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UH / International / INTB / Multidomestic company is what?

Multidomestic company is what?

Multidomestic company is what?


School: University of Houston
Department: International
Course: Introduction to Global Business
Term: Spring 2019
Tags: #UH #Business #INTB3354 #Global #World #Study #Studyguide #Exam #Midterm #Houston, UH, and #spring2019
Cost: 50
Uploaded: 02/28/2019
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Multidomestic company is what?

1. Differences between multidomestic companies and global companies (and  examples)  

Global Company: universal, units integrated, marketing & products are standardized  worldwide

∙ Microsoft or Cisco

Multidomestic Company: strategies tailored to specific markets

∙ Coca-Cola: started in the 19th century, where bottle plants resided in Cuba &  Panama! They continued global expansion & created local partnerships in 206  countries.

2. External/internal forces (definition, differences, examples)  ∙ Internal Forces: controllable forces to adapt to changes in the uncontrollable  force

o Management

When was the coca cola company started?

o Supplies

∙ External Forces: uncontrollable forces with no direct control, but can exert  influence

o Competitive

o Distributive

o Economic

o Socioeconomic

o Financial

o Legal

o Physical

o Political

o Sociocultural

o Labor

o Technology

3. Domestic/foreign/international environments

Environmental Forces 

1. All businesses have external & internal forces

2. Domestics deal with the external domestic environment mostly 3. International deal with domestic, foreign & global environments 4. Foreign deals with same external domestic forces outside home country 5. Forces operate within each other of these environments.  

What is the meaning of internal forces?

We also discuss several other topics like What is a karyotype?

4. Foreign direct investment (FDI)


∙ Increasing Foreign Direct Investments (FDI)

o Investment in a business enterprise by a foreign entity resulting in some  controlling ownership  

o FDI and foreign investment in stock markets are NOT the same thing o The goal is: Investor gaining influence and an interest in the enterprise

5. Why companies globalize  

∙ Globalization is driven by politics, technology, markets, costs, & competition  6. Pros and cons of globalization  


1. Creates better job  


2. Promote economic growth Don't forget about the age old question of Does strategic management work for small as well as large firms?

1. Hurt local/small businesses 2. Corps take advantage of  


3. Harms environment 4. Widens rich & poor gap

7. Regional trade agreements (RTAs) (definition, advantages, examples)  Regional Trade Agreements (RTAs) 

• Lower barriers to trade between neighboring countries

Ex) NAFTA, Pacific Alliance & Trans-Pacific Partnership (TPP)

• RTA Business Perspective:

o Little to no trade regulations [tariffs or quotas]

o Known infrastructure in place for handling products

o Demand for products because of cultural similarities

o Importing encourages neighboring countries to buy from you • RTA Benefits:

o Lower importing prices for RTA member countries

o Decreased reliance on countries outside of the RTA

o Increased bargaining power on the world stage

o Entry point into international trade negotiations If you want to learn more check out Define polyploidy.

8. Protectionism vs. free trade  

• Import-Substitution Industrialization (Protectionism)


• Export-Oriented Industrialization (Free Trade)

9. Mercantilism (definition, examples)  

• Mercantilism (16th-18th centuries)

o Dominant mode of economic thought in early modern Europe

o Make the state stronger & more powerful

o Required resources that could be turned into goods for export

o Positive balance of trade

o Government intervention [high tariffs on imports & other restrictions] We also discuss several other topics like What are examples of common cellular responses to extracellular signals?

10. International trade theories (absolute advantage, comparative advantage,  resource endowments, overlapping demand, Porter’s Diamond)  

• Absolute advantage (Adam Smith): specialization in what most efficient at

• Comparative advantage (David Ricardo): produce a good or service at a lower  opportunity cost than another country

• Resource Endowments

o Resources determine what a country will specialize & export

o Different countries have different resources

o Explains trade between developed & developing countries

• Overlapping Demand

o Income level impacts demand

o Higher-income countries demand goods of a higher quality

o These higher-quality goods are produced by developed countries o Explains why developed countries trade with each other

•     Porter’s Diamond (Competitive Advantage): Certain factors determine a  nation’s competitive advantage

11. Import-substitution industrialization (ISI) vs. export-oriented  industrialization (EOI) (and examples of each)  

Import-Substitution Industrialization (ISI)If you want to learn more check out What is the humanitarian reform?


• Mostly Latin American countries after WWII (but also Africa, Middle East, & parts of  Asia) We also discuss several other topics like What is the testosterone in males?

• State-run economic program of industrialization to replace imported goods with  goods made locally

• Protection of local “infant” industries with high tariffs, import quotas, &  government subsidies

• Generally ignored the idea of comparative advantage

Export-Oriented Industrialization (EOI) 

• Primarily in East Asia; 4 “Asian Tigers” of Hong Kong, Singapore, South Korea, and  Taiwan

• Opened domestic markets to competition (reduced tariffs) in exchange for market  access in other countries

• Rapid industrialization to produce exports for these overseas markets • Embraced comparative advantage

• Rapid economic growth & more equal income distribution

12. Define corporate identity and understand why it is important Corporate Identity and Strategy 

• Strategy depends on goals

Corporate Identity: The way a company presents itself and/or the way the public  perceives the company

• Importance of corporate identity:

• Stand out from your competitors

• Consumer loyalty

• Employee morale

Strategy: actions a manager takes to reach the firm’s goals

13. Understand SWOT analysis and how it is applied  

 SWOT ANALYSIS EXAMPLE: National Beverage Corp. (EX) 

STRENGTHS: Innovation, Presence in new markets, Strong brand loyalty

WEAKNESSES: Limited to North American markets, Heavy reliance on soda sales (over  90% of sales)


