Professional Documents
Culture Documents
Assignment (Answers)
Assignment (Answers)
Q1.
1. Distribution
channel
intermediary:
Specialist
firm
that
provides
Q2.
Focal firm: Initiator of an international business transaction; e.g., MNEs and
SMEs. A relatively small player in its respective industry usually defined as a
firm with 500 or fewer employees. SMEs constitute the great majority of firms
worldwide; they usually create the most new jobs. It characterized by limited
resources, which often prevent internationalizing via FDI. Instead, SMEs
usually internationalize via exporting. There are many more SMEs doing
international business today than ever before.
A relatively new breed of SME that undertakes early and substantial
internationalization. Usually niche players, typically exhibit a high degree of
innovation, entrepreneurial orientation, and a borderless mindset. Usually
leverage information and communications technologies to internationalize
early and operate effectively in world markets. Make up the fastest-growing
segment of exporters in most countries.
Q3.
Foreign direct investment (FDI): The transfer of assets to another country or
the acquisition of assets in that country. International collaborative venture:
Partners pool their resources and share the cost and risks of a new venture.
Exporting: Sale of products or services to customers located abroad, from a
base in the home country or a third country. Importing or Sourcing: Focal firms
procure numerous parts, components, and services from suppliers around the
world. Licensing: Granting the right to a foreign partner to use certain
intellectual property in exchange for royalties. Franchising: Granting the right
to a foreign partner to use an entire business system in exchange for fees and
royalties.
Q4.
Specializes in physical distribution and marketing; connects the focal firm with
the end user in the foreign market. It assists focal firm by providing logistics
services, such as warehousing and customer support, especially critical to
exporters that do not engage in FDI Based either in the foreign market or in
the home country.
Trading Company
It is an intermediary that handles imports and exports of various raw
materials, parts, and finished products. Large trading companies are typically
high-volume, low-margin resellers. Many deal primarily in commodities such
as grains, minerals, coal, and metals (e.g., Cargill in the U.S.). In Japan,
trading companies are key players in international trade; e.g., Mitsubishi,
Marubeni, Mitsui, Sumitomo, all firms in Fortunes Global 500.
Export Management Company (EMC)
EMC are common in the U.S. and numerous other countries. They Acts as an
export agent on behalf of the focal firm; finds export customers, negotiates
terms of sale, and arranges for international shipping, typically for smaller
exporters. Most specialize in specific industries and geographic areas.
Online Intermediaries
Disintermediation bypassing traditional intermediaries is made possible by the
Internet. Examples include Amazon, Dell, and eBay. Traditional retailers, such
as Tesco and Wal-Mart, have also established an online presence. One
negative outcome is unscrupulous marketers that prey on unsuspecting
customers with fake products (e.g., pharmaceuticals).
Foreign Distributor
Takes title to the exporters goods and performs marketing functions, such as
sales, promotion, and after-sales service, on the exporters behalf. It serves
as the extension of the focal firm in the foreign market. Arranges for local
transportation and advises focal firm on how to function effectively in the local
market.
Agent
Also known as a broker, it does not take title to the goods. It works on a
commission basis to bring the buyer and seller together
Manufacturers Representative
Works for the exporter under contract to represent and sell its merchandise in
designated territories. It acts as a contracted salesperson in a designated
territory.
their
companys
strengths,
weaknesses,
opportunities,
and
challenges and then decide which customers to target and what products to
offer. Most international companies only operate in a selected number of
countries. The firm must make the best use of their scarce resources and
decide where to engage the competition and where to implement
partnerships, if necessary.
Three Strategic Objectives are given below,
Efficiency: It refers to lowering the cost of the firms operations and activities
on a global scale. MNEs with multiple value chains must pay special attention
to how they organize their R&D, manufacturing, product sourcing, marketing,
and customer service activities.
Flexibility: The firm must develop worldwide flexibility to accommodate
diverse country-specific risks and opportunities. The firm structures its
operations to ensure it can respond to specific customer needs in individual
markets, especially those critical to company performance.
Learning: The firm must create the ability to obtain learning from operating in
international environments and exploit this learning on a worldwide basis. By
operating in various countries, the MNE can acquire new technical and
managerial know-how, new product ideas, improved R&D capabilities,
partnering skills, and survival capabilities in unfamiliar environments.
International business success is determined in the end by the degree to
which the firm achieves all three skills efficiency, flexibility, and learning.
However, it is often difficult to excel in all three simultaneously.
Q7.
