Term
| Location economies, experience effects, leveraging subsidiary skills |
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Definition
BRITNEY IS RETARTED AND DOESNT KNOW HOW TO BREAK UP TERMS, RETARD, RETARD, RETARD, I HOPE IM WASTING ALL YOUR INK. . . I HOPE THIS IS DISTRACTIONG YOU FROM LEARNING. .. . THIS IS VERY IMPORTANT DONT FAIL, OR LET ME BEAT YOU AGAIN:)
-Location Economies: economies that arise from performing a value creation activity in the optimal location for that activity.
-Creating a Global Web- different stages of the value chain being dispersed to those locations around the globe where perceived value is maximized or where the costs of value creation are minimized.
-Firms would be able to raise perceived V and lower its cost structure (C)
-Some Caveats
-Transportation costs
-Political and economic risks
-Experience curve: systematic reduction in production costs that have been observed to occur over the life of a product
-Learning Effects: cost savings that come from learning by doing
Ex: assembling airframes
-Economies of Scale: reductions in unit cost achieved by producing a large volume of a product
Ex: spread fixed costs over a large volume in the semiconductor industry
-Strategic Significance
The firm that moves down the experience curve the fastest will have a cost advantage against its competitors
-Leveraging skills created within subsidiaries and applying them to other operations within the firm’s global network may create value.
Ex: McDonald’s
Ex: Starbucks |
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Term
| Global Standardization Strategy |
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Definition
-Focuses on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies. (pursue low C)
-Makes the most sense where there are strong pressures for cost reductions and demands for local responsiveness are minimal |
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Term
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Definition
-Focuses on increasing profitability by customizing the firm’s goods or services so that they provide a good match to tastes and preferences in different national markets.
-Employed when demands for local responsiveness are high, but cost pressures are moderate or low.
-Ex: MTV |
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Term
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Definition
-Employed when trying to achieve low costs through location economies, economies of scale, and learning effects.
-Employed when a firm faces both strong cost pressures and strong pressures for local responsiveness.
-Ex: Caterpillar
-Make identical components in a few large-scale manufacturing facilities.
-Add in local product features tailoring finished products to local needs |
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Term
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Definition
-Taking products first produced for their domestic market and selling them internationally with only minimal local customization.
Ex: Microsoft with a little local tailoring by adding in language feature |
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Term
| Pressure for cost reduction and local responsiveness |
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Definition
firms face two pressures
1. presures for cost reductions
- firms must try to minimize unit costs
2. presures to be locally responsive
- a irm differentitae its product offering and marketing strategy from country to country i an efort to accommodate the diverse demands arising from natoinal differences in consumer tastses and preferences |
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Term
| Basic Entry Decisions, Which market, When to enter, Scale of entry |
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Definition
Entry Decisions
-Which Foreign Markets?
-Consider:
-Political factors
-Economic factors
-size of the market
-Purchasing Power
-Potential value
-Employ:
-Cost-Benefit Analysis
-Timing of Entry
-Consider
-First-mover advantage
-First-mover disadvantage: pioneering costs
Ex: Chinese labor’s lack of incentives to work hard
-Scale of Entry and Strategic Commitments
-Consider
-Value of commitment
-The risks of pouring a large amount of capital into
a foreign unknown market.
Ex: Starbucks in France
Ex: Jenny Craig expansion |
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Term
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Definition
-Exporting
-Advantages
-Avoids the cost of establishing manufacturing operations
Ex: Samsung
-May help firms achieve experience curve and economies of scale
-Disadvantages
-High transportation cost
-Tariff barriers
-Firm’s home country might not be appropriate for location economies |
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Term
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Definition
-Turnkey Projects: projects where contractor agrees to handle every detail of the project for a client.
-Operates through management contracts
-Advantages
-Earn great profit through sharing technology
-Lower risks
Ex: packaging projects in China
-Disadvantages
-Does not have complete control of project
-Might end up creating its on competitions and lose comparative advantage |
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Term
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Definition
-Advantages
-A firm would not have to bear the development costs and risks
-Bypass certain government restrictions
-Avoid spreading the firm to thin
-Disadvantages
- Firm would not obtain complete control
-Create competitions
-Can be dealt with through joint ventures or cross-licensing agreements |
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Term
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Definition
-Franchising: licensing characteristic + insisting that the franchisee have to abide by the strict rules as to how it does business.
-Advantages
-Avoid costs and risks of establishing a base in a foreign market
Ex: Seven Eleven
Ex: Costco
-Disadvantages
-Lack of control over quality
-Setting up subsidiary to monitor quality
-Inability to engage in global strategic coordination-- |
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Term
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Definition
-Joint Venture: a firm that is jointly owned by tow or more otherwise independent firms
Ex: Cingular between SBC (now AT&T) and Bell South
-Advantages
-JV benefits from local partner’s host country knowledge
-Firms shares the cost and risk that comes with the JV
-Political acceptable
-Disadvantages
-Lack control of firm’s technology
-Does not give firm the tight control over subsidiaries that it might need to realize experience curve
-Shared ownership can lead to conflicts |
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Term
| wholly owned subsidiaries |
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Definition
-Wholly Owned Subsidiaries: the firm owns 100% of the stock
Done through setting up greenfield venture or acquisition
-Advantages
-Reduced risk of losing control over know-hows
-Obtain tight control over operations (needed for quality control, for example)
-Firm usually need WOS to realize location economies and experience curve economies
-Disadvantages
-Firm would have to bear 100% of costs and risks
-Acquisition: marry divergent corporate culture can be problematic |
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Term
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Definition
Letter of credit- Issued by a bank, indicating that the bank will make mpayments under specific circumstances.