OPPORTUNITIES: Innovation, Expanding to international markets (Latin America) THREATS: The Consumption of Soft Drinks

14. Know the types of value creation and examples of each  Value Creation 

• More Value: more bang for your buck

• Better Value: changing impact, intensity, or application of a product • New Value: breaking into a new sector

• Social Value: having a social impact

15. Understand Porter’s Five Forces and how it is applied (know each of the  five forces)

Michael Porter’s Five Forces Model 

• Intensity of forces affects profitability, desirability of market

• The higher the competition, the less attractive a market is for a company • The more intense the forces, the higher the competition for a company, therefore  the less profitable the market is

The 5 Forces:

1. Threat of New Entrants

• Bring new capacity, knowledge, or ability

• Have a strong desire to increase market share

• Can put competitive pressure on an industry

• Can limit profitability

2. Bargaining Power of Buyers:

• Consumers have an impact on prices and the types of goods or services a  company offers

• Buyers are powerful when:

• There are multiple companies in the industry offering similar goods • They can easily substitute other goods or opt out completely

3. Threat of Substitute Products or Services:

• Threat of consumers switching to a different but comparable product OR opting out completely

• Companies want unique products that cannot be substituted easily

4. Bargaining Power of Suppliers:

• Powerful suppliers can have immense bargaining power


o Charge higher prices

o Withhold services

o Shift costs to their customers (the company buying the products)

• Suppliers are powerful when:

o There are fewer of them than the companies they supply

o They serve multiple companies

5. Rivalry Among Existing Competitors

16. Define environmental scanning  

• Environmental scanning: assessing threats & opportunities around the world that  could affect business (POSITIVE OR NEGATIVE AFFECT)

o Often handled by outside consulting firms [Stratfor]

17. Know the steps of market screening  

• Market screening: form of environmental scanning designed to identify desirable  world markets

o Five levels of screening

First Screening: Basic Needs Potential 

• Is there a need for the product in this market?

• Easily answerable for highly specialized products

• More difficult for less specialized products that depend on desire rather than need  (chocolate…Pop-Tarts…La Croix…)

• Trade data can be useful:

o U.S. Department of Commerce, U.S. International Trade in Goods & Services o European Union, External Trade

o Country market surveys

o Import data

• Trade data can also be limited:

o Does not include information on products made locally

o Does not tell us anything about other environmental factors affecting the  market


Second Screening: Financial & Economic Forces 

• Financial & Economic Data:

o Inflation

o Currency Exchange Rates

o Interest Rates  

o Credit Availability

o Financial Habits of Consumers

• Market indicators:  

o Economic data that can be used to determine the strength of a market (size,  growth rate, readiness for a product, etc.)

o Allows you to compare markets to locate the strongest

Example: You are Hulu, & you are looking to expand to other countries. What data  might you be interested in?

o Size of Population

o Electricity Usage

o Internet Usage

o Electricity/Internet Usage Growth

Third Screening: Political & Legal Forces 

• Entry barriers

o Restrictions on imports

• Government involvement in business

o Some governments may require local participation in a business o Certain industries may be owned & controlled by national companies

o Local content restrictions: companies may have to use a certain percentage  of locally produced parts (may be less cost efficient)

• Political stability

o Is policy related to business reliable?

o Do policies tend to be favorable to business?

o Are taxes on companies consistently low?

o Does regime change or terrorism a threat?


Fourth Screening: Sociocultural Forces 

• One of the most difficult steps, often ignored or done badly by companies • There is no way to “measure” culture; local input is essential

• If cultural differences are high, that will shape how (or if) a company decides to  enter that market

Example: Starbucks in China

Fifth Screening: Competitive Forces 

• Things for a company to consider for a given market:

o Number, size, & financial strength of competitors

o Market shares of competitors

o Marketing strategies of competitors & their effectiveness

o Quality of competitors’ products

o Competitors’ coverage of the market (Are there any niches in the market that are poorly served?)

18. Know the differences between various market entry modes (equity-based  and non-equity-based)  

Non-Equity Entry Modes 

• Exporting products into international markets (most often used)

Licensing: a licensor allows a licensee in another country access to its intellectual  property for a fee & royalties for a fixed amount of time

Franchising: a kind of licensing that allows a franchisee in another country to sell  products or services under a popular brand name with a well-proven marketing strategy

Examples: McDonald’s, KFC, and/or Seven Eleven

Contract manufacturing: when a firm contract with a local manufacturer to make its  products (Apple/Foxconn)

Equity-Based Entry Modes 

Wholly Owned Subsidiary: when a company completely owns & controls the facilities  in another country (either by building from the ground up or by acquiring the facilities)


o Company takes on all the risk, but also takes all the profit

Joint venture: when a company partners with another company (or government entity)  to establish a corporate entity in another country

o Company takes on less risk, but also loses profit & control

19. Understand organizational control and how it is achieved in wholly owned  subsidiaries and joint ventures

Organizational Control 

• How an organization can effectively influence all its subunits to achieve overall  organizational goals. How are decisions made? Are they centralized?  Decentralized? Both?

Wholly Owned Subsidiaries: Several variables influence how centralized decision making is, including:

o Standardization of the company’s products & equipment

o Competence of subsidiary management & headquarters’ reliance on it o Size & age of the company

o Subsidiary satisfaction/dissatisfaction with limited power

Joint ventures: All the above variables apply, but the company will almost always have  less freedom & flexibility. Ways to still maintain control:

o Management contract

o Retain control of finances

o Retain control of technology

o Put people from the company in important executive positions

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