Chapter 9 1. One of the most common entry strategies for MNCs is the joint venture. Why are so many companies opting for this strategy? Would a fully owned subsidiary be a better choice? 1） wholly owned subsidiary is an overseas operation that is totally owned and controlled by an MNC. This option is often pursued by smaller companies, especially if international or transaction costs, such as the cost of negotiating and transferring information, are high. When MNCs make an initial investment in the form of a wholly owned subsidiary in a foreign country, it is sometimes referred to as “greenfield” or de novo (new) investment. The primary reason for the use of wholly owned subsidiaries is a desire by the MNC for total control and the belief that managerial efficiency will be better without outside partners. Due to the sole ownership, it has been found that profits can be higher with this venture and that there are clearer communications and shared visions. However, there are some drawbacks. Typically, wholly owned subsidiaries face a high risk with such a large investment in one area and are not very efficient with entering multiple countries or markets. This can also lead to low international integration or multinational involvement. Furthermore, host countries often feel that the MNC is trying to gain economic control by setting up local operations but refusing to include local partners. Some countries are concerned that the MNC will drive out local enterprises as opposed to helping develop them. In dealing with these concerns, many newly developing countries prohibit wholly owned subsidiaries. Another drawback is that home-country unions sometimes oppose the creation of foreign subsidiaries, which they see as an attempt to “export jobs,” particularly when the MNC exports goods to another country and then decides to set up manufacturing operations there. As a result, today many multinationals opt for a merger, alliance, or joint venture rather than a wholly owned subsidiary. 2） An alliance is any type of cooperative relationship among two or more different firms. An international alliance is composed of two or more firms from different countries. Some alliances are temporary; others are more permanent. A joint venture (JV) can be considered a specific type of alliance agreement under which two or more partners own or control a business. An international joint venture (IJV) is a JV composed of two or more firms from different countries. Alliances and joint ventures can take a number of different forms, including cross-marketing arrangements, technology-sharing agreements, production-contracting deals, and equity agreements. In some instances, two parties may create a third, independent entity expressly for the purpose of developing a collaborative relationship outside their core operations. Just like mergers and acquisitions, alliances and joint ventures can pose substantial managerial challenges. We discuss some of these at the end of the chapter and again in Chapter 10.
There are two types of alliances and joint ventures. The first type is the nonequity venture, which is characterized by one group’s merely providing a service for another. The group providing the service typically is more active than the other. Examples include a consulting firm that is hired to provide analysis and evaluation and then make its recommendations, an engineering or construction firm that contracts to design or build a dam or series of apartment complexes in an undeveloped area of a partner’s country, or a mining firm that has an agreement to extract a natural resource in the other party’s country. The second type is the equity joint venture, which involves a financial investment by the MNC parties involved. Many variations of this arrangement adjust the degree of control that each of the parties will have and the amount of money, technological expertise, and managerial expertise each will contribute to the JV.19 Most MNCs are more interested in the amount of control they will have over the venture rather than their share of the profits. Similarly, local partners feel the same way, which can result in problems. Nevertheless, alliances and joint ventures have become very popular in recent years because of the significant operational benefits they offer to both parties. Some of the most commonly cited advantages include:
a) Improvement of efficiency. The creation of an alliance or JV can help the partners achieve economies of scale and scope that would be difficult for one firm operating alone to accomplish. Additionally, the partners can spread the risks among themselves and profit from the synergies that arise from the complementary resources.
b) Access to knowledge. In alliances and JVs each partner has access to the knowledge and skills of the others. So one partner may bring financial and technological resources to the venture while another brings knowledge of the customer and market channels.
c) Mitigating political factors. A local partner can be very helpful in dealing with political risk factors such as a hostile government or restrictive legislation.
d) Overcoming collusion or restriction in competition. Alliances and JVs can help partners overcome the effects of local collusion or limits being put on foreign competition by becoming part of an “insider” group.

5. In what way do formalization, specialization and centralization have an impact in MNC organization structures? In your answer, use a well-known firm such as IBM or Ford to illustrate the effects of theses three characteristics.

