IB 300 exam 3

chpt 10,11, 12, 13?

organizational structure

the way an organization formally arranges its domestic and international units and activates and the relationships among these components

• seen in charts: done by senior management

organizational design

a process that determines how a company should be organized to ensure its world wide business activities are integrated in an efficient and effective manner

• strategic planning and organizing are closely related

2 issues with IC structure

1. 1. finding the most effective way to take advantage of specialization of design

• 2. coordinating a firms activities to meet overall objectives

  • - integration : same direction

  • - coordination: working together

international division

companies often enter foreign markets by exporting

issue with international division

international division is at the same level as domestic and is responsible for all non country activities

• disagreement and power struggles between domestic and international division

4 worldwide organization structures

• product

• region

• function

• customer class

international product structure

domestic product division is given responsibility for global line and staff operations and is then responsible for worldwide operations

international product structure advantage

avoids duplication of product experts

international product structure disadvantage

creates duplication of area experts

• line of managerial specialist in an international division who advise product division (no line authority)

geographic region structure

geographic area managers responsible for all activities and reports directly to CEO

type of firms that use geographic region

firms with diverse products, different product requirements, competitive environments and political risk

• pharmaceutical

geographic region advantage

duplication of area specialist found in international product division structures is eliminated

geographic region disadvantages

duplication of product and functional specialist is necessary & production coordination presents challenge

• headquarters product manager provides input (no line authority)

global functional structure

organized by function at top level

global functional structure used by..

companies with narrow and high integrated product mix such as oil refining and aircraft manufacturing companies

hybrid structures

uses a mixture of organizational forms at the top level

matrix organization

an organizational structure that is composed of one or more superimposed organizational structure to mesh product, regional, functional, and other expertise

matrix organization issue

product managers are in the same level and their responsibilities will overlap , they must agree on a decision which can delay responses and power politics

matrix overlay

an organization that combines expertise form different area of a company without creating the complex ‘double reporting’ system of a traditional matrix organization

strategic business units

a self contained business entity with a clearly defined market, specific competitors and the ability to carry out its business mission and size appropriate for control by a single manager

reengineering

involves redesigning organizational structure, hierarchy, business systems and processes in order to improve organizational efficiency

• goal is to make the organization lean, flat, fast to respond, and innovative

virtual corporation

coordinates economic activity to deliver value to customers using resources outside the traditional boundaries fo the organization

aka network corporation

virtual corporation advanatage

it permits greater flexibility than other corporate structures

virtual corporation disadvantage

• reduces managements control over the corporations activities

• networks are vulnerable to the opportunistic actions of partners

• replace the security of long term employment and the promise to ever increase salaries with the insecurity of a global market

horizontal corporations

characterized by lateral decision processes, horizontal networks, and a strong corporate- wide business philosophy

ICs adopt the horizontal organizational to..

To improve customer focus, increase flexibility, speed decision-making, encourage cross-functional teamwork, and operate more efficiently across global markets

subsidiaries

companies controlled by other companies (known as parent companies) through ownership of enough voting stocks to elect a majority of the voting members on the company’s board of directors

affiliates

companies controlled by other companies, but less than majority owners may exercise control by a variety of means, both those involving stock ownership and those involving non ownership mechanisms

variables that determine decision

• Standardization of products & equipment

• Competence of subsidiary management / HQ reliance

• Size & age of the IC

• HQ willingness to benefit the whole enterprise at the subsidiary's expense

• Subsidiary frustration with limited power

transfer pricing

prices established for transactions between members of the same enterprise

IC’s profit allocation

direct profit to subsidiaries with the fewest currency controls, best labor relations & political climate and last social unrest

How can an IC control a company with less than 50% ownership?

