International Business Midterm 2

2/25/2013
Chapter 6: Investing Abroad Directly
1. Key Terms:
a. Foreign Portfolio Investment (FPI): foreign indirect management;
holding securities of companies in other countries, but does not entail active
management of foreign assets; based on financial securities the price of this
investment depends on the stock market
b. Foreign Direct Investment (FDI): the direct, hands-on management of
foreign assets. For statistical purposes, the UN defines FDI as an equity stake
of 10% or more in a foreign-based enterprise; based on tangible investments
manage this investment through people managers
c. Management Control Rights: without FDI, it is difficult to establish this the authority to appoint key managers and establish control mechanisms.
d. FDI Flow: the amount of FDI moving in a given period.
e. FDI Inflow: FDI moving into a country.
f. FDI Outflow: FDI moving out of a country.
g. FDI Stock: total accumulation of inbound FDI in a country of outbound FDI
from a country.
2. Horizontal FDI: when a firm takes the same activity at the same value-chain stage
from its home country and duplicates it in a host country through FDI; refers to
producing the same products or offering the same services in a host country as
firms do at home; e.g. BMW
3. Vertical FDI: when a firm moves upstream or downstream in different value-chain
stages in a host country through FDI
* Remember the Value Chain
Input
R&D
Components
Final Assembly
Marketing
Output
4. FDI Flow v. Stock:
a. FDI Flow: is the amount of FDI moving in a given period (usually a year) in a
certain direction
i. FDI Inflow: moving into a country in a year
ii. FDI Outflow: moving out of a country in a year
b. FDI Stock: is the total accumulation of inbound FDI in a country or outbound
FDI from a country
5. Why Does FDI Take Place? FDI provides gains to a firm through OLI
a. Ownership Advantages: Possession and leveraging of certain valuable,
rare, hard to imitate, organizationally embedded resources.
i. Direct ownership provides combination of equity ownership rights and
management control rights.
ii. FDI vs. Licensing:
1. FDI reduces dissemination risk
2. FDI provides tight control over foreign operations

3. FDI facilitates the transfer of tacit knowledge through learning or

doing
b. Location Advantages: Features unique to a place that provide advantage to
a firm.
i. Some locations possess geographical features that are difficult to
match.
ii. Location advantage can arise from agglomeration the clustering of
economic activities in certain locations.
iii. Results from:
1. Knowledge spillover
2. Industry demand for skilled workers
3. Industry demand that facilitates a pool of specialized suppliers
and buyers in a region.
iv. Acquiring and Neutralizing Location Advantages:
1. Location advantage does not entirely overlap with country-level
advantages.
2. Refers to advantage that firm obtains when operating in a
specific location due to firm-specific resources.
3. When one firm enters a foreign country through FDI, competitors
are likely to increase FDI in order to acquire or neutralize location
advantages.
c. Internalization Advantages: Replacement of cross-border markets with
one firm locating and operating in two or more countries.
i. Benefits:
1. Reduces cross-border transaction costs.
2. Replaces external market relationship with single organization
spanning both countries.

6. International Market Transaction:

a. A market transaction between two firms may suffer from high transaction
costs, especially due to opportunism on both sides. For example, NNPC may

demand a higher price than previously negotiated, while BP might refuse a

shipment citing poor quality.
b. Once one side behaves opportunistically, the other wide will threaten or
initiate law suits. But, because the legal and regulatory frameworks governing
such international transactions are generally not as effective as those
governing domestic transactions, the injured party will generally be
frustrated, while the opportunistic party will often get away with it.
7. One Company in Two Countries:
a. FDI resolves the difficulties of an international market transaction through
internalization, which involves replacing the external market with in-house
links. In this example, BP could undertake upstream vertical FDI by owning oil
production assets in Nigeria. Or, NNPC could undertake downstream vertical
FDI by owning oil refinery assets. In either case, the MNE reduces crossborder transaction costs and increases efficiencies by replacing an external
market relationship with a single organization spanning both countries.
8. Different Political Views on FDI:
a. Radical view hostile; treats FDI As an instrument of imperialism. e.g. Nike
several years ago, because they decided to go to foreign countries in order to
exploit lower labor costs and child labor
b. Pragmatic nationalism considers both the pros and cons of FDI and
approves it only when benefits outweigh the costs, countries who see the
benefits of FDI are more open to it e.g. South America and South Africa have
lots of natural resources, but not the labor of technology to take advantage of
them, and both countries will benefit; HOL, Telefonica Spanish companies who
operate in South America, these Spanish countries are more developed
c. Free market view suggests that FDI will enable countries to tap into their
absolute or comparative advantages by specializing in the production of
certain goods or services; the general equilibrium between demand and
supply
9. Benefits and Costs of FDI to Host Countries:
a. Benefits:
i. Capital inflow (FDI): can help improve a host countrys balance of
payments.
ii. Technology spillovers: the domestic diffusion of foreign technical
knowledge and processes that benefit domestic firms and industries.
iii. Advanced management know-how: In many developing countries, it
is often difficult for the development of management know-how to
reach a world-class level if it is only domestic and not influenced by FDI.
iv. Creates jobs
b. Costs:
i. Loss of economic sovereignty: The loss of some (but not all)
economic sovereignty associated with FDI: Because of FDI, decisions
to invest, produce, and market products and foreigners are making
services in a host country.

10.
a.

b.

11.
a.
b.
c.
12.
a.

b.
c.

d.

e.
f.

ii. Loss of domestic firms: Many MNEs invest abroad while

simultaneously curtailing domestic productionthat is, they increase
employment overseas but lay off domestic employees.
iii. Capital outflow: Since host countries enjoy capital inflow because of
FDI, home countries naturally suffer from some capital outflow.
Benefits and Costs to Home Countries:
Benefits:
i. Repatriated earnings from FDI profits
ii. Increased exports - of components and services to host countries
iii. Learning via FDI from operations abroad
Costs:
i. Capital outflow: Since host countries enjoy capital inflow because of
FDI, home countries naturally suffer from some
ii. Job loss: Many MNEs invest abroad while simultaneously curtailing
domestic productionthat is, they increase employment overseas but
lay off domestic employees.
Three Things to Do:
Carefully asses whether FDI is justified in light of other foreign entry modes
such as outsourcing and licensing
Pay careful attention to the location advantages in combination with the
firms strategic goals
Be aware of the institutional constraints and enablers governing FDI, and
enhance legitimacy in host countries
Most important things, questions form this chapter:
Difference between FDI and FPI:
i. Foreign Portfolio Investment (FPI): holding securities of companies in
other countries, but does not entail active management of foreign
assets. Essentially, FPI is foreign indirect investment; based on financial
securities the price of this investment depends on the stock market
ii. Foreign Direct Investment (FDI): the direct, hands-on management of
foreign assets. For statistical purposes, the UN defines FDI as an equity
stake of 10% or more in a foreign-based enterprise; based on tangible
investments manage this investment through people managers
Horizontal FDI: When a firm takes the same activity at the same value-chain
stage from its home country and duplicates it in a host-country.
Upstream and Downstream Foreign investment: changing places on the value
chain
i. Upstream
ii. Downstream
What is the OLI advantage?
i. Ownership Advantages:
ii. Location Advantages:
iii. Internalization Advantages:
Agglomeration Advantage: the clustering of economic activities in certain
locations; e.g. Detroits clustering of everything in the automotive industry
3 Political Views of FDI:
i. Radical

