Term
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Definition
| "Foreign-exchange risk arising because a company has outstanding accounts receivable or accounts payable that are denominated in a foreign currency." -828 |
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Term
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Definition
| Foreign-exchange risk that occurs because the parent company must translate foreign-currency financial statements into the reporting currency of the parent company." - (828) |
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Term
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Definition
| Also known as operating exposure, is the potential for change in expected cash flows because of differences and changes in exchange rates. (752 |
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Term
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Definition
| "A precise document by which the importer's bank extends credit to the importer and agrees to pay the exporter." -(822) How an importer and exporter safely transact through means of a banks issuing credit. |
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Term
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Definition
| An operational strategy that involves either collecting foreign-currency receivables before they are due when the currency is expected to weaken or paying foreign-currency payables before they are due when the currency is expected to strengthen." -(833) |
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Term
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Definition
| An operational strategy that involves either delaying collection of foreign-currency receivables if the currency is expected to strengthen or delaying payment of foreign-currency payables when the currency is expected to weaken; the opposite of lead strategy |
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Term
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Definition
| "The process of buying and selling foreign currency at a profit that results from price discrepancies between or among markets." (815) |
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Term
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Definition
The difference between the spot (present rate) and forward (projected future rate) exchange rates in the forward market; a foreign currency sells at a forward premium when the forward rate for a foreign currency is greater than the spot rate and when the domestic currency is quoted on a direct basis.
Spot < Forward -> a foreign currency weakens / depreciates / devaluates (it takes more foreign currency to buy local currency) |
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Term
| Forward discount (p. 345) |
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Definition
The difference between the spot (present rate) and forward (projected future rate) exchange rates in the forward market; a foreign currency sells at a forward discount when the forward rate for a foreign currency is less than the spot rate and when the domestic currency is quoted on a direct basis.
Spot > Forward -> a foreign currency strengthens / appreciates / revaluates (it takes less foreign currency to buy local currency) |
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Term
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Definition
| The selling and handling of goods through unofficial distributors (it’s authorized and not illegal in comparison to the Black Market which is unauthorized). It exists because of market imperfections. Grey market can undermine the longer-term viability of the distributorship system, cause a company’s operations in different countries to compete with each other, and prevent companies from changing what the market will bear in each country. |
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Term
| Market spreading vs. market penetration |
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Definition
Two export market expansion strategic alternatives - how fast to expand internationally:
Market Penetration – marketing to a relatively small number of export markets; characteristic: high penetration, high control, knowledge of market conditions, economies of scale, economies of information, steep learning curve, short product life cycle
Market Spreading – marketing to as many export markets as possible; characteristic: low penetration, low control, little effort in single markets, target market do not reflect national borders, diversification |
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Term
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Definition
| arketing to a relatively small number of export markets; characteristic: high penetration, high control, knowledge of market conditions, economies of scale, economies of information, steep learning curve, short product life cycle |
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Term
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Definition
| arketing to as many export markets as possible; characteristic: low penetration, low control, little effort in single markets, target market do not reflect national borders, diversification |
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Term
| Penetration pricing strategy (p.623) |
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Definition
| A strategy of introducing a product at a low price to induce a maximum number of consumers to try it; other pricing tactics: Skimming strategy and Cost-plus strategy |
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Term
| Direct vs. indirect exporting (p.506) |
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Definition
Principal types of exporting:
Direct exporting – goods and services are sold to an independent party outside of the exporter’s home country, which then sells the product in the export market to the final consumer. Direct selling involves sales representatives, distributors, or retailers. Products can be also sold directly to the end users or through the Internet.
Adventages: more exposure, more control, more profit; Disadvantages: more attention
Indirect exporting – goods and services are sold to an intermediary in the domestic market, which then sells the goods in the export market to the final consumer. The major types of indirect intermediaries are the export management company (EMC), the export trading company (ETC) and export agents, merchants, or remarketers.
