International Business (Fach) / Kapitel 1-13 (Lektion)

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• What is a mission statement? = a message to be desigend inclusive of the expectations of all stakeholders for a company's performance over the long run --> mission statement guides the whole process of strategic management--> all the other single steps intend to achieve mission 
• Questions concerning the mission statement 1. Why is the firm in the business? 2. What are our economic goals? 3. What is our operating philosphy in terms of quality and company image? 4. Which customers can and do we serve? 5. What are our core competencies and our competitive advantage? 6. How do we view our responsibilities to stockholders, emplyoees, environment?
• Mission Statements in practice: formulation a mission should be based on six fundamental beliefs 1. product/ service provide benefits at least equal to its price 2. product/ service can satisfy the customer's needs in a specific market segment 3. the technology used in the production will provide a cost- and quality-competetitive     product/service 4. with hard work the business will grow and be profitable 5. the magenement philosphy will provide financial and psychological rewards 6. the entrepreneur`s self-concept of the business can be adopted by employees and     stockholders
• Who gives an input to the development of the Company Mission? 1. Inside Stakeholder: Board of directors, Executive Officers, Stockholders, Eymployees 2. Outside Stakeholder: customer, supplier, creditors, government, unions, competitors
• Why is Corporate Social Responsibility relevant? Each Company is embedded in a set of external institutions which have claims towards the firm 1. Stockholders: participation in distribution of profits, additional stock offerings, insight into the                          firm's books 2. Creditors: safety in pledged assets, relative priority in case of liquidation, legal proportion of                    interest payments dependend on the investment 3. Employees: economic, social, psychological satisfaction within their working environment,                        adequate working conditions, individual freedom in offering up their services                         through a contract 4. Customers: service provided with the product, technological data to use the product, adequate                       warranties 5. Supplier: continuing source of business, professional relationship in contracting for purchasing                   and receiving goods and services 6. Government: taxes, adherence to antitrust laws and to dealing with fair and free competiton 7. Unions: recognition as negioating agent for the employees, opportunity to perpetuate the                   union as participant in the organization 8. Competitors: observation of the norms for competitive conduct established by the industry,                          business statesmanship ont he part of peers
• Definition CSR = the idea that a business has a duty to serve society in general as well as the financial interest   of stockholders
• Which influence does CSR have on profitability? --> it is difficult to undertake a cost-benefit analysis because of several reasons 1. some CSR activities don't incur dollar costs at all 2. philantropic activities are often tax deductible: therefore they are often undertaken at a     discounted cost 3. socially responsible behavior does not come at a prohibitive cost 4. socially responsible practices may create savings and thereby increase profits
• 3 broad trends are driving businesses to adopt CSR framework 1. The resurgence of environmentalism- when the oil tank Exxon Valdez sank in 1989 the Corporation for Environmentally Responsible  Economies was founded- principle: establish environmental ethic- common forms are efforts in preserving natural resources and elimination pollution 2. Increasing buyer power- rise of the consumer movement gave power to consumers and investors - consumers are more interested in products from socially responsible firms- therefore investors are more interested in supporting socially resonsponsible companies   through their investments 3. Globalization- Management issues have become more complex since differente cultural views have to be   considered- further barriers: lack of CSR reserach organizations in some countries, differing corporate                             disclosure practices 
• Drivers of globalization - many firms generate a large share of ther sales volume in foreign countries - drivers of globalization concern the general conditions, supply factors, competition and demand  factors surrouding conditions: Deregulation, corporation/Integration, opening of former planned                                    economies, technological progress  demand factors: homogenization of demand, saturation of home market, demand from emerging                           economies competition: existence of global competitors, imitation behaviour, first-mover-advantages supply factors: economies of scale, high R&D expenditures, short product life cycles
• A firm's external environment consists of ... ...  - Remote Environment (= Makroumwelt)   - Economic Environment   - Social Environment   - Political Environment   - Ecologic Environment   - Technological Environment - Industry Environment (= Branchenumwelt)   - entry barriers   - supplier power   - buyer power   - substitute availability   - competitve rivalry - Operating Environment (= the firm)   - competitors   - creditors   - customers   - labor   - supplier
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• The nation in which a firm operates is an element of its environment Factors which affect the attractiveness of a nation 1. Economic factors   - size of GNP and its growth rate   - size of the market and its growth rate   - foreign exchange position 2. Political factors   - form & stability of the government   - attitute toward private and foreign investment by government, customers and competition   - degree of anti-foreign discrimination 3. Geographic factors   - proximity to export markets   - availability of local raw materials   - availability of water, gas, power 4. Labor Factors   - availability of managerial, technical and office personnel able to speak the language of the     partent company   - degree of skill and discipline   - degree and nature of labor voice in management 5. Tax factors   - tax-rate trends   - joint tax treaties with home country   - availability of tarif protection 6. Capital source factors   - cost of local borrowing   - modern baking systems   - government credit aids to new businesses 7. Business factors   - state of marketing and distribution system   - normal profit margins in the firm's industry   - competitive situation in the firm's industry: do cartels exist?
