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Sample Exam Question - 1

Sample Exam Question - 1. All of the following statements are true about developing countries EXCEPT A. They provide sources of cheaper labor in the form of lower wage levels B. Most have an abundance of increasingly productive workers C. They have less economic risks than developed economies

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Sample Exam Question - 1

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  1. Sample Exam Question - 1 • All of the following statements are true about developing countries EXCEPT A. They provide sources of cheaper labor in the form of lower wage levels B. Most have an abundance of increasingly productive workers C. They have less economic risks than developed economies D. All of the above are true

  2. Sample Exam Question - 1 • All of the following statements are true about developing countries EXCEPT A. They provide sources of cheaper labor in the form of lower wage levels B. Most have an abundance of increasingly productive workers C. They have less economic risks than developed economies D. All of the above are true

  3. Sample Question - 2 • Seniority tends to dominate evaluation and promotion in: • Short-term oriented cultures • Cultures high on uncertainty avoidance and low on individualism • Ethnocentric cultures • Being rather than doing cultures

  4. Sample Question - 2 • Seniority tends to dominate evaluation and promotion in: • Short-term oriented cultures • Cultures high on uncertainty avoidance and low on individualism • Ethnocentric cultures • Being rather than doing cultures

  5. Sample Exam Question - 3 • What is the difference between a high and a low context language? Discuss some of the potential problems a person with a low context language may face when negotiating with high context language people.

  6. Class 5 Multinational Corporation: Strategies Strategic Alliances

  7. Today’s Agenda: • Video “Multinational Corporations” • Impact of MNC on the source and host countries • Local-global dilemma • Jollibee case presentation and discussion • International alliances • Motivation to form alliances • Trust issue in international alliances • Transfer of knowledge in alliances

  8. What is a MNC? • Any company that engages in business functions beyond its domestic borders including selling abroad (textbook). • A company that operates production facilities in a number of different countries (video “MNCs”) • Not every MNC is a global corporation yet (K.Ohmae)

  9. Impact of MNC on the Source Country(video “Multinational Corporations) • Higher earnings for the investing company • Export of jobs overseas • Export of technology • Loss of tax revenues

  10. Impact of MNC on the Host Country(video “Multinational Corporations) • Job creation • Technology inflow • Loss of control • Fear of exploitation

  11. Local-Global Dilemma for MNCs transnational multinational • Economic imperative: to expand beyond the home country with global products • Consumer needs: local responsiveness • With what products? • Into which countries? • What modes of entry to use? regional local global multidomestic international global

  12. Choice of Global Products(Gupta & Govindarajan, Business Horizons, 2000) Least attractive Moderately attractive high Required degree of local adaptation Moderately attractive Most attractive low low high Expected payoffs from globalization (refer to text, globalization drivers, p.155-156)

  13. Choice of Strategic Markets (Gupta & Govindarajan, Business Horizons, 2000) Phased-in entry (create a beachhead first) Rapid entry high Strategic importance of market (market potential + learning potential) Ignore for now On reserve low low high Firm’s ability to exploit the market

  14. International Strategic Alliances

  15. Forms of Collaborative Relationship Informal alliances Joint product development alliances Co-marketing alliances ISAs w/o equity investment Joint production alliances Franchising Subcontracting Investment alliances Licensing Joint ventures Joint equity swaps Mergers & acquisitions ISAs with equity investment Direct foreign investment

  16. Forms of Collaborative Relationship Informal alliances Joint product development alliances Co-marketing alliances ISAs w/o equity investment Joint production alliances Franchising Subcontracting Investment alliances Licensing Joint ventures Joint equity swaps Mergers & acquisitions ISAs with equity investment Direct foreign investment

  17. International Strategic Alliance Cooperative, non-equity collaboration between partners or competitors across borders that entails pooling of skills and resources by the alliance partners to achieve the strategic objectives of each cooperating firm

  18. International Strategic Alliance Firm A AB Firm B

  19. International Joint Venture Firm C Firm A Firm B

  20. Types of Alliances: Summary

  21. What motivates a firm to form cooperative relationships? • To extend the existing resources of the firm • To provide customers with “total service offerings” • To circumvent barriers of new int’l markets • To reduce economic and political risks • To seek an alternative to direct investments • To acquire new skills

  22. What encourages a firm to form an alliance? (cont’d) Good prior exporting experience (Dong-Jin Lee’s model, 1998) Exporting performance Decision making uncertainty Intention to form strategic alliance Relational exchange Possibility of opportunism Cultural distance Economic ethnocentrism Duration of relationship

  23. What encourages a firm to form an alliance? (cont’d) Bandwagon pressure (institutional approach) (Pangarkar & Klein’s model, 1998) Peer firms undertake alliances Bandwagon pressure Focal firm undertakes alliances

  24. Why Do Canadian Firms Opt for Cooperative Ventures? • 1 in 9 Cnd firms participate in cooperative ventures • Main reasons: gaining access to new markets, access to new technologies, resource pooling, risk and cost sharing, scale or scope economies, building world-class capabilities • Most common forms - IJV, research consortia, co-marketing alliances

  25. Reasons for Failures • Failure rate is 50-70% • Selection of a wrong partner (lack of trust, misfit in terms of governance, decision making, culture, conflict mgmt) • Failure to learn the new market (its needs, opportunities, risks, competition) • Miscalculated firm’s own strengths and weaknesses in relation to the new markets • Wrong assessment of costs of market entry and operations

  26. Maintenance of partnerships: trust and performance(Aulakh et al. model,1996) • Relational norms: • continuity expectations • flexibility • info exchange Partnership performance Trust • Monitoring mechanisms: • output control • process control • social control

  27. Interfirm trust in cross-national setting( a study of Dyer, 2000) US automakers US suppliers Japanese automakers in US Does not depend on - the length of the relationships - embedded ties and community support Depends on - expectations of the continuity of relationships - offering assistance - fair, predictable, stable processes and routines

  28. Knowledge transfer across alliance partners • Willingness to learn the core competencies of the partner • Partner protectiveness - a barrier to knowledge transfer • Marketing know-how (procedural knowledge) - the most critical knowledge • Explicit, simple and independent knowledge (e.g., “stock-list” based distribution system) • Social, complex, systemic, tacit knowledge (e.g., relationships with suppliers, government and employees) - source of ambiguity and barrier to imitation

  29. Transferring knowledge between individualist and collectivist cultures • Individualists: • preference for linear, credible, explicitly logical knowledge • scientific, systematic, abstractive, cause-effect thinking • Collectivists: • preference for tacit, contextual, comprehensive knowledge coming from authorities • associative thinking

  30. Managerial implications • Foster relational exchanges and trust: communication, liason roles, personal visits, info sharing, language and cultural sensitivity training, trade shows, staff exchanges • Rely more on social interactions rather than formal control mechanisms to develop mutual trust • Codify the corporate marketing knowledge (market knowledge, sales knowledge, customer knowledge) • Invest in human resource development: expatriation of valued specialists, personnel exchange programs, etc.

  31. Bottom-line • MNCs leave different impacts on the source and the host countries • All firms that go international face the local-global dilemma (which products, markets and entry modes?) • Alliance - an integral part of multinational strategy and structure • Alliance is a give-and-take relationship in any place of the value chain

  32. Bottom-line (cont’d) • There is a high rate of failure across alliances • Trust and social control - mandatory precondition for partnership performance, more important than formal control mechanisms • Knowledge transfer between individualist and collectivist cultures may encounter obstacles

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