Advantages: leverage, risk limit, expanding exposure, learning from intermediaries; Disadvantages: sharing the profit, control limit;
Generally, services are more likely to be sold in a direct fashion, whereas goods are exported both directly and indirectly. |
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Term
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Definition
oods and services are sold to an independent party outside of the exporter’s home country, which then sells the product in the export market to the final consumer. Direct selling involves sales representatives, distributors, or retailers. Products can be also sold directly to the end users or through the Internet.
Adventages: more exposure, more control, more profit; Disadvantages: more attention |
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Term
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Definition
goods and services are sold to an intermediary in the domestic market, which then sells the goods in the export market to the final consumer. The major types of indirect intermediaries are the export management company (EMC), the export trading company (ETC) and export agents, merchants, or remarketers.
Advantages: leverage, risk limit, expanding exposure, learning from intermediaries; Disadvantages: sharing the profit, control limit;
Generally, services are more likely to be sold in a direct fashion, whereas goods are exported both directly and indirectly. |
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Term
| export management companies |
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Definition
a company that buys merchandise from manufacturers for international distribution or sometimes acts as an agent for manufacturers
acts as the export arm of a manufacturer
operate on a contractual basis |
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Term
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Definition
a process by which both labor and management participate in the management of a company
emphasizes cooperative decision making within firms that benefits both works and the company |
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Term
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Definition
common law- based on tradition, judge-made precedent and usage and it assigns a preeminent position to existing case law as a guide to dispute resolution; courts interpret the law ---UK and former British Colonies
civil law- based on a very detailed set of laws that are organized into a code. often charge political officials, not judges, responsibility for specifying accessible and written codes of law that apply to all citizens. judges apply existing legal and procedural codes to resolve disputes--- Germany France and Japan |
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Term
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Definition
| based on tradition, judge-made precedent and usage and it assigns a preeminent position to existing case law as a guide to dispute resolution; courts interpret the law ---UK and former British Colonies |
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Term
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Definition
| based on a very detailed set of laws that are organized into a code. often charge political officials, not judges, responsibility for specifying accessible and written codes of law that apply to all citizens. judges apply existing legal and procedural codes to resolve disputes--- Germany France and Japan |
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Term
| revocable letter of credit |
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Definition
| a letter of credit that can be changed by any of the parties involved |
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Term
| irrevocable letter of credit |
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Definition
| a letter of credit that cannot be canceled or changed without the consent of all parties involved |
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Term
| confirmed letter of credit |
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Definition
| a letter of credit to which an additional bank, sometimes in the exporters' country, adds its guarantee of payment; adds the obligation of the exporter's bank to pay the exporter |
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Term
| unconfirmed letter of credit – (pg 352-353) |
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Definition
| A letter of credit that is only assured by the exporter's bank and no 'confirming' bank also guarantees the letter. |
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Term
| Eurocurrency – (pg 736-738) |
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Definition
any currency that is banked outside of its country of origin (EXTRA INFO: Eurocurrency market predates the euro; Eurocurrencies could be dollar or yen in London, British pounds in Zurich, etc)
Four major sources of Eurocurrencies:
· Foreign governments or individuals who want to hold dollars outside the US
· Multinational enterprises that have cash in excess of current needs
· European banks with foreign currency in excess of current needs
· Countries such as Germany, Japan, and Taiwan that have large balance-of-trade surpluses held as reserves |
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Term