ii. Free Market

iii. Pragmatic Nationalism
2/27/2013
Chapter 7: Dealing With Foreign Exchange
1. What Determines Foreign Exchange Rates? (5 determinants of the exchange rate)
a. Long term:
i. Price differential / Relative price differences and PPT: the relative
inflation level; some countries have expensive prices, while others have
cheap ones.
1. Purchasing power parity - a conversion that determines the
equivalent amount of goods and services that different currencies
can purchase, after converting your dollars to euros, you should
be able to buy the exact amount
a. The PPP does not hold, because
i. Transaction costs fees paid to change the money
ii. Differing taxation systems
iii. Information the markets are not perfect, they dont
have real time information
2. Higher inflation less demand for US goods and more demand
for foreign goods, leading to lower exchange rate for US dollar
and higher demand for euros and higher exchange rate for the
euro
a. If domestic inflation is higher than foreign inflation - If the
US inflation level was higher, then the inflation would go up,
there will be more demand for the British pound because it
is worth more and can buy more, so the exchange rate will
go up
b. If foreign inflation is higher - the value of the foreign
currency goes down, because there is less of a demand for
the foreign currency, so the exchange rate goes down
ii. Interest rate differential / Interest rates and money supply: If a
countrys interest rates are high, it will attract foreign funds, and vice
versa.
1. Higher interest rate more demand for US, and then the
exchange rate goes up
a. Domestic interest rate higher than foreign interest rate
people will invest in the US with the higher interest rate,
and the demand for the British pound will decrease, and the
British pound exchange rate will decrease
b. Foreign interest rate is higher than Domestic interest rate
there is more of a demand for the foreign currency British
pounds, and then the exchange rate increases
2. Three quotations:

a. Direct Quotation: the number of American dollars per

foreign currency (US $ / euro)
b. Indirect Quotation: the number of (euro / US $)
iii. Productivity and balance of payments:
1. A rise in a countrys productivity relative to others will
improve its competitive position in international trade and attract
more FDI, fueling more demand for its currency.
a. Higher productivity the exchange rate increases, because
people have more money to spend, and demand more
foreign goods
2. A country in account surplus will see its currency appreciate,
while a country in account deficit will see its currency depreciate.
iv. Exchange rate policies:
1. 2 Policies:
a. The floating (flexible) exchange rate policy the policy
which is adopted by most economies; is the willingness of a
government to let demand and supply conditions determine
exchange rates.
i. The policy can involve either a clean (free) float,
which is a pure market solution
ii. Or a dirty (managed) float, with selective
governmental interventions.
b. A fixed rate policy adopted fixed the exchange rate of a
domestic currency relative to other currencies. A specific
version of the policy involves pegging the domestic
currency, which means to set the exchange rate of the
domestic currency in terms of another currency (the peg).
b. Short term:
i. Investor psychology: The factors noted above predict long-run
movements, but most short-term movements are affected by investor
psychology / or expectations; depend on market perception
1. Bandwagon effect
2. Capital flight
3/4/ 2013
Chapter 7, continued
1. Balance of Payments: A countrys international transaction statement.
a. 2 different accounts:
i. Current Account: considers Goods and services
ii. Financial Account: considers the movement of capital
2. The Evolution of the International Monetary System:
a. The Gold Standard (1870-1914): the price of different currencies was
based on how much gold a certain economy had, the price of the currency
was stronger or weaker; the price of currencies was determined based on the
amount of gold the entire economy had
b. Bretton Woods System (1944-1973): during this period, the other
currencies different than the dollar were based on an exchange rate based on
the dollar

c. The Post Bretton Woods System (1973-present): the system where the
exchange rate of the most important currencies is allowed to fluctuate freely,
and there is a diversity of exchange rates; determined by the market
equilibrium of demand and supply
3. International Monetary Fund: IMF
a. Legacy of the Bretton Woods system
b. Lender of last resort for countries experiencing balances of payment problems
c. Each member country is assigned a quota that determines the required
contribution
i. Quota: depends on the economic size of a country
1. The amount of its financial contribution
2. Its capacity to borrow from the IMF
3. Its voting power
d. Loans typically require long term policy reforms, recommends policies to
country members
4. Strategic Responses to Foreign Exchange Movements:
a. Strategies for Financial Companies:
i. The Exchange Rate: how companies can make or lose money based
on the exchange rate, how to manage exchange rate risk
1. Main goal to profit from the foreign exchange market
ii. Three strategies to reduce the exchange rate risk or to make
profit from exchange rate:
1. Passive:
a. Spot transactions single shot exchange of one currency
for another, this is called a passive exchange rate policy
because the company does not do much to lower exchange
rate risk
2. Active:
a. Forward / Future transactions one transaction of a
currencies for future delivery you are obligated to buy a
foreign currency at a price decided today; today, you lock in
the exchange rate in order to execute a future operation,
and in 6 months, you lock in that exchange rate for the
purchase of another item in a business contract, no matter
what the actual market exchange rate is
b. Currency swap two transactions, because you only
need a foreign currency for a certain amount of time;
conversion of one currency into another at time 1, with
agreement to revert it back to the original currency at time
2 in the future; the biggest difference there are 2
transactions
b. Strategies for Non financial companies:
i. Currency hedging: a transaction that protects trades and investors
from exposure to the fluctuations of the spot (daily) exchange rate
1. Three types of currency hedging:
a. Obligated:
i. Swap: obligated to swap something in the future at
the exchange rate today

