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Sample Exam Question - 1. All of the following statements are true about developing countries EXCEPT A. They provide sources of cheaper labor in the form of lower wage levels B. Most have an abundance of increasingly productive workers C. They have less economic risks than developed economies

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Sample exam question 1

Sample Exam Question - 1

  • All of the following statements are true about developing countries EXCEPT

    A. They provide sources of cheaper labor in the form of lower wage levels

    B. Most have an abundance of increasingly productive workers

    C. They have less economic risks than developed economies

    D. All of the above are true


Sample exam question 11

Sample Exam Question - 1

  • All of the following statements are true about developing countries EXCEPT

    A. They provide sources of cheaper labor in the form of lower wage levels

    B. Most have an abundance of increasingly productive workers

    C. They have less economic risks than developed economies

    D. All of the above are true


Sample question 2

Sample Question - 2

  • Seniority tends to dominate evaluation and promotion in:

  • Short-term oriented cultures

  • Cultures high on uncertainty avoidance and low on individualism

  • Ethnocentric cultures

  • Being rather than doing cultures


Sample question 21

Sample Question - 2

  • Seniority tends to dominate evaluation and promotion in:

  • Short-term oriented cultures

  • Cultures high on uncertainty avoidance and low on individualism

  • Ethnocentric cultures

  • Being rather than doing cultures


Sample exam question 3

Sample Exam Question - 3

  • What is the difference between a high and a low context language? Discuss some of the potential problems a person with a low context language may face when negotiating with high context language people.


Class 5

Class 5

Multinational Corporation:

Strategies

Strategic Alliances


Today s agenda

Today’s Agenda:

  • Video “Multinational Corporations”

    • Impact of MNC on the source and host countries

  • Local-global dilemma

  • Jollibee case presentation and discussion

  • International alliances

  • Motivation to form alliances

  • Trust issue in international alliances

  • Transfer of knowledge in alliances


What is a mnc

What is a MNC?

  • Any company that engages in business functions beyond its domestic borders including selling abroad (textbook).

  • A company that operates production facilities in a number of different countries (video “MNCs”)

  • Not every MNC is a global corporation yet (K.Ohmae)


Impact of mnc on the source country video multinational corporations

Impact of MNC on the Source Country(video “Multinational Corporations)

  • Higher earnings for the investing company

  • Export of jobs overseas

  • Export of technology

  • Loss of tax revenues


Impact of mnc on the host country video multinational corporations

Impact of MNC on the Host Country(video “Multinational Corporations)

  • Job creation

  • Technology inflow

  • Loss of control

  • Fear of exploitation


Local global dilemma for mncs

Local-Global Dilemma for MNCs

transnational

multinational

  • Economic imperative: to expand beyond the home country with global products

  • Consumer needs: local responsiveness

  • With what products?

  • Into which countries?

  • What modes of entry to use?

regional

local

global

multidomestic

international

global


Choice of global products gupta govindarajan business horizons 2000

Choice of Global Products(Gupta & Govindarajan, Business Horizons, 2000)

Least

attractive

Moderately

attractive

high

Required degree of

local adaptation

Moderately

attractive

Most

attractive

low

low

high

Expected payoffs from globalization

(refer to text, globalization drivers, p.155-156)


Choice of strategic markets gupta govindarajan business horizons 2000

Choice of Strategic Markets (Gupta & Govindarajan, Business Horizons, 2000)

Phased-in

entry (create a

beachhead

first)

Rapid

entry

high

Strategic importance of

market (market potential + learning potential)

Ignore

for now

On reserve

low

low

high

Firm’s ability to exploit the market


Sample exam question 1

International

Strategic

Alliances


Forms of collaborative relationship

Forms of Collaborative Relationship

Informal alliances

Joint product development alliances

Co-marketing

alliances

ISAs w/o equity investment

Joint production alliances

Franchising

Subcontracting

Investment alliances

Licensing

Joint ventures

Joint equity swaps

Mergers &

acquisitions

ISAs with equity investment

Direct foreign investment


Forms of collaborative relationship1

Forms of Collaborative Relationship

Informal alliances

Joint product development alliances

Co-marketing

alliances

ISAs w/o equity investment

Joint production alliances

Franchising

Subcontracting

Investment alliances

Licensing

Joint ventures

Joint equity swaps

Mergers &

acquisitions

ISAs with equity investment

Direct foreign investment


International strategic alliance

International Strategic Alliance

Cooperative, non-equity collaboration between partners or competitors across borders that entails pooling of skills and resources by the alliance partners to achieve the strategic objectives of each cooperating firm


International strategic alliance1

International Strategic Alliance

Firm A

AB

Firm B


International joint venture

International Joint Venture

Firm C

Firm A

Firm B


Types of alliances summary

Types of Alliances: Summary


What motivates a firm to form cooperative relationships

What motivates a firm to form cooperative relationships?