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Definition
Glossary: a commercial bill of exchange that requires payment to be made as soon as it is presented to the party obligated to pay (immediately)
Book: draft (or commercial bill of exchange) is an instrument in which one party directs another party to make a payment; drafts and letter of credit often used to protect buyer and seller |
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Term
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Definition
| Glossary: a commercial bill of exchange calling for payment to be made at some time after delivery (for example, 30 days after delivery) |
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Term
| exposure/multi-lateral netting – (pg 750-752) |
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Definition
Exposure – a situation in which a foreign-exchange account is subject to a gain or loss if the exchange rate changes; three types:
1. Translation exposure
· Glossary: foreign-exchange risk that occurs because the parent company must translate foreign-currency financial statement into the reporting currency of the parent company
· Book: occurs because exposed accounts—those translated at the balance sheet or current exchange rate—either gain or lose value in dollars when the exchange rate changes
· Example: US company with subsidiary in Mexico, Mexican subsidiary has 900,000 pesos in bank, what is value of cash after exchange rate change? If dollar equivalent of pesos fall → loss; loss does not represent an actual cash flow effect because the pesos are only translated, not converted to dollars
2. Transaction exposure
· Glossary: foreign-exchange risk arising because a company has outstanding accounts receivable or accounts payable that are denominated in a foreign currency
· Book: occurs because AR or AP in foreign currency that must be settled eventually
· Example: US exporter delivering product to British importer, if payment were to be received in pounds, exporter might incur a foreign-exchange gain or loss due to change in exchange rate (conversely, if in dollars → no impact, regardless of exchange rate change)
3. Economic (or Operating) exposure
· Glossary: the foreign-exchange risk that international businesses face in the pricing of products, the source and cost of inputs, and the location of investments
· Book: he potential for change of expected cash flows; arises from the pricing of products, the sourcing and cost of inputs, and the location of investments
· Example 1: US exporter selling to British importer, pound falling in value…
Importer can either sell product at original price and not earn as much profit or raise price and hope consumers will pay
Exporter can continue to sell at same price (and importer decide what to do about it) or lower price, resulting in lower profit margin
· Example 2: Three years of euro strengthening against dollar…
BMW had costs in strong currency (high costs from manufacturing in Europe) and revenues in weak currency (sales in US dollars) → one consideration was to expand manufacturing into US to balance revenues and expenses in same currency
Netting – the transfer of funds from subsidiaries in a net payable position to a central clearing account and from there to the accounts of the net receiver subsidiaries
Multi-lateral netting – (pg 748-750)
· Example: MNE with operations in four European countries could have several different intercompany cash transfers resulting from loans, sale of goods, licensing agreements, etc…
Rather than have each subsidiary settle its accounts (AP, AR, etc) independently, establish a cash-management center (a clearing account into which each subsidiary transfers it net cash) in one city to coordinate cash flows |
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Term
| skimming pricing strategy – (pg 623) |
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Definition
| charging a high price for a new product by aiming first at consumers willing to pay that price and then progressively lowering the price |
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Term
| Cost-plus pricing strategy |
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Definition
| FROM TEXT: The strategy of pricing at a desired margin over cost. If you knew your product cost $5 for example to produce, you would set the market price at $5 and higher, depending on what profit margin you are looking to make. |
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Term
| Export trading companies (ETC) |
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Definition
| FROM TEXT: A form of trading company sanctioned by US law to become involved in international commerce as independent distributors to match up foreign buyers with domestic sellers. FROM ANSWERS.COM: These are third party companies set up to handle the trading aspects and provide support services for international trading. They can insure goods, ship, and warehouse goods. |
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Term
| Licensing vs. Franchising |
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Definition
Different: In franchising the franchisor has more control over the franchisee and assists in continual operation of the business to keep the business running.
Similar: In both forms of licensing and franchising the licensee or franchisee pay royalties for the use of trademarks, patents, or copyrights.