ii. Forward: obligated to buy something in the future at

the exchange rate today
b. Not obligated:
i. Option: not obligated to buy something, it depends
on the exchange rate in the future
ii. Strategy hedging: spreading out activities in a number of countries in
different currency zones to offset losses in any one region, you are
diversifying your risk by holding different currencies in the places you
are operating
5. Strong v. Weak Dollar:
a. Weak Dollar:
i. Positive helps remedy the US balance if payments, results in more
global balancing
ii. Negative - If the dollar is weak, then you are fostering exporting
activities,
1. Then the domestic unemployment rate goes down
2. The demand for cheap US goods increases and the inflation rate
goes up
b. Strong dollar:
i. Positive rest of the world likes this because it keeps their currency
down, promoting exports
ii. Negative - If the dollar is strong,
1. There is more of a demand for foreign goods, the unemployment
rate goes up,
2. Then the demand for foreign goods is higher and the prices for
these foreign goods increases, importing inflation
c. Common sense: you want a strong dollar, but it costs us higher inflation and
higher unemployment
6. Most important things from this chapter questions:
a. Current account: the amount of money a country has depending on its
importing and exporting activities
i. Strong dollar deficit, because you will import more than export
ii. Weak dollar surplus, because you will export more than import
b. Types of floats
c. Describe the IMFs roles and responsibilities
*no class on the 3/20 no class for 2 weeks
*pick group members for group project
*group projects due april 24
*april 22, second quiz
*april 29, last day of class
*two more essays, Chapter 9 and Chapter 11

3/6/2013

Chapter 8: Capitalizing on Global and Regional Integration

1. The Case for Global Economic Integration:
a. Global economic integration: efforts to reduce trade and investment
barriers around the globe
i. Political benefits:
1. Promotes peace by promoting trade and investment
2. Builds confidence in a multilateral trading system - because it
involves all participating countries (the key word
being multilateral) and not just two countries (bilateral)
3. Nondiscrimination: country can not make distinctions between its
trading partners; if a country lowers a trade barrier, it has to do
the same for all WTO member countries
ii. Economic benefits:
1. Disputes are handled constructively
2. Rules make life easier and discrimination impossible for all
participating countries
3. Free trade and investment raise incomes and stimulate economic
growth
iii. Problems:
1. Environmental impact
2. Uneven distribution between the haves and have-nots
2. The Evolution of the GATT and WTO
a. GATT (General Agreement on Tariffs and Trade): 1948-1994
i. Reduced level of tariffs through multilateral negotiations
ii. Three areas of concern:
1. No protection for services or intellectual property
2. Loopholes needed reform
a. Multifber Arrangement (MFA) was designed to limit free
trade in textiles
3. Global recessions led governments to invoke non-tariff barriers
(NTBs) such as subsidies and local content requirements
b. WTO (World Trade Organization): 1995 present
i. Transformed GATT from provisional treaty to full-fledged international
organization
ii. New features:
1. Agreement governing trade of services (GATS)
2. Agreement governing intellectual property rights (TRIPS)
3. Trade dispute settlement mechanisms old GATT trade dispute
settlement mechanisms experienced long delays
a. However, WTO rulings are recommendations not orders so
the WTO has no real power to enforce its rulings
b. Country can either:
i. Change its laws
ii. Defy the ruling by doing nothing, and suffer trade
retaliation by the winning country
4. Trade policy reviews
3. The Case for Regional Economic Integration:

a. Regional economic integration: efforts to reduce trade and investment

barriers within one region
i. Pros:
1. Promotes Peace
2. Disputes handled constructively
3. Consistent rules
4. Raise incomes and stimulate economic growth
5. Larger market
6. Simpler standards
7. Reduced distribution costs
8. Economies of scale for firms in the region
ii. Cons:
1. Discrimination against firms outside of region
2. Some loss of sovereignty
iii. E.g. Norway and Sweden chose not to join the EU
b. 6 Types of Regional Economic Integration:
i. Free Trade Area (FTA): A group of countries that remove trade
barriers among themselves. Each country still maintains different
external policies regarding non-member. There is no freedom of
movement among people. E.g. NAFTA
ii. Customs Union: One stop beyond an FTA, so in addition to FTA
policies, a customs union has common external policies on nonparticipants in order to combat trade diversion. e.g. Benelux Belgium,
the Netherlands, and Luxembourg
iii. Common Market: In addition to Customs Union, allows the free
movement of goods and people. E.g. EU used to be a common market
iv. Economic Union: Has all the features of Common Market, but
members also coordinate and harmonize economic policies in order to
blend their economies into a single economic entity. E.g. EU is now an
economic union
v. Monetary Union: a group of countries that use a common currency
E.g. 12 countries of the Euro area
vi. Political Union: The integration of all political and economic affairs of
a region. E.g. United States or the Soviet Union
4. Accomplishments of the European Union:
a. 1951 Belgium, France, Germany, Italy, Luxembourg, and the Netherlands
signed the European Coal and Steel Community (ECSC) Treaty, which
integrated the coal and steel industries among the 6 countries to promote
trade and prevent future wars form breaking out (because the coal and steel
industries have traditionally provided the raw materials necessary for war)
b. 1957 ECSC signed the Treaty of Rome, which launched the European
Economic Community (first a customs union, and then a common market)
c. EU and predecessors have delivered over 50 years of peace
d. Introduction of common currency, the euro it account for approximately
21% of the worlds GDP
e. Formation of a single market
f. Benefits:
i. Reduces currency conversion costs

ii. Facilitates direct price comparison

iii. Imposes monetary disciplines on governments
g. Costs:
i. Countries unable to implement independent monetary policy
ii. Limits the flexibility in fiscal policy (in areas such as deficit spending)
5. Five Organizations in the Americas:
a. NAFTA (North American Free Trade Agreement; 1994): Mexico, US, and
Canada
b. Andean Community (1969):
c. Mercosur (1991):
d. Union of South American Nations (USAN; 2005)
e. United States-Dominican Republic-Central America Free Trade Agreement
(CAFTA; 2005)
6. Three Organizations in Asia:
a. Australia-New Zealand Closer Economic Relations Trade Agreement
(ANZCERTA or CER; 1983)
b. Association of Southeast Asian Nations (ASEAN; 1967)
c. ASIA-Pacific Economic Cooperation (APEC; 1989)
7. The Influence of Regional Trade on Global Business?
a. Think regional, downplay global.
b. Understand the rules of the game and their transitions at both global and
regional levels.
8. Questions:
a. Most important - know types of integration levels
b. Advantages and Disadvantages of Economic Integration
c. Difference between a custom union and a common market
Chapter 9: Growing and Internationalizing the Entrepreneurial Firm
1. Terms to know:
a. Entrepreneurship identification and exploration of previously unexplored
opportunities.
b. Entrepreneurs founders and owners of new businesses or managers of
existing firms. In this unit, term is limited to owners, founders and managers
of small and medium-sized enterprises (SMEs).
c. International entrepreneurship - combination of innovative, proactive,
and risk seeking behavior that crosses national borders and is intended to
create wealth in organizations.
2. Institutions, Resources, and Entrepreneurship:

3.

