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BU491 - Business Policy II > Midterm > Flashcards

Midterm Flashcards

1
Q

What are the 3 characteristics of a true MNE?

A
  1. Substantial direct investment in foreign countries
  2. Active coordinated management of offshore assets
  3. Strategic and organizational integration of foreign operations
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2
Q

Traditional motivations to internationalize (pre 1970):

A
  1. Market seeking
    - Fill capacity, exploit competitive advantages and economies of scale and scope.
  2. Resource seeking
    - Secure key supplies
    - Exploit factor cost differences (access low-cost factors of production)
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3
Q

Emerging motivations to internationalize (post 1970):

A
  1. Industry internationalization forces
    - Scale economies, ballooning R&D investments, shortening product life cycles
  2. Global scanning and learning
    - Access emerging trends, new technologies, and best skills worldwide
  3. Competitive positioning
    - use global operations to pre-empt others, cross-subsidize markets
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4
Q

Which framework should be used to better understand the risks and costs associated with internationalization?

A

The CAGE Framework

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5
Q

What are the four elements of the CAGE framework?

A
  1. Culture distance
    - Different language, different religions, different social norms
  2. Administrative and political distance
    - Unions, currency, tariffs, quotas, etc.
  3. Geographic distance
    - Distance to country, within-country distances, access to waterways/oceans
  4. Economic distance
    - Wealth and income of customers, resource and factor costs
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6
Q

Which five approaches to foreign market entry are available to firms?

A
  1. Export
  2. Licensing
  3. Franchising
  4. Joint Ventures
  5. Subsidiaries
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7
Q

Internationalization Process Theory (Uppsala Model):

A

Incremental process of learning and increasing commitment to foreign market

  • Perceived uncertainty and knowledge about foreign markets determine the internationalization process.
  • Gradually increasing internationalization after a long period of doing business exclusively in the home market.
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8
Q

Global vs. Multinational Enterprises

A

Global:
- High global integration
- Low national responsiveness

Multinational:
- Low global integration
- High national responsiveness

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9
Q

What are the elements of the PESTEL analysis?

A

P - Political
E - Economic
S - Socio-cultural
T - Technological
E - Environmental
L - Legal

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10
Q

What factors impact a firm’s ability to integrate and coordinate globally?

A
  • Economies of scale and scope
  • Factor costs
  • Increasingly liberalized environment for trade
  • Expanding spiral of globalization
    - Convergence of customer needs
    and preferences
    - Global enterprises as change
    agents
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11
Q

What are the forces of local differentiation and local responsiveness?

A
  1. Cultural differences
    - Consumer tastes and preferences
    - Ways of doing business
  2. Countries current situation plus government demands
    - Tech standards
    - Distribution channels
    - National laws and regulations
    - Local ownership restrictions
    - Political risk
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12
Q

What factors are driving an increased need for rapid and coordinated worldwide innovation and learning?

A
  • Shortening product life-cycles
  • Increased cost of R&D
  • Emergence of global technology standards
  • Competitors’ ability to develop and diffuse innovation globally
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13
Q

Three key pillars of global corporations:

A
  1. Technology
  2. Global recruiting
  3. The finance function
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14
Q

What are some factors that are leading towards deglobalization?

A
  1. The Splinternet (US vs. China)
  2. The Intensifying War for Talent
  3. More Complicated Corporate Finances and Regulatory Regimes
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15
Q

What are the four steps in the Political Risk Framework?

A
  1. Understand
  2. Analyze
  3. Mitigate
  4. Respond
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16
Q

What questions are asked in Step 1 (Understand) of the political risk framework?

A
  • What is my organization’s political risk appetite?
  • Is there a shared understanding of our risk appetite?
  • How can we reduce blind spots?
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17
Q

What questions are asked in Step 2 (Analyze) of the political risk framework?

A
  • How can we get good information about the risks we face?
  • How can we ensure rigorous analysis?
  • How can we integrate political risk analysis into business decisions?
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18
Q

What questions are asked in Step 3 (Mitigate) of the political risk framework?

A
  • How can we reduce exposure to the political risks we have identified?
  • Do we have a good system and team in place for timely warning and action?
  • How can we limit the damage when something bad happens?
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19
Q

What techniques are used by MNEs to manage country political risk?

A
  • Recruiting local partners
  • Limiting R&D in nations with leaky intellectual property protection
  • Purchasing insurance against political risks such as the expropriation of property, political violence, currency inconvertibility, and breach of contract
  • Diversifying their FDI across countries
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20
Q

What questions are asked in Step 4 (Respond) of the political risk framework?