  • To extend the existing resources of the firm

  • To provide customers with “total service offerings”

  • To circumvent barriers of new int’l markets

  • To reduce economic and political risks

  • To seek an alternative to direct investments

  • To acquire new skills


What encourages a firm to form an alliance cont d

What encourages a firm to form an alliance? (cont’d)

Good prior exporting experience

(Dong-Jin Lee’s model, 1998)

Exporting

performance

Decision making

uncertainty

Intention

to form

strategic

alliance

Relational

exchange

Possibility

of opportunism

Cultural

distance

Economic

ethnocentrism

Duration of

relationship


What encourages a firm to form an alliance cont d1

What encourages a firm to form an alliance? (cont’d)

Bandwagon pressure (institutional approach)

(Pangarkar & Klein’s model, 1998)

Peer firms

undertake

alliances

Bandwagon

pressure

Focal firm

undertakes

alliances


Why do canadian firms opt for cooperative ventures

Why Do Canadian Firms Opt for Cooperative Ventures?

  • 1 in 9 Cnd firms participate in cooperative ventures

  • Main reasons: gaining access to new markets, access to new technologies, resource pooling, risk and cost sharing, scale or scope economies, building world-class capabilities

  • Most common forms - IJV, research consortia, co-marketing alliances


Reasons for failures

Reasons for Failures

  • Failure rate is 50-70%

  • Selection of a wrong partner (lack of trust, misfit in terms of governance, decision making, culture, conflict mgmt)

  • Failure to learn the new market (its needs, opportunities, risks, competition)

  • Miscalculated firm’s own strengths and weaknesses in relation to the new markets

  • Wrong assessment of costs of market entry and operations


Maintenance of partnerships trust and performance aulakh et al model 1996

Maintenance of partnerships: trust and performance(Aulakh et al. model,1996)

  • Relational norms:

  • continuity expectations

  • flexibility

  • info exchange

Partnership

performance

Trust

  • Monitoring mechanisms:

  • output control

  • process control

  • social control


Interfirm trust in cross national setting a study of dyer 2000

Interfirm trust in cross-national setting( a study of Dyer, 2000)

US automakers

US suppliers

Japanese automakers in US

Does not depend on - the length of the relationships

- embedded ties and community support

Depends on - expectations of the continuity of relationships

- offering assistance

- fair, predictable, stable processes and routines


Knowledge transfer across alliance partners

Knowledge transfer across alliance partners

  • Willingness to learn the core competencies of the partner

  • Partner protectiveness - a barrier to knowledge transfer

  • Marketing know-how (procedural knowledge) - the most critical knowledge

  • Explicit, simple and independent knowledge (e.g., “stock-list” based distribution system)

  • Social, complex, systemic, tacit knowledge (e.g., relationships with suppliers, government and employees) - source of ambiguity and barrier to imitation


Transferring knowledge between individualist and collectivist cultures

Transferring knowledge between individualist and collectivist cultures

  • Individualists:

    • preference for linear, credible, explicitly logical knowledge

    • scientific, systematic, abstractive, cause-effect thinking

  • Collectivists:

    • preference for tacit, contextual, comprehensive knowledge coming from authorities

    • associative thinking


Managerial implications

Managerial implications

  • Foster relational exchanges and trust: communication, liason roles, personal visits, info sharing, language and cultural sensitivity training, trade shows, staff exchanges

  • Rely more on social interactions rather than formal control mechanisms to develop mutual trust

  • Codify the corporate marketing knowledge (market knowledge, sales knowledge, customer knowledge)

  • Invest in human resource development: expatriation of valued specialists, personnel exchange programs, etc.


Bottom line

Bottom-line

  • MNCs leave different impacts on the source and the host countries

  • All firms that go international face the local-global dilemma (which products, markets and entry modes?)

  • Alliance - an integral part of multinational strategy and structure

  • Alliance is a give-and-take relationship in any place of the value chain


Bottom line cont d

Bottom-line (cont’d)

  • There is a high rate of failure across alliances

  • Trust and social control - mandatory precondition for partnership performance, more important than formal control mechanisms

  • Knowledge transfer between individualist and collectivist cultures may encounter obstacles


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