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EXAM 3
Chapters 14-20
104
Management
Undergraduate 4
12/13/2014

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Term
organizational architecture
Definition
the totality of a firm's organization, including formal organizational structure, control systems and incentives, processes, organizational culture, and people
Term
three conditions in regards to organizational architecture
Definition
1. the different elements of a firm's org. arch. must be interanally consistent

2. the org. arch. must match or fit the strategy of the firm--strategy and arch. must be consistent (i.e. if the firm is pursuing a global standardization strategy but has the wrong kind of org. arch in place then it is unlikely that it will be able to execute that strategy effectively)

3. strategy, architecture, and competitive environment must all be consistent
Term
organizational structure
Definition
1. the formal division of the org into subunits such as product divisions, national operations, and functions

2. the location of the decision-making responsibilities within that structure (centralized or not)

3. the establishment of integrating mechanisms to coordinate the activities of subunits, including cross-functional teams and or regional committees
Term
control systems
Definition
the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits (i.e. measuring profitability)
Term
incentives
Definition
the devices used to reward appropriate managerial behavior
Term
processes
Definition
the manner in which decisions are made ad work is performed within the organziation
Term
organizational culture
Definition
the norms and value systems that are shared among the employees of an org
Term
people
Definition
the employees of the org and ALSO the strategy used to recruit, compensate, and retain those individuals and the type of people that they are in terms of their skills, values, and orientation
Term
organizational structure (3 dimensions)
Definition
1. vertical differentiation
2. horizontal different
3. integrating mechanisms
Term
vertical differentiation
Definition
the location of decision-making responsibilities within a structure
Term
horizontal differentiation
Definition
the formal division of the structure
Term
integrating mechanisms
Definition
mechanisms for coordinating subunits
Term
arguments for centralization (4)
Definition
1. can facilitate coordination for smooth operations
2. ensures that decisions are consistent with org objectives
3. gives top-level managers the means to bring about needed major organizational changes
4. avoids the duplication of activities that occur when similar activities are carried on by various subunits within the org
Term
arguments for decentralization (5)
Definition
1. top management can become overburdened when decision-making authority is centralized, and it can result in poor decisions
2. motivational research favors decentralization--people give more to their job when they have greater control and individual freedom of their work
3. permits greater flexibility--more rapid response to environmental changes--b/c the decisions do not have to be referred up the hierarchy
4. results in better decisions because decisions are made by people who know more about the issue b/c they work closer to the "spot"
5. can increase control--holds people more accountable for their actions/decisions and fewer chances for excuses for poor performance
Term
international division
Definition
when firms initially expand abroad, they often group all their international activities into an international division--regardless of the firm's domestic structure, its international division tends to be organized on geography
Term
worldwide area structure
Definition
tends to be favored by firms with a low degree of diversification and a domestic structure based on functions
--under this structure the world is divided into geographic areas where an area may be a country or a group of countries
--each area tends to be a self-contained, largely autonomous entity with its own set of value creation activities (i.e. its own production, marketing, R&D, human resources, and finance functions)
--operations authority and strartegic decisions relating to each of these activities are typically decentralized to each area, whith headquarters retaining authority for the overall strategic direction of the firm and financial control
Term
worldwide product division structure
Definition
tends to be adopted by firms that are resonably diversifies and, accordingly, originally had domestic structues based on product divisions
--as with the domestic product divisional structure, each division is a self-contained, largely autonomous entity with full responsibility for its own value creation activities
--the headquarters retains responsibility for the overall strategic development and financial control of the firm
Term
global matrix structure
Definition
horizontal differentiation proceeds along two dimensions: product division and geographic area. the philosophy is that responsibility for operating decsions pertainging to a particular product should be shared by the product division and the various areas of the firm
--thus, the nature of the product offering, the marketing stratecy, and the business strategy to be pursued in are 1 for the products produced by division A are determined by consiliationg between division A and area 1 management
Term
knowledge network
Definition
a network for transmitting information within an org that is based not on formal org structuren, but on informal contacts between managers within an enterprise and on distributed information systems
--the great strength of such a network is that it can be used as a nonbureaucrativ conduit for knowlege flows within a multinational enterprise
Term
personal control
Definition
control by personal contact with subordinates--this type of control tends to be most widely used in small firms where it is seen in the direct supervision of subordinates actions; however, it also structures the relationship sbetween managers at diff levels in multinational enterprises
Term
bureaucratic control
Definition
control through a system of rules and procedures that directs the actions of subunits--the most important bureaucratic controls in subunits within multinational firms are budgets and capital spending rules
--budgets are a set of rules for allocating a firm's financial resources
--a subunit's budget specifies with some precision how much the subunit may spend
Term
PG. 427 output controls
Definition
involve setting goals for subunits to achieve and expressing those goals in terms of relatively objective performance meterics such as profitability, productivity, growth, market share, and quality
--the performance of subunit managers is then judged by their ability to achieve the goals--if succeeded they get a reward
Term
cultural controls
Definition
exist when emplloyees "buy into" the norms and value systems of the firm--when this occurs, employees tend to control their own behavior, which reduces the need for direct supervision--self control can reduce the control for other systems
Term
performance ambiguity
Definition
exists whent he causes of a subunit's poor performance are not clear
--this is not common when a subunit's performance is partly dependent on the performance of other subunits, that is, when there is a high degree of interdependence between subunits within the org
Term
four basic strategies that multinational firms pursue
Definition
1. localization= focus on local responsiveness