A
  • Are we capitalizing on near misses?
  • Are we reacting effectively to crises?
  • Are we developing mechanisms for continuous learning?
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21
Q

Efficiency formula:

A

Efficiency = value of outputs / value of inputs

  • Higher value outputs = better efficiency
  • Lower cost of inputs = better efficiency
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22
Q

What is multinational flexibility?

A

The ability to manage risks and exploit opportunities arising from the diversity and volatility of the global environment.

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23
Q

Sources of diversity and volatility

A
  • Macroeconomic risks (e.g., changes in prices and exchange rates)
  • Political risks
  • Competitive risks (e.g., uncertainties about competitor’s actions)
  • Resource risks (e.g., availability of raw material)
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24
Q

What are required for multinational flexibility?

A
  • Scanning and responding to discontinuities in global environment
  • Selecting most attractive markets, sensing their needs, and developing adaptive responses
  • Understanding and managing different forms of risk
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25
Q

What are the three fundamental tools for building worldwide competitive advantage?

A

National differences
- Differences in factor costs
- Differences in output markets

Scale economies
- Macroeconomic theory: cost per unit of output decreases with increasing scale
- Learning and progressive cost reduction

Scope economies
- Share investments and costs across the same or different value chains
- Sharing can take place across segments, markets, or products and may involve the joint use of different kinds of assets (e.g., production machinery, ICT, marketing, etc.)

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26
Q

How can a company respond to the strategic challenges?

A
  1. Defend worldwide dominance
  2. Challenge the global leader
  3. Protect domestic niches
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27
Q

What are some challenges of the global matrix org. structure?

A
  • Informational logjams
  • Problem resolution through escalation
  • Overlapping responsibilities
  • Turf battles and a loss of accountability
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28
Q

Aside from organizational structure, what other tools are required to effectively manage a complex organization?

A
  • Administrative systems
  • Communication channels
  • Interpersonal relationships
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29
Q

What is administrative heritage?

A

Organizational history, the values, norms, and embedded management culture

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30
Q

Three archetypes of administrative heritage:

A
  1. European empire (multinational model)
  2. American empire (international model)
  3. Japanese empire (global model)
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31
Q

Describe decentralized federation (European model)

A
  • Strategy based on understanding and responding to national markets
  • Organization developed as a portfolio of national companies
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32
Q

Describe coordinated federation (American model)

A
  • Organization built on strong links to the parent company based on transfer of expertise.
  • Foreign units often free to make adjustments to reflect market differences.
33
Q

Describe centralized hub (Japanese model)

A
  • Organization grew as dependent foreign units tightly controlled from the centre.
  • Strategy based on capturing global scale economies.
34
Q

What are the three key organizational characteristics for building a transnational enterprise?

A
  1. Builds and legitimizes multiple internal perspectives
  2. Dispersed and interdependent physical assets and capabilities
  3. Robust and flexible integrative process
35
Q

What does it mean to build multidimensional internal perspectives?

A
  • Develop strong national subsidiary management, global business management, and worldwide functional management.
  • Ensure multidimensionality in management perspectives and decision-making.
36
Q

What does it mean to build dispersed and interdependent physical assets and capabilities?

A
  • Achieve efficiency by specializing the activities of selected units.
  • Most efficient local plants might become regional or global production centres.
  • Most effective R&D and innovation labs might become ‘centres of excellence’.
  • Interdependent relationships across organizational units.
37
Q

What does it mean to build flexible integrative processes?

A
  • There is not a single static management model that is applied universally in the company.
  • Benefits from central control and integration or local responsiveness might differ between business units, functions, and regions.
38
Q

In comparing the attributes of a transnational organization to that of humans, what does the structure represent?

A

Anatomy:

  • Cross-unit teams, task forces, and committees supplement the formal line structure.
39
Q

In comparing the attributes of a transnational organization to that of humans, what do the processes represent?

A

Physiology:

  • Volume, content, and direction of information flows (the higher complexity and uncertainty the greater the need for information).
  • Informal and formal communication channels.
40
Q

In comparing the attributes of a transnational organization to that of humans, what does the culture represent?

A

Psychology:

  • Shared understanding of the company’s mission
  • Behaviour of senior management
  • Personnel policies
41
Q

What are three key capabilities in the new competitive battleground?

A

Sensing
Responding
Implementing

42
Q

What are the two classic processes for traditional innovation?

A
  1. Center-for-global
  2. Local-for-local
43
Q

Describe center-for-global innovation.

