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Explain the concepts of IB and global business

Q: Explain how formal institutions affect domestic and international competition

Domestically: focuses on antitrust - Designed to combat monopolies and cartels antitrust policies seek to balance efficiency and fairness through- collusive price setting- price setting above competitive levels and predatory price setting- lowering prices below costs and raising after competition is wiped out International competition: focus on antidumping focuses on antidumping laws to prevent foreign companies to sell products below their costs to wipe out domestic firms Often foreign firms are discriminated against- with the help of their government in america the antitrust policy is pro-consumer and pro-competition In japan the exact opposite pro producer and pro- incumbent

Q: List the factors that influence the foreign exchange rate

foreign exchange rate- price of a currency in terms of another - relative price differences PPP - interest rate & money supply - productivity & balance of payments - exchange rate policies - investor psychology

19 important questions on Explain the concepts of IB and global business

Explain how value is created from a firms resources and capabilities

value is created through value adding activities, and getting rid of non-value- adding resources and capabilities

Explain how resources and capabilities can be analyzed using the VRIO framework

focuses on VALUE, rarity, inimitability,organzational

value- can lead to competitive advantage

rarity- potential to provide temporary competitive advantage

imitability- can lead to competitive advantage

organzational- sustained competitive advantage

Explain how formal institutions affect domestic and international competition

Domestically: focuses on antitrust

- Designed to combat monopolies and cartels

antitrust policies seek to balance efficiency and fairness

through- collusive price setting- price setting above competitive levels

and predatory price setting- lowering prices below costs and raising after competition is wiped out

International competition: focus on antidumping

focuses on antidumping laws to prevent foreign companies to sell products below their costs to wipe out domestic firms

Often foreign firms are discriminated against- with the help of their government

in america the antitrust policy is pro-consumer and pro-competition

In japan the exact opposite pro producer and pro- incumbent

How local firms compete with MNES

Defender- strategy which focuses on local assets in which MNEs are weak

Extender- strategy which focuses on leveraging homegrown competencies abroad

dodger- cooperating though JOINT ventures

contender- stratergy that centers on a firm engaging in rapid learning

Use the resource-based view and the institutional trade view to show why nations trade

Nations trade by importing and exporting, this is only done when it benefits both sides and therefore is a win/win situation for both parties

resource based view- a nations must have a strong VRIO framework which makes this product, valueable, rare, hard to imitate and organizationally embedded which others nations dont have and therefore it has to be imported

institutional based view- governments might help facilitate trade through the WTO,

however it can also limit the trade to protect domestic firms and infant industries, this can be achieved through tarrif barriers, and non tarrif barriers such as quotas

List the factors that influence the foreign exchange rate

foreign exchange rate- price of a currency in terms of another

- relative price differences PPP

- interest rate & money supply

- productivity & balance of payments

- exchange rate policies

- investor psychology

Explain how FDI creates OLI advantages

FDI undoubtedly creates economic gains if the costs outweigh its outcome

ownership- refers to MNES possession of centran VRIO properties overseas. owning these help MNE beat rivals overseas

location- the advantages when doing business in different places. this location could provide natural and labor resources and closer access to markets which helps build on the VRIO framework.

Internationalization- replacing cross-boarder markets, with one firm operating in two countries. this reduces transaction costs

Benefits of ownership, location and internationalization

ownership- provides management control rights, reduces the risk of knowledge being taken advantage of- dissemilation risk- knowledge being spilt over.

Location- agglomeration- clustering of similar firms in a certain location

provides knowledge spillover- how to's and information from other firms

creates a skilled labor force who could possible work for multiple similar firms

creates a pool of specialized suppliers and buyings whom locate in this region

Internationalization- reduces transaction costs and reduces uncertainty

Distinguish between different political views of FDI

radical view- a political view that is hostile to FDI, as it exploits domestic resources and labor

Free market view on FDI- FDI is at its best with no government intervention, as it allows countries to tap into the absolute or comparative advantages

pragmatic nationalism on FDI- only approves of FDI when its benefits outweigh its costs

benefits of FDI for host countries:

-capital inflow

-technology

-managment

-job creation

Costs of FDI for host countries:

-loss of sovereignty

-competition for local firms

-capital outflow, profits wont go to them

Discuss how resources and institutions can help overcome the liability of foreigners

Liability of foreigners- the inherit disadvantage foreign firms experience when doing business a host country

1. there are numerous differences between formal and informal institutions in different countries, to overcome the liability of foreigners, firms have to be well prepared and learn about these differences

2. foreign firms often are discriminated against, and due to differences in cultures values and norms they can experience the liability of foreingers

this can be balanced by deploying overwhelming resources and capabilities to off set this liability

What to do, be well prepared and have knowledge about informal and formal instit

Compare and contrast first mover, versus later movers

First mover- advantages

-proprietary technology

-ride the learning curve

-get the scarce resources

-creates entry barriers of later movers

-may build good relationships with stakeholders

late mover advantages

-opportunity of the free ride

-less technological and market uncertainty

-can adapt to first movers bad sides.