Multi domestic Industry: Industries in which the firm must adapt its offerings
to suit the culture, laws, income level, and other specific characteristics of
each country are known as multi domestic industries. In such industries, each
country tends to have a unique set of competitors. Accordingly, a multi
domestic industry is one in which competition takes place on a country-bycountry basis. Three examples of multi domestic industries include the British
Publisher Bloomsbury, Coca-Cola, and KFC. These companies adapt their
products to the local cultures.
Global Industry: An industry in which competition is on a regional or
worldwide scale. In some types of industries, such as aerospace,
automobiles, metals, computers, chemicals, and industrial equipment, firms
generally approach international business by catering to the needs and tastes
of customers on a regional or global scale. Most global industries are
characterized by a handful of major players that compete head-on in multiple
markets. Kodak is an example of a global company that must contend with the
same rivals Japans Fuji and Europes Agfa-Gevaert around the world. Also,
in the earth-moving equipment industry, Caterpillar and Komatsu compete
head-on in all major world markets.
Q8.
Global integration is the coordination of the firms value-chain activities
across multiple countries to achieve worldwide efficiency, synergy, and crossfertilization in order to take advantage of similarities between countries. Firms
that emphasize global integration make and sell products and services that
Strategies
Emerging
fromthe
Integration
Responsiveness
Framework:
Four strategies have emerged from the Integration Responsiveness
Framework, and we will look closely at each one.
1. Home replication strategy
2. Multidomestic strategy
3. Global strategy
4. Transnational strategy
Depending on the type of the strategy, a companys assets and capabilities
are either centralized or decentralized, knowledge is developed and diffused
in either one direction or in many, and the importance of the overseas office to
the home office varies.
Home replication strategy: In the home replication strategy, the firm views
international business as separate from, and secondary to, its domestic
business. Expanding abroad is viewed as an opportunity to generate
additional sales for domestic product lines. Thus, the firm designs products
with domestic customers in mind and pursues international business in order
to extend product life cycles and replicate home-market success. Such a firm
expects little useful knowledge to flow from its foreign operations. For most
internationalizing firms, home replication is usually an initial, temporary
approach rather than a long-term strategy.
Multi domestic strategy: In a multi domestic strategy, the firm employs
highly autonomous nationals who adapt corporate strategic guidelines to meet
specific local needs and conditions. Because of this approach, the company is
often perceived as a local firm in each of its markets. Firms with limited
international experience find multi domestic strategy an easy option, because
they can delegate many tasks to their country managers.
Although multi domestic strategy is more responsive to individual markets, it
may lead to inefficient manufacturing, redundant operations, a proliferation of
over-adapted products, and higher operating costs.
Global strategy emphasizes central coordination and control of international
operations. Management tends to view the world as one large marketplace.
Global strategy can also improve the quality of products and processes,
primarily by simplifying manufacturing and other processes. However, the firm
must maintain ongoing communications between headquarters and its
subsidiaries, as well as among the subsidiaries. When carried to an extreme,
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Global Matrix Structure: The experience of MNEs in the 1970s and 1980s
highlighted the strengths and weaknesses of the previously described
organizational structures. Gradually, MNE managers realized that such trends
increasingly required them to address global and local needs simultaneously.
This new understanding led to the creation of the global matrix structure, an
arrangement that seeks to leverage the benefits of global strategy and
responsiveness to local needs. Specifically, the global matrix structure is a
combination of the geographic area, product, and functional structures. It aims
to reap the advantages of each while minimizing their disadvantages. To
make it work, headquarters management should simultaneously:
1. Coordinate and control international operations
2. Respond to needs in individual countries; and
3. Maximize inter organizational learning and knowledge sharing among
the firms units worldwide
The global matrix structure is closely associated with transnational strategy.
Managerial responsibility for each product is shared by each product unit and
the particular geographic areas of the firm. Thus, firms develop a dual
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Q11.
Advanced economies have largely evolved from manufacturing economies
into service-based economies. Home to 14% of the worlds population, they
account for about half of the worlds GDP, over half of world trade in products,
and three-quarters of world trade in services. They have democratic,
multiparty systems of government, with economic systems usually based on
capitalism. They host the worlds largest MNEs.
Developing economies: It is about seventeen percent of the citizens in
developing economies live on less than $1 per day; around 40 percent live on
less than $2 per day. Developing economies are hindered by high infant
mortality, malnutrition, short life expectancy, illiteracy, and poor education
systems. For example, the proportion of children who finish primary school in
most African countries is less than 50 percent. Lack of adequate health care
is a big concern. Some 95% of the worlds AIDS victims are found in
developing economies. Governments in developing economies are often
severely indebted. In fact, some countries in Africa, Latin America, and South
Asia have debt levels that approach or exceed their annual gross domestic
product.