A
  • Headquarters senses opportunities
  • Centralized assets and resources of the parent company are used to create a new product or service
  • Implementing strategy decided centrally and executed locally
44
Q

Describe local-for-local innovation.

A
  • National units sense local needs
  • Distributed assets and resources allow for local response
  • Local-for-local implementation
45
Q

What are the problems associated with the center-for-global innovation model?

A
  • Risk of market insensitivity
  • Imperialism
  • Technological/competitive advantage of home market may fade
46
Q

What are the problems associated with the local-for-local innovation model?

A
  • Risk of duplication
  • Reinventing the wheel
47
Q

Locally leveraged innovation model

A

Special resources and capabilities of each national subsidiary are available to other units as well

48
Q

Globally linked innovation model

A

Resources and capabilities of many unites (center and subsidiaries) pooled to jointly create and manage an activity.

49
Q

What are the problems associated with the locally leveraged innovation model?

A

Threatened by not-invented-here (NIH)

50
Q

What are the problems associated with globally linked innovation?

A

High coordination costs

51
Q

What is reverse innovation?

A
  • Develop products for markets in emerging economies.
  • Sell in developed markets
52
Q

What is reverse innovation important?

A
  • Many emerging markets are no longer small
  • They have high growth rates
  • Glocalization ignored faster growing middle or lower-end customer segment in emerging markets.
  • Potential local new entrants can enter developed markets with low cost alternatives
53
Q

5 steps to establish Local Growth Teams (LGTs)

A
  1. Shift the power to where the growth is. Authority to decide what to develop and how to produce, sell, and service.
  2. Build new offerings from the ground up.
  3. Build LGT from ground up.
  4. Customize objectives, targets, measure
  5. Report to someone high in the organization
54
Q

What are some challenges to managing foreign R&D?

A
  • Foreignness is becoming a liability
  • Intellectual property (IP) regime has strengthened
  • Risks with keeping and sharing advanced technology
  • Innovation transaction costs can jeopardize the lead
  • Time to market of innovative products and services
55
Q

What is a strategic alliance?

A
  • A formal and mutually agreed commercial collaboration between companies
  • The partners pool, exchange or integrate specific business resources
  • Yet they remain separate businesses, making alliances distinct from mergers and acquisitions
56
Q

What are the 5 motivators for alliance formation?

A
  1. Technology exchange
  2. Global competition
  3. Industry convergence
  4. Economies of scale and reduction of risk
  5. Alliances as an alternative to mergers
57
Q

What are some risks of competitive collaboration?

A
  • Benefits from the collaboration might be asymmetrical
  • One partner can develop a competitive edge over the other and erode the other’s competitive position
  • Successful partnerships will lead to strengthening of a competitor
  • Collaborating with a competitor might be the precursor to a takeover by one of the firms
  • Strategic and organizational complexity that creates management costs
58
Q

What are the 3 pre-alliance tasks?

A
  1. Partner selection
  2. Escalating commitment
  3. Alliance scope
59
Q

What are the 3 post-alliance tasks?

A
  1. Managing the boundary
  2. Managing knowledge flows
  3. Providing strategic direction
60
Q

Framework for alliance formation decisions:

A
  1. Costs and benefits on the individual level as well as the alliance portfolio level of analysis
  2. Integrated and codified decision process involving managers on the business as well as the corporate levels.
  3. Clearly defined roles and responsibilities for all actors involved in decision making.
61
Q

3 ways to shore up existing JVs in a downturn:

A
  1. Raise capital in unconventional ways
    - Loans, new owners, creative commercial arrangements
  2. Reduce costs through synergies and new operating models
    - Understand the needs, metrics, incentives, and deliverables of different functions and business units
  3. Regearing financial ratios
    - Increase borrowing or pay dividends
62
Q

What are the three key management positions in a transnational company?

A
  1. The global business manager
  2. The worldwide functional manager
  3. The country subsidiary manager
63
Q

What are the roles and responsibilities of the global business manager?

A

Responsibility:
- Develop global efficiency and competitiveness

Roles
- Global business strategist
- Architect of asset & resource configuration
- Cross-border coordinator

64
Q

Explain the global business manager’s role as “global business strategist”.

A
  • Worldwide perspective on strategic position
  • Incorporate perspectives and interests of geographic and functional managers
  • Keep consistency of business strategy with corporate strategy
  • Reconcile different views and prepare an integrated strategy
65
Q

Explain the global business manager’s role as “architect of asset and resource configuration”.

