Political Factors

Question 1

elements

Answer 1

laws/regulations, taxes, trade agreements

Question 2

laws

Answer 2

(federal, provincial, municipal)

Determines what companies are/aren’t allowed to do

Question 3

taxes

Answer 3

Necessary for health care and education

Question 4

trade agreements

Answer 4

% of foreign content

Duty, tariffs, quotas that are in place to protect consumers and businesses

Question 5

significance

Answer 5

Protection of consumers; unethical businesses; financial and physical safety
Support, protection and regulation of domestic businesses; fair competition; entrepreneurship,
Encourage competition
Opportunity creation in foregin markets

Question 6

business implications

Answer 6

Affects uncertainty, risk, and constraints/ costs faced by firms

Question 7

business influence over government

Answer 7

lobbying
collaboration
advertising

Question 8

lobbying

Answer 8

Individuals hired to represent company’s/ groups interests
Find a politician/member of parliament in the lobby and then persuade them → this is a direct influence
Lobbying Act- must register and follow rules
Previously they did not have to state that they were a lobbyist, so politicians just thought they were a concerned citizen.
But now they have to identify themselves as lobbyists
Trade associations- small businesses/ individuals join and lobby as an industry lobby group (have to make it clear that they are lobbyist)
Big companies such as Rogers and Bell
Small businesses/ individuals can join trade associations

Question 9

collaboration

Answer 9

CRTC (Canadian Radio Television Consulting) consults with industry members
Often times government is open to hearing out a business

Question 10

advertising

Answer 10

Corporations influence voters
Can influence governments through consumers if they get them on their side
Rogers and Bell said more providers for consumers is not good, and many people called their MMPs about it.

Question 11

government influence over business

Answer 11

service provider, business support, laws/regualtions, taxation

Question 12

service provider

Answer 12

a- schools/canada post

i- competition and social goals

Question 13

business support

Answer 13

a- subsidies, trade agreements

I- opportunity, protection

Question 14

laws/regulations

Answer 14

a- competition, consumer, pollution, IP rights

I- competition, consumer protection, innovation, social goals, barriers

Question 15

taxation

Answer 15

a- income, sales, property restrictive

I- consumer spending, incentives, barriers

Question 16

forms of business ownership

Answer 16

• sole proprietor
• partner ship (general/limited)
• corporation (public, private, crown)

Question 17

sole proprietorship

• ease of formation
• regulations
• control
• resources
• taxation
• liability

Answer 17

Owners and business one entity; no distinction between personal and business assets and liabilities
Few regulations
taxed as personal income –> advantage if the business has losses (can subtract the losses from personal income to decrease taxes you pay
unlimited liability

Question 18

partnership

• ease of formation
• regulations
• control
• resources and capabilities
• taxation
• liability

Answer 18

Owners and business one entity; no distinction between personal and business assets and liabilities
partner agreement
more resources, capabilities
since govt views as one entity you pay business profit as personnel income
unlimited liability (unless limited partner)

Question 19

general partnership

Answer 19

Partners are actively involved in decision making and in the business
all partners have joint and several liabilities
joint liability – together share liability
several liabilities – 1 may be liable for all
no distinction between my assets and business assets, if business is doing badly whoever business owes money to can actually go after owners (unlimited liability in who can tax you)

Question 20

limited partnership

Answer 20

limited partners liability = investment
Can only lose what you invested
limited partners cannot be active in management
at least one general partner

Question 21

corporation

Answer 21

separate entity from owners (shareholders)
taxes, debts and liabilities are not shared between business and owner
Business goes bankrupt, owner doesn’t necessarily (since they are 2 separate entities)

Question 22

types

Answer 22

• public
• private
• crown

Question 23

public

Answer 23

• starts with IPO (initial public offering)

- shares are publicly traded

Question 24

private

Answer 24

• shares are not publicly traded

- shareholders in third pillar (big family owned businesses)

Question 25

crown

Answer 25

- owned by the government | - canada post, lcbo

Question 26

private vs public - private - ease of formation - regulations - control over profits/decisons - resources - taxation - liability

Answer 26

- 1-49 straight forward to form regulations are simple control over decisions/ profits are shared between share holders resources and capabilities are whatever the owner brings taxed separately from shareholders, lower than personal income tax rates limited liability (limited to the assets they brought into the business)

Question 27

public vs private - public - ease of formation - regulations - control over profits/decisons - resources - taxation - liability

