Managment 405

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What are the things that motivate a company to expand internationally? • Increase size of potential markets • economies of scale • Taking advantage of arbitrage opportunities • Extend PLC • Optimize the physical location for every activity in its value chain performace enhancer cost reduction
Potential risks of international expansion
currency risks
economic risks
political risks
certain types of management risks
what are some Political and economic risk 9 Social unrest 9 Military turmoil 9 Demonstrations 9 Violent conflicts and terrorism 9 Laws and their enforcement
least corrupt countries FINLAND, ICELAND, NEW ZEALAND
what are some currency risks? 9 Currency exchange fluctuations 9 Appreciation of the U.S. dollar
Management risks 9 Culture 9 Customs 9 Language 9 Income levels 9 Customer preferences 9 Distribution system
Offshoring and outsourcing: Outsourcing 9 occurs when a firm decides to utilize other firms to perform value-creating activities that were previously performed in-house. • Offshoring 9 takes place when a firm decides to shift an activity that they were previously performing in a domestic location to a foreign location.
2 opposing pressures as you expand international (Cost and adapting to local markets)
reducing costs and adapting to local markets • Strategies that favor global products and brands 9 Should standardize all of a firm’s products for all of their worldwide markets 9 Should reduce a firm’s overall costs by spreading investments over a larger market
Three assumptions 1. Customer needs and interests worldwide are becoming more homogeneous 2. People are willing to sacrifice product preferences for lower prices at high quality 3. Economies of scale in production and marketing can be achieved through supplying global markets
Fees that a multinational receives from a foreign licensee in return for its use of intellectual property are usually called royalities
All of the factors below have made India's software services industry extremely competitive on a global scale
A. large pool of skilled workers
B. Large network of public and private educational institutions
C. large growing market and sophisticated customers
assumptions that may not always be true 1. Product markets vary widely between nations 2. In many product and service markets, there appears to be a growing interest in multiple product features, quality and service • Technology permits flexible production • Cost of production may not be critical to product cost • Firm’s strategy should not be product-driven
4 diff types of strategies of international expansion
global
transnational
international
multi-domestic
International Strategy: a strategy based on firms’ diffusion and adaptation of the parent companies’ knowledge and expertise to foreign markets, used in industries where the pressures for both local adaptation and lowering costs are low. • based on diffusion and adaptation of the parent company’s knowledge and expertise to foreign markets. • primary goal is worldwide exploitation of the parent firm’s knowledge and capabilities
Global Strategy: a strategy based on firms’ centralization and control by the corporate office, with the primary emphasis on controlling costs, and used in industries where the pressure for local adaptation is low and the pressure for lowering costs is high • Competitive strategy is centralized and controlled largely by corporate office • Emphasizes economies of scale
Multi-domestic Strategy: a strategy based on firms’ differentiating their products and services to adapt to local markets, used in industries where the pressure for local adaptation is high and the pressure for lowering costs is low. • Emphasis is differentiating products and services to adapt to local markets • Authority is more decentralized
Transnational Strategy: a strategy based on firms’ optimizing the trade-offs associated with efficiency, local adaptation, and learning, used in industries where the pressures for both local adaptation and lowering costs are high • Optimization of tradeoffs associated with efficiency, local adaptation, and learning • Firm’s assets and capabilities are dispersed according to the most beneficial location for a specific activity
Entrepreneurship: 9 the creation of new value by an existing organization or new venture that involves the assumption of risk.
Entrepreneurial opportunities(recognition):
Opportunity recognition:
--- the process of discovering and evaluating changes in the business environment, such as a new technology, socio-cultural trends, or shifts in consumer demand, that can be exploited.
• New value can be created in: 9 Start-up ventures 9 Major corporations 9 Family-owned businesses 9 Non-profit organizations 9 Established institutions
Opportunity Analysis Framework: Triangle= Opportunity, Resources, and Entrepreneurs
The majority of entrepreneurial start-ups are financed with: Personal savings and the contributions of family and friends
start ups (how do they happen? • Current or past work experiences • Hobbies that grow into businesses or lead to inventions • Suggestions by friends or family • Chance events • Change
Entrepreneurial opportunities in existing firms: • Needs of existing customers • Suggestions by suppliers • Technological developments that lead to new advances • Change
Discovery Phase: 9 the process of becoming aware of a new business concept. 9 May be spontaneous and unexpected 9 May occur as the result of deliberate search for new venture projects or creative solutions to business problems
Opportunity evaluartion phase •Opportunity evaluation phase involves analyzing an opportunity to determine whether it is viable and strong enough to be developed into a full-fledged new venture. Talk to potential target customers Discuss it with production or logistics managers conduct feasibility analysis
Characteristics of good opportunities: Attractive. The opportunity must be attractive in the marketplace; that is, there must be market demand for the new product or service Achievable. The opportunity must be practical and physically possible Durable. The opportunity must be attractive long enough for the development and deployment to be successful; that is, the window of opportunity must be open long enough for it to be worthwhile. Value creating. The opportunity must be potentially profitable; that is, the benefitsmust surpass the cost of development by a significant margin.