Discuss characteristics of an entrepreneurial firm

a firm that is, innovative, proactive, risk-seeking behavior, low success rate.

value- their innovations must add value

rare- best performing entrepreneurial firms tend to have the best, rarest and insights of opportunities

inimitable- difficult to imitate

organizational- must be organizationally embedded

Explain why firms undertake acquisitions?

acquisitions- transfer of control of operations and management from one firm to another.

motives for acquisitions

-synergistic- have superior capabilities and resources- leverage superior managerial capabilities, enhances market power and scale economies, access to complementary resources

humbristic- overconfidence in managers ability to manage a firm better than themselves

managerial motives- self interest action

Explain why acquisitions often fail

because managers often fail to address pre and post acquisition problems

Explain how institutions and resources influence acquisitions and alliances

formal institutions- formal legal and regulatory frameworks- can be shown through anti-trust concerns and entry mode requirements

antitrust concerns- are more likely to approve of alliances compared to acquisitions

entry mode requirements- they can simply ban or discourage asquisitions which therefore forcefully creating alliances with local firms

informal institutions- cognitive pillar, the taken for granted values and beliefs that guide firms behavior

and the collective norms and actions, firms might follow and copy other firms to protect theirs. even without direct knowledge of how this will benefit their company- bandwagon effect.

Explain how institutions and resources affect strategy, structure and learning

formal institutions- several institutional frameworks to guide firm behavior

- they often encourage undertaking activities which would not otherwise take place. can use tax incentives and free infrastructure upgrades to attract MNEs to invest in higher value adding activities.

Describe the four p's

the 4 p's that collectively make up the marketing mix

product- the product or service, including follow ups and maintenance

price- the expenditures customers are willing to pay for a product.

promotion- refers to all communications that marketers insert into a market place. in international marketing, country of origin effect is the positive or negative perception of firms and products of a certain country

place- the location where products and services are provided, supported by the distribution channel, that facilitates the movement of goods from producers to consumers.

Discuss how resources and institutions affect the supply chain management and marketing

formal rules- formal rules can be implemented to restict or ban advertisements on taboo subjects, or to negatively advertise other products

informal rules- the guiding principles of cultures, norms and ethics to guide marketing stratergies

and it is also the norm for many firms to outsource to asia, to tap into low costs

resources-

value-does the activity add value?

rarity- doing similar to others can add value, however exploying different options can also

imitable- they have to be careful of other companies follow their path,

organizationally- is the firm capable organizationally to do these activites?

Explain the principal-agent conflicts and the principle-principle conflicts

the relationship between shareholders and managers, also known as principal (owners) and agent (managers) this conflict is because the interest of both parties dont overlap. in coorporate world principals will focus on maximixing profits where as agents will want to maximize their income, power and perks

principal-principal

The question on the page originate from the summary of the following study material:

International Business | 9781408019566 | Mike W Peng, et al

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Topics that are related to Explain the concepts of IB and global business

Globalising business

Explain the concepts of IB and global business

19 important questions on Explain the concepts of IB and global business

Explain how value is created from a firms resources and capabilities

Explain how resources and capabilities can be analyzed using the VRIO framework

Explain how formal institutions affect domestic and international competition

How local firms compete with MNES

Use the resource-based view and the institutional trade view to show why nations trade

List the factors that influence the foreign exchange rate

Explain how FDI creates OLI advantages

Benefits of ownership, location and internationalization

Distinguish between different political views of FDI

Discuss how resources and institutions can help overcome the liability of foreigners

Compare and contrast first mover, versus later movers

Discuss characteristics of an entrepreneurial firm

Explain why firms undertake acquisitions?

Explain why acquisitions often fail

Explain how institutions and resources influence acquisitions and alliances

Explain how institutions and resources affect strategy, structure and learning

Describe the four p's

Discuss how resources and institutions affect the supply chain management and marketing

Explain the principal-agent conflicts and the principle-principle conflicts

Topics that are related to Explain the concepts of IB and global business

Globalising business

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