1. Chapter Two Theoretical Foundations MKT568 Global Marketing Management Dr. Fred Miller

2. Sample Essay Questions 1. Given the following production data, which country(ies) enjoy an absolute advantage and in what commodity? Which enjoy a comparative advantage and in what commodity? Using the Cappuccino Trail video as an example, explain the difficulties of basing competitive advantage on locational factors such as climate and growing conditions. 2. Using the Cappuccino Trail video as an example; 1) explain how a country might use Porter’s Diamond model to create a competitive advantage in beans/brands and 2) explain how Café Direct/Nescafe/Starbucks might use Porter’s Value Chain model to establish a competitive advantage in the retail coffee market.

3. Theories of International Production Country specific advantages - (CSA’s) absolute and comparative, locational International product life cycle Porter’s diamond factors, interaction, government, man-made New trade theory firm specific advantages (FSA’s) Eclectic theory – matching CSA’s & FSA’s

4. Absolute and Comparative Advantage 200100 Totals1758590Totals 1000 Wool853550Wool 100 0Wine905040Wine TotalsPortugalEngland TotalsPortugalEngland Absolute Advantage 18080100Totals1707595Totals 1000 Wool8535 (70%)50Wool 80 0Wine8540 (88%)45Wine TotalsPortugalEngland TotalsPortugalEngland Comparative Advantage

5. Cappuccino Trail Video What CSA’s give equatorial countries comparative advantage in coffee production? What are the benefits of relying on locational factors for comparative advantage? What are the dangers of relying on locational factors for comparative advantage?

6. Cappuccino Trail Video 1608575Totals 853050Brands 755025 Beans Totals B A 200100 Totals 1000 Brands 100 0 Beans Totals Peru Switzerland Based on the video, which country is Peru and which is Switzerland? In this scenario, who benefits from specialization and trade? By how much?

7. Cappuccino Trail Video In this situation, which of the following are true? 1. Switzerland has an absolute advantage in beans 2. Switzerland has a comparative advantage in brands 3. Peru has an absolute advantage in brands 2. Peru has a comparative advantage in beans 1606595Totals 752550Brands 854045 Beans Totals Peru Switzerland

8. Cappuccino Trail Video In this scenario, who benefits from specialization and trade? By how much? 18080100Totals 1000 Brands 80 0 Beans Totals Peru Switzerland 1606595Totals 752550Brands 854045 Beans Totals Peru Switzerland

9. Advantage Porter’s Diamond Competitive Advantage for Countries Firm strategy, structure and rivalry Related and supporting industries Demand conditions Factor conditions Source: Adapted and reprinted with the permission of the Free Press, a division of Simon and Schuster, from The Competitive Advantage of Nations, by Michael E. Porter. Copyright © 1990 by Michael E. Porter

10. Porter’s Diamond Competitive Advantage for Countries Firm Strategy, Structure and Rivalry Related and Supporting Industries Demand ConditionsFactor Conditions How would you revise this strategy to one supporting firms strong in developing coffee brands? Consumer Electronics Strong firms Competitive features ComponentsInnovative buyers Design EngineersKnowledgeable Media suppliers Retail infrastructure Fashion Apparel Innovative designers Competitive styles Fabric suppliersStylistic buyers Fashion designersFashion conscious Specialty retailing Promotional Media Beer Large, diverse brewers Complex positioning Hops, barley, yeastSocial acceptance BrewersKnowledgeable Advertising industry Hospitality infrastructure Beans or Brands? Multiple cooperatives Diverse growing strategies Skilled farmersKnowledgeable Regional systemSelective Transportation infrastructure Agricultural supports

11. FSA’s and Marketing Strategy Production-based vs marketing specific advantage Product price focus vs market satisfaction focus Market orientation vs knowledge/resource-based orientation Who can we serve? vs Who needs our skills? The value chain and internationaliztion Johanssen’s model, Porter’s model Foreign entry, local marketing & global management

12. Value-Added Analysis for Consumer Electronic Products Panasonic Radio Shack ComponentsAssembly Marketing, sales, and distribution Retailing Source: Reprinted from “Designing Global Strategies: Comparative and Competitive Value-Added Chains,” by Bruce Kogut, Sloan Management Review, Summer 1985, pp. 27-38 by permission of publisher. ©1985 by the Sloan Management Review Association. All rights reserved

13. Porter’s Value Chain Competitive Advantage for Companies Radio Shack Inventory Mgt Retail Mgt Location Customer Service Ads Inventory Product Suppliers Panasonic Product Design Engineering Production Online Support Ads Sales Components Production Coffee producers Café Direct Nescafe Starbucks

14. Internationalization Theory Modes of entry internalization of FSA’s - export, foreign direct investment (FDI) externalization of FSA’s – licensing, alliances Transaction cost theory The Competitive Environment Rivalry, new entrants, substitutes, buyer and supplier power Global competitors Strength, repertoire, rivalry, hypercompetition

15. Cappuccino Trail Video What firm specific advantages does CafeDirect seek in serving consumer coffee markets? Is it working? What firm specific advantages does Nestle’s seek in serving consumer coffee markets? Is it working? How has Starbucks responded to criticism of its use of Ethiopian place names in its branding strategies?Starbucks

16. CaféDirect’s Competitive Advantage PeruMexico Tanzania Uganda

17. Fair Trade and Local Production as Competitive Advantages Fair Trade products include: Fresh fruit Cocoa and chocolate Coffee and tea Honey Wine and spirits Sports balls Flowers and cosmetics Sugar and confectionary Fruit juice and yogurt Herbs and spices Nuts and snacks Cotton products Rice and quinoa Fair trade products have up to 15% share of some UK market sectors

18. Ethiopia and Starbucks WSJ article discussing the issues YouTube video for Oxfam’s position Starbuck’s response Oxfam’s comments on the resolution of the dispute Ethiopia’s Branding Strategy

19. Chapter Two Theoretical Foundations MKT568 Global Marketing Management Dr. Fred Miller