1. Business 187 - Global Dimensions of Business Review for second midterm Prof. Wood

2. The midterm …  25-28 multiple-choice questions  A choice of one of two essays (handed out ahead of time)  Bring Scantron (Form 882-E – the small style) Blue book (small is OK)

3. Multiple choice questions will cover …  assigned reading in Chapters 1, 8, 11, 9, 13, and 16  From the first third of the course, only Ch. 1 will be included Also, the Porter article “The Competitive Advantage of Nations”

4. Use these slides and the class review discussion as guides  Study… the text your notes the original slides available on the class web page  Memorizing stuff from the slides is not enough! Make sure you understand each concept on the slides Have slides, your notes, and text open all at once  All midterm topics are mentioned on slides, but the slides themselves cannot provide full detail

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6. Key issues in Chap. 1: International Business - An Overview  Why has international business grown? Government policies (freer trade) New technology New institutions  Modes of international business Importing and exporting merchandise Service “exports and imports” Investment:  direct investment and  portfolio investment

7.  What is a “multinational enterprise?”  Two basic multinational strategies Multi-domestic (locally responsive) company Globally integrated company  Price competition, rapid change, better communication favor global integrated strategy  Ethical dilemmas – How to think about right and wrong Normativism Relativism

8. Key issues in Chaps. 8 and 11: Foreign Direct Investment (FDI)  Definition of foreign direct investment  Why firms do foreign direct investment Be able to think about under what circumstances a firm would produce abroad Why not just license your tech to a local firm?  Acquisitions vs. do-it-yourself  Most FDI is to and from developed countries, but investment in developing countries is growing

9. Hopes and fears of developing (poor) countries  What developing countries want  What they fear from investing companies

10. Key issues in Chap 9: Foreign exchange  What are money? foreign exchange? exchange rate?  How to find out a currency’s value (on line or in newspaper)  Dollar as most widely used/traded London as site of most trade  Fixed vs. “floating” exchange rates

11.  Trading terms: bid, offer, spread  Fully convertible (hard) currency vs. “soft” currencies  Key issues of “fundamental analysis” in predicting change in a currency’s value Note: Text of Ch. 9 is confusing and difficult. Download the slides

13. Sessions 8-10: Global Corporate Strategy  What goes into the big decisions

14. Porter’s Competitive Advantage of Nations  Understand what Porter means by the competitive advantage of an industry  Understand the four determinants Factor conditions (specialized factors) Demand conditions Related and supporting industries Firm strategy, structure, and rivalry  Understand what Porter means by each  Importance of pressure on firms

15. Key issues in Global Sourcing (Country Evaluation and Selection)  How location decisions should be influenced by Porter’s theories  Scanning and initial decision techniques Know some key criteria  Size  Growth rate  Stability  Spillovers Limitations of scanning  Dangers in using standard data sources

16.  What causes firms to eliminate proposals from countries  Diversification vs. Concentration strategies  Differences between new and reinvestment/harvest decisions

17. Key issues in Chapter 16: Marketing  Product policy choices Production orientation Sales orientation Customer orientation Strategic marketing orientation  Forecasting for countries where you currently have little or no sales  “Gap” analysis (where you have sales)

18.  Reasons products have to be altered from country to country Standardize basic elements to control costs

19.  Complexities of pricing  Distribution systems “Distribution” is “the course – physical path or legal title – that goods take between production and consumption.” Includes both shipping and the process by which the product is sold Price escalation Need to work with distributors

20. Promotion  Push vs. Pull marketing Push marketing: sell through direct sales techniques Pull marketing: You encourage demand through techniques such as advertising Complex distribution systems encourage push  Differences in media  Benefits and difficulties of standardizing marketing message globally

23. Info in slides from here are not required

24. Conclusions from the Dental News case  Dental News exists because There are few distributors of dental equipment in poorer countries Communications media from rich countries don’t tell dentists in poorer nations what they can get and how… So it’s hard to be a dentist in these nations

25. Not required: Key points from Chap. 15: Control Strategies  What is control? planning, evaluation, and correction to ensure the organization meets its objectives  Why is control important?  Control difficulties abroad Distance Diversity Uncontrollables Extra uncertainties (government instabilities, etc.)

26. Location of decision-making  Globally integrated strategy – more centralized  Multidomestic strategy – decentralized Be able to describe how the choice of strategy will affect what a firm does

27. Control mechanisms  don’t memorize a list of mechanisms, but know that …  Strategic intent is the big shared mission that everyone knows they are pursuing  Corporate culture is shared values that produce similar behavior in different countries

28. Not required Key points in Chap. 17: Export and Import Strategies (Micro view)  Ch. 16 covered the macro, strategic view of marketing  Ch. 17 deals with specific details of exporting Characteristics of exporters  Probability of being an exporter increases with company size (revenues)  Export intensity, the % of revenues coming from exports, is not correlated with size

29. U.S. Government help: Export Assistance Centers of the International Trade Administration (ITA) U.S. embassies in other countries

30.  Intermediaries in distribution Sales representatives (“reps”) do not take title Distributors actually buy your goods from you Export management companies  handle everything, but rare in U.S.

31.  Famous kinds of Asian intermediaries Sogo shosha - Japanese general trading company Chaebol - Big Korean group with trading company  Other intermediaries in U.S. Freight forwarder (exporting) Customs broker (for importing)

32. Export Documentation  Key export documents Pro forma invoice – like a “letter of intent” Commercial invoice – an actual bill (describes goods and payment terms) Bill of lading – receipt for goods from the carrier (airline, shipping line) Export license – required for some tech goods Certificate of origin – proof goods came from a particular place 17-11

34. Getting paid  Letter of credit – document that obligates buyer’s bank to pay when goods shipped (usually very reliable)  Open account – the seller just sends a bill (often very dangerous)