4.
5.
6.

a. Formal Institutions and Entrepreneurship: In general, governments in

developed economies impose fewer procedures and a lower total cost than
governments in poor economies, where entrepreneurs confront harsher
regulatory burdens.
b. Informal Institutions and Entrepreneurship: Individualistic, low
uncertainty avoidance societies tend to foster more entrepreneurs than
collectivistic, high uncertainty-avoidance societies.
c. Entrepreneurial Resources must be:
i. Valuable
ii. Rare
iii. Imitable
iv. Organized
Characteristics of a Growing Entrepreneurial Firm:
a. Growth: The growth of an entrepreneurial firm can be viewed as an attempt
to more fully use underutilized resources and capabilities. An entrepreneurial
firm can leverage its vision, drive and leadership in order to grow, even
though it may be shorter on resources such as financial capital than a larger
firm would be.
b. Innovation: Innovation is the heart of entrepreneurship, and allows for a
higher sustainable basis for competing advantage. Entrepreneurial firms are
uniquely ready for innovation, since their owners, managers and employees
tend to be more innovative and risk-taking.
c. Financing: All start-ups need to raise capital.
Financing the Entrepreneurial Firm:
Internationalizing the Entrepreneurial Firm:
a. Myth: only large MNEs do business abroad, SMEs operate domestically
b. Born global firms: start ups that do international business from inception
Entering Foreign Markets:
a. Direct exports: involves the sale of products made by entrepreneurial firms
in their home country to customers in other countries.
i. Sporadic (or passive) exporting refers to sales that are prompted by
unsolicited inquiries.
b. Franchising / Licensing:
i. Licensing: refers to Firm As agreement to give Firm B the rights to use
Firm As proprietary technology or trademark for a royalty fee.

ii. Franchising: is essentially the same idea, except it is used typically in

service industries, while licensing is usually used in manufacturing
industries.
c. Foreign Direct Investment: FDI has several advantages over direct export
or franchising/licensing. A firm becomes more committed to serving foreign
markets and psychologically closer to foreign customers. A firm is better able
to control how its proprietary technology and brand name are used. However,
it does have one major drawback cost and complexity.
7. An Export Import Transaction:
a. Export transactions are complicated, especially by the problem of how to
overcome the lack of trust between exporters and importers when receiving
an order. Such a transaction can be facilitated by banks on both sides
thorough a letter of credit, a financial contract which states that the
importers bank will pay a specific sum of money to the exporter.
8. The Stage Model:
a. Suggests that required level of complexity and resources increase as firm
moves from direct export to licensing to FDI.
b. But, there are many counter-examples (born global firms).
c. The key to rapid internationalization the international experience of the
entrepreneurs.
9. Staying in Domestic Markets:
a. Indirect exports: while direct exports are lucrative, many SMEs do not have
the resources to handle such work. Indirect exports, which involve exporting
through domestic-based intermediaries, can allow these SMEs to reach
overseas customers.
b. Supplier of foreign firms: SMEs can reach foreign markets by becoming a
supplier to a foreign firm.
c. Franchisee or licensee of foreign brands: An SME can become a licensee
or franchisee of a foreign brand, which allows it to access training and
technology transfer from the licensor/franchiser.
d. Alliance partner of foreign direct investors: Becoming an alliance
partner allows an SME to work with an MNE, rather than losing to them.
e. Harvest and exit strategy involves selling an equity stake or the entire firm
to foreign entrants.
10.

Debate: Slow vs. Rapid Internationalization

a. Slow: According to stage model, firms need to enter culturally and
institutionally close markets first, accumulate overseas experience, then
move to more sophisticated strategies, such as FDI.
b. Rapid: Every industry has become global, and entrepreneurial firms should
go after opportunities rapidly. Firms that internationalize earlier do not face
obstacles of domestic orientation.

Chapter 10: Entering Foreign Markets

1. The Liability of Foreignness
a. The inherent disadvantage foreign firms experience in host countries because
of their non-native status

b. Differences in formal and informal institutions

c. Discrimination against foreign firms.
2. Overcoming Liability of Foreignness
a. Under the Institution based view, firms need to take action deemed
legitimate by formal and informal institutions
i. Institution based view:
1. Regulatory risks
2. Trade and investment barriers
3. Differences in cultures, norms, and values
b. Under the resource based view, firms offset liability by deploying
overwhelming resources
i. Resource based view:
1. Value
2. Rarity
3. Imitability
4. Organization
3. Location Specific Advantages:
a. Location-specific advantages benefits a firm reaps from features specific
to a particular place.
b. Agglomeration location specific advantages that come about from
clustering of economic activities.
i. Given that different locations offer different benefits, it is imperative
that a firm match its strategic goals with potential locations.
4. Location Specific Advantages and Strategic Goals:
a. Natural resource seeking: Firms have to go to a specific location where
particular resources are found.
b. Market seeking: Firms go to countries that have strong demand for their
products and services.
c. Efficiency seeking: Firms single out the most efficient locations featuring
combination of scale economies and low cost-factors.
d. Innovation seeking: Firms target countries and regions renowned for
generating world-class innovations.

5. Cultural and Institutional Distances:

a. Cultural Distance: difference between two cultures along identifiable

dimensions. Ex: individualism
b. Institutional Distance: similarity or dissimilarity between regulatory,
normative and cognitive institutions.
6. First and Late Mover Advantages:
a. Location is only one aspect of entry decisions; entry timing and entry modes
are also critical
i. First Mover Advantages:
1. Proprietary technology
2. Preemptive investments
3. Establish entry barriers for late entrants
4. Relationships and connections with key stakeholders (customers,
governments)
ii. Late Mover Advantages:
1. Free ride on pioneering investment of first movers
2. First movers face greater technological and market uncertainties.
3. First movers may be inflexible.
7. How to Enter?
a. Scale of entry amount of resources committed to entering a foreign
market.
i. Large-scale entries:
1. Demonstrate strategic commitment to certain markets, assuring
local customers and suppliers for the long haul
2. Deters potential entrants hard-to-reverse strategic commitments
3. Limit strategic flexibility elsewhere and incur huge losses if these
large-scale bets turn out wrong
ii. Small-scale entries:
1. Less costly
2. Focus on organization learning.
3. Limits downside risk.
4. Lack of strong commitment may lead to difficulties in building
market share and capturing first mover advantages.
8. The Comprehensive Model of Foreign Market Entries:
a. First Step Equity v. Non Equity mode
i. Equity mode include JVs and WSOs; larger, hard to reverse
commitments. Calls for the establishment of independent organizations
overseas.
ii. Nonequity mode includes exports and contracts; tend to be smaller
commitments.
b. Second step Making actual selection
c. Modes of Entry

