24F RSM100 Lecture Remember – Lecs 6-12 [Post-Midterm]

International v.s. Global Company

International = mere import/exports;

Global = variety of regions, local production, globally dispersed headquarters.

It is a spectrum.

3 Proofs of increasing globalization

1. International trade: 10% of global GDP in 1970; ~30% now.

2. Foreign direct investment: <5% of global GDP in 1980; ~10% now.

3. Financial transaction: Cross border trades went from <5% of US, GER, JPN’s GDP to 200%.

But some are left behind & negativ ely impacted.

3 Reasons Why Nations Trade

1. Obtain goods they want/need but can’t product (e.g. Asia: silk/tea; Americas: fur/sugar/cotton/coffee)

2. Obtain gold/“hard” currencies through trade surplus (fill king’s treasury/pay armies)

3. Absolute v.s. comparative advantage (Newcastle example; international division of labour).

4 Foundations of Canadian Economy

• Rich natural resources but small population

• Proximity to U.S. border – dependent + patriotism

• Political history – trades with Europe (esp. UK/FR)

• Immigration

3 Reasons Why Companies Trade

1. Excess resources (e.g. Saudi Arabia’s oil)

2. Cost Reduction – Specialization & economies of scale

3. Foreign market demand (e.g. Italian & French wine, luxury, and Champagne/fake Parmesan cheese).

International trading decision occurs at the…

Company level (not national).

History of Canadian Trading

• Fur trapping & fishing

• Hudson Bay Company – market surplus for UK goods

• Agriculture – wheat & grains export to Europe

• Post-WW2 – Economic growth with U.S.

6 Major Risks of International Trading

1. Unfamiliarity with international trading partners.

2. FX rates

3. Wars

4. Natural disasters

5. Regulations

6. Shipping (e.g. FL hurricanes, CAN cargo ships on fire, traffics and port close-downs, global events like COVID, zero-emission ports)

4 Important Free Trade Agreements

1. 1965 The Auto Pact: Automotive parts with U.S.

2. 1989 Canada–United States Free Trade Agreement (CUSFTA): Reduced tariffs

3. 1994 North American Free Trade Agreement (NAFTA): Adds MX, and removes tariffs for most sectors other than diary/poultry/publication.

   • Canada joined because US wanted free trade with MX, but Canada was worried that USM had a better deal than CUSFTA.

4. 2019 USMCA: Updated NAFTA.

Canada’s “Nation of Joiners”

• Founding member of: UN, World Bank, IMF, WTO

• Member of: APEC, OAS

• Military arrangements: NATO

• Built trust

• International trading mindset

• Diplomatic skills

Impact of a Depreciating CAD

• Cheaper exports; more expensive imports

• Increasing net trade surplus

• All else held equal, increasing GDP.

Drawback: inflation

3 Reasons to Care About Culture

1. Ideas/Perspectives

2. Tastes

3. Canada is an immigration country (even if we don’t outside, people still come in).

6 Ways People from Different Cultures Interact

1. Work

2. Compete

3. Buy & sell

4. Negotiate

5. Legal disputes

6. M&A

4 Challenges to Doing Businesses in Diverse Cultures

1. Speed of building relationships

2. Language barriers (e.g. Pocari Sweat & Chevy Nova)

3. Unintended offenses (e.g. gestures, jokes, eating with hand)

4. Bias/stereotypes/discrimination

Cultural Differences (lowk idk what’s testworthy here)

1. Building relationships

   • Latin America: pay multiple visits + gifts China: fight for the bill

     • In some countries, the older pays; in some countries, the younger pays.

2. Symbols

   • Italy: #17

   • China: #4, clocks (death); green hats (got cheated on)

   • Peru: purple flowers (poison)

3. Gestures:

   • Japan: shaking your leg (disrespect + losing money)

   • Korea: Youngest pours the drink; hand over heart

   • Some countries ask you to be early/some asks you to be late.

   • Writing names with red ink = death; writing over business cards = writing over their face.

   • Physical touch boundaries – Europe v.s. Asian/Muslim countries.

4. Food

   • Singapore: gum

   • India: beef

   • Muslim countries: pork/alcohol

3 Key Issues in International Ethics

1. Labour standards: working conditions/wages/hours/age (e.g. Congo child labour: working in mines with hazardous materials without PPE, young girls are raped, caused by corruption)

2. Corruption: leniency across countries (e.g. it’s illegal for Canadians to bribe foreign companies)

3. Environmental standards: pollution/conservation standards.

2 Reasons Why Ethics (Reputations)

• Reputation to host country: they have higher standards for foreign companies.