• Porter's 5 Forces - major approach to evaluate the attractivness of an industry setting - 5 different forces influence the industry's attractivness: 1. Threat of potential new entrants 2. Threat of substitute products 3. bargaining power of the customers 4. bargaining power of the suppliers 5. industry rivalry
• 6 major sources of barriers to entry New entrants enter the market if there are low entry barriers 6 major sources of barriers to entry: 1. economies of scale   - savings a firm has because of increased volume   - forces the aspriant to come in on large scale or accept a cost disadvantage   - result of better managerial coordination in production functions and processes 2. product differentiation/ brand identification   - firms in the industry often have popular brands   - aspirant has to spend heavily to overcome brand loyality 3. capital requirements   - capital needed for unrecoverable expenditures (e.g. in R&D) = sunk costs   - need to invest in large financial resources to compete 4. Cost disadvantages independet of size: advantages that stem from the effects of the learning    curve    - proprietary technology    - access to best raw material sources    - government subsidies 5. Access to distribution channels   - the new product must displace the old ones via promotion and intense selling efforts   - sometimes: need to create own distribution channel 6. Government Policy   - can limit entry to industry: license requirements, limits on access to raw materials   - contorl of air and water pollution standards
• 6 major sources of barriers to entry New entrants enter the market if there are low entry barriers 6 major sources of barriers to entry: 1. economies of scale   - savings a firm has because of increased volume   - forces the aspriant to come in on large scale or accept a cost disadvantage   - result of better managerial coordination in production functions and processes 2. product differentiation/ brand identification   - firms in the industry often have popular brands   - aspirant has to spend heavily to overcome brand loyality 3. capital requirements   - capital needed for unrecoverable expenditures (e.g. in R&D) = sunk costs   - need to invest in large financial resources to compete 4. Cost disadvantages independet of size: advantages that stem from the effects of the learning    curve    - proprietary technology    - access to best raw material sources    - government subsidies 5. Access to distribution channels   - the new product must displace the old ones via promotion and intense selling efforts   - sometimes: need to create own distribution channel 6. Government Policy   - can limit entry to industry: license requirements, limits on access to raw materials   - contorl of air and water pollution standards
• Supplier Power A supplier is powerful if: - there are only a few suppliers in the industry: high concentration of suppliers - the firm only purchases a small amount of goods - the product he provides is highly differentiated  - there are built-up switching cost for the firm - he poses a potential threat of integrating forward into the industry's business - the industry is not an important customer of the supplier Powerful suppliers can exert their bargaining power by1. ricing prices2. reducing the product's quality
• Buyer Power a buyer group is powerful if: - there are only a few buyers: high concentration - if it purchases in large volumes - if there are no switching costs - if it earns less so that there are incentives to lower the price - if the product is standard/ undifferentiated - if they pose a threat of integrating backwards into the firm's industry