Different: Franchisors may provide supplies, management services, or technology, whereas in licensing this is not provided. |
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Term
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Definition
| Agreement whereby one company gives rights to another for the use, usually for a fee, of such assets as trademarks, patents, copyrights, or other know-how. |
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Term
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Definition
| A specialized form of licensing in which one party (the franchisor) sells to an independent party (the franchisee) the use of a trademark that is an essential asset for the franchisee’s business and also gives continual assistance in the operation of the business. |
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Term
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Definition
| Foreign Corrupt Practices Act: A law that criminalizes certain types of payments by US companies, such as bribes to foreign government officials. This was presented in class. This is a complex policy that attempts to govern corrupt business practices. Although, even in its attempt the line between proper business behavior and corrupt business behavior is grayed. For example as in class: is it against the FCPA to do business with a Prince from a country that is known for its corruption around the industry? |
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Term
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Definition
| elies on religious and spiritual principles solely to define the legal environment. Example: Islamic law or Shari’a, based on the Koran. |
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Term
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Definition
| anchored in the wisdom of daily experience or for those who are more intellectually inclined, certain spiritual or philosophical traditions. Few countries in the world use this system in its whole as of today. |
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Term
| Identify Levitt’s three key arguments in support of global marketing. Do you agree or disagree with his arguments? Provide examples from the Paulo’s Pizza case (or another company) to support your answer. |
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Definition
Levitt's arguments in support of global marketing: (from slides)
1. Consumers are becoming more similar
2. Consumers prefer value over differentiation
3. Concentrating on what everyone wants results in economies of scale
1. Growing desire for more western foods and goods.
2. In Paulo's Pizza differentiation is necessary because Japanese do not like tomatoes or cheese, and this contradicts Levitt's argument.
3. In Paulo's Pizza keeping the same menu items will allow Paulo's Pizza to make minimal changes to their operations plans, and capitalize on their previously established processes. |
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Term
| Which of these products/services lend itself best to a global approach to marketing: Crocs, Vail Resorts, Apple Computer, Build-A-Bear, Hot Topic, Tiffany & Co.? Choose one and explain how you will position this product using a global approach to marketing (be sure to address the 4Ps of marketing). |
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Definition
4 P's of Marketing:
Product: Branding: Worldwide vs Local branding? One brand vs. multiple brands?
Packaging: How is the packaging perceived by foreign cultures? (example in class was Japanese Coke cans, and how they kept sending them back because the red wasn't right, etc. Packaging in Japan was much more important than where they were receiving the packaging from.
Promotion:
Message: Is the message of your advertising translatable into foreign cultures?
Media: How are you going to advertise your product differently?
Legal Issues: Are you legally allowed to advertise in the same methods as in your home country? (Advertising to children, etc.)
Pricing: Will international factors effect the pricing of your product? Consider exchange rates, government regulations, transportation costs/tariffs, global pricing pressure.
Place: (Distribution): How will you choose to distribute your product? How will you manage the channels of distribution? Are you concerned about a gray market developing around your product due to your expansion into international markets? Gray markets are markets that are legally selling your product to other markets. |
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Term
| mpare and contrast the four product policies in international marketing (p.613) |
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Definition
product orientation- A marketing strategy based on producing products at the lowest cost possible and providing them to consumers everywhere, irrespective of consumer preferences or differences.
customer orientation- A customer orientation asks 'what and how can the company sell in country A?' In this case, the country is held constant and the product is changed.
sales orientation- A company tries to sell abroad what it can sell domestically and in the same manner that consumers are sufficiently similar globally.