To obtain funding for rapid growth, firms often seek venture capital
Entrepreneurial Resources: • Human capital • Social capital • Government resources 9 Small Business Administration 9 Government contracting 9 State and local governments
Entrepreneurial Leadership (3 characteristics):
Vision--may be most important asset, ability to envision realities that dont exist yet, transformational leadership, share with others
Dedication and drive--reflected in hard work, patience, stamina, internal motivation, intellectual commitment to enterprise
comittment to excellence--venture founders and small business owners must understand customer, provide quality products, pay attention to detials, continuously learn
what is strategic control 9 the process of monitoring and correcting a firm’s strategy and performanceInformational, behavioral
Traditional control system
1. strategies are formulated and top management sets goals
2. strategies are implemented
3. performance is measured against the predetermined goal set
traditional control system most appropriate when Environment is stable and relatively simple Goals and objectives can be measured with certainty Little need for complex measures of performance
Contemporary control system
Continually monitoring the environments (internal and external)

Identifying trends and events that signal the need to revise strategies, goals and objectives
two key issues 9 Scan and monitor external environment (general and industry) 9 Continuously monitor the internal environment
Effectiveness of Contemporary Strategic Control System: Focus on constantly changing information that has potential strategic importance.
  1. The information is important enough to demand frequent and regular attention from all levels of the organization.
  2. The data and information generated are best interpreted and discussed in face-to-face meetings.
  3. The control system is a key catalyst for an ongoing debate about underlying data, assumptions, and action plans.
Culture sets implicit boundaries • (unwritten standards of acceptable behavior) 9 Dress 9 Ethical matters 9 The way an organization conducts its business
Sustaining that culture • Effective culture must be 9 Cultivated 9 Encouraged 9 Fertilized
Maintaining an effective culture 9 Storytelling 9 Rallies or pep talks by top executives
How companies motivate employees: Rewards and incentives 9 Powerful means of influencing an organization’s culture 9 Focuses efforts on high-priority tasks 9 Motivates individual and collective task performance 9 Can be an effective motivator and control mechanism
Corporate governance 9 the relationship among various participants in determining the direction and performance of corporations. 9 primary participants are the shareholders, the management, and the board of directors.”
External governance control mechanisms 9 methods that ensure that managerial actions lead to shareholder value maximization and do not harm other stakeholder groups and that are outside the control of the corporate governance system. Market for corporate controlAuditorsBanks and analystsRegulatory bodies Media and public activists
Aircraft makers Boeing and Airbus have a high degree of __________ because they make very similar products and have many buyers in common. market commonality
Simple structure: An organizational form in which the owner-manager makes most of the decisions and controls activities, and the staff serve as an extension of the top executive. Simple structure is the oldest and most common organizational form: Staff serve as an extension of the top executive’s personality Highly informal Coordination of tasks by direct supervision Decision making is highly centralized Little specialization of tasks, few rules and regulations, informal evaluation and reward system
what are the adantages and disadvantages Advantages 9 Highly informal 9 Centralized decision making 9 Little specializationDisadvantages 9 Employees may not understand their responsibilities 9 May take advantage of lack of regulation
Functional structure: An organizational form in which the major functions of the firm, such as production, marketing, R&D, and accounting, are grouped internally.
Advantages(Functional) 9 Enhanced coordination and control 9 Centralized decision making 9 Enhanced organizational-level perspective 9 More efficient use of managerial and technical talent 9 Facilitated career paths and development in specialized areas
disadvantages 9 Impeded communication and coordination due to differences in values and orientations 9 May lead to short-term thinking (functions vs. organization as a whole) 9 Difficult to establish uniform performance standards
Divisional structure: An organizational form in which products, projects, or product markets are grouped internally. 9 Also called multidivisional structure or M-Form Organized around products, projects, or markets Each division includes its own functional specialists typically organized into departments Divisions are relatively autonomous and consist of products and services that are different from those of other divisions Division executives help determine product-market and financial objectives
advanatges and disadvantages Advantages(Divisional/Multidivisional) 9 Strategic business unit (SBU) structure 9 Separation of strategic and operating control 9 Quick response to important changes in external environment 9 Minimal problems of sharing resources across functional departments 9 Development of general management talent is enhancedDisadvantages(Divisional/Multidivisional) 9 Can be very expensive 9 Can be dysfunctional competition among divisions 9 Differences in image and quality may occur across divisions 9 Can focus on short-term performance
matrix structure advantages and disadvantages an organizational form in which there are multiple lines of authority and some individuals report to at least two managers.Advantages 9 Facilitates the use of specialized personnel, equipment and facilities 9 Provides professionals with a broader range of responsibility and experienceDisadvantages 9 Can cause uncertainty and lead to intense power struggles 9 Working relationships become more complicated 9 Decisions may take longer
Successful learning organizations 9 Create a proactive, creative approach to the unknown 9 Actively solicit the involvement of employees at all levels 9 Enable all employees to use their intelligence and apply their imagination
key elements of a learning organization
1. inspiring and motivating people with a mission r purpose
2. empowering employees at all levels
3. accumulating and sharing internal knowledge
4. gathering and integrtaing external information
5. challenging the status quo and enabling creativity
Leaders base of power(Personal vs. Organizational) (Formal and informal), Power 9 a leader’s ability to get things done in a way he or she wants them to be done Organizational bases of power 9 A formal management position that is the basis of a leader’s power.