• Reputation in home country: global corporate responsibility (e.g. The Globe & Mail Test).

3 Ways to “Do Good” in Intl Business

1. Employee benefits (e.g. wage, hours, medical, transportation)

2. Community development (e.g. philanthropy, environmental stewardship)

3. Positive stakeholder relationships

   • Local customers

   • Employee leaders

   • Local governments

   • Suppliers

5 Advantages China Had in Producing EVs Due to State Capitalism

1. Subsidies: unfair advantage

2. Cheaper labour costs

3. Economies of scale

4. Established battery supply chain

5. Global dominance

2 Accusations Against China in EV Production

1. Intellectual property theft

2. Bullying trade partners

4 Pros of State Capitalism

1. Rapid industry growth

2. Promotes competitive products

3. Stability for companies during economic contractions

4. Leads to global dominance

4 Cons of State Capitalism

1. Inefficiency/overproduction

2. Limits innovation

3. Global tension / Retaliation of other countries

4. Using tax dollars

5 Contributions of Economies of Scales to China’s EV Production

1. Decreasing average fixed cost → decreasing average cost

2. Cheaper labour

3. Standardized parts

4. Supply chain control of batteries (the most expensive part)

5. Bargaining power

3 Impacts of Tariffs on Business Strategy

1. Localize production

   • Tesla: moved production back to US/MX for tax rebates

2. Continue to innovate to justify high prices

   • Tariffs might hinder innovation

   • Tesla: only company with self-driving technology

3. Supply chain management

   • Diversify

   • Control

3 Benefits of Supply Chain Control

1. Create consistency → mitigate risks (e.g. political tension/natural disasters)

2. Cuts costs, ensures quality

3. Adapts and responds to changes quicklier

(CCC: Consistency, costs, changes)

5 Advantages of Vertical Integration

1. Control over supply chain and innovation

2. More independent

3. Bargaining power

4. Quicker adaptation to market demand

5. Internal communication

3 Advantages of Outsourcing

1. Saves costs

2. Flexible – fewer fixed costs

3. Global market

4 Advantages of Imposing Tariffs

1. Prevent foreign competition

2. Lowers levels of playing field

3. Money stays in domestic

4. Tax revenue

3 Constraints to Imposing Tariffs

1. Decrease long-term focus on competitiveness

2. Make prices less competitive

3. Decrease consumer choice

5 Ways to Mitigate Risks from Global Supply Chain Dependency

1. Diversify suppliers

2. Local production

3. Buffer spots

4. Regional alliances

5. Inventory management

Balancing Environment v.s. Economic Goals from Tariffs

1. Affordability in switching to EVs

2. Jobs of 3 million people from domestic EV production v.s. lives of 6 million people from enhanced accessibility to EVs

2 Foundations of Strategy

1. Competitive advantage: valuable & rare

2. Sustainable competitive advantage: Hard to be imitated

A competitive advantage is one that is …

Valuable & rare

Strategic Management Process – 4 Core Competencies of Internal Analysis

• Organizational resources & capabilities

  1. Special knowledge/expertise

  2. Superior technology

  3. Efficient manufacturing approaches

  4. Unique product distribution systems

Strategic Management Process – 8 Aspects of External Analysis

• Industry

  1. Resource suppliers

  2. Competitors

  3. Customers

• Environment

  1. Technology

  2. Government

  3. Social structures & population demographics

  4. Global economy

  5. Natural environment

Tesla SWOT

• Strength: Technological advancement – self-driving cars

• Weakness: Expensive

• Opportunities: Environmentally conscious customers

• Threat: High pricing gives room for competitors like BYD

2 Types of Growth Strategies

1. Concentration strategy (e.g. Tim Hortons – they’re everywhere.)

2. Diversification strategies:

   • Related diversification: Rogers buying Fido

   • Unrelated diversification: Rogers buying SkyDome

   • Vertical integration: Buying customers/suppliers

4 Retrenchment Strategies (Restructuring & Divestituture Strategies)

1. Changing operations to correct weakness

2. Liquidation

3. Restructuring: downsizing/rightsizing (e.g. AVIS – comes with staffing & morale issues)

4. Restructuring: divestitures

4 Parts to Strategy Formulation

1. Cost & quality

   • e.g. Toyota achieving great balance, v.s. BMW/Mercedes

2. Knowledge & speed

3. Barriers to entry

4. Financial resources: allows a company to “be there”

   • e.g. Tim Hortons in the U.S.

