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Global Business Study Guide - PowerPoint

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Global Production and Supply Chain
Global Financial Management

August 11, 2008
Discussion Section
   Recap of chapter 12 and 14
   Review of chapter 16
       Chapter 16 discussion
   Review of chapter 11
       Chapter 11 discussion
   Review of chapter 20
       Chapter 20 discussion
   Study guides for Chapter 17 & 18
   A few notes about the final
   Q&A about the Final
       Additional office hours on Wednesday, 10-12am @ Café
Recap of chapter 12 and 14
   Chapter 12: The strategies of International Business
     Valuecreation and strategic positioning
     Market pressure and strategy determination

   Chapter 14: Entry strategy and strategic alliances
     Pros and cons of various entry modes
     Pros and cons of greenfield ventures, acquisition and
      strategic alliances.
    Chapter 16: Global Production,
    Outsourcing, and Logistics
   The central role of production and logistics
   Where to produce (Table 16.1)
      Country factors
      Technology factors: fixed cost, min efficient scale, flexible manufacturing and mass
      Product factors: value to weight ratio, universality
   Changing role of foreign factories
   What to do produce - Make-or-Buy Decision/vertical integration

                        Make                                           Buy
                     Lower cost
              Specialized Investments
                                                                    Lower cost
         Protecting proprietary technology

   Managing global supply chain
     Just-in-time inventory
     Information technology
Chapter 16 Learning Goal
   What are the roles of production and logistic?
   How do country differences, production
    technology, and product features affect the choice
    of where to locate production activities?
   How can the role of foreign subsidiaries in
    production be enhanced over time as they
    accumulate knowledge?
   What factors do firms take into consideration
    when decision whether to make or buy?
   What is required to efficiently coordinate a
    globally dispersed production system.
Chapter 16: Discussion
   A chemical firm is considering how best to supply the
    world market for sulfuric acid. A manufacturing plant
    costs approximately $20million to construct and
    requires a moderately skilled workforce. The total
    value of the world market for this product over the next
    10 years is estimated to be between $20billion and
    $30 billion range. The tariffs prevailing in this industry
    are moderate.
     Should the firm favor concentrated manufacturing or
      decentralized manufacturing?
     What kind of location(s) should the firm seek for its plant(s)?
Chapter 11: The Global Capital
   Benefits and risks of the global capital market to borrowers
    and investors
       Cost of capital, risk reduction
       Opportunity for speculation, lack of information
   Growth of the global capital market in the last quarter
       Information technology, deregulation
   Benefits and risks of the Eurocurrency market
       Lack of regulation, foreign exchange risk
   Attractions of the Eurobond market
       Regulatory interference, disclosure requirements, favorable tax
   “Global” equity market
Chapter 11 Learning Goals
   What are the benefits of the global capital market?
   Why has the global capital market grown so rapidly
    over the last quarter century
   What risks are associated with the globalization of
    capital markets?
   What are the risks and benefits associated with the
    Eurocurrency market, the global bond market, and the
    global equity market?
   How does foreign exchange risk impact the cost of
   Foreign exchange risks
Chapter 11: Discussion
• Why has the global capital market grown so
  rapidly in recent decades?
• Do you think this growth will continue throughout the
  next decade?
• What implications does this growth have for
  borrowers and investors from developed and
  developing countries?
Chapter 20: Financial Management in
the International Business
   Investment decision
       Capital budgeting (NPV of cash flow)
       Cash flow to the parent company
       Political and economic risks (discount rates)
   Financing decision – source and structure
   Global money management objectives:
       Efficiency: cash balance and transaction cost
       Minimize tax payment
   How to move money across borders?
       Dividend remittance
       Royalty payments and fees
       Transfer prices
       Fronting loans
   Techniques for global money management
       Centralized depositories and multilateral netting
Chapter 20 Learning Goals:
   How does operating in different nations impact
    investment decisions within the multinational
   What are the different financing options available to
    the subsidiary of a multinational enterprise?
   How can money management in an international
    business be used to minimize cash balances,
    transaction costs, and taxation?
   What are some of the basic techniques for global
    money management?
Chapter 20: Discussion
   You are the CFO of a US firm with a wholly owned
    subsidiary in Mexico that manufactures component
    parts for your US assembly operations. The
    subsidiary has been financed by bank borrowings in
    the United States. One of your analysts told you
    that the Mexican peso is expected to depreciate by
    30% against the US dollar on the foreign exchange
    markets over the next year. What actions, if any,
    should you take?
Chapter 17 Study Guide
What determines firms’ global marketing and R&D strategies?

   Marketing
       Market segmentation
       Product attributes - affected by cultural differences, economic
        development, and product & technical standards
       Distribution channels - retail concentration, channel length, channel
        exclusivity and channel quality
       Communication differences – barriers, what determines the optimality of
        push vs. pull strategies?
       Standardized vs. localized advertising
       Price discrimination, predatory pricing, multipoint pricing and experience
        curve pricing
       Government regulation on pricing: antidumping and competition policy
   R&D
       Used to be concentrated in the U.S., no longer so
       As successful product requires the integration of R&D, marketing, and
        production – achieved through cross-functional teams
Chapter 18 Study Guide:
Global Human Resource Management
   What is human resource management
   Benefits and costs of the 3 staffing policies:
       Ethnocentric, polycentric and geocentric (see Table 18.1, pg 631)
   Why do global expat managers fail?
   How to reduce failure rates:
       Cultural, language and practical training
       Repatriation of expats
   Problems with performance appraisals in a MNE
   Components of expat pay
   Managing international labor relations – decentralized and
    centralized control
Final Exam
   Same format as midterm
   Bring a #2 pencil and a green scantron
   Suggested articles to focus on:
       “A Tale of Two Factories”
       “Philippines Jollibee Goes Abroad”
       “Low-Skilled Jobs: Do They Have to Leave?”
       “Big Mac’s Local Flavor”
       “Calling the Faithful”
   Other questions
   Good luck!

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