• Buyer Power a buyer group is powerful if: - there are only a few buyers: high concentration - if it purchases in large volumes - if there are no switching costs - if it earns less so that there are incentives to lower the price - if the product is standard/ undifferentiated - if they pose a threat of integrating backwards into the firm's industry Powerful customers can:1. force down prices2. demand higher quality/ better service3. play competitors off against each other
• Threat of substitute products - high if the substitute product is cheaper or has a better quality - high if there a low switching costs for the customers - if customers aren't loyal to the company's product/ brand
• Determinants of Industry Rivalry - industry growth: if the industry is growing firms can grow with the market and don't have to                              steel each others market share - fixed costs: if there are high fixed costs the rivalry is higher as well, because then firms have to                      sell greater volumes to live from the fix cost digression - existing overcapacities? - product differences - exit barriers - diversity of competitors
• Identifying of relevant competitors - common mistakes in in identifying competitors - identifiying competitors is a milestone in the development of a strategy, but it's a process full of  uncertainty and risk - overemphasizing current and known competitors and giving inadequate attention to potential new ones overemphasizing large competitors while ignoring small ones assuming that competitors will continue to behave in the same way misreading signals that may indicate a shift in the focus of the competitors overemphasizing the competitor's financial resources and strategy while ingoring their assets assuming that every firm in the industry is open to the same opportunities believing that the purpose of strategy is to outsmart the competition rather than to satisfya customer's needs
• How can a specific national setting be evaluated for its strategic attractiveness? 1. Economic Environment   - level of economic development   - population   - GNP   - per capita income   - social infrastructure   - natural resources   - inflation 2. Legal Environment   - legal tradition   - effectiveness of the legal system   - treaties with foreign nations   - laws affecting business firms   - patent trademark laws 3. Cultural Environment   - customs, norms, values, beliefs   - language   - attitude   - motivations   - social institutions   - religious beliefs 4. Political Environment   - form of government   - stability of government   - political ideology   - strength of oppositional groups   - foreign policy   - social unrest
• Model of Culture: multilayer approach & onion model 1. layer: artefacts & products   = observable reality of the culture: language, food, buildings, fashion 2. layer: norms & valus   = mental sense a culture group has of what is "right" and "wrong"   --> norms can develop on a formal level as for example written laws and on an informal level        as for example a social control 3. layer: basic assumptions   = basic values, e.g. striving for survival Onion Model- inner layers of the onion determine the outer layers -Inner layer: basic assumptionsMiddle layer: Norms & ValuesOuter layer: artefacts & products
• Culture as a group-level phenomenon, not as an individual-level phenomenon - national culture descriptions always relate to the group level - individual members of a culture are not described - means of natural culture characteristics vary according to national culture 
• definition culture "Culture is a group-specific, collective phenomenon of commonly shared values. It is the collective programming of human thought that sets the members of one group apart from those of other groups."