5 Steps of Strategy Formulation with Eaton Example

1. Identifying current missions, objectives, strategies

   • Eaton: was middle-high end (like The Bay)

2. Analyze internal & external environments (SWOT)

   • Wanted to shift to a higher end dept. store

3. Revise & select new corporate, business, functional strategies:

   • Changed strategy to high-end retailer

4. implement: corporate governance, management systems & practices, strategic leadership

   • Changed stores appearance & marketing campaigns

5. Evaluate: strategic control.

   • Realizing existing branding won’t change.

   • Consumers’ states changed because: (1) e-commerce and (2) small boutique stores.

Eaton’s & Sears’ Example

Sears bought the remainder of Eaton’s.

Sears failed because consumers thought it’s outdated.

Closed at Eaton Centre and was replaced by Nordstrom & Simons.

Next steps: (1) get to sub-urban roots and (2) innovate store racks.

Ashley Madison Branding Change Example

• No longer for cheaters; marketing campaign is more open.

• But Name is Brand

• Couldn’t attract female users but the commercial was not helping.

• Men also lost trust

Does Ashley Madison’s Branding Change Make Sense

• Yes: Expanding customer base; attempting to revive reputation.

• No: The reputation won’t change anyway.

Importance of Branding

Carnival Cruise Line v.s. Holland America – more than models; have different brands.

Strategy v.s. Tactic

• Strategy: Big picture, long-term, doesn’t change often.

  • Focuses on goals, missions, priorities.

• Tactics: Supplement to strategy, short-term, moment-to-moment.

  • Redesigning products, reassigning tasks, closing stores, etc.

  • (I feel like it’s just containing more specific to-dos)

Porter’s 5 Forces

• Bargaining powers of customers

• Bargaining powers of suppliers

• Threats of new entries

• Threats of substitutes

• Industry competition

Porter’s Generic Strategies

Broad (about standing out in a populous market)

• Cost Leadership – Having competitive pricing over everyone else (e.g. Hyundai, KIA)

• Differentiation Leadership – Making product stand out in competition (e.g. BMW, Volvo)

Narrow

• Cost focus – providing at lower cost but having to narrow the market (e.g. Suzuki)

• Differentiation Focus – targeting a niche market (e.g. Land Rover, Subaru)

BCG Matrix

• Dogs: Low market share; low market growth potential [Retrenchment strategy]

• Question marks: Low market share; high market growth potential [Growth or retrenchment strategy]

• Cash cows: High market share; low market growth potential [Stability or moderate growth strategy]

• Star: High market share; high market growth potential [Growth strategy]

5 Mistakes Target Made

1. Supply chain mismanagement

2. Poor logistics planning

3. Misunderstanding of Canadian culture (coupon v.s. flyers; private labels)

4. Underestimated competition

5. Weak online presence

Overambitious expansion – too rushed.

5 Ways Target Could’ve Done Better

1. Bring private brands over

2. Do more market research

3. Canadian-exclusive products

4. Price competition

5. Open fewer stores in more populated areas

2 Things Walmart Did Better Than Target When They Entered Canada

1. More efficient

2. More research

6 Reasons Why Costco Was Successful

1. Employees were well paid

2. Exclusivity

3. Revenue stream from membership fees

4. “Treasure-hunt” experience

5. Samples

6. Cutting Expenses (“Bare-bones”) that made people feel they got a deal (e.g. No Frills v.s. Fortinos)

2 Threats Costco Faces & Solutions

Threats: E-commerce & subscription fatigue.

Solutions: targeting younger people – offer student memberships, expand private names.

5 Vs of Big Data

• Volume – # of data

• Velocity – High speed

• Veracity – Accuracy & reliability

• Variety – Structured (database), semistructured, unstructured (picture)

• Value – Purpose of data

CIA Triangle

• Confidentiality: Private, secure, secret

• Integrity: Consistent, accurate, reliable

• Availability: Systems & applications accessible

4 Risks of Big Data

1. Virus

2. Information leaks

3. Loss

4. Cyberattacks

6 Roles of CIO

Investopedia defintion: Management, implementation, usability.

1. Strategic planning: IT Planning, new available technology

2. Technology management: hardware, infrastructure, software

3. Budgeting: Managing IT budget, cost-effect analysis

4. Managing IT team

5. Compliance & security

6. Stakeholder communication

3 Reasons to Not Fire Immigration & Citizenship CIO

1. Otherwise too much money – cost-effective analysis

2. Immigration process is long and Canada has no competitors, 2 extra days won’t hurt.

3. No one will blame Canada anyway and they made Canada look kind of popular too.

4 Purposes of Big Data

1. Predict Demand: Determine what to sell

2. Point out Gaps: Pinpoint issues

3. Turnout Analysis: Shortened problem-solving time (3 weeks → 20 min), filtering out noise

4. In-Store v.s. Online Retail

4 Challenges of Big Data

1. Capital intensive – cost constraints

2. Relevance – too much data

3. Recruitment

4. Training

Key Takeaways from Target & Tesla’s Moral Issues Cases

Target:

• Being categorized immediately

• Relevant ads are better than irrelevant ones

• Should have option to opt out

Tesla:

• Is the value of human life quantifiable?

