INTB Final Exam

Question 1

Support activities

Answer 1

provide inputs that allow the primary activities to occur.

1) Information Systems - can alter the efficiency and effectiveness of the firms other value creation activities
2) Logistics - transmission of physical materials through the value chain
3) Human resources - assures the right mix of skilled people to perform value creation activities.identify, recruit and develop talent. the totality of a firm’s
4) Company infrastructure - context within which all other value creation activities occur. Includes organizational structure, control systems and culture of a firm. (includes top management as well) all of these are important in developing competitive advantage

Question 2

Organizational Architecture

Answer 2

totality of a firm’s organization, including formal organizational structure, control systems and incentives,, culture, processes, and people.

Question 3

Organizational Culture

Answer 3

Values and norms shared among an organization’s employees.

Question 4

Organizational Structure

Answer 4

1) formal division of of the organization into sub-units like product division, national operations, and functions. horizontal differentiation
2) location of decision making responsibilities within that structure (centralized or not) - vertical differentiation.
3) establishment of integrating mechanisms to coordinate the activities of sub-units including cross functional teams or pan-regional committees

Question 5

Controls

Answer 5

the metrics used to measure the performance of sub-units and make judgments about how well managers are running those units.

Question 6

Incentives

Answer 6

the devices used to reward appropriate manager behavior, and are closely tied to performance metrics.

Question 7

Processes

Answer 7

the manner in which decisions are made and work is performed within the organization.

Question 8

People

Answer 8

employees of the organization, and in addition also refers to the strategy to recruit, compensate, retain individuals/ the type of person that they are in skills, values, or orientation.

Question 9

Core competency

Answer 9

Skills within the firm that competitors cannot easily match or imitate. the bedrock of a firm’s competitive advantage

Question 10

Location Economies Part 1

Answer 10

trade barriers and transportation costs permitting, the firm will benefit by basing each value creation activity at that location where economic/political legal conditions are most conducive to performing that activity.
– cost advantages from performing a value creation activity at the optimal location for that activity.

Question 11

Location Economies Part 2

Answer 11

It can lower the costs of value creation and help the firm to achieve a low-cost position, and it can enable a firm to differentiate its product offering from those of competitors.

Question 12

Global Web

Answer 12

when different stages of value creation are dispersed to those locations around the globe where value added is maximized or where costs of value creation are minimized.

Question 13

Experience effects

Answer 13

systematic reductions in production costs that occur over the life of a product. Two things explain this effect = learning effects and economies of scale.

Question 14

Learning effects

Answer 14

cost savings that come from learning by doing. Learning by repetition. Stops after about 2 or 3 years.

Question 15

Economies of scale

Answer 15

cost advantages associated with large-scale production.

Question 16

Advantages of experience curve

Answer 16

allows a firm to reduce its cost of creating value and increase its profitability.

Question 17

Two types of competitive pressures

Answer 17

pressure for cost reduction and pressure to be locally responsive.

Question 18

Universal needs

Answer 18

exist when the tastes and preferences of consumers in different nations are similar if not identical.

Question 19

Pressures for cost reduction

Answer 19

Highest in industries that produce products that fill universal needs, when major competitors are based in low cost locations, and when consumers face low switching costs and are powerful.

Question 20

Pressures for local responsiveness

Answer 20

Differences in consumer tastes and preferences, and

differences in infrastructure and traditional practices

Differences in distribution channels,

host government demands.

Question 21

Global standardization strategy

Answer 21

focuses on increasing profitability and profit growth, by reaping the cost reductions that come from economies of scale, learning effects and location economies. often for products that serve universal needs. (Industrial goods)

Question 22

Localization strategy

Answer 22

Increasing profitability by customizing the goods and services so that they provide a good match to tastes and preferences in different national markets.

Question 23

Transnational strategy

Answer 23

attempt to simultaneously achieve low costs through location economies, economies of scale, and learning effects while also differentiating product offerings across geographic markets to account for local differences and fostering multidirectional flows of skills between different subsidiaries in the firm’s global network of operations.