2. international= create value by transferring core competencies from home to foreign subsidiaries
3. global standardization strategy= focus on the realization of location and experience curve economies. if they are diversified, these firms operate with a worldwide product division structue

3. transnational strategy= focus on the simultaneous attainment of location and experience curve economies, local responsivenetss, and global learning. these firms may operate with matrix-type structures in which both product division and geopgraphic areas have significant influence

4. environment, strategy, architecture, and performance= notion that a "fit" between strategy and architecture is necessary for a firm to achieve high performance
Term
CH. 15
Definition
Term
strategic alliance
Definition
cooperative agreements between potential or actual competitors
Term
timing of entry
Definition
first mover advantages
first mover disadvantages= rise to pioneering costs (cost that an early entrant has to bear that a later entrant can avoid)
Term
exporting advantages
Definition
1. avoide the often sustantial costs of establishing manufacturing operations in the host country
2. may help a firm acheve experience curve and location economies
Term
turnkey project
Definition
firms that specialize in the design, construction, and start-up of turnkey plants are commone in some industries
--in this project, the contractor agrees to handle every detail of the project for a foreign client, including the training of operating personnel. at completion of the contract, the foreign client is handed the "key" to a plant that is ready for full operation
Term
licensing agreement
Definition
an arrangement wherby a licensor grants the right to intangible property to another entity (the licensee) for a specified period, and in return, the licensor receives a royalty fee from the licensee (intangible property= patents, inventions, formulas, processes, designs, copyrights, tradmarks)
Term
franchising
Definition
a specialized form of licensing in which the franchiser not only sellls intangible property (normally a trademark) to the franchisee but also insists that the franchisee agree to abide by strict rules as to ow it does business. the franchiser will aslo ofen assist the franchisee to run the business on an ongoing basis
Term
joint venture
Definition
entails establishing a firm that is jointly owned by two or more otherwise independent firms--popular mode for entering a new market
Term
wholly owned subsidiary
Definition
the firm owns 100 percent of the stock--can do greenfield investment or find an established firm in the market
Term
types of entry modes
Definition
1. exporting
2. turnkey contracts
3. licensing
4. franchising
5. joint ventures
6. wholly owned subsidiaries
Term
optimal mode of entry depends on core competencies
Definition
1. technological know-how
2. management know-how
Term
strategic alliances
Definition
cooperative agreements between potential or actual competitors (esp. between firms from diff. countries)
--want to reduce firm's risks of giving to much away to the partner
Term
exporting in japan
Definition
MITI= japanese ministry of international trade and industry (is always on the lookout for export opportunities)