• Management contract

• Control of finances

• Control of technology

• Place IC personnel in key executive positions

Primary reports sent to IC headquarters

• Financial reporting

• Technological reporting

• Market opportunity reporting

• Political & economic reporting

market screening

a modified version of environmental scanning in which the firm identifies desirable markets by eliminating the less desirable markets

2 levels of market screening

country screening and segment screening

country screening

a screening that uses countries as the basis for market selection

segment screening

a screening that uses market segments, within a country analysis of groups of consumers (e.g., gender, age, income, hobby, profession) as a basis for market selection)

what is assessed in an initial screening?

it is assessing whether a country has a basic need for the product based on climate, geography, and natural resources

types of goods easy to assess

specialized industrial material or equipment such as heavy duty snow removal equipment

types of goods hard to assess

products based on desires other than needs such as chocolate, consumer robots or HD movies

what is assessed in the second screening?

financial and economic factors ; such as inflation, currency exchange, interest rates. credit availability, customers paying habits and rates of return on similar investments

market indicator

economic data used to measure the relative market strength of countries or geographic areas such as market size, market growth rate, and e-commerce readiness

market factor

economic data that highly correlates with demand for a product

ex. average people eat out 3 times a week

trend analysis

a statical technique used to estimate future values by observing a variable over time and identifying patterns. it assumes past conditions remain constant

cluster analysis

a statistical technique that divides objects into groups based on similarity, it helps organize large amounts of information into meaningful categories

what is assessed in the third screening?

political and legal forces such as barriers to entry, government controls, stability of government policy and political stability

examples of barriers to entry

import restrictions, ownership structure requirement, technology requirements, local content restrictions and government owned competitors

examples of government controls

restrictions on repatriation of earnings and inability to provide foreign exchange for profit remittances

what is assessed in the fourth screening and why is difficult ?

cultural forces; it is difficult because cultuture is subjective and interpretive, data is difficult to assemble, especially from a distance, companies may need consultants and professional organizations

what is assessed in the fifth screening?

competitive forces: The number, size, and financial strength of the competitors. Their market shares. Their marketing strategies. The apparent effectiveness of their promotional programs. The quality levels of their product lines. The source of their products—imported or locally produced. Their pricing policies. The levels of after-sales service. Their distribution channels. 10. Their coverage of the market

• Eliminates countries where research shows that strong competitors would make a profitable operation difficult to attain.

what is assessed in the final stage of screening?

final selection of new markets assesses personal visits, corroborating information found during screening, and Face-to-face interviews to uncover information not found in reports

5 characteristics of segment screening

• definable

• large

• accessible

• actionable

• capturable

definable

segments can be identified and measured

large

segment is large enough to justifiy effort

accessible

target segment can be reached though promotion or distribution

actionable

marketing programs can be implemented for the segment

capturable

there is room to compete even if demand is already being served

trade mission

a market visit by businesspeople and or the government officials searching for business opportunities. the purpose is to learn firsthand about foreign markets

trade fair

a large exhibition where companies promote products, meet buyers and agents, learn about markets and gather competitive intelligence

social desireable bias

is the respondents desire to please the interviewer causing answers that please the interviewer rather than reflect the true beliefs or feelings

non equity modes of entry

• exporting

• Turnkey project

• Licensing

• Franchising

• Management contract

• Contracted manufacturing

equity based modes of market entry

wholly owned subsidiary and joint venture

Why do most companies begin their involvement in international business via exporting?

because exporting requires little investment and is relatively free of risks

What is a turnkey project?

A turnkey project is the export of technology, management expertise, and possibly capital equipment where the contractor:

• Designs and builds a plant

• Supplies technology

• Provides production inputs

• Trains personnel

• Turns the ready-to-run facility over to the purchaser after testing

Licensing

A contractual arrangement where one firm grants another access to patents, trade secrets and technology

Franchising

A form of licensing where one firm allows another to operate a business under an established name and following specific rules

difference between franchising and licensing

Licensing gives rights to intellectual property, while franchising allows operation of an entire business format under an established brand.

management contract and examples

A management contract is an arrangement where one firm provides management services to another firm for a fee

Example

• Hilton Hotel managing foreign hotels using the Hilton name

contracted manufacturing

An arrangement in which one firm contracts another firm to produce products according to its specifications.

• No investment in manufacturing facilities required.

• Products are marketed under the contracting firm's brand.

• Often referred to as outsourcing

greenfield Investment

Starting from the ground up by building a new plant.

Acquisition

Purchasing an existing business.