social orientation- Successful international marketing requires serious consideration of potential environmental, health, social, and work-related problems that may arise when selling or making their products abroad. |
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Term
| What are the advantages/disadvantages of using a host country national vs. a home country national in an international assignment? |
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Definition
Home country national (ethnocentric approach)
Advantages:
Command and control – familiarity with the way decisions are made and things get done at headquarters means that expatriates can be counted on to transfer home-country procedures to foreign operations
Local talent gaps – in the face of a shortage of qualified local candidates, along with a particular need to transfer specialized technologies, staffing overseas operations with highly skilled expatriates makes sense
Social integration – putting expatriates in positions around the world helps spread the word about underlying corporate practices and policies
Ownership structure – deploying expatriate managers to foreign join-venture operations solidifies a company’s ownership interest in the venture
Local implementation – because the process of transferring policies and practices is prone to breakdown, it’s a good idea to have expatriate managers on hand to solve the problems
High turnover among locals – because expatriates are less likely to leave the company than local employees – even highly skilled professionals – they’re less likely to leak proprietary information in the event they change companies
Management development – the international exposure and experience gained by expatriates adds to a company’s fund of knowledge about international-business strategies and practices
Disadvantages:
· Can inspire belief that one’s company is intrinsically better at everything
· Can promote cultural arrogance and illiteracy
· May blind managers to innovations in other countries
Host country national (polycentric approach)
Advantages:
Cost containment – for a slew of reasons ranging from tax equalization to housing allowances, an expatriate compensation package can be several times more than either a home-country base salary or the salary required to hire a local manager
Nationalism – host countries – especially those that aren’t well disposed to foreign-controlled operations – often prefer local managers who can be trusted to put local interests above a foreign firm’s global objectives
Management development – consistently awarding top jobs to expatriates makes it harder for a company to attract, motivate, and retain local employees
Employee morale – local workers often prefer to work for local managers
Expatriate failure rates – the unavoidable failure of some expatriates may ultimately take a toll on the company in terms of unsatisfactory performance, sidetracked careers, and deflated morale
Product issues – because they’re arguably more astute at interpreting and dealing with local conditions, local managers are better able than expatriates to adjust operations accordingly
Disadvantages:
· Complicates value chain coordination
· Isolates country operations
· Reduces incentive to engage an international perspective
· Potential for quasi-autonomous country operations |
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Term
| What are the key components of an expatriate compensation package? What are different approaches to computing an expat compensation package? |
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Definition
Key components:
base salary
foreign service premium- incentive to compensate individuals for the inconveniences of moving
allowances- cost of living (so the standard of living does not decline due to high prices of the foreign city), housing (so they can duplicate the same quality of housing in new location), spouse (to help spouse find work and take cross-cultural training), hardship (to people assigned to difficult environments or dangerous locations)
fringe benefits- medical and retirement to match that they would have in their home country
tax differentials- ensure after-tax income will not suffer because of the costs created by foreign assignment
Different approaches
Home-based method- bases the expatriates compensation on the salary of a comparable job in his/her home country
headquarters-based- bases salary in terms of the salary of a comparable job in the city where the company is headquartered
host-based- (sometimes called destination and localization pricing) bases salary on prevailing pay scales in the locale of the foreign assignment; this helps reduce tension between the expat and the colleagues in the host country; not as lucrative as other methods |
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Term
| 8. Using the lessons learned from the TelCommTek case, identify and discuss Factor X (i.e., qualities that you look for in an expatriate assignment)? |
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Definition
no proven formula
Must understand business and issues
cross cultural sensitivity
adaptability and flexibility
proven track record of international knowledge
develop satisfactory relationships with host nationals
leadership ability
knowledge of foreign language
family and spouse support |
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Term
| hat are the major drivers for the expansion of international alliances in the global economy? (pg 540-541) |
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Definition
1. To gain location-specific assets
·
2. To overcome governmental constraints –
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3. To diversify geographically
4. To minimize exposure in risky environments – companies worry that political or economic changes will affect the safety of assets and their earning in their foreign operations one way to minimize loss from foreign political occurrences is to minimize the base of assets located abroad—or share them → government may be less willing to move against a shared operation for fear of encountering opposition from more than one company another way to spread risk is to place operations in a number of different countries → reduces chance that all foreign assets will encounter adversity at the same time |
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Term
| What are the advantages and challenges facing a company like United Airlines in leading/participating in an international alliance, such as the Star Alliance? (pg 558-561) |
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Definition
Star Alliance is an alliance whereby airlines combine routes, sales, airline terminal services, and frequent-flier programs
Advantages:
Airlines have sought cooperative agreements to complement their route structures and capabilities