Emerging markets are found in Asia, Eastern Europe, Southern Africa, Latin
America, and the Middle East. Perhaps their most distinguishing characteristic
is rapidly improving living standards and a growing middle class with rising
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economic aspirations.
Q12.
Emerging markets have become important target markets for a wide variety of
products and services.
1. Emerging markets as target markets
Many have huge middle classes, with significant income for buying
electronics, cars, health care services, and countless other products.
Many exhibit high economic growth rates.
2. Emerging markets as manufacturing bases
Many are home to low-wage, high-quality labor for manufacturing and
assembly operations.
Many have large reserves of raw materials and natural resources, e.g.,
South Africa, Brazil, Russia.
3. Emerging markets as sourcing destinations
MNEs have established numerous call centers in Eastern Europe, India,
the Philippines, and elsewhere.
Dell and IBM outsource certain technological functions to knowledge
workers in India.
Intel and Microsoft have much of their programming activity performed in
Bangalore, India.
Investments from abroad benefit emerging markets: They lead to new
jobs and production capacity, transfer of technology, and linkages to the
global marketplace.
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Q13.
Key Criteria for Assessing the Attractiveness of Emerging Markets and
Developing Economies.
Q14.
Challenges of Doing Business in Emerging Markets.
Political instability: Political instability is associated with corruption and
weak legal frameworks that discourage inward investment and the
development of a reliable business environment. In Russia, for example,
bureaucratic practices favor well-connected, homegrown firms. Western oil
companies have been denied access to Russias energy resources.
Weak intellectual property protection: Even when they exist, laws that
safeguard intellectual property rights may not be enforced, or the judicial
process may be painfully slow. In Argentina, enforcement of copyrights on
recorded music, videos, books, and computer software is inconsistent.
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red
tape,
and
lack
of
transparency:
Burdensome
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Q16.
A global market opportunity is a favorable combination of circumstances,
locations, and timing that offers prospects for exporting, investing, sourcing, or
partnering in foreign markets. In such locations, the firm may perceive
opportunities to sell its products and services; establish factories or other
production facilities to produce its offerings more cheaply or more
competently; procure raw materials, components, or services of lower cost or
superior quality; or enter beneficial collaborations with foreign partners.
The Six Tasks of Global Market Opportunity Assessment (GMOA).
There are six major tasks that are necessary to assess global opportunities.
We shall look at each of them in detail.
1. Analyze organizational readiness to internationalize: When assessing the
firms readiness to internationalize, managers peer into their organization to
determine the degree of motivation, resources, and skills necessary to
successfully engage in international business. They measure the firms
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2. Assess the suitability of the firms products and services for foreign
markets: When analyzing the suitability of their products, firms must first
consider whether their potential customers actually desire these products and
then consider how they will deliver these products. Are there existing
impediments that will make sales difficult?
3. Screen countries to identify attractive target markets: When country
screening, exporters first examine such criteria as population, income,
demographic characteristics, government stability, and nature of the general
business environment in individual countries. Statistics that span several
years help determine which markets are growing and which are shrinking. The
exporter can purchase research reports from professional market research
firms that provide assessments of and key statistics for particular markets.
Some firms target countries that are psychically nearthat is, countries
similar to the home country in language, culture, legal environment, and other
characteristics. As managerial experience, knowledge, and confidence grow,
firms expand into more complex and culturally distant markets, such as China
or Japan. Other firms are more venturesome and target nontraditional, higherrisk countries. The born-global companies exemplify this trend.
4. Assess the industry market potential, or the market demand, for the
product(s) or service(s) in selected target markets: The firm assesses the
market potential for each country and develops a three- to five-year sales
forecast, which includes items such as the growth rate of the market and the
barriers to market entry that may be present. The firm assesses the market
potential for each country and develops a three- to five-year sales forecast,
which includes items such as the growth rate of the market and the barriers to
market entry that may be present
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6. Estimate company sales potential for each target market: The next step is
to determine company sales potential in each country. Company sales
potential is an estimate of the share of annual industry sales the firm expects
to generate in a particular target market. Arriving at this estimate is often more
challenging than earlier steps in the process, because the researcher typically
needs to obtain highly refined information from the market and make some
fundamental assumptions to project the firms revenues and expenses three
to five years into the future. These estimates are never precise and require
quite a bit of judgment and creative thinking.
Q17.
Company Sales Potential:
An estimate of the share of annual industry sales that the firm expects to
generate in a particular target market.
The firm estimates the most likely share of industry sales that the
company can achieve over a specific period of time for each target
market.
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Firm determine the factors that will influence company sales potential.
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