Week 4 Notes
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This 5 page Class Notes was uploaded by Isabel Hubeny on Monday February 23, 2015. The Class Notes belongs to BUS-G202 at Indiana University taught by Kreft in Winter2015. Since its upload, it has received 93 views. For similar materials see Corporate Social Strategy in Business at Indiana University.
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Date Created: 02/23/15
Day 7 Topic 3 Non Market Strategy and International Expansion Economic Profits Revenueall costs Revenue Price Quantity sold Costs Explicit Implicit Explicit Costs Monetary payments ie wages paid to labor Implicit Costs Non monetary opportunity costs Calculate as normal rate of return Normal Rate of Return What firms could get by investing in businesses with similar risk Role of Entrepreneur takes risks to discover profitability 80 don t make it lots of risk offer new products opens more markets lowers technology costs and finds new research Intrepreneur Corporate Innovation helps other firms stay innovative Economic Freedom Entrepreneurship and Economic Growth Economic freedom low cost low government regulation and taxation good property security and legal structure How does an increase in freedom an increase in growth An increase in freedom means an increase in entrepreneurship which eventually leads to an increase in economic growth because entrepreneurs naturally gravitate toward free places Ex West Virginia More movement to the outside of West Virginia because there are no W Virginia regulations but it is close enough to have access to the W Virginia human capital Creative Destruction and Entrepreneurship Increased entrepreneurial efforts increase destruction of older industries As efficiency rises there is an increase in the availability of free resources To protect from creative destruction government can create regulations and block innovation Ex Steel is inefficient to make in the US but the gov t backs it to win steelworker votes Therefore government makes tariffs and quotas Ex Train caboose worker An unnecessary position due to than increase of technology Therefore the government makes a rule to have 2 people in the conductor s cars so as to keep the employment Con ict of Interest Definition When a professional individual has a private interest that in uences their official duties professional unique experience skill set private interest clouds judgement Day 8 Types of Con icts of Interest 1 Self Dealing intention to help self 2 In uence peddling intention to help others a EX Dick Cheney Before he was VP ofUS he was also CEO of Halliburton People say Dick Cheney was selfdealing when being in uential running for VP helping his investment in Halliburton which was getting more money Or in uence peddling because he had some kind of kinship with the company and was doing them favors 3 Accepting benefits receiving bribes or nonmonetary gifts a EX Wine guy who takes free wine 4 Misuse of Inside Information a EX Insider trading 5 Misuse of Employer s Property a EX Consulting using free dinners liberally 6 Outside Employment Moonlighting holding more positions at once which biases professional behavior a EX Anderson provided audit for Enron and consulting and moonlit Therefore SarbanesOxley includes that no one can consult and audit the same company b EX Investment banks have lots of channels so they do well in one category so customer comes back to be involved in other ways Can result in recession 7 Post Employment holding a sequence of employment positions where you carry a bias from one job to the next Transparency Interruption Corruption abuse of power for personal gain petty corruption decision made by lowlevel bureaucrats Centered on local regional regulations licenses and discretionary spending grand corruption decision made by national policy formation infrastructure decisions military equipment procurement Views of Corruption quotSandquot Corruption is bad GDP growth decreases foreign direct investment decreases and income inequality increases There is misallocation of government property Oil Corruption can be good when it allows to speed of commerce in an environment controlled by heavy government regulation Day 9 Genicon Debrief Background Tiny company gt 21 employees 3 employees focused on research and development others are focused on sales Specialized in disposable laparoscopic noninvasive surgery devices Produces cheaper products of patent expired technology through reverse engineering Specializes in complement good to high technology goods 80 ofthe sales happen outside ofthe US GPO gt groups purchased organization used to leverage big brands to go down on price They don t care for genicon but US hospitals all use GPOs which makes it harder for Genicon to infiltrate the US market Genicon entered the EU with generic mature product Genicon used to be in developed countries but now is considering developing countries because the expected growth is bigger by getting in early However there is lots of risk because in these countries there tends to be a lot of regulation but as these countries develop there are signs of lowering regulation 70000 average cost for Genicon to open a new location 50000 up front and 20000 to start steadily Statistics on Brazil India China and Russia 1 Medical Device growth the most important statistic China gt Russia small and not a lot of growth potential 2 Market Potential Index look at GDP per capita infrastructure needs This focuses on the overall economy growth therefore not as specific as the first statistic which focuses on the specific industry growth This also only ranks emerging developing economies China gt Brazil 3 Freedom Index Brazil gt Russia However all are fairly the same because all the countries fall in the range of 5059 which is basically quotmostly not free Other countries similar to this range is Italy Countries with an 80100 Freedom Index are considered very free Hong Kong the US FAlls in the 7079 Freedom Index which is considered mostly free Those that are moderately free France are 6069 4 Corruption Perception Index Brazil gt Russia lt Russia is more corrupted Ex the cost of the Olympics was due to paying people off Brazil however similar to India and China 5 Property Rights Index Genicon waits for patent expiration and reverse engineers to make technology generic and disposable But they still care about IP because it wants to protect high technology devices High technology will only go to countries if the protection is there and Genicon is a compliment good to these high tech goods IndiagtRussia Brazil ties with China and they are both close to India Lowest non market cost Brazil Highest non market cost Russia average rank 4 All other countries are tied in ranked at around 2 so have to go into the specifics deciding between putting more weight on nonmarkets or economics Result Genicon is risk averse therefore it entered Brazil first It went to India next and then China IT did this to learn the nonmarket environment with low risk first It did not expand to russia because it might violate the Foreign Corrupt Practices Act
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