(Govt restrictions to prevent full mergers among airlines from different countries may be a blessing because corporate and nat’l cultures may be difficult to mesh)
The need to collaborate has been important because of the following factors:
1. Regulatory – countries have always seen airlines as key industries in which they want domestic service that is controlled by domestically owned companies; many countries have ensured national control through whole of partial government ownership of airlines
· governments can protect airlines by regulating which foreign carriers have landing rights, which airports and aircraft the carriers can use, frequency of flights, whether foreign carriers can fly beyond the country, overflight privileges, and fares they can change
· national attitudes and regulations not only give rise to separate national airlines but also limit airlines’ expansion internationally; with few exceptions, airlines:
o cannot fly on lucrative domestic routes in foreign countries – Lufthansa cannot compete on the New York to Los Angeles route because the US govt allows only US airlines on that route
o cannot easily control a flight network abroad that will feed passengers into their int’l flights – Air France has no US domestic flights to feed passengers into Chicago for connections to Paris, but American has scores of such flights (however, Air France has advantage w/in France, where US carries cannot operate)
o cannot service pairs of foreign countries – United cannot fly between Brazil and Portugal because the Brazilian and Portuguese governments give landing rights on thse routes only to Brazilian and Portuguese airlines → to avoid restrictions, must ally themselves w/carriers from other countries
· deregulation of airlines in the US and European Union has forced airlines to find new means to compete
2. Cost – sharing capabilities such as baggage handlers and baggage handling equipment may spread costs
· Airlines may sometimes sublease aircraft to each other, make market agreements to fly on alternate days, or share service in the same aircraft which then has a dual-flight designation → to cover the use of airport grounds, ground equipment and commissary services
· High costs of maintenance and reservations systems has led to joint ventures; United, US Airways, etc share ownership in Covia, which operates and deliver the Apollo reservation system
3. Competitive – marketing agreements to complement their route structures
· For example, Northwest handles KLM’s operations in it Detroit facilities…
Challenges:
· Blurred the competitive distinctions among the major int’l carriers
· Problem is relationships are intertwined among so many airlines → difficult to determine whether companies are competing, cooperating, or colluding (colluding = to act together secretly, esp w/harmful intent); mgmt may find hard to be cooperative when trying to compete
· Problem with marketing agreements is that connections from one airline to another show up as separate routes in reservation system…come up last on screen...travel agents tend to recommend first they see…passengers worry about making connections (on connecting flights) when they must change airlines → worry puts connections between two different airlines at a disadvantage to connections on the same airline |
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Term
| Using the lessons learned from Chapter 14, write a brief essay discussing the following questions: Why do alliances end? How do alliances end? What are key issues to consider in terminating an alliance? |
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Definition
There are many reasons alliances end. In the case with collaborative arrangements such as joint ventures, one or more of the partners become dissatisfied with the venture. This occurs in over half of joint ventures internationally. Several reasons that can lead to break-up and that should be considered when terminating an alliance:
Relative importance to partners – in many cases one partner’s management team is more active and blames the inactive management team for making poor decision or giving lack of attention.
Divergent objectives – For example, one company may have the objective of expanding, while the other company in the joint venture wants to stay it its current size.
Control problems – Because of questions about control, one company may modify the product or service without consent of the other company, creating problems.
Comparative contributions and appropriations – One company’s capability to contribute with its assets may diminish over time, resulting in dissention between partners.
Differences in culture – This is self-explanatory. Differences in the county’s culture of one company vs. another may affect the joint venture. Differences in corporate culture also will affect. It is important before creating a joint venture to keep in mind corporate and country differences in culture before entering into the joint venture.
Methods to dissolve a joint venture:
Termination by acquisition
Termination by dissolution
Termination by reorganization/restructuring of the alliance |
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Term
| What are the advantages of supporting a global brand vs. launching local brands in international markets? Provide examples to support your answer. |
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Definition
| Global brands are standardized and can become well-known all over the world by being seen repeatedly in different parts of the world. Therefore, recognition of the brand will be higher with global brands. However, global brands can sometimes be unsuitable for certain locations in the world where that particular culture does not understand or accept the brand. This is a specific problem with language in branding. An example of this would be using the number 4 in a brand (from class), when in Asia the number 4 is synonymous with death. Using the number 4 would create a social conflict around your brand in Asia. Adopting local brands for each country uniquely, however, will create the ability to customize the brand to each countries unique cultural characteristics and language. |
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Term
Read the Ventus Case, pp 676-681 of the Daniels’ text. Be prepared to answer the following question:
a. What will be the best path for growth for Ventus? Evaluate the various options discussed in the case. What path would you recommend? Briefly explain your answer.
b. What 2 other challenges are likely to face Ventus in the new term (other than those noted in the case)? How should Ventus deal with these challenges? |
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Definition
Options for growth for Ventus:
Should Ventus drive growth by expanding the number of seats held by existing customers or should it build a new pipeline of customers?
