RSM100 Lecture Review - Final

Lecture 6 – International Business 

International Company – imports/exports products to one or more countries 

Global Company – pursues customers in all major regions (North America, Asia, Europe) 

Absolute + Comparative Advantage 

Reasons Companies Trade – profitable pursuit for excess resources, cost reduction, foreign market demand 

Risks of Trade – natural disasters, political instability, exchange rates 

Benefits of (Free) Trade – consumers pay lower prices & have more choice, economic growth + prevention of economic distortion  

• Driver of globalization 

Foreign Exchange – How does a low Canadian dollar affect international trade and the economy? 

• Currencies used to be pegged to the value of gold; now, many sovereign states often use the USD as a benchmark for exchange rates  

Culture – cultural nuances can affect international business; as such it is a key factor in determining what we do and how we do it 

• “Pocari Sweat” – Japanese energy drink that did not sell well in the foreign market due to translation issues  

CASE STUDY – EU Tariffs on Chinese Vehicles  

• EU set to implement 36.3% of tariffs on Chinese EVs on top of already existing 10% tax on all imports 

• Would only be implemented on EVs, not the individual parts (China monopolizes many parts, like batteries)  

• Costs – Chinese Manufacturers (5500), EU Manufacturers (20,000) 

• This allows Chinese firms to sell EVs at lower rates than other countries 

• ex – U.S has a 100% tariff on Chinese EVs but because of China’s low production costs, they are still able to price competitively  

CASE STUDY – State Capitalism (China) vs. Market Economy (U.S) 

• State Capitalism & the Global Market 

• State-owned Entreprises – Chinese SOEs are major players in global markets and often outperform private ones thanks to state backing 

• Controlled Market Access – China's large domestic market acts as leverage in negotiations with foreign companies/countries  

• Overall, China influences global markets by leveraging its state control & its economic power 

• Advantages of State Capitalism 

• Government support allows for competitive pricing 

• Companies grow faster  

• Companies are comparably more stable in the event in the event of economic downturns 

• Disadvantages of State Capitalism 

• Retaliation from other countries 

• Inefficiencies/overproduction 

• Limits competition and innovation  

• Economies of Scale & Chinese EV Production 

• Larger scale of production, which lowers costs 

• 80% ownership of battery manufacturing industry (key part of EVs) 

• Lower labor costs  

• Tariffs 

• Protection from competition, cycle of money remains within domestic circle, encourages consumers to buy domestically, protects industry jobs 

• Loss of natural competition, stifles innovation, less consumer choice 

• Supply Chain Control 

• Crucial for risk mitigation 

• Increase cost efficiency & lower costs overall 

• Respond to changes in market  

• Vertical Integration vs. Outsourcing 

• Vertical Integration – control supply chain, innovate, less dependency, bargaining power 

• Outsourcing – save on costs, flexible, access to global markets, increased product development  

Lecture 7 – Strategy 

• Strategic Competitiveness 

• Competitive Advantage 

• Sustainable Competitive Advantage – difficult for competitors to imitate; valuable and rare  

• Internal + External Analysis = Strategic Management  

• Strategic Management 

• Internal Analysis – assessment of core competencies (special knowledge? superior technology? efficient manufacturing?) 

• External Analysis – assessment of macroenvironment (technology, government, social structure) / industry environment (suppliers, competitors) 

• SWOT – Tesla 

• S – Technological advancements 

• W – Cost of inputs (batteries) 

• Strengths & Weaknesses are internal analyses, Opportunities & Threats are external analyses  

• Types of Strategies 

• Growth 

• Concentration 

• Diversification 

• Related diversification – Rogers acquisition of FIDO 

• Unrelated diversification – Rogers buying the Skydome & renaming to Roger’s Center 

• Vertical integration 

• Restructuring 

• Readjusting operations 

• Retrenchment 

• Liquidation 

• Correcting weaknesses 

• Downsizing 

• Divesture  

• Strategy Formulation 

• Identify, Analyze, Revise, Implement, Evaluate  

• Branding Change 

• Ashley Madison attempted to rebrand as a standard dating site following their data breach scandal 

