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MANA- 4321 PART 1

by: Antonio Castillo

MANA- 4321 PART 1 MANA 4321

Antonio Castillo
GPA 3.8

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About this Document

These are the first half the notes that cover Dr. Datta's material. Important concepts that came up in past exams are either highlighted, underlined or italicized.
International Business Management
Dr. Deepak
business, International Business, International Management
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This 12 page Bundle was uploaded by Antonio Castillo on Sunday January 31, 2016. The Bundle belongs to MANA 4321 at University of Texas at Arlington taught by Dr. Deepak in Fall 2015. Since its upload, it has received 35 views.


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Date Created: 01/31/16
International Business 4321 (9/1/15)  “Flattening” is progress and it poses a threat to history US and European prosperity and power o New environment is very different from old environment. Faced with much stronger levels of competition o Must be able to adapt  New economies need better education and high speed broadband connections o More globally aware government policies  Human capital is a global commodity  Globalization- shift towards a much more interdependent/integrated world economy o Two essential components:  globalization of markets- merging of distinct national markets  globalization of production- sourcing of goods and services from different parts of the world to take advantage of national differences in the cost and quality  Bumrungrad International Hospital—outsource medical care International Management (9/3/15)  Is globalization a good or bad thing? o Positive- Free trade results in greater efficiency (get products in different countries that it may be cheaper in)  Negative- destroys manufacturing jobs in wealthy countries o Positive- reduction of poverty in less developed countries  Negative- Creates income inequality and other social problems o Positive- Lower prices for goods and services  Negative- Wage rates of unskilled workers in advanced countries go down o Positive- Free Trade results in economic progress and tougher environmental regulations  Negative- Manufacturing are shifted to countries that lack regulation o Positive- United Nations exit to serve the interests of member subvert them  Negative- Policies on nation states undermine sovereignty  GINI coefficient is a measure of dispersion…the higher the GINI coefficient the greater the income inequality  Causes of income inequality o Divergence in Education o Skill biased tech change—meaning that you need certain skills required to manage different types of machinery o Low skilled workers losing ground to low-wage workers in other countries o Decline of unions due to globalization because companies can produce it in other places o Reduction in taxation to high earners o Immigration don’t contribute to the economy  Changing demographics of the global economy o Changes world output  International Diversification, why go international? o Infiltrate other markets that have less competition o Increase revenue and bottom line, price products higher.  Process of international diversification o Staging Process- when to go international? o Arenas- which geographic areas? o Vehicles- Which market entry strategy will we use? o Differentiators- how does being international make our product more attractive to customers? o Economic Logic- How will international diversification be beneficial  Reasons for going international o Use underemployed resources o Seek new markets for additional sales o Secure key supplies o Exploit firm specific assets o Access to low cost factors o Benefit from government investment subsidies (9/10/15)  Global Strategy framework  Different economic systems are in place in different areas o Market Economy- Free interplay of demand and supply, no restrictions on supply, free and fair competition o Command Economy- Government moderates the activities  i.e Russia and Cuba had o Mixed Economy- combination of mark and command  Most economies are mixed economies  Is like a continuum between market and command (there is none that are in extremes)  Economic Environment factors (things to look at when considering a market) o Need to understand the size of the economy  Through GDP using the Nominal measure and PPP (more accurate figure) o See how rapidly the economy is growing o Income per capita (distribution is more important when considering a market) o Fiscal and monetary policies, interest and taxation to strategically locate a company in a country will little taxation o High inflation makes it impossible to operate (deflation is the worst because prices can fall dramatically and people are reluctant to buy anything at all) o Balance of payments o “Hard” currency reserves- don’t have sufficient amount of foreign currencies o Exchange rate fluctuations makes stuff cheaper to export but exported goods will have a marked up price inside the given country o Unemployment levels have implications for cost (high cost of labor with high unemployment)  Political Systems o Democracy o Totalitarianism  Communism- China  Theocratic- Saudi Arabia  Tribal- African