Benefits:

• Instant market access

• One less competitor after purchase

Joint Venture

A corporate entity formed by:

• An international company and a local owner, or

• Two international companies

They share a common business undertaking. Large construction projects such as dams and airports are common examples

Strategic Alliance

A collaboration with: Competitors, Customers and Suppliers

May be equity or non-equity based and helps firms:

• Enter markets faster

• Access new products, markets, and technologies

• Share costs, resources, and risks

ex. Airline code-sharing alliances

marketing mix

is a set of strategic decisions about a product and its promotion, pricing, and distribution to satisfy customer needs and wants in a target market. It consists of the 4 P’s

4 P’s

• Product – what is being sold

• Price – how much customers pay

• Place – distribution and availability

• Promotion – communication with customers

Why does management prefer to standardize marketing mix globally?

Advantages of standardization:

• Cost savings through economies of scale

• Longer production runs lower manufacturing costs

• Learning curve benefits

• Advertising and promotional materials only need to be created once

• Consistent global image

• Consistent pricing strategies

corporate visual identity (CVI)

Corporate Visual Identity (CVI) includes a firm:

• Name

• Logo

• Slogan

• Graphics

• Colors

• Typeface

These help consumers identify the company.

total product

everything the customer buys, not just the physical item. It includes

• Physical product

• Brand name

• Accessories

• After-sales service

• Warranty

• Instructions for use

• Company image

• Package

types of products that Require Less Adaptation

• Industrial products (e.g., memory chips)

• Services (business consulting, financial services)

• Luxury products (champagne, perfume)

types of products that Require Less Adaptation

Consumer products, especially products sold to lower economic strata and products sensitive to local culture

How does economic strata affect product adaptation?

• Social and cultural values become more distinct in lower economic strata.

• Greater market penetration requires greater product modification.

• Companies may need different packaging or services.

  • Example: IKEA offers assembly services in China and India

Industrial Products

• Usually require less adaptation.

• Changes are often due to legal requirements such as safety, health, emissions, or noise standards

Consumer Products

Often require more adaptation because consumer preferences vary across cultures

Services

• Generally, require less modification than consumer products.

• May require adaptation for legal requirements.

Sociocultural Forces

Consumer preferences often require changes in:

• Physical products

• Packaging

• Labels

• Brand names

  • ex .smaller package sizes where consumers shop daily at neighborhood stores

Meaning of colors in different countries

that color meanings differ across cultures and marketers must consider this when adapting products. (look at textbook)

Legal Forces

• Safety standards, pollution regulations, food regulations, pharmaceutical requirements

• Saudi Arabia requires products containing animal fats or meat to identify the animal source and indicate if no swine products are used.

Brand Names

• In many countries, ownership belongs to the first registrant.

• In the U.S., ownership traditionally depended on order of use

Internet Domains

A domain name may already be registered in another country

Patents

• Most countries use a first-to-file system.

• The U.S. switched from first-to-invent to first-to-file in 2013.

Economic Forces: disparity of income

• Large income differences affect standardization.

• Companies may need to simplify products or repackage them to fit consumers' purchasing power.

Physical Forces examples

Climate and geography often require product changes:

• Heat and humidity require electrical equipment with extra-heavy insulation.

• High altitudes require modified cooking instructions for food products.

Promotion

Promotion is any form of communication between a company and its publics, including customers and distribution channels

Promotional Mix

Includes:

• Advertising

• Personal selling

• Sales promotion

• Public relations

• Publicity

• Social media

How can cultural dimensions affect advertising decisions?

Marketers must adjust advertising to fit cultural expectations.

• Directness vs. indirectness

• Comparison advertising

• Humor

• Gender roles

• Explicitness

• Sophistication

• Popular vs. traditional culture

• Information content vs. fluff

What are the primary advantages of Internet advertising?

• Reaches affluent, accessible audiences

• Inexpensive

• Less regulated than traditional advertising

• Interactive

• Consumers choose messages they receive

• Effective for reaching groups such as teenagers

Glocal Advertising

"Think globally, act locally."

• Combines standardization and localization.

• Creates cost-effective strategies for regions with similar cultures and needs

Programmed-Management Approach

• Middle ground between fully standardized and fully local advertising.

• Headquarters standardizes what can be standardized while allowing local flexibility

Personal Selling

• Direct selling by sales personnel.

• Common for industrial products.

• Also used in consumer sales in developing countries

Sales Promotion

short-term incentives such as: [IB 300-Chapter 13 | PDF]

• Point-of-purchase displays

• Contests

• Premiums

• Trade show exhibits

• Celebrity endorsements

• Coupons

• Money-off offers