• “Life is short, have an affair” turned into “Find your moment” 

• Since the scandal turned their target market (cheaters) against them, Ashley Madison needed to explore a new market 

• This attempted rebranding failed since consumers still associated Ashley Madison with cheating; the company did eventually revert to their original business model  

• Strategy vs. Tactic 

• A strategy is a “big picture” idea 

• A tactic is a short-term plan 

• Five Strategic Forces  

• Suppliers + Consumers (bargaining power) 

• New Entrants + Substitutes (threats) 

• Industry Competition (rivalries) 

• CASE STUDY – Why Target Failed in Canada  

• Target’s first attempt at international expansion 

• Key Mistakes  

• Rushed in too quickly and aggressively  

• Underestimated existing competition  

• Misjudged the Canadian consumer – assumed them to be carbon copies of the American consumer 

• Poor logistics – had store and warehouse issues; locations were too far to service each other  

• Leadership – inexperienced, no knowledge of Canada  

• What Should Have Been Done 

• Start by only opening a few stores (test the waters) 

• Extensive market research 

• Having brands exclusive to Canada  

• CASE STUDY – Rise of Costco 

• Treasure Hunt Strategy 

• Exciting items/low prices, offers do not stay on the shelves forever which creates a sense of urgency  

• Store never looks the same; this is done to encourage exploration 

• Costco’s Success 

• Low mark-ups – encourages customer retention 

• Different type of shopping experience 

• Strategy – Free samples 

• Strategy – Membership requirement 

• Threats 

• E-commerce, subscription fatigue  

Lecture 9 – Technology 

“If information is the oil of the 21^st century, analytics is the combustion engine” 

5 Vs of Big Data – Volume (amount), Variety (diversity), Velocity (speed), Veracity, Value (worth) 

CIA Triad – Confidentiality, Integrity, Availability; corporations must adhere to this triad as they have access to our data  

Uses of Big Data – predict demand, point out gaps (software showed certain Walmart products were not selling because they had neglected to be displayed) + turnout analysis (problems solved at quicker rate) 

Challenges of Big Data – capital intensive, recruitment + training 

Chief Information Officers – increasingly important role within businesses due to the surge of data usage; they are responsible for strategic planning, technology management and cost management of technology 

Machine Learning – algorithms whose performance improves as they are exposed to data over time (ex – Tesla's self-driving cars) 

Lecture 9 – Climate Change  

1. Threat of Climate Change 

• Increasing common extreme weather events are forcing businesses to reassess the way they handle risk management (ex – more aware of location & mitigating climate risk) 

2. Who Must Respond 

• Action on all levels – Individual, Municipal, Provincial, Federal & Global  

• Traditional (focus on equal priority) vs. New Sustainability Model (focus on environment) 

• Under the new model, it is said that for a business to be sustainable it must first prioritize the environment, then the society, and last of all its profitability  

3. Options to Respond 

• Strive to minimize personal negative impact 

4. Sustainability 

• Focus on socially conscious investing (1/3 of U.S AUM is sustainable investing, ex. for every $ invested in America, 1/3 goes towards sustainability) 

• ESG performance is an increasingly common tool of analysis 

5. Technology 

• Tool to address climate change 

• EVs, renewable power (nuclear, hydrogen, carbon capture/sequestration) 

• Lab-grown meat, insect consumption, refreeze Arctic 

CASE STUDY – Shift  

• Vision – transform the potential of trash into value  

• Human waste has energy potential 

• Targets two macro-global problems, energy insecurity and climate change 

• Impacts  

• Individual – free resources, clean cooking fuel, improved quality of life 

• Community – fertilizer  

• Global – reduce greenhouse gases, mitigate climate change, diminish energy insecurity  

Lecture 10 – Coca Cola & Coca Cola Bottling 

CASE STUDY 

•  Coca Cola Company Overview  

• 135+ years of Coke 

• 200+ countries – global 

• Atlanta, Georgia – the location of a company’s headquarters impacts culture & stock 

• Entrepreneurial, “American” 

• Coca Cola Bottling Overview 

• Tim McNerney – Chief Customer Officer (sales & marketing) 