Should the company attain all the new customers it can, or should it be selective in obtaining only lucrative verticals, such as health care, financial services, and high technology?
Should the company focus on new customer segments arising in the US and China that are growing fast? If so, should they build new facilities or acquire or partner with companies near the US, like Mexico or Costa Rica.
I would recommend that Ventus follow a combination of these two recommendations: first, they should drive growth by building a larger customer base, acquiring newly emerging market segments from the US and China, while also offering services via partnering with SPI Technologies, under PLDT. In telecommunications, just as with the technology industry times are changing fast – and companies must excel or be left behind. Ventus is much more apt to survive and maintain its competitive edge that it has carried for so long if it expands its customer base while offering new technologies in new markets. Following these recommendations Ventus should build new facilities in or near its new market segments, placing close to their customers and increasing exposure. Facilities will be built in the United States and China capturing the Hispanic market, and US multinationals in China.
Two challenges Ventus may face and what to do:
Increased competition. Ventus is competing in a market that is expanding quickly, specifically business process outsourcing. To deal with increased competition, Ventus should build facilities in or near the markets they wish to obtain to increase their exposure in these areas and boost sales of their services.
Lack of interest from the Hispanic segment in the US. Ventus does not currently have a presence in the US. This may pose a potential problem for Ventus to acquire the newly forming Hispanic market. Ventus can battle this challenge by creating sales teams and advertising specifically geared toward the Hispanic market. |
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Term
| What are the advantages of supporting a global brand vs. launching local brands in international markets? Provide examples to support your answer. |
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Definition
| Global brands are standardized and can become well-known all over the world by being seen repeatedly in different parts of the world. Therefore, recognition of the brand will be higher with global brands. However, global brands can sometimes be unsuitable for certain locations in the world where that particular culture does not understand or accept the brand. This is a specific problem with language in branding. An example of this would be using the number 4 in a brand (from class), when in Asia the number 4 is synonymous with death. Using the number 4 would create a social conflict around your brand in Asia. Adopting local brands for each country uniquely, however, will create the ability to customize the brand to each countries unique cultural characteristics and language. |
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Term
Read the Ventus Case, pp 676-681 of the Daniels’ text. Be prepared to answer the following question:
a. What will be the best path for growth for Ventus? Evaluate the various options discussed in the case. What path would you recommend? Briefly explain your answer.
b. What 2 other challenges are likely to face Ventus in the new term (other than those noted in the case)? How should Ventus deal with these challenges? |
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Definition
Options for growth for Ventus:
Should Ventus drive growth by expanding the number of seats held by existing customers or should it build a new pipeline of customers?
Should the company attain all the new customers it can, or should it be selective in obtaining only lucrative verticals, such as health care, financial services, and high technology?
Should the company focus on new customer segments arising in the US and China that are growing fast? If so, should they build new facilities or acquire or partner with companies near the US, like Mexico or Costa Rica.
I would recommend that Ventus follow a combination of these two recommendations: first, they should drive growth by building a larger customer base, acquiring newly emerging market segments from the US and China, while also offering services via partnering with SPI Technologies, under PLDT. In telecommunications, just as with the technology industry times are changing fast – and companies must excel or be left behind. Ventus is much more apt to survive and maintain its competitive edge that it has carried for so long if it expands its customer base while offering new technologies in new markets. Following these recommendations Ventus should build new facilities in or near its new market segments, placing close to their customers and increasing exposure. Facilities will be built in the United States and China capturing the Hispanic market, and US multinationals in China.