sogo shosha= japan's great trading houses--have offices all over the world, and they proactively, continuously seek export opportunities for their affiliated companies lare and small
Term
export management companies (EMC)
Definition
one way for first-time exporters to identify the opportunities associated with exporting and to avoid many of the associated pitfalls is to hire an EMC
= export specialists that act as the export marketing deparment or international deparmtne for their client firms--they start exporting operations for a firm with the understanding that the firm will take over operations after they are well established
Term
letter of credit
Definition
issued by a bank at the request of an importer, the letter of credit states that the bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents
Term
bill of exchange
Definition
a draft; is the instrument normally used in international commerce to effect payment

a draft is simply an order written by an exporter instructing an imorter, r an importer's agent, to pay a specidfied amount of money at a specified time
Term
draft definition...and they fall into two categories
Definition
a draft is simply an order written by an exporter instructing an imorter, r an importer's agent, to pay a specidfied amount of money at a specified time

1. sight draft
2. time draft
Term
sight draft
Definition
payable on presentation to the drawee
Term
time draft
Definition
allows for a delay in payment--normally 30, 60, 90, or 120 days
it is presented to the drawee, who signifies acceptance of it by writing or stamping a notice of acceptance on its face

when time draft is drawn on and accepted by a BANK--> banker's acceptance

when drawn on by a firm--> trade acceptance
Term
bill of landing
Definition
the third key document for financing international trade is the bill of lading
= issued to the exporter by the common carrier transporting the merchandise

3 purposes:
1. recept
2. contract
3. document title
Term
export-import bank
Definition
an independent agencyof the US gov. its mission is to provide financing aid that will facilitate exports, imports, and the exchange of commodities between the US and other countries

also has a direct lending operation under which it lends dollars to foreign borrowers for use in purchasing US exports
Term
countertrade
Definition
denotes a range of barterlike agreements; its principle is to trade goods and services for other goods and services when they cannot be traded for money
Term
barter
Definition
the direct exchange of goods and/or services between two parties without a cash transaction--it is not a common arrangement
Term
counterpurchase
Definition
a reciprocal buying agreement; occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sal e is made
Term
offset
Definition
similar to a counterpurchase insofar as one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale
--the difference is that this party can fulfill the obligation with any firm in the country to which the sale is being made
--from an exporter's persepctive, this is more attractive than a straight counterpurchase agreeemtn because it gives the exporter greater flexibiligy to choose the goods that it wishes to purchase
Term
switch trading
Definition
the use of a specialized third-party trading house in a countertrade arrangment
when a firm enters a counterpurchase or offset agreement with a country, it often ends up with what are called counterpurchase credits, which can be used to purchasegoods from that country
switch trading occurs when a third party trading house buys the firm's counterpurchase credits and sells them to another firm that can better use them
Term
buyback
Definition
occurs when a firm builds a plant in a country--or supploies technology, equipment, training, or other services to the country--and agrees to take a certain percentage of the plants output as partial payment for the contract
Term
CH. 17
Definition
Term
production
Definition
the activites involved in creating a product--both service and manufacturing activities can be used (like logistics) to 1) lower the costs of value creation and 2) add value by better serving customer needs
Term
total quality management (TQM)
Definition
the Six Sigma methodology is a direct descendant of the TQM philosophy that was widely adopted, first by japanese companies and then American companies, during the 1980s and 90s
Term
six sigma
Definition
the modern successor to the TQM--is a statistically based philosophy that aims to reduce defects, boost productivity, eliminate waste, and cut costs throughout a company
Term
ISO 9000
Definition
the EU requires that the quality of a firm's manufacturing processes and products be certified under a quality standard known as ISO 9000 before the firm is allowed access to the EU marketplace
Term
minimum efficient scale
Definition
the level of output at which most plant-level scale economies are exhausted is referred to as the min. eff. scale of output
this is the scale of output a plant must operate to realize all major plant-level scale economies
Term
flexible manufacturing technology (or lean production)
Definition
covers a range of manufacturing technologies designed to reduce setup times for complex equipment, increase the utilization of individual machines through better scheduling, and improve quality control at all stages of the manufacturing process