• Origins, elements and consequences of national culture Origins: geographic (climate, flora fauna)             historical             technological & political economy             social (family, religion, school, media, government) Elements: values, rituals, beliefs, thought process Consequences: consumption decisions and behaviors                          management style
• the ladder: how culture influences the way consumers think/ act from bottom to top: 1. observable data & experience 2. select data 3. add meaning 4. make assumptions 5. draw a conclusion 6. adopt beliefs about the world Reflective Loop: the beliefs we adopt affect what data we will select next time
• The "cultural phenomenon" can exist at several levels (not only the national culture level) - group-level: different departments of a company can have different culturs (--> "thought worlds"                      of marketing and sales department) - organizational level: certain companies are known for specific corporate cultures (Marriot Hotel                                   service orientation) - global level: the convergence of cultures is due to technology development, such as internet                       communication
• Cultural dimensions ... - can be employed to capture national cultural differences  - to analyze in which national cultural context a firm operates
• Hofstede's Cultural dimensions - different dimensions to explain the core behavior of pepole (developed out of survey for  different countries)- these tools should help to analyze the inner layers of the onion Degree of Power Distance- degree of inequality that exists and is accepted among people with and without power- high PDI = culture accepts an unequal distribution of power    --> acknowledge leader's power- low PDI --> use teamwork Degree of Individualism- strength of ties people have to others within the company- high IDV score = loose connection with others  --> don't ask for too much personal information- low IDV --> supress feelings & emotions in order to work in harmony Degree of Masculinity & Femininity- masculine culture means that society sticks with tradition male and female roles- high MAS in countries where men are expected to be tough and strong- high MAS = well defined distinction between men's & women's work  --> be aware that people may expect male and female roles to be distinct- low MAS --> avoid discriminatory practices & treat men and women equally Degree of Uncertainty Avoidance- degree of tolerance for uncertainty and ambiguity (e.g. being ok with unstructured   situations or not)- high UAI = formal, lots of rules and principles  --> communicate often and plan and prepare- low UAI --> minimize emotional response by being calm Degree of long-term orientation- indicates if society does embrace long-term devotion to traditional values- high LTO = country subscribes to the values of long-term commitment  --> show respect for tradition- low LTO --> expect to live by the same standards and rules you create
• Criticism on Hofstede's cultural dimensions 1. Level of analysis: ignorance of culturally hetergoneous nations 2. ethic measurement: assumption that all cultural dimensions have the same meaning in every                                     nation 3. single company focus: focus on IBM --> would other members of the cultures have answered                                                                     differently? 4. Bias in the questionaire response: some were filled out in groups, not individually 
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• T./H-T.: 1. cultural dimension 1. Universalism vs. Particularism   - are rules important or not?   - are rules changeable or not?   --> universalism: signal changes publicly, strive for uniform procedures   --> particularism: build informal networks, informal patterns of activity
• T./H-T.: 2. cultural dimension 2. Individualism vs. Communitarism   - individualism: focus on yourself and your future related to your own perspective     --> adjust individual needs to organizational needs   - communiarism: focus on the group and "We" (staying in the same firm for 20 years)     --> seek to integrate personality with authority within the group
• T./H-T.: 3. cultural dimension 3. degree of neutralism vs. affectivity    - neutralism: not showing emotions and feelings (may explode suddently because of                        being dammed up), physical contact taboo     --> prepare extensively and avoid expresive or enthusiastic behavior   - affectivity: reveal thoughts and emotions verbally and non-verbally: showing emotions is                      expected     --> discover whose work and efforts has been invested in which project to appreciate            tenacious positions
• T./H-T.: 4. cultural dimension 4. specifity vs. diffuseness   is responsibility specifically assigned or diffusely accepted?   - specifity: precise and transparent, direct to the point     --> keep work and privacy seperated   - diffuseness: indirect, seemingly aimless forms of relating, evasive      --> consider an employee's whole situation before judging
• T./H-T.: 5. cultural dimension 5. degree of achievement and ascription   - achievement: respect on superior in hierarchy is based on how effectively the job is                            performed (a position one holds is based on his skills not on his age, etc.)     --> respect for a manager is based on knowledge and skills   - ascription: respect for superior in hierarchy is seen as a measure of your commitment to the                       organization (managers are often middle-aged, male, qualified by their                        background)     --> respect is based on seniority: decisions are challenged only by people with higher                                                           authority 
• T./H-T.: 6. cultural dimension 6. time orientation    do we do things at a time or several things at once?   - sequential: one activity at a time, therefore appointments are well structured in advance     --> plan the career of an employee jointly with him or her   - synchronic: several things at once, therefore appointments are approximate and                        time is intangible      --> discuss with employee their final aspiration in the context of the company