Chapter 11: Making Alliances and Acquisitions Work

1. Strategic alliances: voluntary agreements between forms involving exchange,
sharing or co-developing products, technologies, or services
2. Acquisitions:
3. Graph of alliances and acquisitions main difference is ownership
a. Alliance non-ownership contracts, e.g. a contract of co-marketing, research
and development, turnkey project
i. Non- Equity:

1. Co-marketing two or more companies approach their

marketing together for strategic reasons
2. Turn key project a project where formal institutions protect
domestic industries preventing foreign firms from acquiring firms;
the foreign firms pay someone in the country in order to build the
new domestic company there, and then after that, the contractor
will sell the company gives the keys to the foreign firm; a way
to enter the foreign market
3. Strategic supplier where you agree with someone else, a
major supplier, in order to get certain inputs for your production
system, specific to your industry
4. Strategic distributer you contract with a distributer for
distributing your product in the foreign countries
5. Licensing / Franchising
a. Licensing intellectual assets
b. Franchising real assets
ii. Equity: higher risk and higher compromise
1. Strategic investment: where the foreign firms buys certain
equity (10% 51%) in the target company, and through this, you
can take advantage of the technology the target company
provides
2. Cross share holdings: the foreign firm and the target company
buy shares from each other, so then the interest between the two
companies is much higher, each company controls part of the
other
3. Joint venture: where two companies and then decide to create a
third company, for example one provides the financial backing
and one provides the technology
4. Acquisition: company A buys company B and creates a much
bigger company A
b. Acquisitions ownership contracts
4. Strategic Alliances
a. (Non- Equity) Contractual alliances: associations between firms that are based
on contract, with no sharing of ownership
i. Co-marketing
ii. Research and development
iii. Contracts (non-ownership)
iv. Turnkey projects
v. Strategic suppliers
vi. Strategic distributors
vii. Licensing / franchising
b. Equity based alliances: based on ownership or financial interest between
firms
i. Strategic investment: one firm invests in another, basically for
technological reasons
ii. Cross-shareholding: indirect control companies can have through
ownership structures, the pyramid; e.g. A owns B and C, and C owns D
and E, so A owns part od D indirectly

iii. Joint ventures

5. Merger and Acquisitions:
a. Merger: combinations of operations of management of two firms to establish
a new legal entity, accounts for only 3% of all M and As
i. Consolidation: equal
ii. Statutory: only one firm survives
b. Acquisitions: transfer of the control of operations and management from one
firm (target) to another (acquirer) ; 97% of all M and As
6. Influence of Institutions:
a. Institution based view: formal and informal institutions
i. Formal
1. Antitrust concerns: antitrust authorities are more likely to approve
alliances than acquisitions
2. Entry requirements: many governments place limitations on
foreign firms mode of entry
ii. Informal
1. Normative pillar: firms copy other reputable organizations to
establish legitimacy
2. Cognitive pillar: internalized, taken for granted values that guide
alliances and acquisitions
b. Resource based view: how a firms internal resources determine success with
the VRIO framework (Value, Rarity, Imitability, Organization)
i. Value:
1. Advantages:
a. Reduce costs, risks, and uncertainties.
b. Access complementary assets and learning opportunities.
c. Possibility to use alliances as real options.
i. Real option the option to buy the real assets of the
target company in the future
2. Disadvantages:
a. Choosing the wrong partners
b. Potential partner opportunism
c. Risk of helping nurture competitors (learning race): when
you learn quickly the tricks of your partner to use that
information in your own interest
ii. Rarity: relational (collaborative) capabilities, the ability to manager
inter-firm relationships, may be rare
iii. Inimitability:
1. Alliances make it easier to observe and imitate firm-specific
capabilities
a. Learning race the race in which partners aim to learn the
others tricks
2. Trust and understanding between allies is difficult to imitate
3. Firms that excel in post-acquisition integration possess hard to
imitate capabilities
iv. Organization: some successful alliances are organized in a way that is
difficult to imitate

1. How firms are organized to take advantage of benefits or

acquisition while minimizing the costs
a. Strategic fit: effective matching of complementary strategic
capabilities
b. Organizational fit:
7. Alliances:
a. Formation of Alliances:
i. Stage 1: To cooperate or to not cooperate?
1. Market transactions: importing and exporting activites (non-e)
2. Cooperative inter-firm relationships: through alliances (non-e)
3. Mergers and acquisitions (e)
a. Competitive Challenges as a stand alone firm
i. Economies of scale
ii. Stand alone market risk
iii. Unable to satisfy higher foreign demand
iv. Not enough funding to enter a foreign market alone
b. Drawbacks of acquisitions
i. High financial risk in acquisitions
ii. Partner can take advantage of weaker partners
knowledge from an uneven balance of power
iii. Less flexibility as a firm
ii. Stage 2: Contract or equity?
1. Contract
2. Equity level of compromise and risk higher
a. Allows firms to learn tacit capabilities
b. Allow firms to have some control over joint activities
iii. Stage 3: Specification of the relationship?
1. Specify one of 8 options, either a contract or equity based choice
a. Contract
i. Co-marketing
ii. R and D contracts
iii. Turnkey project
iv. Strategic supplier / distributor
v. Licensing / Franchising
b. Equity
i. Strategic investment
ii. Cross-shareholding
iii. Joint venture
iv. Stage 4: Dissolution of Alliances: 70% of these fail after a few years or
they dont continue
1. Initiation Reconciliation
2. Going Public Mediation by 3rd Parties
3. Uncoupling Last minute salvage
4. Aftermath - Go alone or New relationship
b. Performance of Alliances
i. Four key factors:

