Summary MGT 302 FINAL EXAM STUDY GUIDE | LATEST GUIDE

MGT 302 FINAL EXAM STUDY GUIDE Tacit Knowledge – Information that is intuitive and difficult to articulate or codify in writing; Ex. swimming or riding a bike (you would want to show a person v. just tell them if they’ve never done these things before) • Can be gained through personal experience or interaction • Shared knowledge might be dispersed throughout the company Codified Knowledge – Information that can be easily captured in the form of text, tables, or diagrams; Ex. Jamba Juice recipes, procedures, etc. on how to make smoothies • Product specifications, scientific formulas and computer programs are examples of codified knowledge First Mover Advantages versus Pioneering Costs First Mover Advantages: this is the advantage gained by the first business/company to enter into a new market, can achieve huge market potential and growth as a result Pioneering Costs: costs the firm has to bear that a later entrant can avoid; can arise when the business system in a foreign country is so different from that in a firms home market that the enterprise has to devote considerable time efforts and expense to learning the rules of the game.) Value-to-Weight Ratio A high value-to-weight ratio means that the product is expensive and doesn’t weigh a lot so the cost to ship the products is low. This means that it would make more sense to produce in one place and ship from there. A low value-to-weight ratio are heavy inexpensive items like paint and certain bulk chemicals so when they are shipped long distances it can get expensive. It would be more cost efficient to produce these items in multiple markets. Types of Intellectual Property • Patents - consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention.The procedure for granting patents, the requirements placed on the patentee, and the extent of the exclusive rights vary widely between countries according to national laws and international agreements. • Copyrights - legal concept, enacted by most governments, giving the creator of an original work exclusive rights to it, usually for a limited time. Generally, it is "the right to copy", but also gives the copyright holder the right to be credited for the work, to determine who may adapt the work to other forms, who may perform the work, who may financially benefit from it, and other related rights • Trademarks - distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, designated for a specific market, and is used to distinguish its products or services from those of other entities. • Industrial Designs - rights that make exclusive the visual design of objects that are not purely utilitarian. A design patent would also be considered under this category. An industrial design consists of the creation of a shape, configuration or composition of pattern or color, or combination of pattern and color in three dimensional form containing aesthetic value • Trade Secrets - formula, practice, process, design, instrument, pattern, or compilation of information which is not generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers Intellectual Property Rights form of legal entitlement which allows its holder to control the use of certain intangible ideas and expressions. The term intellectual property reflects the idea that once established, such entitlements are generally treated by courts, especially in common law jurisdictions, as if they were tangible property. The most common forms of intellectual property include patents, copyrights, trademarks, and trade secrets. Externalities knowledge ‘spillovers’- general knowledge related to a specific industry or idea; comes from sheer concentration of intellectual talent, and a network of informal contacts that allows firms to benefit from each other’s knowledge generation. Basic Entry Decisions: • Which foreign markets – Choose markets close to home and easily moved to • Timing the entry – First mover advantage for new entrants can lead to brand becoming synonymous with the solution of a problem; Ex. Apple iPod is synonymous with mp3 players/portable music problem in the mind of the consumers o Switching costs for customers implemented by first mover can further solidify customer use/base o First mover mistakes can end up benefiting later entrants • Scale of entry – Do we want to enter a foreign market on a very large scale? (Show up and make a large statement) Or should we show up slowly? Resources may determine this for you Strategic Commitments Decision that has a long-term impact and is difficult to reverse such as entering a foreign market on a large scale; can have important influence on the nature of competition in a market; limits a company’s strategic flexibility. Advantages and disadvantages of all the international entry modes EXPORTING – It refers to selling goods and services produced in home country to other markets. The seller of such goods and services is referred to as an “exporter” who is based in the country of export whereas the overseas based buyer is referred to as an “importer”. Advantageous: 1) Avoids the often substantial costs of establishing manufacturing operation the host country. 2) Exporting may help a firm achieve experience curve and location economies. For example: By manufacturing the product in a centralised location and exporting it to other national markets, the firm may realize substantial scale economies from its global sales volume. This is how Sony came to dominate the global TB market, how Matsushita came to dominate the VCR market, how many Japanese automakers made in roads to in the U.S. market, and how South Korean firms such as Samsung gained market share in computer memory chips. Disadvantages: 1) Exporting from the firm’s home base may not be appropriate if lower-cost locations for manufacturing the product can be found abroad. Thus, particularly for firms pursuing global standardization or transnational strategies, it may be preferable to manufacture where is the mix of factor conditions is most favourable from a value creation perspective and to export to the rest of the world from that location. 