• T./H-T.: 7. cultural dimension 7. internal vs. external control   - internal: dominating attitude is bordering on an aggressiveness towards the environment     --> get agreement on clear objectives   - external: flexible attitude, willing to compromise     --> achieve congruence among various people's goals
• Porter's Value Chain - can be used to structure the internal activities, because it is divided into   supporting and primary activities and enables a company to find out where its core  competencies lie - Supporting Activities:   general administration HRM Research, technology, system development procurement - Primary Activities: inbound logistics production outboung logistics marketing & sales service
• Primary Activities - inbound logistics: activities, costs, assets associated with obtaining raw material, component                               parts and with receiving and storing inputs from the suppliers - operations: activities, costs and assets associated with the transformations of inputs into the                     final product (production, packaging, environmental protection) - outbound logistics: activities, costs, assets associated with the physical distribution of the final                                 product to buyers (warehousing, order processings...) - marketing & sales: activities, costs, assets related to advertising and promotion and market                                 research and distributor support - service: activities, costs, assets associated with providing assistance to buyers (installations,                 reparation, technical assistance)
• Support Activities - general administration: general management, accounting & finance - HRM: recruitement, hiring, training, development of knowledge-based skills - Reserach, technology, system development: R&D in product and processes, design,                                                                           software development - procurement: purchasing and providing raw material, outsourcing, negotiating with suppliers
• core competencies within the value chain: 3 main aims 1. being different: product has a special feature and can be sold for a higher price 2. provide the product for a cheap price: e.g. via decreasing the production costs  3. being quicker on the market: first mover advantage (e.g. being very innovative)
• Possible factors for assessing sources of differentiation in primary activities 1. inbound logistics: soundness of material 2. production: appropriate automation of production process 3. outboung logistics: timeliness and efficient delivery of final product 4. marketing & sales: development of image of quality and favorable reputation 5. Service: prompt attention to customer complaints
• possible factors for assessing sources of differentiation in support activities 1. general administration: capability of indentifying new product market opportunities and                                           potential environmental threats 2. HRM: a working environment that keeps turnover at a low level 3. Research, technology, system development: success of research and development activities                                                                            in leading product and process innovations 4. Procurement: finding alternate sources for inputs to minimize dependency on suppliers
• 2nd tool of internal analysis: the product life cycle = a means to assess the perspectives of current product offerings  - y-Achse: product sales- x-Achse: phases - stages from left to right: Introduction, Growth, Maturity, Decline
• Product Life Cycle: Introduction Phase during this stage the company has to built up product awareness and market development along with the resources to support initial losses product awareness skimming strategy good channel relationships financial resources to absorb lack of profitability
• Product Life Cycle: Growth Phase During this stage market growth increases rapidly with the firm seeking to increase market share brand awareness advertising skills access to distribution channels establishing or stabilizing market shares product features that differentiates versus competitive offerings
• Product Life Cycle: Maturity Phase During this phase growth in sales increases slowly, there is increase competition and similar product offerings.The firm needs competencies to defend its market share: sustained brand awareness ability to differentiate product and features resources to sustain price wars operating advantages to improve decreasing margins judgement to know whether to stay in or exit the market
• Product Life Cycle: Decline Phase During this phase the product and its competitors start to experience declining sales and increased pressure of margins withstand intense price-cutting brand strength to allow reduced marketing good supplier relationship to gain cost concessions innovation skills
• 3rd tool of internal analysis: Resource based view The Resourced based view considers firms as a bundle of resources that are highly interconnected and different for every company
• 3 kinds of resources (resource based view) --> some resources can become the building block for distinctive competencies <-- 1. tangible assets (= easy to measure)   - assets often found on a firm's balance sheet   - the physical and financial needs of a company   e.g. production facilities, financial resources, real estate and computers 2. intangible assets (= harder to measure)   - a firm's asset that you cannot touch or see, but that is often   - critical in creating competitive advantage   e.g. brand name, company reputation, organizational moral, experience, technical knowledge 3. organizational capabilities    - skills a company uses to transform inputs into outputs   - ability & ways of combining assets, people and processes

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