Question 24

International strategy

Answer 24

Trying to create value by transferring core competencies to foreign markets where indigenous competitors lack those competencies.
- centralize product development, but establishes marketing and manu. functions in

Question 25

Timing of entry

Answer 25

When a firm enters a foreign market before other foreign firms and late when a firm enters after other international businesses have established themselves.

Question 26

First mover advantages

Answer 26

ability to preempt rivals and capture demand by establishing a strong brand name. Another is to build sales volume in that country and give themselves and eventual cost advantage over other entrants. Finally, ability to incur switching costs among consumers to make them stay with the brand and company.

Question 27

First mover disadvantages

Answer 27

Pioneeering costs (costs an early entrant bears that later entrants avoid, such as learning the rules, ignorance, and the liability of being a foreigner) If they waited, they could benefit from learning from other firms entering the market.

Question 28

Exporting

Answer 28

sale of products produced in one country to residents of another country.

Question 29

Advantages of Exporting

Answer 29

1) Avoids substantial costs of establishing manufacturing operations.
2) Exporting could help achieve economies of scale and location economies.
3) Complete control over production

Question 30

Disadvantages of exporting

Answer 30

1) Exporting from the firm’s home base may not be as effective if lower cost locations for manufacturing the product can be found abroad. (This is an argument against exporting from a home country).
2) High transport costs can make exporting uneconomical, especially in bulk products.
3) Tariff barriers can make exporting uneconomical.
4) The firm will have to trust its distributor to do a job that is up to their standards.

Question 31

Turnkey projects

Answer 31

a firm agrees to set up an operating plant for a foreign client, and hand over the key when the plant is fully operational and the personnel are trained.

Question 32

Advantages of turnkey projects

Answer 32

1) The know how required to assemble and run a plant is valuable. Turnkey projects get returns on those skills.
2) Particularly useful strategy when there are FDI restrictions, and is less risky than traditional FDI,
3) A long term investment could expose the company to more risks.

Question 33

Disadvantages of turnkey projects

Answer 33

1) The firm that enters into a turnkey deal has no long term interest in the country. (bad if it turns out to be a major market) to combat this, take a minority stake in the operation.
2) The firm that sets up the operation may have created a competitor from their foreign client.
3) If the process technology is the source of competitive advantage, then they are also selling their advantage to a potential or actual competitor.

Question 34

Licensing

Answer 34

licensor grants the rights to intangible property to the licensee for a specified period and receives a royalty fee in return.

Question 35

Advantages of Licensing

Answer 35

Low development costs and risks,
Overcome barriers to investment.
Easier to respond to customer needs

Question 36

Disadvantages of Licensing

Answer 36

1) Lack of control over technology and know how lost to outside competitors.
2) Inability to realize location and experience curve economies if every licensee is a separate operation
3) Inability to engage in global strategic coordination, and potential for creating a competitor

Question 37

Advantages of franchising

Answer 37

Low development costs and risks, essentially the same as licensing so they can build a global presence quickly.

Question 38

Disadvantages of Franchising

Answer 38

(Often used by service companies, so no need to worry about location economies)

1) LACK of Quality Control
2) Inability to engage in global strategic cooperation

Question 39

Joint Venture

Answer 39

establishing a firm that is jointly owned by two or more independent firms.

Question 40

Advantages of Joint Ventures

Answer 40

1) Access to local partner’s knowledge
2) Sharing development costs and risks
3) Politically acceptable

Question 41

Disadvantages of Joint Ventures

Answer 41

1) Lack of control over technology
2) Inability to engage in global strategic cooperation to wage war on competitors, and
3) inability to realize location economies and experience economies.
4) shared ownership arrangement can lead to conflicts and battles for control between the investing firms.

Question 42

Advantages of Wholly owned subsidiaries (greenfield)

Answer 42

1) protection of core competencies
2) Ability to engage in global strategic coordination
3) Ability to realize location and experience economies

Question 43

Disadvantages of Wholly owned subsidiaries

Answer 43

the mostly costly method of entering a foreign market.

and they are slower to establish.

Question 44

Method of entry if a firm’s core competency (competitive advantage) is its technological know how

Answer 44

AVOID licensing and joint venture.

It will use A SUBSIDIARY if possible, unless they structure their agreements in a different way.