• “Your local bottler”  

• Focuses on consumer relationships and marketing  

• Licensing  

• Coke – Benefits of Bottlers 

• Global company, global strategy  

• Close to clientele  

• Focus on brand-building strategies  

• Coke – Disadvantages of Bottlers 

• Inconsistencies in production 

• Communication 

• Bottlers – Benefits of Licensing 

• Set market prices 

• Recognized brand reputation (pre-sold demand) 

• Bottlers – Disadvantages of Licensing  

• Local regulations 

• Can’t control brand image  

• CASE STUDY – Acquisition of ILC Skincare 

• Identifying Potential Acquisition 

• Market Research 

• Growth Potential 

• Synergies 

• Review Opportunity 

• Consider financial analysis & market position of the business  

• Present Offer – Negotiation 

• Initial Offer > Negotiation Process > Final Agreement  

• Funding the Acquisition 

• Equity, debt financing 

• Creative funding 

• Transition 

• Communication, cultural integration, strategic alignment 

• Integration & Optimization 

• Set clear objectives, leverage synergies, innovate, empower  

Lecture 11 – Case Competition  

Unite - “Match your goals” 

• Mission – bridge the gap between academics & social life 

• User verification, profile matching algorithm, progress tracking, time management 

FreshByte - “Fresh eats, fresh bites” 

• Mission – to resolve the issue of wasted food  

• Tracks fridge inventory & expiry dates 

• Can suggest tailored recipes + create shopping lists 

NeuroTag - “Unlock your mind’s potential” 

• Mission – abolish sleep deprivation 

• Drug free, non-invasive, clinically proven 

• Fall asleep 50% quicker with improved sleep quality 

HotSpot - “Stay charged with every step” 

• Self-charging battery pack 

• Mission – solve daily charging problems 

• Environmental sustainability + patented 

Lecture 12  

• CASE STUDY – Amazon 

• Operations Management 

• Efficient supply chain management 

• Consumer-oriented 

• Efficient use of data analytics 

• Cheetah/Gazelle Theory 

• Amazon pursues weak third-party retailers and sets terms to take advantage of them 

• Strategy 

• Operated at a loss for ~20 years to build its current infrastructure 

• Amazon Web Services kept them afloat during this time 

• Began operations with easily shippable items (ex. book) 

• Needed an incentive for users to choose Amazon / e-commerce over buying products themselves; chose free shipping which forced the company to operate a loss  

• Use of Big Data 

• Predict demand by analyzing what customers were looking at and how long they were looking at it for 

• Review database to figure out top-rated products  

• Worker productivity  

• Anti-trust Lawsuit 

• Accused of using anti-competitive tactics to maintain dominance within industry by the EU 

• Unfair advantage – Amazon Web Services 

• It can be argued that Amazon should not be targeted with anti-trust lawsuits/other countries should not follow in the steps of the EU because consumers would be upset  

• Fiscal Analysis 

• Highest profit margin comes from Web Services (still) 

• International sector is NOT profitable, however  

• Sales increasing, losses decreasing  

• Is it reasonable to project future profit if Amazon continues to operate internationally? 

• 2018, 2019 (losses), 2020 (profits – pandemic year), 2021 (loss) 2022 (MAJOR outlier, huge loss) 2023 (return to normal trends) 

• It is imperative to consider economic and other global factors when conducting profit/loss analysis  

• Ethics 

• Employee – overworked but are provided with jobs  

• Customer – access to competitive pricing, shipping, choice but privacy in question 

• Public – pays tax dollars, provides employment, but has been known to engage in questionable behaviour and promote dangerous products  

• Investor – ROI, but negative reputation from anti-trust lawsuits and boycotts  

• Khan’s Closing Thoughts  

• Change your life by changing your focus 

• Marshmallow Test – instant gratification is never worth it  

• Do not worry about stress/other people’s urgencies 

• Outcome, Purpose, Action – figure these things out for yourself  

• Time Targets 

• Dimension of Distraction – not urgent, not important 

• Dimension of Delusion – urgent, not important  

• Dimension of Demand – urgent & important  

• Dimension of Fulfilment – not urgent, but important