INTRODUCTION TO INTERNATIONAL BUSINESS Global Production and Supply Chain Management Global Financial Management August 11, 2008 Discussion Section

Agenda  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, Café Strada

Recap of chapter 12 and 14  Chapter 12: The strategies of International Business  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  Country factors  Technology factors: fixed cost, min efficiency frontier, flexible manufacturing and mass customization  Product factors: value to weight ratio, universality  Changing role of foreign factories  Make-or-Buy Decision  Managing global supply chain  Just-in-time inventory  Information technology MakeBuy Lower cost Specialized Investments Protecting proprietary technology Scheduling Flexibility Lower cost Offsets

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 11: The Global Capital Market  Benefits and risks of the global capital market to borrowers and investors  Growth of the global capital market in the last quarter century  Information technology, deregulation  Benefits and risks of the Eurocurrency market  Attractions of the Eurobond market  “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 capital?  Foreign exchange risks

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 enterprise?  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 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