1. Equity: greater equity stake may mean firm is more committed,

likely to result in higher performance
2. Learning and experience:
a. Has a firm successfully learned from its partners?
b. Experience often used as a proxy
3. Nationality: dissimilarities in national culture may create strains
in alliances
4. Relational capabilities: alliance performance may
fundamentally boil down to soft, hard-to-measure, relational
capabilities
8. Acquisitions
a. Why make acquisitions?
i. Institutional based view
1. Add value
a. Synergistic motives
i. To respond to formal institutional constrains and
transitions, and take advantage of economies of scale
2. Reduce value
a. Hubristic motives
i. Herd behavior: following norms and chasing fads of
M&As
b. Managerial motives
i. Self interested actions such as empire buildings
guided by informal norms and cognitions
ii. Resource based view
1. Add value
a. Synergistic motives
i. Leverage superior managerial capabilities
ii. Enhance market power and scale economies
iii. Access to complementary resources
2. Reduce value
a. Hubristic motives
i. Managers over-confidence in their capabilities
b. Managerial motives
i. Agency problems mangers might decide to do an
acquisition, so that they can work for their own
interest, so that they can use the new resources for
their own benefits
b. Acquisition Failures:
i. Problems for all M&As:
1. Pre-acquisition: overpayment for targets
a. Mangers over-estimate their ability to create value
b. Inadequate pre-acquisition screening
c. Poor strategic fit
2. Post-acquisition: failure in integration
a. Poor organizational fit
b. Failure to address multiple stakeholder groups concerns
ii. Cross-Border Acquisition Failures:

1. Pre-acquisition: overpayment for targets

a. Lack of familiarity with foreign cultures, institutions, and
business systems
b. Nationalistic concerns against foreign takeovers (political
and media levels)
2. Post-acquisition: failure in integration
a. Clashes of organizational cultures compounded by clashes
of national cultures
b. Nationalistic concerns against foreign takeovers (firm and
employee levels)
9. Questions:
a. In what two primary areas do formal institutions affect alliances?
i. Anti-trust concerns
ii. Entry requirements
b. Under what conditions would you choose an acquisition over an alliance?
i. Acquisition - strategic information, like a software company and what
adds value to the company is the knowledge, so if you share that
information, you could lose your competitive advantage - if you wanted
total control over a company
c. When does majority JV seem more appropriate? When does minority JV
appeal?
d. Is it necessary that managers pay attention to politics of M&As?
e. Key factors you must take into consideration before formation of alliance or
acquisition?
i. Informal institutions
f. Organizational fit and Strategic fit:
i. Organizational fit: similarity in cultures between firms
ii. Strategic fit: the matching of complementary assets
Group project: Market Entry Strategy Project
Due April 24, 2013
Very general probably wont fit exactly the country of your choice
Four sections:
1. Market Intelligence Report include the most important facts regarding the
company of your choice, focus the analysis on the formal and informal institutions
a. Depending on your product maybe an analysis of per capita income is
appropriate, depending on how expensive your product is
b. Demographic Analysis will be interesting, if our product is focused on most
of the population
c. Infrastructure if you need certain logistics in order to distribute your product
across the country, then this is relevant
d. Formal and informal - Domestic laws and Domestic regulations that could
affect your product
2. BEAR resource based view, analysis of internal factors
3. ROME assess the different potential market entry strategies

4.
5.
6.
7.

a. Why do you want to go to your country by exporting directly, or licensing, or

franchising?
b. Joint ventures
c. Or even direct acquisition through FRE?
d. So analyze each of them, and then pick the strategy of your choice
MESA the most important
a. Description of the final choice made regarding the market entry strategy
3-4 members per group
No more than 12 pages, but it doesnt matter could be 6-7-8
Content sound analysis

Most important market strategy entry analysis

Chapter 12: Strategizing, Structuring, and Learning
1. Two pressures for MNE:
a. Cost reduction: to cut costs, calls of global integration, which means that
we should cut costs by creating uniform products for everyone
b. Local responsiveness: calls for local adaptation, which means that we
should provide products / services depending on what location we are
2. Multinational Strategies and Structures:
a. Strategy v. Structure:
i. Strategy: the way you will adopt in order to achieve your goals
ii. Structure: the way your organization is set up; the way the firm is
organized
iii. Every single strategy has its own structure, and every structure has its
own strategy Relationship between strategy and structure is reciprocal
iv. Neither strategy nor structure is static, it is often necessary to change
one, the other, or both
b. 4 Different Strategy / Structures:
i. Home replication strategy / international division structure: low
pressure for cost reduction, low pressure for local responsiveness
(same clients everywhere)
1. Home replication strategy: duplicates the home based
competencies in foreign countries
a. Advantages:
i. Leverages home country based advantages
ii. Relatively easy to implement
b. Disadvantages:
i. Lack of local responsiveness
ii. May alienate foreign costumers
2. International division structure: organizational structure
when firms initially expand abroad
a. In this case, we offer exactly the same product as in the
home country
b. Why? Because the product is not focused on the host
country demand, but on the home country demand

*Example - this campus, not adaptive to Spanish educational

system
ii. Global standardization strategy / Global product structure: high
cost reduction, low local responsiveness (different clients globally)
1. Global standardization strategy: development of standardized
products in order to take advantage of economies of scale
a. Advantages:
i. Leverages low cost advantages
b. Disadvantages:
i. Lack of local responsiveness
ii. Too much centralized control
2. Global production division structure: the organizational
structure that organizes the multinational enterprise according to
different countries and regions, where they are considered one
homogenous unit with no differences in between countries
a. Highly responsive to pressure for cost efficiency
b. Reduces inefficient duplication in multiple countries
c. Lags in local responsiveness
d. Disadvantage: you are considering different locations as the
same; but in real life, the world is different
*Example Coca Cola, Apple, McDonalds
iii. Localization strategy / Geographical area structure: low
pressure for cost reduction, high local responsiveness
1. Localization strategy: also called multi-domestic strategy,
focused on foreign areas and regions which are considered standalone markets; considers every location as an individual region
so the product or service offer must be adapted
a. Advantages:
i. Maximizes local responsiveness
b. Disadvantages:
i. High costs due to duplication of effort in multiple
countries
ii. Too much local autonomy
2. Geographical area structure: the organization of the company
based in different geographical area
a. Regional managers carry a great deal of the weight
b. Strong local responsiveness, but that also encourages
fragmentation of MNE
c. Disadvantage: high cost, you have to place different
subsidiaries wherever you are
*15th Avenue Tea and Coffee
iv. Transnational strategy / global matrix structure: high pressure
for cost reduction, high pressure for local responsiveness
1. Transnational strategy: cost effective and locally responsible
a. Advantages:
i. Cost efficient while being locally responsible
ii. Engages in global learning and diffusion of
innovations

b. Disadvantages:
i. Organizationally complex
ii. Difficult to implement
c. Examples usually automobiles
2. Global matrix structure: the structure used to alleviate the
pressure from both global production division and geographical
area structure
a. Difficult to deliver in practice
b. May add layers of management, slowing down decision
speed.
*Example General Motors, has ownership stakes in foreign
carmakers; so a big MNE offers local products through its
relationships with subsidiaries
3. Knowledge Management: the structures, processes, and systems that actively
develop, leverage, and transfer knowledge
a. 2 kinds:
i. Explicit knowledge: codifiable, easy to be transferred
ii. Tacit knowledge: non-codifiable, transfer requires hands-on practice
(based on expertise, training process)
b. Knowledge Management in 4 types of MNEs:
i. Globalizing R&D: a fundamental basis for competitive advantage is
innovation based firm heterogeneity; decentralized R&D in different
locations virtually guarantees persistent heterogeneity
4. Questions
a. What pressure is unique to international competition? Pressure to local
responsiveness
b. Describe 4 strategy choices: 1. home replication strategy 2.