• Should Tesla keep developing so more people can benefit from self-driving or pause until they find a solution to the current issues?

• Who is responsible when machine learning technology makes a mistake?

Main Threats from Anthropogenic Climate Change

1. Extreme weather (hurricanes, floods)/natural disasters

   • Business impact: property damage, disruption insurance

2. CO₂ emissions

2 Principle Factors of Rising CO₂ Emissions

1. Growing population

2. Increasing technology use per capital

   • Increasing income/GDP

   • More advanced/energy-consuming technology

3 Risks of Climate Change to All Species

1. Habitat destruction

2. Ecosystem collapse

3. Biodiversity loss

4 Risks of Climate Change to Humans

1. Direct physical harm

2. Flooding

3. Crop failure

4. Human migration & conflict

Spectrum of Who Must Respond to Climate Change

Individual → Municipal → Provincial → Federal → Global

More scale = more impact = more responsibilities

Shareholder Capitalism v.s. Stakeholder Capitalism

Shareholder Capitalism (Milton Friedman): Maximize profits.

Stakeholder Capitalism:

1. Shareholders

2. Customers

3. Suppliers

4. Employees

5. Planet

6. Communities

Traditional Model of Sustainability

Sustainability is intersection of…

• Economics

• Equity

• Environment

New model of Sustainability

Working outwards in from…

• Environment

• Society

• Economics

2 Options to Respond to Environmental Risks

1. Minimize own negative impact

   • e.g. Hotel: (1) WFH, (2) less/more public transit, (3) default to not washing towels.

2. Prepare for unavoidable consequences

   • e.g. Hotel: (1) build barricades, (2) relocate buildings, (3) contingency plan, (4) insurance

4 Trends in Sustainability

1. ESG

2. Impact investing/socially conscious investing

   • 1/3 of U.S. Assets Under Management is sustainable investing

3. Inflation Reduction Act (IRA): encouraging investment in clean energy

4. COP29: UN climate conference; new global climate finance target

Larry Fink’s Quote

“Climate change has become a defining factor in companies’ long-term prospects… we are on the edge of a fundamental reshaping of finance.”

8 Potential Roles of Technology in Sustainability

1. Most obvious:

   1. EVs

   2. Renewable power (wind/solar)

2. Less obvious:

   1. Hydrogen/carbon capture (oil & gas)

   2. Lab-grown meat (agriculture)

3. Out of left field:

   1. Insect consumption

   2. Refreezing the arctic

   3. Send SO₂ into stratosphere

   4. SHIFT

2 Key Issues SHIFT Saw

1. Energy insecurity – lack of access to safe, reliable, inexpensive energy

2. Climate change

3 Benefits SHIFT Brought

1. Reduce smoke inhalation by traditional energy sources

2. Limit methane release

3. Provide lighting at night – increased productivity

3 Strategies SHIFT Used

1. Scalable energy domes in agriculture-based communities

2. Anaerobic digestion technology

3. Mix of private & public funding streams

10 Impacts of SHIFT

Global:

1. Prevent climate change

2. Reduce global greenhouse gases

3. Save lives with clean energy source

4. Diminishing energy insecurity

Community:

1. Fertilizer from residual waste

2. Improved productivity

Individual – Improved quality of life

1. Free resources

2. Clean cooking fuel

3. Gas for lanterns

4. Lighting at night

2 Things Tim McNerney Learned at Nestlé

1. Getting tough: Being told “no,” understanding people’s motivations & schedules;

2. Independence: different location than manager (who was in Calgary).

Differences Between Nestlé’s and Coca-Cola’s Corporate Cultures

Nesté: Strict, no flexibility to hours

Coca-Cola: More entrepreneurial (e.g. Only had one KPI when managing Walmart = >10% growth).

Coca-Cola’s Sustainability from Shareholders’ & Stakeholders’ Perspectives

Stakeholders want less emissions;

Shareholders want to remove any friction from the point of purchase.