allow the company to produce a wider variety of end products at a unit cost that at one time could be achieved onnly throught the mass production of a standardized output
Term
mass customization
Definition
describes the ability of companies to use flexible manufacturing technology to reconcile two goals that were once thought to be incompatible--low cost and product customization
Term
flexible machine cells
Definition
another commone flexible manufacturing technology
--a grouping of various types of machinery, a common materials handler, and a centralized cell controller (computer)
--each cell normally contains four to six machines capable of performing a variety of operations-=-the typical cell is dedicated to the productions of a family of parts or products
the settings on machines are computer controlled, which allows each cell to switch quickly between the production of diff parts or products
Term
global learning
Definition
a major aspect of transnational strategy is a belief in global learning--the idea that valuable knowledge does not reside just in a firm's domestic operations; it may also be found in its foreign subsidiaries. foreign factories that upgrade their capabilities over time are creatign valuable knowledge that might nenefit the whole corporation
Term
make-or-buy decisions
Definition
deceisions about whether international businesses should perform a certain value creation activity themselves or outsource it to another entity
Term
specialized asset
Definition
on e whose value is contingent on a particular relationship persisting
Term
dynamic capabilities
Definition
capabilities (skills) in other words are dynamic; they are learned through experience how to lower cost, design better products, increase product reliability, and so on
Term
just in time (JIT) inventory systems
Definition
philosophy is to economize on inventory holding costs by having materials arrive at a manufacturing plant just in time to enter the production process and not begore
--the major cost savings comes from speeding up inventory turnover, reducing inventory holding costs, such as warehousing and sotrage costs
Term
marketing mix
Definition
the set of choices the firm offers to its targeted markets
Term
market segmentation
Definition
identifying distinct groups of consumers wholse purchasing behavior differs from others in important ways (by geography, demography (sex, age, race, etc.), sociocultural factors (social class, values, religion), and psychological factors (personality)
Term
concentrated retail system
Definition
a few retailers supply most of the market
Term
fragmented retail system
Definition
there are many retailers, none of which has a major share of the market
Term
channel length
Definition
the number of intermediaries between the producer (or manufacturer) and the consumer
if the producer sells directly to the consumer, the channel length is very short
--some countries have longer distribution channels than others
Term
exclusive distribution channel
Definition
one that is difficult for outsiders to access
i.e.- it is often difficult for a new firm to get access to shelf space in supermarkets (markets don't want to gamble on products of unknown firms)
Term
channel quality
Definition
the expertise, competencies, and skills of established retailers in a nation and their ability to sell and support the products of international businesses
--in less developed nations the quality is variable
Term
source effects
Definition
occur when the receiver of the message (the potential consumer in this case) evaluates the message on the basis of status or image of the sender
Term
country of origin effects
Definition
the extent to which the place of manufacturing influences product evaluations
i.e.- japanese consumers tended to rate japanese products more favorabley than US prodcuts across multiple dimensions, even when independent analysis showed that they were actually inferior
Term
noise
Definition
the amount of other messages competing for a potential consumer's attention, and this too varies across countries

in highly developed countries the noise level is much higher (fewer firms in less developed countries)
Term
push strategy
Definition
emphasizes personal selling rather than mass media advertising in the promotional mix (relatively costly)
Term
pull strategy
Definition
depends more on mass media advertising to communicate the marketing message to potential consumers
Term
price elasticity of demand
Definition
a measure of the responsiveness of demand for a product to change in price