-Pro: Increase security
-Cons: transaction fee |
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Term
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Definition
-Draft: an order written by an exporter instructing an importer to pay a specified amount of money at a specified time.
-Slight draft: payable on presentation to the drawee
-Time draft: allows for delayed payment
-For immediate cash the draft can be sold at a discount rate |
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Term
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Definition
Bill of Lading-A document issued to an exporter by a common carrier trasporting merchandise. It serves as a recipt, a contract adn a document of title.
EX
Receipt
Contract
Document title |
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Term
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Definition
Export Credit Insurance
In the absence of L/C ECI can also protect exporters
-prevents- If a customer defaults, the insurance firm will cover the majority portion of the loss. |
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Term
countertrade-def Barter def
Types- 6 barter, counterpurchase, offset, switch trading, compensation or buybacks |
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Definition
countertrade: an alternative means of structuring an international sale when conventional means of payment are difficult
Barter: direct change of goods/services between two parties without a cash transaction. |
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Term
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Definition
| Counterpurchase: reciprocal buying: when a firm agrees to purchase a certain amount of material back from a country to which a sale is made |
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Term
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Definition
| Offset: counterpurchase with any firm in a nation |
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Term
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Definition
| Switch Trading: when Firm A buys the counterpurchase products bought by Firm B and then sells it to another firm |
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Term
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Definition
| Compensation or Buybacks: payment through investment profits |
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Term
| distribution systems: retail concentration |
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Definition
| Retail Concentration: how concentrated are the consumers |
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Term
| Distribution system: channel length |
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Definition
Channel Length: number of intermediaries between the producer and the consumer
--The longer the chain the more expensive it is |
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Term
| Dist Syst: channel exclusivity |
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Definition
| Channel Exclusivity: how difficult is it for outside to access |
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Term
| Dist Syst: channel quality |
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Definition
| Channel Quality: expertise and skills of the established retailers |
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Term
| barriers to communication |
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Definition
-Barriers to International Communication
-Cultural Barriers
=Develop cross-cultural literacy
-Source and Country of Origin Effects
-Country of origin effects: country of origin are often used as a cue when evaluating products
Cambodian food producers
Made in Japan v.s. Made in China
-Noise levels: the amount of other messages competing for a potential consumer’s attention |
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Term
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Definition
Pull (mass media)
-Product type and consumer sophistication
-Consumer products industries: pull
-Consumer education is a major factor
-Media Availability
-censorship would limit media access
Pull
Consumer goods
Long distribution channels
Sufficient print or electronic media |
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Term
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Definition
Push (personal selling)
-Product type and consumer sophistication
-Industrial and complicated products: push
-Consumer education is a major factor
-Channel length
-push strategy in a long channel could be costly
-Media Availability
-Censorship would limit media access
Push
-Industrial complicated products
-Short distribution channels
-Few print or electronic media available |
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Term
| global advertising: standard vs localized |
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Definition
-Global Advertising-pg 599
-For standardized advertising
-lower costs
-concentrated talent
-Against standardized advertising
-Cultural differences
-Advertising regulations
-Dealing with country differences
-Changing setting
-Consult the law |
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Term
| strategic pricing: predatory, mulitpoint, experience curve |
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Definition
-Strategic Pricing
-Predatory Pricing: use price as a competitive weapon to drive weaker competitors out of a national market
-Multipoint Pricing Strategy: firm’s pricing strategy in one market may have an impact on its rival’s pricing strategy in another market
-Experience Curve Pricing: price low world wide in attempting to build global sales volume as rapidlyu as possible |
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Term
| regulatory influences on prices |
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Definition
-Regulatory Influences on Price
-Antidumping Regulations
-Competition policy: restriction from monopoly practices |
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Term
| types of staffing policy: ethnocentric, polycentric, geocentric |
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Definition
-The Ethnocentric Approach: positions are filled by parent- country nationals
-Advantages: overcomes lack of qualified managers in host nations, unified culture, and helps transfer core competencies
-Disadvantages: produces resentment in host country, can lead to cultural myopia
-The Polycentric Approach: recruits host-country nationals to manage subsidiaries while parent-country nations occupy key positions at corporate headquarters
-Advantages: alleviates cultural myopia, inexpensive to implement
-Disadvantage: Limits career mobility, isolates headquarters from foreign subsidiaries
-The Geocentric Approach: seeks the best people for key jobs throughout the organization, regardless of nationality.
-Advantages: use human resources efficiently, helps build strong culture and informal management networks
-Disadvantages: national immigration policies may limit implementation, expensive |
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Term
| consumer behavior/prodcut attributes |
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Definition
PRODUCT ATTRIBUTES
-Cultural Difference
-Ex: Preference of Scents, Cheese, Types of meat
-Economic Development
-PPP
-Elastic demand and Inelastic demand
-Product and Technical Standards
-Ex: DVD, Makeup, GMO |
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Term
| Strategy and the Firm: Strategic Positioning |
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Definition
To maximize its profitability a firm must:
-Pick a position on the efficiency frontier that is viable in the sense that there is enough demand to support that choice
-Configure its internal operations, such as manufacturing, marketing, logistics, information systems, human resources, so that they support that position
-Make sure that the firm has the right organization structure in place to execute its strategy
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The strategy, operations, and organization of the firm must all be consistent with each other if it is to attain a competitive advantage and garner superior profitability |
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Term
| Strategy and the Firm :Value creation |
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Definition
Value: differences between a firm’s costs of production and the value that consumers perceive in its products.
Porter- 2 basic strategies for creating value and attaining competitive advantage
Low cost
Differentiation |
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Term
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Definition
| once there was a little boy named jeff who had learning disabilites and who drooled everday and noone liked him |
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