EXAM 2 Essay Questions Flashcards
Describe the development of a global corporation thru the 4 strategy levels.
Level 1 – export/import activity has minimal effect on the existing management orientation or on existing product lines
Level 2 – foreign licensing and technology transfer requires little change in management or operation
Level 3 – direct investment in overseas operations –is characterized by large capital outlays and the development of global management skills
Level 4 – substantial increase in foreign investment – the firm begins to emerge as a global enterprise with foreign assets comprising a significant portion of total assets
· Why do firms globalize?
U.S. firms can reap benefits from industries and technologies developed abroad.
Direct penetration of foreign markets can drain vital cash flows from a foreign competitor’s domestic operations.
The resulting lost opportunities, reduced income, and limited production can impair the competitor’s ability to invade U.S. markets.
· Describe the 4 main strategic orientations of global firms.
Polycentric orientation
When the culture of the country in which the strategy is to be implemented is allowed to dominate a company’s international decision making process
Regiocentric orientation
When a parent company blends its own predisposition with those of its international units to develop region-sensitive strategies.
Ethnocentric orientation: When the values and priorities of the parent organization guide the strategic decision making of all its international operations
Geocentric orientation
When an international firm adopts a systems approach to strategic decision making that emphasizes global integration.
· What factors contribute to the increased complexity of the global environment? Explain.
Multiple political, economic, legal, social, and cultural environments as well as various rates of change
Interactions between the national and foreign environments are complex
communication and control efforts difficult
· Describe a multidomestic industry. What 5 factors increase the degree to which an industry is multidomestic?
A multidomestic industry is one in which competition is essentially segmented from country to country
Customized products to meet the tastes or preferences
Lack of economies of scale
Unique Distribution channels to each country
Fragmentation of the industry,
Subsidiary has a low technological dependence of R&D
· Describe a global industry. Describe 5 factors that make for the creation of a global industry.
A global industry is one which spans on an international level.
Small group of global competitors
Homogeneous product needs across markets
High level of R&D expenditures on products
Economies of scale in the functional activities of firms in the industry
Low level of trade regulation and of regulation regarding foreign direction investment
· Briefly describe from lowest to highest commitment the 7 competitive strategies for firms in foreign markets.
- Export
- License
- Contract Manufacturing
- Franchising
- Foreign Branch
- Joint Ventures-two firms merge captial to form one alliance
- Wholly Owned Subsidiary- highest form of foriegn investment
Be able to describe the elements of SWOT analysis and summarize it’s limitations.
SWOT is an acronym for the internal Strengths and Weaknesses of a firm and the environmental Opportunities and Threats facing that firm.
A SWOT analysis can overemphasize internal strengths and downplay external threats
A SWOT analysis can be static and can risk ignoring changing circumstances
- According to a SWOT analysis diagram, what strategy does Cell 1, Cell 2, Cell 3, and Cell 4 support?
Cell 1 Aggresive strategy
Cell 2 Diversification
Cell 3 Defensive strategy
Cell 4 Turn around strategy
- Describe the primary activities and support activities associated with the value chain analysis.
Primary Activities: The activities in a firm of those involved in the physical creation of the product, marketing and transfer to the buyer, and after-sales support
Support Activities: The activities in a firm that assist the firm as a whole by providing infrastructure or inputs that allow the primary activities to take place on an ongoing basis
- Describe the resource based view of a firm.
a method of analyzing and identifying a firm’s strategic advantages based on examining its distinct combination of assets, skills, capabilities, and intangibles
If a firm wants to chart its progress internally, what method of comparison is appropriate? Describe how this works. What is the purpose of benchmarking? How else can a firm evaluate itself against its industry?
Three circle analysis would be appropriate. This is an internal analysis technique wherein strategists examine customers’ needs, company offerings, and competitor’s offerings to more clearly articulate what their company’s competitive advantage is and how it differs from those of competitors. This in turn leads to benchmarking, which is an effective way of comparing itself against the industry.
Current ratio
Current assets / Current Liabilites
Quick/acid test
(Current Assets-Inventory) / Current Liabilites
Turnover equation
Sales in numerator always
denominator is the thing being turned over