inelastic vs. elastic
Term
strategic pricing
Definition
three aspects
predatory pricing
multipoint
and experience curve pricing
Term
predatory pricing
Definition
the use of price as a competitive weapon to drive weaker competitors out of a national market, and once the competitors have left the market, the firm can raise prices and enjoy high profits
Term
multipoint pricing
Definition
the firm's pricing strategy in one market may have an impact on its rivals' pricing strategy in another market;
aggressive pricing in one market may elicit a competitive response from a rival in another market
Term
experience curve pricing
Definition
strategy on an international scale will price low worldwide in attempting to build global sales volume as rapidly as possible, even if this means taking large losses initially. such a firm believes that in several years, when it has moved down the experience curve, it will be making substantial profits and have a scost advantage over its less aggressive competiors
Term
CH. 19
Definition
Term
human resource management (HRM)
Definition
the activities an org carries out to use its human resources effectively

these activites incluede determining the firm's human resource strategy, staffing, performance evaluation, management development, compensation, and labor relations
Term
expatriate manager
Definition
a citizen of one country who is working abroad in one of the firm's subsidiaries
Term
staffing policy
Definition
the selection of employees for particular jobs; at one level this involves selecting individuals who have the skills requireed to do particular jobs. At another level, staffing policy can be a tool for developing and promoting the desired corporate culture of the firm
Term
ethnocentric staffing policy
Definition
one in which all key management positions are filled by parent-country nationals
Term
polycentric staffing policy
Definition
requires host-country nationals to be recrutied to manage subsidiaries, while parent-country nationals ocupy key positions at corporate headquarters
Term
geocentric staffing policy
Definition
seeks the best people for key jobs throughout the org, regardless of nationality. this policy has a number of advantages--one is that it builds a cadre of international executives who feel at home working in a number of cultures
Term
expatriate failure
Definition
the premature return of an expatriate manager to his or her home country
Term
accounting standards
Definition
rules for preparing financial statements; they define what is useful accounting information
Term
auditing standards
Definition
specify the rules for performing an audit--the technical process by which an independent person (the auditor) gather evidence for determining if financial accounts conform to required accounting standards and if they are also reliable
Term
Lessard-Lorange model
Definition
a number of methods are available to international businesses for dealing with this problem (exchange rates producing substantial distortions on budget prepared when foreign currency is converted to home currency)

1. the initial rate, the spot exchange rate
2. projected rate, the forward rate (predicted rate it will be)
3. the ending rate, the spot exchange rate when the budget and performance are being prepared
Term
internal forward rate
Definition
a company-generated forecast of future spot rates
Term
money management
Definition
decisions attempt to manage the firm's global cash resources--its working capital--most efficiently; this involves minimizing cash balances, reducing transaction costs, and minimizing the corporate tax burden
Term
transaction costs
Definition
the cost of exchange
Term
transfer fee
Definition
banks charge a transfer fee sometimes for moving cash from one location to another; this is another transaction cost
Term
bilateral netting
Definition
multilateral netting is an extension of bilateral netting. Under this, if a french subsidiary owes a mexican subsidiary $6 million and the mexican subsidiary simultaneously owes the french subsidiary 4 million, a bilateral settlement wil be made with a single payment of 2 million from the french subsidiary to the mexican one, the remaining debt canceled
Term
multilateral netting
Definition
bilateral netting extended to the transactions between multiple subsidiaries within an international businesw
Term
tax credit
Definition
allows an entity to reduce the taxes paid to the home governement by the amount of taxes paid to the foreign GOV
Term
tax treaty
Definition
an agreement specifying which items of income will be taxed by the authorities of the country where the income is earned
Term
deferral principle
Definition
specifies that parent companies are not taxed on foreign source income until they actually receive a dividend
Term
tax havens
Definition
firms use tax havens to minimize their tax liability; it is a country with an exceptionally low, or even no, income tax; international businesses avoid or deger income taxes y establishing a wholly owned, nonoperating subsidiary in the tax haven
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