combined into one company
- newly formed company assumes the assets and liabilities of both companies
- e.g. momentum and metropolitan merged to created MMI Holdings

ACQUISITIONS
- purchase of one company by another company for the purpose of adding (or enhancing) the acquiring firm's productive capacity
- one company acquires the operating assets of another company in exchange for cash, securities or a combination of both
- RCL foods bought TSB sugar to form FoodCorp

STRATEGIC ALLIANCES
- a business relationship
- 2+ companies work to achieve collective advantage
- can vary strategic alliance approach which could range from a simple licensing agreement to actual combining of physical resources
- e.g. Seattle Coffee and Caltex Freshstop

11

List reasons that explain why mergers and acquisitions can fail.

1. Lack of compelling strategic rationale
2. Failure to perform due diligence
3. Post merger planning and integration failures
4. Financing and the problem of excessive debt

12

Explain why lack of compelling strategic rationale can cause mergers and acquisitions to fail.

- decision to merge is sometimes not supported by a compelling strategic rationale
- both companies have unrealistic expectations of complacency strengths and presumed synergies
- problems that promoted merger can often become worse

13

Explain why failure to perform due diligence can cause mergers and acquisitions to fail.

- "due diligence" doing homework about company they're acquiring
- acquiring company only later discovers that intended acquisition may not accomplish the desired objectives

14

Explain why post merger planning and integration failures can cause mergers and acquisitions to fail.

- proposed mergers must include an effective LAN for combining divisions with similar products (if not, then duplication can = friction
- reporting functions among managers become divisitive
- further complicated due to differences in corporate culture

15

Explain why financing and the problem of excessive debt can cause mergers and acquisitions to fail.

- assume major amounts of debt through short term loans
- performance doesn't meet expectations = unable to meet loan objective
- may be forced to sell off entire divisions
- may default on payment
- debt may be destabilizing to newly formed company

16

Explain broadband communication.

- historic boundaries that once separated media and telecommunications are becoming less distinct
- result: convergence of modes whereby technologies are becoming more fully integrated
- convergence is driven by digitalization of media and IT
- increased potential for manipulation/transformation of data
- broadband communication is used to describe ability to distribute multi-channel info and entertainment services
- broadband connotates high speed internet access
E.g. Bringing Fibre to homes