Chapter 8

Question 1

What are the two dimensions to evaluate the HQ-Subsidiary relationship?

Answer 1

Risk and control

Question 2

Competitive risk arises when…

Answer 2

Competitive structures are unstable
New entrants
New and sub. products
New tech

Question 3

Economic risk arises when…

Answer 3

Infrastructure systems are poor, government systems are poor, or resources/labor/tech aren’t easily accessible

Question 4

Political risk arises when…

Answer 4

War/terror occurs, subsidiary’s assets are confiscated

Question 5

Technology risk arises when…

Answer 5

Product tech is stolen, poor systems to manage, technological knowledge are lacking

Question 6

What are the four types of risk?

Answer 6

Competitive, economic, political, technological

Question 7

The president is due to increase tariffs on products imported from Asia. What type of risk is this?

Answer 7

Economic

Question 8

France begins increasing subsidies on parts for Airbus, putting them at unfair competition against Boeing. what type of risk is this?

Answer 8

Economic.

Question 9

Apple opens a second HQ in Tennessee and cannot find enough skilled people to hire. What type of risk is this?

Answer 9

Economic

Question 10

Airbnb grows and threatens to displace Marriott’s market share. What type of risk is this?

Answer 10

Competitive.

Question 11

As mobile gaming rises, Nintendo sees a drop in sales. What type of risk is this?

Answer 11

Competitive. It is about tech but the threat is a competing product.

Question 12

What type of risk is causing businesses to move out of Catalan?

Answer 12

Political risk due to the independence revolution. Economic risk due to leaving the EU, thereby increasing tariffs.

Question 13

If Amazon opened a subsidiary in Spain, what would be some of the government’s biggest concerns?

Answer 13

Brain drain. Hire local talent and move them out! Also taking profits and moving them out. Lobby politics.

Question 14

What sort of control structure does Coca Cola have on its subsidiaries?

Answer 14

Highly centralized. Most major decisions are probably made at HQ in Atlanta

Question 15

What are the four control models classified by Bartlett and Ghoshal (1989)?

Answer 15

Global, Multinational, International, Transnational

Question 16

Global control (Bartlett Ghostal 1989)

Answer 16

Centralizes key functions (MK, Finance, R&D…). Specific local needs tend to be ignored.

Question 17

Multinational control (Bartlett Ghostal 1989)

Answer 17

Decides financial strategy – Considerable autonomy for subsidiary (every country is different)

Question 18

International control (Bartlett Ghostal 1989)

Answer 18

Considerable control over the subsidiary’s management systems and MK policy, but less so than in the GC.

Question 19

Transnational control (Bartlett Ghostal 1989)

Answer 19

Combo of GC, MC, and IC. Product is designed to be globally competitive and adapted to local subsidiares to meet local market demands.

Question 20

Expropriation

Answer 20

When gov. confiscates assets from one or a few firms in an industry. Ex. If China’s Comac was private, the forced takeover from Chinese gov. would be considered expropriation.

Question 21

Nationalization

Answer 21

When confiscation affects all firms in an industry. Ex. Kind of what happened in 2008.

Question 22

What does Harzing’s study suggest? (2001)

Answer 22

Expatriates were more common in a subsidiary whose HQ was in a country with relatively high uncertainty avoidance. Ex. Denmark doesn’t trust the Spanish labor force, they send Danes!!!