IBUS 310 Terms 2

FSA

firm-specific advantages; what makes a firm successful; some are location-bound while others are not

international business

relationship between the firm and host country's environment

3 things that make up FSAs

unique resources, routines, entrepreneurial skills

paradox of transferable FSAs

if you can easily write them, they are easily transferred, but they can be easily copied; those that are not easy to imitate are less easily transferrable; transferability

bounded rationality

imperfect assessment (we don't have all the info)

bounded reliability

imperfect effort (opportunistic behavior, false promises, etc.)

3 levels of analysis of a business

business environment, strategy, management

transnational mindset

ability to develop and interpret criteria for business and personal performance that are independent from the assumptions of a single country, culture, or context, and to implement these criteria appropriately in different countries, cultures, and contexts

5 focuses of a transnational mindset

global integration of the value chain, adaptation of producers/marketing/business models, organizational centralization vs decentralization, market entry decisions, integrating non-market strategy

3 things "no" means (in the context of business) **MOST IMPORTANT THING OF THE SEMESTER

not the right time, not the right person, wrong question

2 places you may be able to get an internship abroad

US Commercial Service at the embassy, American Chamber of Commerce

why FSAs?

to build a sustainable competitive advantage

sustainable competitive advantage

when a firm consistently earns higher profits than other firms in its industry

most important part of sustainable competitive advantage

uniqueness; think about the value chain

strategy

actions that managers take to attain the goals of the firm to increase profitability and profit growth

profitability

rate of return a firm makes on its invested capital

profit growth

percentage increase in profitability over time

corporate vs business strategy

entire company vs particular business units; they operate independently, but are related

location economies

labor, regulations, transportation, etc.

experience effects

learning effects; repetitive nature leads to efficiency as you learn

economies of scale

reduction in unit cost due to large volume; the more you produce, the less fixed cost is allocated to each unit, which reduces the unit cost

how do you increase profitability

create more value

explanation of profitability and value chart

V-P = consumer surplus per unit

P-C = profit per unit sold

V-C = value created per unit

The closer P gets to V, the more people will pay

4 types of international business strategies

transnational, international, global standardization, localization

transnational strategy

the ideal strategy; high globalization and localization, high local responsiveness and cost reduction

global standardization strategy

low local responsiveness, high cost reduction (same product everywhere)

international strategy

low local responsiveness, low cost reduction (early stages; can eventually move to global standardization or transnational)

localization strategy

high local responsiveness, low cost reduction (entirely different products everywhere; can eventually move to transnational)

value chain

business model that describes the full range of activities needed to create a product/service

the problem with outsourcing

gives local people knowledge and resources to compete

5 strategies for home team advantage

engage deeply with customers and users, partner with local suppliers, foster development in local talent pools, shape the regulatory and institutional environments, participate in broader development of social value (or create the illusion that you are)

Porter's 5 Forces purpose

analyze competition to determine competitive intensity and therefore attractiveness of an industry in terms of profitability

Porter's 5 Forces

threat of mobility/new entry, supplier power, threat of substitutes, buyer power, industry rivalry (major determinant)

industry rivalry (P5Forces)

number of competitors in a space, customer loyalty, already there, etc.

standardization

less costs, quicker entry, develop global brand name, centralized, "know-how" and skill

adaptation

adapt products to local taste

pros of global integration

benefit from differences in comparative advantages, increased bargain power, economies of scale, lower costs

cons of global integration

need standardization for global strategy, difficult to adapt and adjust, potential higher costs

vertical integration

centralization vs decentralization

horizontal integration

structure of organization

corporate governance

framework needs to reflect the culture, style, and issues of the organization

principal agent problem

there is inherently a conflict of interest between those with control and those with ownership of a company (managers/agent vs shareholders/principal)

3 basic sources of conflict (principal agent problem)

managers' desire to remain in power, managerial risk aversion, free cash flow (leftover cash when everything is paid off)

what to do with free cash flow

pay to investors, invest in future development, invest passively in financial securities

ways to combat conflict (of principal agent problem)

CEO contractually has to act to maximize shareholder value, give CEO stock options

3 spheres of sustainability

social, environmental, economic

2 dimensions of nonmarket strategy

local and global, strategic and moral

"3 M" Test **another most important thing of the semester

mirror: would I be able to sleep at night?

mom: would I care if my children/parents found out?

media: would I care if it were reported in the news?

character/legacy: what do I hope for my obituary to say?

non-market strategy

firm's plan of how to increase its social, political, and environmental effectiveness in a particular environment; about values

integrated non-market strategy

plan of how to integrate market and non-market strategies

value of statistical life (VSL)

used to decide whether or not to adopt new regulations

if cost of regulation < # lives x VSL , adopt regulation

Brent Spar

created CSR

oil storage platform used to hedge against low prices of oil; Shell decided with the help of scientists and governments to get rid of it by sinking it in the middle of the Atlantic after the oil was drained; Greenpeace staged a dramatic protest that resulted in Shell giving money to them, which silenced them, and using Brent Spar as a pier in a Norwegian fjord

DDD shift (CSR)

to decide, dialogue, deliver from decide, announce, defend

Monsanto's Stewardship Agreement

unintended pollination can lead to patent infringement

Foreign Corrupt Practices Act

prohibits payments of bribes to foreign officials to assist in business goals (does not count expediting, SEC can bring civil enforcement)

due to Lockheed bribing foreign officials to buy their fighter jets and the crisis in Japan that ensued from this

prosecutorial discretion

US prosecutors have to say whether or not to try a case

Wrongful Acts Triangle Framework

motivation to commit wrongful acts increases when 3 factors are present: pressure, opportunity, rationalization

bottom line

financial records

double bottom line

measures performance in terms of positive social impact

triple bottom line

measures saving the planet

microfinance

scheme for providing very small loans to micro-entrepreneurs, taking little/no collateral (group lending methodology, high return on equity)

copyright

protects specific creative work for the life of the author +70 years if the author is known or for 95/120 years if the author is not known

patent

protects from the use, manufacturing, or sale of an idea for a limited duration of time to promote innovation

trademark

protects specific symbols, words, names, etc. for a limited duration of time that can be renewed

service mark

trademark but for services

R vs TM symbols

registered (more specific and more protected) vs not registered; McDonald's M is R, whereas "I'm lovin' it" is TM

Madrid Protocol

allows for international trademark protection; one time, one currency, one language, etc.

New Silk Road/One Belt, One Road

China's new plan where resources go into China, finished goods come out; would cover 62% of the population in the world; embracing soft power

China's National Security Law

broad and goes beyond physical threats; wants the absence of international/domestic threats

US principle of national security

manage threats, not fully eliminate

3 primary efforts of China in the US right now

shaping the context (encourages self-censorship and regulating, Confucius institutes), controlling the Chinese diaspora (media propaganda in other countries), targeting the US political core

DDD framework

3 ways to create value abroad

deploy, develop, deepen

outsourcing

outside of the organization

offshoring

outside the home country

offshore outsourcing

outside of organization and home country

hollowing out

short-term gains of offshore outsourcing are undercut by long-term losses, like being replaced because the workers in the other country gain knowledge and resources and have home-team advantage; new competitors

horizontal FDI

firm invests in foreign markets to expand its current lines of business

globally integrated enterprise

integration of production and value delivery worldwide due to less barriers, IT revolution, and shared technology and business models

chain of command

line of authority from top to bottom of an org

span of control

number of subordinates reporting directly to a manager