A
  • Oversee the worldwide distribution of key assets and resources
  • Shape the future configuration by leveraging existing resources and capabilities
  • Link resources and capabilities in a configuration that resembles the integrated network form.
66
Q

Explain the global business manager’s role as “cross-border coordinator”.

A
  • Decide on sourcing pattern and managing cross-border transfer processes.
    • Build on the most capable national operations and capitalize on locations of
      strategic importance.
  • Organize cross-border transfer processes.
    • Direct central control: for products of high strategic importance
    • Develop internal market mechanisms: for commodity-like products
67
Q

What are the roles and responsibilities of the worldwide functional manager?

A

Responsibility:
- Provide support to line managers, particularly by diffusing innovations and transferring knowledge on a worldwide basis.

Roles
1. Worldwide intelligence scanner
2. Cross-pollinator of “best practices”
3. Champion of transnational innovation

68
Q

Explain the worldwide functional manager’s role as “worldwide intelligence scanner”.

A
  • Capture and transmit leading-edge information across national boundaries in order to track trends, developments, and potential challenges and make appropriate adjustments.
  • Establish functional specialist information channels to link local technologies, marketers, and production experts.
69
Q

Explain the worldwide functional manager’s role as “cross-pollinator of best practices”.

A
  • Identify and evaluate leading-edge practices
  • Take initiatives that will expose others to the new ideas
    • Informal contacts
    • Formal reviews
    • Cross-unit visits and transfers
70
Q

Explain the worldwide functional manager’s role as “champion of transnational innovation”.

A
  • Locally leveraged
    • Identify local innovations that have applications elsewhere by scanning the
      company’s worldwide operations
  • Globally linked
    • Fully exploit the company’s access to worldwide information and expertise by
      linking and leveraging intelligence sources with internal centers of excellence.
71
Q

What are the roles and responsibilities of the geographic subsidiary manager?

A

Responsibility:
- Defending the company’s market position against global competitors, responding to local customers and host governments, leveraging local resources and capabilities to strengthen the company’s competitive position worldwide.

Roles:
1. Bicultural intepreter
2. National defender & advocate
3. Frontline implementer of corporate strategy

72
Q

Explain the geographic subsidiary manager’s role as “bicultural interpreter”.

A
  • Expert in needs of the local market, competitor strategies, demands of the host government.
  • Interpret information for corporate management.
  • Communicate the importance of information to organizational members whose perceptions might be biased by ethnocentric mindsets.
  • Interpret and apply corporate goals and strategies to the local level of operation.
  • Communicate the corporate strategies to local employees.
73
Q

Explain the geographic subsidiary manager’s role as “national defender and advocate”.

A
  • Defend need for national responsiveness.
  • Ensure that the needs and opportunities that exist in the local environment are understood and incorporated into the decision-making process.
  • Advocate for role of subsidiary within global operations.
  • Identify and represent their national organization’s key assets and capabilities and the ways in which they can contribute to the MNE as a whole.
74
Q

Explain the geographic subsidiary manager’s role as “frontline implementer of strategy”.

A
  • Convert corporate strategic plans into actions for subsidiaries while responding to host country demands and pressures.
  • Action needs to be sensitive enough to respect diverse local constituencies, and be pragmatic enough to achieve the expected corporate outcome.
  • Implement something the manager was against.
75
Q

What are the 4 MNE positions?

A
  1. The Exploitative MNE
  2. The Transactional MNE
  3. The Responsive MNE
  4. The Transformative MNE
76
Q

The Exploitive MNE

A
  • Ethics-free pursuit of low-cost labour and subsidized investment
  • Expansion regardless of resulting economic, social or cultural change.
  • Accept no responsibility for social and environmental consequences of their actions.
  • Adversarial relationship with NGOs.
77
Q

The Transactional MNE

A
  • Approach is both legally compliant and non-oppressive in market dealings
  • Does not pursue the bottom line at all costs
  • Does not promote products where they are socially, culturally, or economically inappropriate.
  • Law-abiding, non-exploitive attitude
  • NGO relationship based on monitoring and challenging.
78
Q

The Responsive MNE

A
  • Philosophy reflects long-term viability as participants in and contributors to the broader social and economic environment.
  • Makes commitment to be contributing corporate citizen in the environments in which it operate.
  • More sensitive to stakeholder needs and more proactive, more responsive and constructive role.
  • Co-operation with NGOs.
79
Q

The Transformative MNE

A
  • Sensitive to problems and needs of developing countries.
  • Takes lead in efforts to deal with root causes.
  • LT approach requiring learning, adaptation, and commitment to results.
  • Often partnership with NGOs.

BU491 - Business Policy II (1 decks)

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