4/15/2013
Monday next week, quiz
Final is on May 3rd , 8:30 AM
Chapter 13:
1. Terms:
a. Human resources management: the set of different activities for hiring
managers; attracting, selecting, and managing employees
b. Staffing: the human resource management activities related to hiring
managers and filling the positions
c. Host country nationals: managers from the host country, from the same
country
d. Parent country nationals: managers from the parent country
e. Third country nationals: managers from neither the host or parent country
f. Expatriates: managers from foreign countries
2. 2 Types of expatriates:
a. Parent country nationals (PCNs):
i. Advantages:

1. Control by headquarters is facilitated

2. May be the most qualified
3. Managers are given international experience
ii. Disadvantages:
1. Opportunities are limited
2. Adaptation may take a long time
3. Usually very expensive
b. Third country nationals (TCNs):
i. Advantages:
1. May bridge the gap between headquarters and the subsidiary
2. May be less expensive than PCNs
3. Dont have conflicts, culturally, because they do not belong to the
home country or the host country cultures more flexible than
PCNs or HCNs
4. Typically have a lot of international experience
ii. Disadvantages:
1. Host government and employees may resent TCNs
2. Similar to disadvantages for PCNs
3. Three Approaches to Staffing:
a. Ethnocentric approach:
i. Emphasizes norms and practices of parent company
ii. Relies on PCNs
iii. Perceived lack of talent among HCNs often necessitates this approach
iv. E.g. occurs in Asian multinational companies
v. Focus on PCNs
b. Polycentric approach:
i. Focuses on the norms and practices of host country
ii. Relies on HCNs
iii. When in Rome
iv. HCNs have no language or cultural barriers
v. Placing HCNs in top roles may boost morale of other HCNs
vi. E.g. Price Waterhouse Coopers, SLU Madrid
vii. Focus on HCNs
c. Geocentric approach:
i. Focuses on finding the most suitable managers, disregarding nationality
ii. This approach can create a corporate wide culture and identity
iii. Focus on TCNs / skills
4. Strategy and Staffing:
a. Systematic link between strategic posture of an MNE and its staffing approach
MNE strategies
Typical staffing approaches
Typical top manage
local subsidiaries
Home replication
Ethnocentric
Parent country nati
Localization
Polycentric
Host country nation
Global standardization
Geocentric
A mix of all 3
Transnational
Geocentric
A mix of all 3
i. Represents home company
ii. Represents foreign country

5.

6.

7.

8.
9.

iii. Mix
iv. Mix
The Role of Expatriates (just TCNs and PCNs)
a. 4 Roles:
i. Strategist: representing interests of the MNEs headquarters, in order
to maximize the wealth of current shareholders
ii. Daily managers: run operations and build local capabilities
iii. Ambassador: representing headquarters interests, build relationship
with host-country stakeholders, represent subsidiary to headquarters
iv. Trainer: for their replacements
Factors in Expatriate Selections:
a. Expatriate failures are high
i. Premature (earlier than expected) return
ii. Unmet business objectives
iii. Unfulfilled career development objectives
b. Causes for failure:
i. Familys inability to adjust to culture
ii. Usually a combination of work-related and family-related problems
c. Situation:
i. Corporation headquarters preferences
ii. Host country subsidiary preferences
iii. Language
d. Individual:
i. Technical ability and experience
ii. Cross cultural ability
iii. Family and spousal attachments
Development for Expatriates and Repatriates:
a. Psychological contract: is an informal understanding of expected delivery of
future benefits
b. Career anxiety
c. Loss of status
d. Cultural re-adjustment
Training and Development for HCNs:
a. In China, for example, the key factor in retaining or losing talent is which
employer can offer training and development opportunities
Compensation for Expatriates:
a. Going rate: you get exactly the same salary as a HCN, In line with the
polycentric approach
i. Advantages:
1. Equally among parent, third, and host country nationals in the
same location
2. Simplicity
3. Identification with host country
ii. Disadvantages:
1. Variation between assignments in different locations for the same
employee
2. Re-entry problem if the going rate in the parent country is less
than that in the host country

10.

11.

b. Balance Sheet: balances the cost of living differences, with financial

incentives; in line with the ethnocentric approach
i. Advantages:
1. Equity between assignments for the same employee
2. Facilitates expatriate re-entry
ii. Disadvantages:
1. Costly and complex to administer
2. Great disparities between expatriates and host country nationals
Compensation for HCNs:
a. Low level HCNs have relatively little bargaining power
b. HCNs in management and professional positions are gaining more bargaining
power
Quiz information:
a. April 22 at 9:30
b. For the quiz, chapters 7 12
c. 12 questions
i. 2 T/F questions
ii. 7 MC questions
iii. 3 short answer questions
d. Wednesday, review of most important concepts for the quiz
e. For the final, Chapters 6-13
f. Chapter 11 due this Wednesday, do that today

4/17/2013
Chapter 13, continued:
1. Performance Appraisal: evaluation of employee performance for the purpose of
promotion, retention, or ending employment
2. Labor Relations at Home:
a. Firms key concern cut costs, enhance competitiveness
b. Unions concern higher wages and more benefits
c. Threat of job loss v. threat of strike
3. Formal Institutions and Human Resource Management:
a. Formal institutions: every country has rules and regulations governing HRM
b. Informal institution: MNEs from different countries have different norms in
staffing.
4. Questions:
a. What are the four most important roles that expatriate play?
b. What is the relationship between the MNE strategies and the staffing
approaches?
c. Two different systems:
i. Going rate
ii. Balance sheet
5. Quiz Review:
a. Format:
i. 2 T/F
ii. 7 MC
iii. 3 Short Answer
iv. Chapters 7, 9, 10, 11, 12, 13

b.

c.

d.