countries  Right-wing o Psedo-Democratic  Not full democracies (i.e Russia)  Impact of policy changed determine how successful one might be o Can create or diminish market opportunities o Redefines the rules of competition o Increase or decrease the risks of doing business (9/15/15)  Political decisions are key when considering to do business in a country o Reactive approach to decisions having been made is a slow process, savvy companies try to predict political decisions and see what could happen  Should look at the government to predict political decisions —can look at the political parties and see which one has the greatest influence  Contingency plans are created through the most likely scenario but should also figure out the most pessimistic/optimistic scenario  Protectionism has a significant impact on a market you are trying to compete in o There are two types: Import Tariffs and Non-Tariff barriers o Another form of protectionism are Quotas, limitations on how much one country can export to another o Voluntary Export Restraints (VER)  Which is banned by the World Trade organization o Domestic content legislation  Buy American clause demands industries to buy products from the US that have high US content o Monetary Barriers  Use the foreign exchange to import goods from other countries  Limited terms on how much of the money you can convert o Stringent standards  Used to prevent importation of certain kinds of products o Subsidies  They are extensive so most complaints have to do with subsidies  Agricultural subsidies are very big, more than 2058 billion use in subsidies in the farming sector  Government in Norway, Switzerland and Japan subsidizes farming in a big way  They are a problem because the pricing mechanism gets completely skewed and makes competition much more difficult o Boycott/Embargo  Purely for political purposes o Why do countries use protectionism measures?  Promote domestic production and increase employment rates  Complaint of the domestic industries  Help “strategic” industries such as telecommunications  Protect industries in developing countries—industries will never grow up which is a problem  Old industry argument  Level the playing field; combating unfair competition (9/17/15)  Political risk is what political forces will negatively affect profit o Any company looking to do business in foreign countries have to be aware of political backlash o Political risks have become more important because…  International markets are more interconnected (i.e Turkey might be affected by Syria etc.)  The world has become a much more volatile place  Offshoring results in shifting of operations to countries with possible political risks  Increased dependence for energy  Three types of political risks o Transfer risk- changes in ease of transfer of capital, goods, technology and people in and out of a country (i.e restrictions in visas) o Operational risk- change in operations due to changes in government policies (GM and daewoo) o Ownership risk- forced change in proportion of equity owned by the company  Macro political risks Causes Outcomes Competing political philosophies Confiscation, expropriation or nationalization (ownership) Civil wars Damage to property persons Social unrest and disorders Loss of Transfer freedoms New international alliances  Micro political risks Causes Outcomes Changing values (Turkey) High inflation, increased taxation, currency instability Unstable economic conditions Breach/revision of contracts Vested interests Discrimination Quasi-political (Marxist government) Local businesses gang up to combat foreign competitiors Latent hostility towards foreigners Mandatory labor benefits. Operating restrictions  Countries with the least risk is Norway, Singapore, Germany, US, China etc.  Political risk rating agencies o Business environment risk intelligence o Economist Intelligence Unit o PRS Group LLC  Political risk- defensive strategies o Stay ahead—technical and managerial capabilities o Multiple sourcing of products o Raise political costs of intervention o JVs with politically connected local companies o Maximize debt investment from local sources o Significant exports o “Good Citizen”—public services o Hedging via insurance (9/29/15)  What is culture? o A system of values and norms that are shared among a group of people that when taken together constitute a design for living— Hofstede, Namensworth and weber  Cultural gestures are different around the world…long horn sign,  Culture has an effect in a lot of aspects o Language (verbal and non-verbal) o Attitudes and beliefs  Time  Directness  Deadlines  Achievement and work  Wealth, material possessions o Morals and etiquette  What is viewed as acceptable in one culture does not mean the same in another o Religion o Social Structure  Individual vs Collective  Social strata o Norms and value systems  Cultural dimensions o Power distance  Inequality is fundamentally good  The powerful are entitled to privileges  Everyone has a place o Uncertainty avoidance  Conflict should be avoided  Laws should be followed  Experts and authorities are correct  Consensus is important o Individualism  People are responsible for themselves o Masculinity  Gender roles should be clearly distinguished  