Answer 27

- amount of people is unlimited expensive and complicated too form many regulations (stock market, audits) board of directors have control over profits and decisions resources and capabilities are whatever they can afford to buy taxed seperatly from shareholders and slightly higher than private limited liability --> only lose what you invested

Question 28

social enterprise

Answer 28

- help overcome market inequalities/failure (inefficient allocation of resources) (areas of health, environment) - social value is the primary objective but financially sustainbilty is imperative (donor and government funding is not reliable)

Question 29

social enterprise implications

Answer 29

- economic value not required priority | - dual stakeholders- those served and those supporting

Question 30

social enterprise examples

Answer 30

sos- students offering support

Question 31

traditional vs social | - traditional

Answer 31

value- financial roi, finances are primary social benifit- secondary serve- paying customers and investors organizational form- for-profit

Question 32

traditional vs social | - social

Answer 32

value- social roi, financial sustainability only social benifit- primary serve- underserved populations- can’t afford/ access service; supporters/investors organizational form- various forms

Question 33

globalization

Answer 33

The world becoming a single interdependent system → products are exported all over the world

Question 34

driving forces

Answer 34

- cost and market benefits - technology makes it easier, faster and cheaper - competitive pressure

Question 35

cost and market benefits

Answer 35

Suppliers available abroad may allow companies to lower their costs by finder cheaper/better sources of supply Doing business with foreign buyers → market benefits of you diversifying the markets, achieves efficiencies

Question 36

technology

Answer 36

Can sell abroad without having to travel | Easier, faster, cheaper to find and sell products abroad