e.

f.

g.

v. Chapter 8 on final only, not on the quiz

Chapter 7 Foreign Exchange Rates
i. What happens, for instance, in the balance of payments if we do have a
strong or weak domestic currency?
ii. Is the trade deficit or trade surplus affected by a strong or weak
domestic currency?
iii. Different determinants of the exchange rates:
1. Long term
a. Relative price difference between countries
b. Differential between interest rates
c. Productivity
d. Exchange rate policies
2. Short term
a. Investors psychology expectations of the market
iv. Relationship between the exchange rates and the labor market
1. What happens if a certain economy has a very strong domestic
currency, how does that affect the labor market?
2. For example what happens, or what would you prefer, to reduce
unemployment in an open economy? A strong or weak domestic
currency?
a. You would want a weak currency, then you can export more,
you need to hire more people, and the unemployment is
lower
Chapter 9 Entrepreneurship
i. Described the different foreign entry strategies direct exports,
franchising, licensing, FDI
ii. Letter of credit when you export, you have your exporting and
importing banks, and theres an agreement between the two of
collateral credit
Chapter 10 Entering Foreign Markets
i. Two different modes to enter a foreign market
1. Equity based
2. Non-equity based
ii. Advantages and disadvantages of these different strategies
iii. Different non-equity modes contractual methods
iv. Licensing, franchising, turnkey projects, and FDI, co-marketing
Chapter 11 Alliances and Acquisitions
i. Several of the same concepts between 10 and 11
ii. Joint ventures
iii. Dissolution of alliances marriage
Chapter 12
i. Structures and strategies the four strategies with their own associated
structures
ii. Think about examples of each of these strategies and structures
Chapter 13
i. The staffing approaches
ii. Different kinds of expatriates
iii. Relationship between staffing approaches and types of expatriates

4/22/2013
strong currency import more current account deficit
weak currency export more current account surplus
real option with a non equity agreement, the buying company has the option to later
purchase assets to buy the other percent of the company, making the buying company
the major shareholder
80
*Final Friday, May 3
Chapters 7,8,9,10,11,12,13
1. 34 questions, in total
a. MC 17
b. TF - 6
c. Short Answer 11
i. Pay attention to the specific topics on informal institutions, such as
cultural differences, the liability of foreignness
ii. Advantages and disadvantages of first and late movers
iii. Chapter 8 which talks about the different international agreements
and the different levels of integration
1. FTA importing and exporting without tariffs
2. Custom unions
3. Common markets
4. Political unions
iv. Couple of questions over alliances
1. Advantages and Disadvantages
2. Non-equity and equity modes
v. Focused on differentiating or relating concepts
vi. Review the integration responsiveness framework which relates the
strategies with the structures
1. Advantages and Disadvantages
vii. At least one or two questions based on the last chapter about HRM
1. Different components
2. Types of staffing approaches
3. Relationship between staffing approaches and strategy/structures
4. Different compensation methods when to apply one of them
instead of the other advantages and disadvantages
a. Going rate
b. Balance sheet
Review on Monday
4/29/2013
Final Friday May 3 at 9 AM
1. Chapter 6
a. FDI
b. Different Ways to Go Abroad

c. Different Advantages in terms of ownership, location

2. Chapter 7 very important
a. Exchange Rates
b. 4 Determinants of the Exchange Rates specific questions about this and
how exchange rates affect the performance of companies
i. Differential in interest rates
1. 2 Countries US and UK
a. US has higher interest rates than the UK
i. People want to put their money in the US
ii. British investors want to put their money in the US
iii. Increase in demand for US dollars
iv. The dollar will appreciate and get stronger
v. The exchange rate will go down, because you need
less dollars to purchase each pound
ii. Differential in inflation how does it affect the exchange rates?
1. 2 Countries US and UK
a. Higher domestic inflation - higher inflation in US than in UK
i. People in US demand cheaper British goods
ii. In order to buy these, you will demand British pounds
iii. More demand for British pounds
iv. The US dollar will depreciate and get weaker relative
to the British pound
v. And the exchange rate goes up, you have to pay more
dollars for each pound
iii. Differential in income levels
1. 2 Countries US and UK
a. Higher income levels in US than in UK
i. People in US have more money, have more demand
for all goods
ii. Including more demand for foreign goods like British
goods
iii. More Demand for British pound
iv. The US dollar will depreciate and get weaker relative
to the pound
v. And the exchange rate goes up, you have to pay more
dollars for each pound
iv. Expectations / Investor psychology up or down
1. Good expectations about performance in domestic economy
more demand for US dollars dollar becomes stronger
c. Evolution of the international monetary system
d. Different exchange rate systems take a look at these ***
i. Types:
1. Free floating
2. Managed
3. Fixed
ii. Definitions
iii. Examples
e. Real Options

3.
4.
5.
6.

7.
8.

f. Related the exchange rate with the trade deficit

g. Relationship between exchange rates and labor market and unemployment
i. Strong currency purchasing power increases, buying more foreign
goods than domestic goods then domestic industry drops and
domestic unemployment increases
ii. Most countries want weak currencies so that they can better export and
decrease domestic unemployment
Chapter 8
a. International Trade Agreements
b. 5 Different Levels of Integration Between the Different Economies
Chapter 9
a. Entrepreneurial Firms
b. Advantages and Disadvantages or Early Movers and Late Movers
Chapter 10
Chapter 11
a. Alliances and Acquisitions
b. Non-equity and Equity contracts
c. Different steps in order to form an alliance
d. Steps to dissolve alliances
Chapter 12
Chapter 13
a. HRM
b. Different kinds of expatriates
c. Different staffing approaches, how to hire foreign managers depending on
your strategy

9. Take a look at:

a. Market Entry Strategies
i. Different Strategies
ii. Examples
b. Organizational Fit
c. Structural Fit
d. Cultural Distance
e. Differences Between the Non-Equity and Equity Modes
i. Examples!!! Lots of examples of these concepts!
f. Advantages and Disadvantages of First Mover
g. Definitions and examples
i. Comarketing
ii. R&D
iii. Joint Ventures
iv. Licensing and Franchising
h. Alliances, Acquisitions
i. Different Strategies and Structures
j. Different Pressures of MNEs
i. Cost reduction
ii. Local responsiveness
k. VRIO Framework resource based view
l. Different kinds of foreign managers when to use which

i. HCNS
ii. PCNS
iii. TCNS
m. Two additional questions EC upgrades midterm by 4 pts if correct, if youre
wrong you are downgraded on your midterm by 1 pt you have to answer
them both correctly in order to get the points