2) High transportation costs can make exporting uneconomical, particularly for bulk products. Managers need to manufacture products regionally. This strategy enables the firm to realize some economies from large-scale production adn at the same time to limit its transportation costs. 3) Tariff barriers can make exporting uneconomical. The threat of tariff barriers by the host-country government can make it very risky. 4) A firm delegates its marketing, sales, and service in each country where it does business to another company. This is a common approach for manufacturing firms that are jut beginning to expand internationally. The other company may be local agents often carry the products of competing firms and so have divided loyalties. In such cases, the local agent may not do as good a job as the firm would if ti managed its marketing itself. TURNKEY PROJECTS – The contractor agrees to handle every detail of the project for a foreign client, including the training of operating personnel. At completion of the contract the foreign clients handled the “key” to a plant that is ready for full operation. Turnkey is a means of exporting process technology to other countries. Advantages 1) The know-how required assembling and running technologically complex process, such as refining petroleum or steel, is a valuable asset. Turnkey project are a way of earning great economic returns from that asset. This strategy is particularly useful where foreign direct investment is limited by hostgovernment regulations. For example, the governments of many oil rich countries have set out to build their own petroleumrefining industries, so the restrict FDI in their oil and refining sectors. But because many of these countries lack petroleum-refining technology, they gain it by entering into turnkey projects with foreign firms that have the technology. Disadvantages 1) No long-term interests in the foreign country. This can be disadvantage if that country subsequently proves to be a major market for the output of the process that has been exported. 2) Inadvertently create a competitor. For example: Many of the other Gulf states now find themselves competing with these firms in the world oil market. 3) If the firm’s process technology is a source of a competitive advantage, then selling this technology through turnkey project is also selling competitive advantage to potential or actual competitors. LICENSING – A licensing agreement is an arrangement whereby a licensor grants the rights to intangible property to another entity for a specified period and in returns the licensor receives a royalty fee form the licensee. Intangible property includes patents, inventions, formulas, processes designs, copyrights, and trademarks. For example: To enter the Japanese market, Xerox, inventor of the photocopier, established a joint venture with Fuji Photo that is known as Fuji-Xerox. Xerox then licensed its xerographic know-how to Fuji-Xerox. In retursm Fuji-Xerox paid Xerox a royalty fee equal to 5 percent of the net sales revenue that Fujo=Xerox earned from the sales of photocopiers based on Xerox’s patented know-how. Advantages: 1) Firm does not have to bear the development costs and risks associated with opening a foreign market. Normally, the licensee puts up most of the capital necessary to get the overseas operation going. It is attractive for firms lacking the capital to develop operations overseas. For example: A fir ma use licensing when it wishes to participate in a foreign market but is prohibited from doing so by barriers to investment. This was one of the original reasons for the formation of the Fuji-Xerox joint venture in 192. Xerox wanted to participation the Japanese market but was prohibited setting up a wholly owned subsidiary by the Japanese government. 2) Licensing is frequently uses when affirm possess some intangible property that might have business applications, but it does not want to developed those application itself. For example, Bell Laboratories at AT&T originally invented the transistor circuit in the 1950s, but AT&T decided it did not want to produce transistors, so it licensed the technology to a number of other companies. Similarly, Coca-Cola has licensed its famous trademark to clothing manufacturers, which have incorporated the design into clothing. Disadvantages: 1) It does not give a firm the tight control over manufacturing, marketing, and strategy that is required for realizing experience curve and location economies. Licensing typically involves each licensee setting up its own production operation. Te severely limit the firm’s ability to realize experience curve and location economies by producing its product in a centralized location. 2) Competing in a global market may require firm to coordinate strategic moves across countries by using profit earned in one country to support competitive attacks in another. By its very nature, licensing limits a firm’s ability to utilize a coordinated strategy. 3) Technological know-how constitutes the basis of many multinational firms’ competitive advantage. Most firms wish to maintain control over know-how to foreign companies. Most firms wish to maintain contol over how their know-how is used, and a firm can quickly lose control over its technology by licensing it