2 Benefits of Operational Efficiency from KO & Bottlers’ Specialization

1. Lower prices for customers

2. More funds for investments

4 Advantages of Coca-Cola’s Specialization

1. More localized strategies specifically for customers

2. Producing near the market – operational efficiency

3. Focus on brand-building & customer research

4. Easier to comply to local regulations (benefits expansions, considering local nuances)

4 Constraints for Coca-Cola’s Specialization

1. Inconsistencies in product quality control

   • Mitigated by: (1) Pantone sheets for colours and (2) water tests

2. Complex external communications

3. Strategy & interest conflict: long-term v.s. profit

4. Main assets are under Bottlers

3 Advantages of Coca-Cola Bottler’s Specialization

1. Make more profit with control over last mile pricing

2. Pre-sold demand with global brand

3. Focusing on inventory management (and not branding strategy) → Operational efficiency

4 Constraints of Coca-Cola Bottler’s Specialization

1. Having to execute & adapt to global strategy / regulation

2. Profit sharing

3. Responsible for meeting local regulation & sustainability standards

4. Must consider reputation of Coca-Cola

4 Reasons Kilmer Diversified Their Portfolio

1. Diversify revenue stream profile

2. Saw ability in improving something

3. Specialization in buying business

4. Partnerships & collaboration – potential synergies

(DISS: Diversify, improve, specialization, synergies)

2 Tools McNerney Used for M&A

Google

Media (videos & podcasts)

6 Steps in M&A

1. Finding Targets

2. Reviewing Opportunities

3. Presenting the Offer

4. Securing Capital & Financing

5. Transitioning to New Ownership

6. Integration & Optimization

M&A: 3 Steps to Finding Targets

1. Market research:

   1. Industry trends

   2. Competitor analysis

   3. Customer pain points

   • ILC: Shifting away from big brands

2. Growth potential:

   1. Strong growth prospects,

   2. Innovative products/service

   3. Loyal customer base

   • ILC: Favour towards “Made in Canada” – safe & high quality

3. Synergies: Using connections

   1. Complementary products

   2. Distribution channels

   3. Cost savings

M&A: 3 Parts to Reviewing Opportunities

1. Financial Analysis: Profitability, revenue growth, cash flows;

2. Market Position: Market share, brand reputation, competitive advantages – long-term potential/risks.

3. Operational Efficiency: Operations, supply chain, infrastructure

   • Key people

   • Cost optimization

M&A: 3 Steps to Presenting the Offer

1. Initial Offer: competitive, align valuation & strategic objectives;

2. Negotiation: exclusive, conducting due diligence, addressing key T&C;

3. Final Agreement: Legally binding, begin transition.

M&A: 4 Ways to Secure Capital & Financing

1. Equity financing: leverage existing capital/seek investment; high risks, high returns.

2. Debt financing:

   1. Predictability of cash flow

   2. Able to pay back 125% of obligations

3. Creative funding:

   • Crowdfunding

   • seller financing

   • Earn-outs

4. Careful planning: Balances risks, costs, long-term sustainability

M&A: 3 Steps to Transition to New Ownership

1. Communication: engage key stakeholders, especially employees

   • McNerney made his early investments safeties for employees.

2. Cultural integration: align values, goals, and operational practices

   • More empowerment under McNerney

3. Strategic alignment: define strategic vision, synergies, and growth plans

   • McNerney walked owner through financial statements, leader to less waste.

M&A: 4 Keys to Integration & Optimization

1. Set clear objectives – measurable

2. Leverage operational, financial, strategic synergies

3. Innovate & expand

4. Empower the team – retaining, motivating, collaborative

(OISE: Objectives, Innovation, Synergies, Empowerment)

Amazon: 3 Key Success Factors

1. Efficient supply chain management

2. Focus on customer experience

3. Humans help robots in fulfillment centers

   • Data analytics: predictions

Amazon: Cheetah & Gazelle

Target less developed publishers: present nice terms then change them.

For market share.

Amazon’s 4 Strategic Decisions to Sustain Losses

1. Losing profits for market share

   • Competitive prices, fast shipping

2. Amazon Web Services: Used AWS for cash.

3. Alliance with government

4. Started with a simple product

Big Data @ Amazon

1. Tracking products that look interest to customers

2. Worker productivity

3. Amazon Go Stores (palm scanning)

Amazon’s Anti-Trust Lawsuits: Should Canada Sue?

Yes:

1. Squeezing out competitors

2. Unfair advantage

No:

1. Paid their dues through unprofitable years

2. Convenient for consumers

3. Exclusive Patents: Encourage innovation (lowkey regulated monopoly)

4. Amazon: “We’re small in every sector!”

Does Amazon Benefit Contemporary Startups?

Yes: Access to larger market; provides customer base

No: Taking advantage of them; randomly banning them