Two challenges Ventus may face and what to do:
Increased competition. Ventus is competing in a market that is expanding quickly, specifically business process outsourcing. To deal with increased competition, Ventus should build facilities in or near the markets they wish to obtain to increase their exposure in these areas and boost sales of their services.
Lack of interest from the Hispanic segment in the US. Ventus does not currently have a presence in the US. This may pose a potential problem for Ventus to acquire the newly forming Hispanic market. Ventus can battle this challenge by creating sales teams and advertising specifically geared toward the Hispanic market. |
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Term
| Will Dell’s Direct Business model work in emerging markets, like China or India? What aspects of the model are likely to run into hurdles? How would you address these hurdles? (article and a little bit from Ch 17) |
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Definition
Background info: Dell’s direct sales model is a build-to-order; eliminated resellers and retailers that sell directly to the consumer by phone or internet; customizes every computer to customer’s needs and waits to build it until ordered → little inventory, newest technology, costs minimized
China:
not working well
had to change their model to compete
don’t have credit cards → adapted by striking deals w/banks to facilitate pymts
don’t purchase w/o seeing first & learning about → forced to go back to retail outlet approach
holds hands-on promo events in shopping malls
advertise in newspapers & direct mail
not perceived as affordable → now producing basic PC (SmartPC?) → competitive price point
aggressively marketing this PC to corp, govt entities, etc → bulk of revenues
betting as infrastructure is developed/improved, PC to the home user will pay off
worry about fluctuations of yuan:
if weakens → sales will decline
if strengthens → improve sales (since products manufactured locally in China
analyst: challenge by relying on direct-sales model to attract mainland consumers because Chinese consumers don't buy purely on price…need retail outlets for consumers…need to do a lot of educating the buyer in China…
Dell, despite gains, remains a bit player in country dominated by Beijing-based Legend, which has 30% market share & presence in big-city retail outlets…Dell is 4th just ahead of IBM
personal market is too important to ignore because so few Chinese have computers at home
unclear how many can afford to buy a computer (varies by area)
analyst said skeptical that Dell can make profit w/such low price & doesn't think consumers will be willing to buy sold only over telephone (use a month's salary to buy → have to see it)
Dell thinks its direct-sales model will be wave of the future in China
as more enterprises become tech-savvy and infrastructure improves, several analysts agree the direct-sales model could win out in long run
India:
is working well w/ corp & govt entities as they like to bypass the retailers
still had to deploy retail outlets to sell to the home user consumer
infrastructure is barrier; takes 21 days to receive after placing order (instead of 7)
price point also an issue, but basic PC → help capture more market share
Additional notes:
Asia, in general, like to negotiate & bargain; part of culture, built in to collective system
Supply chain control – lack of excellent transportation and delivery logistics (for parts and finished goods), could cause delays & increase costs → locate plant near manufacturing for parts required (physical factor under operating environment pg653) for faster delivery and reduction of transportation & transaction costs. If unable to locate in these places, would need larger inventory. (Concept: shortening distance in supply chain → improve dependability)
Use retailers (already have goods shipped to their facilities) less worry about transportation infrastructure (this would be a strategy under operations pg653)
Lack of cultural experience → hire local managers to provide insight to culture |
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Term
| 11. In the first exam, you selected 3 currencies as good potential investmnts. Again, identify these currencies and their exchange rates vs. the dollar (week of 3/02/09 vs. week of 1/05/09). Choose one from these 3 currencies. Did the currency appreciate or depreciate vs. the dollar? In your opinion, what factors explain this currency’s appreciation/ depreciation? |
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Definition
Current 1/05/09
Russian Rouble- 35.9 29.42
Indian Rupee - 51.8 49.65
Brazilian Real - 2.39 2.34
I think that you could select any of these currencies and explain the depreciation in the same way. The United States economy encountered, and began to deal with, the severe economic downturn. Additionally, these countries are producing countries, and relying on the consuming countries of the world to drive their economies, so as the United States fell further and further into trouble, these economies were bound to follow. |
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