Shared Flashcard Set

Details

MGT 499 - Ch. 7
Exam 2
24
Business
Undergraduate 4
11/06/2011

Additional Business Flashcards

 


 

Cards

Term
Motivations for international expansion
Definition
  • Increase the size of potential markets for a firms products and services.
  • Take advantage of arbitrage (buying something where it's cheap and selling it for a higher price) opportunities
  • Optimizing the physical location for every activity in its value chain
Term
3 strategic advantages
Definition

Performance enhancement

Cost reduction

Risk reduction

Term
Performance enhancement
Definition
Providing access to outstanding individuals, quality of external and internal coordination and availabilty that cannot be attained domestically.
Term
Cost Reduction
Definition

Both this and performance enhancement benefits parrallel the business-level strategies of differentiation and overall cost leadership.

 

Ex: Nike's decisions to manufacture athletic shoes from Asian countries such as China, Vietnam and Indonesia.

 

These operations can affect the cost structure in terms of local manpower and other resources, transportation and logistics and gov't incentives

Term
Risk reductions
Definition

Ways for rivals to manage currency risks has been to spread the high-cost elements of their manufacturing operations across a few selet and carefully chosen locations around the world

 

Term
3 potential risks of international expansion
Definition

Political and economic risk

currency risk

management risk

Term
Political and economic risk
Definition

Political risk - potential threat to a firm's operations in a country due to ineffectiveness of the domestic political system (e.g. military turmoil, demonstrations and even violent conflict and terrorism)

 

Economic risk - potential threat to a firm's operations in a country due to conomic policies and conditions, including property rights laws and enforcement of those laws. (e.g. Microsoft has lost billions of dollars in potential revenue through piracy of its software products in many countries, including China)

Term
Currency Risks
Definition
Potential threat to a firm's operations in a country due to fluctuations in the local currency's exchange rate
Term
Management risks
Definition
Potential threat to a firm's operations in a country due to the problems that managers have making decisions in the context of foreign markets. (e.g. culture, customs, language, income levels, customer preferences, distributions systems, etc)
Term
2 pressures faced by companies competing in global markets
Definition

1. Cost reductions

2. Local responsiveness

Term
Cost reduction
Definition
Competitive pressures require that firms do what they can to lower unit costs so that consumers will not perceive their product and service offerings as too expensive
Term
Local responsiveness
Definition

Managers must strive to be responsive to local pressures in order to tailor their products to the demand of the local market in which they do business.

 

Differentiating their offerings and strategies from country to country to reflect consumer tastes and preferences and making changes to reflect differences in distribution channels, HR practices and gov't regulations

Term

Global strategy

Transnational strategy

 

 

International strategy

 

Multidomestic strategy

Definition
Term
International Strategy
Definition

Goal is worldwide exploitation of parent company's knowledge and capabilities. Local adaption and pressures to lower costs are low!

 

  • Lack of local responsiveness may result in the alienation of local customers.
  • Lower costs becuase of less need to tailor products and services.
  • e.g. Nike designs its shoes in the US, but all the manufacturing is done in countries like China or Thailand.
Term
Global strategy
Definition

A strategy based on a firms' centralization and control by the corporate office, with the primary emphasis on controlling costs, and used in industries where the pressure for local adaption is low and the pressure for lowering costs is high.

 

  • LOWERING COSTS
  • Offers products and services as well as to locate manufacturing, R&D and marketing activities in only a few locations near one another.
  • Risks - If a co. has all manufacturing facilities in one location, exporting to far locations may create a double-edged sword.
  • e.g. Boeing, pharmaceuticals, jet aircraft
Term

Transnational strategy "Glocalization"

Hybridization

 

Definition

A strategy based on firms' optimizing the trade-offs associated with efficiency, local adaption and learning.

 

Pressures for local adaption and lowering costs are high


e.g. Nestle


Strengths - ability to attain economies of scale, ability to adapt to local markets,


Limitations - Challanges in determing optimal lcoations of activities to ensure cost and quality, managerial challenges in fostering knowledge transfer.

 

Term
Multidomestic strategy
Definition

A firm whose emphasis is on differentiating its product and service offerings to adapt to local markets

 

E.g. Honda

 

local adaption of products and services will increase a co. cost structure.

 

Term

Entry Modes of International Expansion

 

Hint: "ELFS JV W"

Definition

From low degree of ownership and extent of investment and risk:

 

Exporting, Licensing, Franchising, Strategic Alliance, Joint Venture, Wholly Owned Subsidary

Term
Exporting
Definition

Producing goods in one country and selling them to another.

 

Term
Licensing and Franchising
Definition

Licensing - enables a company to recieve a royalty or fee in exchange for the right to use its trademark, patent, trade secret or other valuable item of intellecutal property.

 

Franchising - contracts generally include a broader range of factors in an operation and have a longer time period during which the agreement is in effect.

Term
Strategic Alliances and Joint Ventures
Definition

Strategic Alliances - generally focus on initiatives that are smaller in scope than joint ventures.

 

Joint Ventures - entail the creation of a third party legal entity.

Term
Wholly Owned Subsidiaries
Definition
is a business in which multinational company owns 100 percent of the stock.
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