Formalization: use of defined structures and systems in decision making, communicating, and controlling Specialization: Assign individuals to specific, well-defined tasks Centralization: Important decisions are made at the top Formalization generally necessitates a greater use of budgets, financial data, and other tools in controlling subsidiary operations. An informal structure tends to make wider use of face-to-face, informal controls. It is important to note that while the outward structural design of overseas subsidiaries may appear simiar, the internal functioning in the characteristics such as formalization may be quite different.
Specialization and centralization is usually associated with taller organizational structures, whereas generalization and decentralization is usually associated with a flatter structure. Most of today’s large MNCs such as Ford and IBM are flattering their structures, thus make them more flexible, decentralized and better able to learn and stay ahead of change.

Chapter 8
2. Define global integration as used in the context of strategic international management. In what way might globalization be a problem for a successful national organization that is intent on going international? In your answer, provide an example of the problem.

Global integration is the production and distribution of products and services of a homogeneous type and quality on a worldwide basis.
Global integration can be a problem for the international firm if it causes the firm to overlook important local or regional differences in things such as personnel practices or customer tastes. For example, if an appliance maker used a pure globalization strategy, it might not recognize that some countries are very much accustomed to top loading washers, while others are more partial to front loaders.

5. Anheuser-Busch

Anheuser-Busch would need to contrite on profitability and marketing when expanding into India. Profitability is so important because MNCs need high profitability from their overseas operations than they do form their domestic operations. Setting up overseas operations involves greater risk and effort. Marketing strategies must be determined on a country-by-country basis. Therefore, the strategies used in the United States may or may not work in India. The implementation of marketing strategy in the international arena is built around the well-known “four Ps” of marketing: product, price, promotion, and place. Anheuser-Busch may need to develop new products to distribute in India, especially since beer is hardly ever consumed. The price may also need to be reduced as well.

7. What conditions have allowed some firms to be born global? What are some examples of born-global companies? Besides the increasing attractiveness of global market and the saturation and cut-throat competition in the mature markets of most developed countries, firms that are born-global capitalized on advance in telecommunication and Internet technologies, as well as the increasing efficiencies and lower costs of shipping. Firms that are born global also face less organizational inertia, and are therefore more flexible and responsive than established organizations. However, born global strategies necessitate creativity, innovativeness, diversity, and a distinctive mix of orientations and strategies that allows for swift responsiveness in diverse international markets. Example includes Amazon.

Chapter 7
1. How does explicit communication differ from implicit communication? Which is one culture that makes wide use of explicit communication? Implicit communication? Describe how one would go about conveying the following message in each of the two cultures you identified: “You are trying very hard, but you are still making too many mistakes.”

Explicit communication involves directly saying exactly what you mean whereas implicit communication requires making inferences about meaning. The U.S. culture makes wide use of explicit communication. For example, most American managers are taught to set objectives in quantitative terms with timetables for accomplishment. On the other hand, the Chinese culture emphasizes on implicit communication. The Chinese are intentionally more ambiguous and no one individual carries responsibility for a particular idea. Instead, groups or terms of employees assume joint responsibility. To convey the message in the U.S. culture, a manager using explicit communication would probably say, “ you are trying hard, but you are still making too many mistakes.” In the Chinese culture a manager might say, “your effort is commendable” and then begin to coach the employee on the area in which the mistakes are being made.

4. Diaz Brothers is a winery in Barcelona. The company would like to expand operations to the United States and begin distributing its products in the Chicago area. If things work out well, the company then will expand to both coasts. In its business dealings in the Midwest, how might culture prove to be a communication barrier for the company’s representatives from Barcelona? Identify and discuss two examples.

The biggest cultural barriers to communication will probably stem from lifestyle differences between the Midwest and Barcelona. A prime example will be lunchtime behavior. In Chicago it is common to see managers eating lunch at their desks purchased form the local fast food restaurant. In France, lunch is usually a quite lengthy affair involving wine and casual conversation. Also, the French managers may be unwilling to work into the night to complete a project whereas the Chicagoan may not think twice about a late nighter. In any case, the outsider often has difficulty interpreting why these culturally specific events are happening, and this becomes a barrier to effective communication.