Question 37

internal

Answer 37

``` Knowledge/ Capabilities What do I know about exporting my product or building my product in that foreign market, selling my product to foreign consumers? Production Do I have the production capabilities? Preference A lot of risk Takes a lot of new knowledge Finances The amount of money you have determines the options that you have What’s the return on investment (ROI) ```

Question 38

external

Answer 38

pest

Question 39

political

Answer 39

Trade barriers: created by quotas, tariffs, subsidies Protectionism: an attitude or mindset within a particular country of preferring domestic producers, compared to foreign producers More difficult for foreign producers to succeed (supporting domestic) Can extend to the laws, quotas, tariffs, subsidies Local content laws: the percentage of a good that must be produced locally/domestically Ex. canadian radio, automobiles, chinese company partnerships Business Practice Laws Bribery accepted? What does competition look like?

Question 40

social and cultural

Answer 40

Customer needs: begins with understanding the customer Customer “values” - Culture is a big part of who we are as customers → generational cohorts, mindset, lifestyle habits, language Create barriers that companies need to think about Language Some labels/names might have to change Social norms Norms of behaviour

Question 41

economic

Answer 41

Exchange rates The canadian dollar compared to the currencies that your doing business with Value of Canadian currency as opposed to others, could be cheaper/more expensive Affects your costs and how competitive your prices are in comparison to the domestically produced products Foreign GDP: the more wealthy the nation is, the more money there is in the hands of consumers → the more opportunity you have to sell your G/S there How rich the company is How much disposable income the country has

Question 42

technological

Answer 42

IP Laws: how carefully are your IP for your patents, tech → how well are they going to be protected Tech standards Being compatible with foregin countries (Something with a plug would have to change since Europe has different outlets)

Question 43

external -porters 5 forces

Answer 43

- distribution network - customers - competition - suppliers - substitutes

Question 44

distribution network

Answer 44

how easy is it to break into? → big barrier to entry

Question 45

customers

Answer 45

how much buyer power do they have? Ar they reachable/winnable? Are customers locked in?

Question 46

competition

Answer 46

saturation, big vs small companies, gaps you can fill, easy for differentiation, What it takes to differentiate

Question 47

suppliers

Answer 47

supplier power, accessibility to supplies

Question 48

substitutes

Answer 48

how good are they, how appealing are they to consumers, how much of a hard time are you going to have winning consumers away from substitutes in the market

Question 49

factors when considering going international --> country comparison

Answer 49

- population - average spending (E) - customer reachability - competition - liability of foreigners (S) - distance - administrate barriers (P)

Question 50

population

Answer 50

features - Large; large market segment | significance - more= better

Question 51

average spending

Answer 51

f-Average income/high spending on this type of product | s-Have money and spend it on our product

Question 52

customer reachability

Answer 52

f-No lock-in, dominant habit or brand; physical reachability | s-Can be persuaded; able to switch; can easily get the product

Question 53

competition

Answer 53

f-Little; no one addressing your niche fragmented; no dominant player; opportunity to differentiate s-Uncontested market easy to win; competitors won’t or can’t shut you out

Question 54

liability of foreignness

Answer 54

f-Cultural distance of customers and doing business; existing networks and capabilities s-Bigger= greater risk; must learn to design product, reach and win customer, build distribution network

Question 55

distance

Answer 55

f-How far do I have to ship and move? | s- Further= more costs

Question 56

administrative barriers

Answer 56

f-Importing bureaucracy; trade barriers; lots of regulations | s-more time, more hassle, more change, more barriers

Question 57

foreign entry strategies

Answer 57

Strategies range from having very low control over marketing and very low investment requirements to high control over marketing and production - indirect export - sales agent or distributor - licensing and franchising - joint venture - sales office - foreign subsidiary

Question 58

indirect export

Answer 58

requires the least amount of investment, has least amount of control What it is: Sell to a third-party export merchant in your own country. Export company identifies where to sell and takes care of shipping and obtaining payment Takes care of exporting product, doing paperwork, getting to distributors and consumers Why use it: No additional cost No market knowledge, export experience or new infrastructure needed Smaller companies No risk from foreign market political volatility Risks/costs: No customer contact Knowledge is power → understanding and anticipating customer wants is what allows you to guide innovation and build quality products, builds brand name No control over destination no control over pricing No control over promotion or foreign distribution strategy Capabilities and resources needed: None

Question 59

sales agent or distributor

Answer 59

What it is: Hire an agent or distributor to sell your product using their local network and you manufacture domestically and ship abroad Why use it: You aren’t familiar or have the network resources to easily tap into the foreign market Limited understanding of foreign market Helps you understand the market better Risks/costs: Share attention with other organizations Sell other brands too → more motivated to sell brands that do better Limited marketing control Counting on sales agent/distributor to foster relationships and sell your products Subject to trade barriers Still exporting to foreign markets Capabilities and resources needed: Manufacture in sufficient quantity to satisfy agent/distributor; adjust product; some understanding of foreign market and exporting

Question 60

licensing and franchising

Answer 60

What is it? - Giving local organization the right to use your intellectual property (brand, patent, copyright) in exchange for royalties; another company produces goods or services using your intellectual property in exchange for royalties Why use it? - Faster and larger expansion with fewer financial resources, no need to understand the market, export, produce, distribute, etc. - No need to overcome trade barriers or acquire additional resources Risks/costs - Damage to intellectual property Capabilities and resources needed- - Intellectual property of value that other company can’t easily acquire

Question 61

joint venture

Answer 61

What it is: Partner with a local firm for mutual benefit; partnership can take many forms – mutual distribution, sharing of knowledge, investment Need to be a mutually agreeable approach Need to manage relationships to ensure partners are working properly Why use it: Political or trade barriers overcome market barriers with lower investment or risk overcome production constraints Risks/costs: Time, personnel, money Partnership doesn’t work – partner doesn’t deliver, doesn’t deliver as expected or promised or is difficult to work with (incompatibilities); Not easy to break up Capabilities and resources needed: something of value for partner, capability to negotiate, supervise and work in partnership; resources as determined by partnership

Question 62

sales office

Answer 62

What it is: Establish your own sales office but manufacture in your domestic market and ship abroad Still producing domestically but your going to have your own office established in that foreign market that takes responsibility for taking delivery of goods, developing distribution networks, working with marketing, forging consumer relationships Why use it: Retain marketing control Insufficient volume to justify facility Have excess capacity in domestic facility Don’t have resources to build foreign facility Don’t want to take risk (yet) Risks/costs: Trade barriers, market knowledge, investment to establish foreign sales capabilities Capabilities and resources needed: Understanding of foreign market, ability to pay for and supervise foreign office, investment in foreign office, ability to modify product

Question 63

foreign subsidiary

Answer 63

What it is: Manufacture and sell in foreign market Why use it: Overcome trade barriers Control of intellectual property and marketing Risks/costs: Cost of facility and establishment of operations; sometimes need permission of foreign government Capabilities and resources needed: Sales volume justifies investment; understanding of foreign market and access; distribution capabilities

Question 64

choosing by applying the diamond-e

Answer 64

- risk tolerance - experience - market knowledge/network - management capability/org structure - sales volume - intellectual property - financial, hr, resources