Question 45

Method of entry if a firm’s core competency (competitive advantage) is its management know how

Answer 45

Service firms favor FRANCHISING and SUBSIDIARIES (joint or wholly owned)

Question 46

If there are great pressures for cost reduction, the company will use the following methods of entry:

Answer 46

Exporting and wholly owned subsidiaries.

Question 47

Firms pursuing transnational and global standardization strategies prefer to use which method of entry?

Answer 47

Wholly owned subsidiaries.

Question 48

Pros of Acquisitions

Answer 48

1) quick to execute
2) can preempt competitors by rapidly globalizing and acquiring.
3) Managers view acquisition as less risky than greenfield ventures.

Question 49

Why do acquisitions fail?

Answer 49

1) overpaying for the acquisition
2) Clash of cultures between the two newly merged companies.
3) attempts to synergize the two companies encounter roadblocks and take much longer than anticipated.
4) inadequate pre-acquisition screening

Question 50

What factors reduce the risk of failure of an acquisition>

Answer 50

Pre-Screening to make sure that
1) they do not overpay
2) they do not uncover any nasty surprises after they buy
3) the culture of the firm they are buying matches up with their own.
And MOVE RAPIDLY ON AN INTEGRATION PLAN.

Question 51

Advantages/Disadvantages of Greenfield ventures as opposed to acquisitions

Answer 51

1) Greater ability to build the kind of subsidiary company it wants

BUT it is very slow and takes a lot of money. they are very risky.

Question 52

Strategy

Answer 52

actions managers take to achieve their goals
Two types
Increase profitability
Increase profit growth

Question 53

Profitability

Answer 53

reducing costs (low-cost strategy) or adding value and charging more (differentiation strategy) - these are the two basic types of getting comparative advantage.

Question 54

Profit growth

Answer 54

Sell more in existing markets, or enter new markets.

Question 55

Operations

Answer 55

Different value creation activities a firm undertakes.

Question 56

The ___, ____, and ____ must be consistent with each other if it is to attain a competitive advantage and superior profitability.

Answer 56

Strategy, operations, organization

Question 57

Primary Activities

Answer 57

Design, creation, delivery, marketing, support and after sale service (R&D, Production, marketing/sales, and customer service)

Question 58

Production

Answer 58

Creation of goods or services. could mean selecting and stocking the products, ringing up customers. Create value from efficiency and lower cost, or produce in a way that a higher value product is produced.

Question 59

Marketing and sales.

Answer 59

Increase the value that customers perceive in the product. Can create value through discovering consumer needs.

Question 60

Service

Answer 60

After sale service and support. Creates a perception of superior value in the minds of consumers.

Question 61

Human Resource Management

Answer 61

activities an organization conducts to use its human resources efficiently.

Question 62

Expatriate Manager

Answer 62

citizen of one country appointed to a management position in another country.

Question 63

Human resources is responsible for

Answer 63

culture, people, and incentives and controls for organizational architecture.

Question 64

Organizational culture

Answer 64

organization’s norms and beliefs

Question 65

Ethnocentric staffing policy

Answer 65

All key management positions are held by parent country nationals.

Question 66

Why ethnocentric staffing policies?

Answer 66

1) the host country lacks qualified individuals
2) best way to keep unified corporate culture.
3) Best way to transfer core competencies to new market.

Question 67

Why are ethnocentric staffing policies going out of style?

Answer 67

1) limits advancement opportunities for host country nationals and anyone from not the MNE’s country.
2) can lead to cultural myopia - failure to understand cultural differences and required approaches to marketing and management.

Question 68

Polycentric staffing approach

Answer 68

requires host country nationals to be recruited to manage subsidiaries, while parent country nationals occupy key positions at corporate headquarters.
Less likely to suffer cultural myopia, may be less expensive to implement.
Effective for a localization strategy.

Question 69

Drawbacks of polycentric staffing approach

Answer 69

Isolates HQ from subsidiaries

Limits advanced career mobility for any host country nationals.

Question 70

Geocentric staffing policy

Answer 70

the best people for the job, regardless of home country.
- Uses human resources efficiently
- helps build strong unifying culture and informal management networks
Allows firm to make the BEST use of human resources.
Gives them a cadre of managers who feel comfortable working in different cultures, which is the first step toward building a unifying corporate culture, required for transnational and global standardization.

