Business 187 Global Dimensions of Business

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Business 187 - Global Dimensions of Business

• Review for second midterm
• Prof. Wood

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The midterm

• 25-28 multiple-choice questions
• A choice of one of two essays (handed
  out ahead of time)
• Bring
• Scantron (Form 882-E the small style)
• Blue book (small is OK)

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Multiple choice questions will cover

• assigned reading in
• Chapters 1, 8, 11, 9, 13, and 16
• From the first third of the course, only Ch. 1
  will be included
• Also, the Porter article The Competitive
  Advantage of Nations

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Use these slides and the class review discussion
as guides

• Study
• the text
• your notes
• the original slides available on the class web
  page
• Memorizing stuff from the slides is not enough!
  Make sure you understand each concept on the
  slides
• Have slides, your notes, and text open all at
  once
• All midterm topics are mentioned on slides, but
  the slides themselves cannot provide full detail

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Key issues in Chap. 1 International Business -
An Overview

• Why has international business grown?
• Government policies (freer trade)
• New technology
• New institutions
• Modes of international business
• Importing and exporting merchandise
• Service exports and imports
• Investment
• direct investment and
• portfolio investment

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• What is a multinational enterprise?
• Two basic multinational strategies
• Multi-domestic (locally responsive) company
• Globally integrated company
• Price competition, rapid change, better
  communication favor global integrated strategy
• Ethical dilemmas How to think about right and
  wrong
• Normativism
• Relativism

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Key issues in Chaps. 8 and 11 Foreign Direct
Investment (FDI)

• Definition of foreign direct investment
• Why firms do foreign direct investment
• Be able to think about under what circumstances a
  firm would produce abroad
• Why not just license your tech to a local firm?
• Acquisitions vs. do-it-yourself
• Most FDI is to and from developed countries, but
  investment in developing countries is growing

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Hopes and fears of developing (poor) countries

• What developing countries want
• What they fear from investing companies

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Key issues in Chap 9 Foreign exchange

• What are
• money?
• foreign exchange?
• exchange rate?
• How to find out a currencys value
• (on line or in newspaper)
• Dollar as most widely used/traded
• London as site of most trade
• Fixed vs. floating exchange rates

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• Trading terms bid, offer, spread
• Fully convertible (hard) currency vs. soft
  currencies
• Key issues of fundamental analysis in
  predicting change in a currencys value
• Note Text of Ch. 9 is confusing and difficult.
  Download the slides

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Sessions 8-10Global Corporate Strategy

• What goes into the big decisions

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Porters Competitive Advantage of Nations

• Understand what Porter means by the competitive
  advantage of an industry
• Understand the four determinants
• Factor conditions (specialized factors)
• Demand conditions
• Related and supporting industries
• Firm strategy, structure, and rivalry
• Understand what Porter means by each
• Importance of pressure on firms

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Key issues in Global Sourcing (Country Evaluation
and Selection)

• How location decisions should be influenced by
  Porters theories
• Scanning and initial decision techniques
• Know some key criteria
• Size
• Growth rate
• Stability
• Spillovers
• Limitations of scanning
• Dangers in using standard data sources

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• What causes firms to eliminate proposals from
  countries
• Diversification vs. Concentration strategies
• Differences between new and reinvestment/harvest
  decisions

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Key issues in Chapter 16 Marketing

• Product policy choices
• Production orientation
• Sales orientation
• Customer orientation
• Strategic marketing orientation
• Forecasting for countries where you currently
  have little or no sales
• Gap analysis (where you have sales)

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• Reasons products have to be altered from country
  to country
• Standardize basic elements to control costs

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• Complexities of pricing
• Distribution systems
• Distribution is the course physical path or
  legal title that goods take between production
  and consumption.
• Includes both shipping and the process by which
  the product is sold
• Price escalation
• Need to work with distributors

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Promotion

• Push vs. Pull marketing
• Push marketing sell through direct sales
  techniques
• Pull marketing You encourage demand through
  techniques such as advertising
• Complex distribution systems encourage push
• Differences in media
• Benefits and difficulties of standardizing
  marketing message globally

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Info in slides from here are not required
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Conclusions from the Dental News case

• Dental News exists because
• There are few distributors of dental equipment in
  poorer countries
• Communications media from rich countries dont
  tell dentists in poorer nations what they can get
  and how
• So its hard to be a dentist in these nations

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Not requiredKey points from Chap. 15 Control
Strategies

• What is control?
• planning, evaluation, and correction to ensure
  the organization meets its objectives
• Why is control important?
• Control difficulties abroad
• Distance
• Diversity
• Uncontrollables
• Extra uncertainties (government instabilities,
  etc.)

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Location of decision-making

• Globally integrated strategy more centralized
• Multidomestic strategy decentralized
• Be able to describe how the choice of strategy
  will affect what a firm does

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Control mechanisms

• dont memorize a list of mechanisms, but know
  that
• Strategic intent is the big shared mission that
  everyone knows they are pursuing
• Corporate culture is shared values that produce
  similar behavior in different countries

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Not requiredKey points in Chap. 17 Export and
Import Strategies (Micro view)

• Ch. 16 covered the macro, strategic view of
  marketing
• Ch. 17 deals with specific details of exporting
• Characteristics of exporters
• Probability of being an exporter increases with
  company size (revenues)
• Export intensity, the of revenues coming from
  exports, is not correlated with size

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• U.S. Government help Export Assistance Centers
  of the International Trade Administration (ITA)
• U.S. embassies in other countries

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• Intermediaries in distribution
• Sales representatives (reps) do not take title
• Distributors actually buy your goods from you
• Export management companies
• handle everything, but rare in U.S.

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• Famous kinds of Asian intermediaries
• Sogo shosha - Japanese general trading company
• Chaebol - Big Korean group with trading company
• Other intermediaries in U.S.
• Freight forwarder (exporting)
• Customs broker (for importing)

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Export Documentation

• Key export documents
• Pro forma invoice like a letter of intent
• Commercial invoice an actual bill (describes
  goods and payment terms)
• Bill of lading receipt for goods from the
  carrier (airline, shipping line)
• Export license required for some tech goods
• Certificate of origin proof goods came from a
  particular place

17-11
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Getting paid

• Letter of credit document that obligates
  buyers bank to pay when goods shipped (usually
  very reliable)
• Open account the seller just sends a bill
  (often very dangerous)