Men should be decisive  The fifth dimension= long-term orientation (mostly with Asian China and Japan) o Society embraces long-term devotion to traditional, forward thinking values o Country prescribes to the values of long-term commitments and respect for tradition o Strong work ethic where long-term rewards are expected as a result of todays hard work  Impact of cultural differences o Policies and procedures  To what extent should things be formalized o Systems and controls  Structure  Planning systems  Reward systems o Information and communication  Openness and informality o Decision making  Who makes decision  Level of participation  Cultural Issues- Cultural Barriers o Ethnocentrism concluding that new culture is bad, “stupid” or ineffective because it is different  Ascribe something negative because we see it in our own cultural perspective…try viewing it from there perspective o Lack of Cultural Empathy: inability to view from the perspective of the hos culture  Culture is not static o Culture evolves over time o Changes can be painful—Japanese not used to being laid off o It is not unidirectional, cultural differences between countries keep changing  Demographic Environment—market defined by demographics o Population growth o Education and literacy  Countries compete in terms of education system because it defines skills  PISA test is important for public policy—allows countries to see what they need to do for their educational system (Program for international Student Assessment) o Age Distribution and changes  Tells you about the market place and what will be in demand o Population and population shifts  Legal Environment o Likelihood that a trading partner will opportunistically break a contract or violate property rights  i.e counterfeit of your product o Tariffs, quotas and trade barriers o Restrictive trade practices legislation o Taxation o Product safety and liability  Worries are the liabilities incurred if something were to go wrong o Intellectual property  Patent—different in each country (some longer than others)  Trademark  Copyright laws o Labor Laws o Laws governing business practices  Loss from Piracy o Loss of sales in copycat country, driving local producers out of business  Very high and can drive business out o Loss of sales in third countries where it is forces to compete with pirated products o Reputation as a producer of quality products and service suffers  Some people buy without knowing it is a pirated product and reputation for quality goes down o Dominant share by pirating company prevents entry  Occurs in the movie industry (10/13/15)  Software privacy—implications of larger products such as cars o Revenues can be diminished  Protective property rights o Enforcement through communication with senior levels of government (can’t stop it)  it is likely to be short-lived if demand is high o Education, letting people know of the damage that piracy can do  Who? PR law enforcement and general public on the perils of counterfeit (i.e with pharmaceuticals) o External pressures  Confronting host governments  Explaining cost of non-enforcement o Economic growth- as countries become more developed, country brands also develop that become more important.  Companies that own the brands make sure that piracy does not happen—typically know how to control it better since its home country  Determinants of national competitive advantage—Michael Porter argued o Factor conditions  Some countries endowed with certain factors—basic and advanced factors  Basic Factors are those in which you are in doubt: Natural resources(i.e Saudi endowed with oil), Climate, geographic location, demographics  Advanced Factors play a more important role and can be influenced through public policy—results from an investment by people, companies and governments  Communications (High Speed), Skilled Labor, Research o Firm strategy Structure and Rivalry  Long-term corporate vision is very important  Ideology and structure may help or hurt the firm  Domestic Rivalry improves a company’s competitiveness o Demand conditions  Nature of demand in the country—want sophisticated and demanding consumers  Creates capabilities  Impacts quality and innovation o Related and supporting industries  Dominant industries in certain countries had great support of world class suppliers  Porter’s Theory-Predictions o Should predict the pattern of international trade that we observe in the real world o Countries should be exporting more than they should be importing  In order to formulate strategy we need to understand the environment and organization—focus on generic strategies  Components of Value Added o Amount you can charge depends on the perceived benefit o Volume drives down cost structure o Competing at Cost is tough  Value Chain separates the different way to create value o Firm must optimize the value chain  Four Dimensions of Distance o Distance does not just mean geographic  Cultural- different languages and ethnicities etc.  Administrative- legal and political distance  Geographic- physical distance, size of country, weak transportation or communication links  Economic- Differences in incomes, in costs and quality. Knowledge resources.


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