Question 71

Geocentric policies are limited by…

Answer 71

1) immigration laws

2) Very expensive to implement

Question 72

Four things that predict success in an overseas posting:

Answer 72

• Self-orientation (self esteem, confidence)
• Others-orientation (relationship development and willingness to communicate)
• Perceptual ability (understand why people do what they do overseas, and empathizing.
• Cultural toughness (country of assignment and how common/comfortable they are)

Question 73

Some suggest a global mind set is..

Answer 73

the fundamental attribute of a global manager.

Question 74

Companies can select people that have certain attributes and give them training to make them better

Answer 74

expatriate managers.

Question 75

Three types of training that companies give expatriates:

Answer 75

Cultural training, language training, and practical training.

Question 76

Prepare them for reentry into their home country organization.

Answer 76

Repatriation = not very well implemented so far, people coming home are often overlooked.

Question 77

Organizational structure

Answer 77

1) the formal division of the organization into sub-units.
2) the location of decision-making responsibilities within that structure.
3) the establishment of integrating mechanisms to coordinate the activities of sub-units including cross functional teams.

Question 78

Control systems

Answer 78

metrics used to measure performance and make judgments.

Question 79

Vertical differentiation

Answer 79

location of decision making responsibilities within a structure.

Question 80

Horizontal differentiation

Answer 80

formal division of the organization into sub-units.

Question 81

Integrating mechanisms

Answer 81

ways to coordinate sub-units.

Question 82

Arguments for Centralizing decisionmaking

Answer 82

1) can facilitate coordination
2) ensures that decisions are consistent with organizational objectives
3) gives the power to top management to carry out major organizational changes.
4) helps avoid the duplication of activities across sub-units.

Question 83

Arguments for DEcentralization

Answer 83

1) top managers can be overburdened
2) research favors decentralization
3) greater flexibility
4) better decisions
5) can increase control

Question 84

Functional Division (Domestic)

Answer 84

Organizes by function - doesn’t work if they have so many products. they are coordinated and decisionmaking is centralized.

Question 85

Product Divisional (Domestic)

Answer 85

Combats the problems of coordination and control of functional division.

Question 86

International Division Structure

Answer 86

Has the international division as another department, but it has the problem of relegating the int. division to secondary status, and it has a lack of coordination between the domestic and international divisions.

Question 87

Global standardization will tend to have what vertical differentiation? Localization strategies will tend to have what vertical differentiation?

Answer 87

Centralized to control manufacturing across different regions.
Decentralized to customize their offerings to the locations they are selling in.

Question 88

Core competencies allow firms to reduce the costs of value creation and/or create perceived value so that premium pricing is possible.

Answer 88

Did you know this?

Question 89

Firms that take advantage of location economies in parts of the world create a

Answer 89

global web of value creation activities.

Question 90

Approach to increasing experience effects is to intensify production for global markets

Answer 90

from one global location. (?)

Question 91

To be the most profitable…

Answer 91

elements of the org. architecture must be consistent, the architecture must fit the strategy, and the strat. and arch. must be consistent with each other and competitive conditions.

Question 92

Worldwide product division structure (reasonably diversified companies)

Answer 92

allows for worldwide coordination of value creation activities of each division.
realize location economies and experience effects
transfers core competencies
BUT does NOT allow for local responsiveness

Question 93

Worldwide area structure

Answer 93

favored by firms with low diversification and domestic functional structure

1) divides into regions, with decentralized authority.
2) local responsiveness, but can fragment the organization, and is used with a LOCALIZATION strategy

Question 94

Global Matrix structure

Answer 94

used by transnational companies, is the grid one.

Question 95

Favorable markets are

Answer 95

1) politically stable
2) free market systems
3) low inflation rates
4) low private sector debt

Question 96

Organizational culture evolves from

Answer 96

• founders and leaders
• national social culture
• history of the company
• decisions that resulted in high performance.

Question 97

What is the strategic role of HRM in international firms?

Answer 97

It can help reduce the costs of value creation and add value by better serving customer needs.