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SMMCG6[CS-3 & CS-4] Global Strategy & Stakeholders and Governance,…

- - - - Motivation for Going International
        
        Accessing lower-cost factors of production
        
        Securing natural resources
        
        Expanding markets for products
        
        Accessing local knowledge or talent
        
        Reducing overall business risk
      - MNEs
        
        Companies that operate in two or more countries
        
        Represent a small fraction of firms
        
        They employ a significant portion of the workforce and conduct the majority of private R&D
    - - The process of closer integration and exchange between countries and people
    - - Technological improvements in communication and transportation
      - The systematic reduction of trade and investment barriers
- - - - low pressure for both
    - - high cost pressure
    - - high responsiveness pressure
    - - high pressure for both
- - - - Exporting
        
        Direct export
        
        Low risk, low control
        
        Indirect exports
    - - Licensing & Franchising
        
        Contractual transfer of intangible assets
        
        patents
        
        Low resource commitment, risk of imitation
        
        technology
        
        brand
        
        trademarks
    - - Active coordination and collaboration across a broad scope of activities with local partners
        
        R&D
        
        Marketing
        
        W. L. Gore and its Japanese partners
    - - Large-scale co-aggregation
        
        Combining resources to create massive economies of scale
        
        Early Sony Ericsson
      - Complementary capabilities
        
        Foreign technology × Local market advantages
        
        Starbucks
    - - Greenfield
        
        Highest ownership, control rights, highest financial returns, highest investment costs and risks
      - Brownfield
      - Acquisition
  - - - Cultural
      - Administrative
      - Geographic
      - Economic
    - - bilingual law
      - currency differences
  - - - Gradual expansion
        
        expand in the home country
        
        Prioritize entering similar markets with close "psychological distance"
        
        Gradually transition from a low-risk model to subsidiaries
    - - focused its business on the global market
        
        export-oriented economic zones in emerging markets
- - - - shares can be freely traded
    - - company = separate legal entity
    - - investors’ loss is limited
    - - shareholder
        
        claim on residual value (ownership)
      - professional manager
        
        actual operating rights (control)
  - - - maximize shareholder value
    - - balance interests of
        
        employees
        
        customers
        
        shareholders
        
        government
        
        society
  - - - 1.Identify stakeholders
        
        2.Identify interests/needs
        
        3.Analyze opportunities & threats
        
        4.Define responsibilities (economic / legal / ethical / philanthropic)
        
        5.Develop responses
  - - - financial + customer + internal + learning
    - - firm as a network of partners
    - - Poison Pill
      - Dual-Class Shares
  - - - Agency Costs
    - - Asymmetric Information
        
        Adverse Selection
        
        e.g.misleading personal abilities
        
        Moral Hazard
        
        e.g.pursuing personal gain
    - - board monitoring
      - incentive compensation
        
        e.g.stock-based pay
      - market control
        
        e.g.takeover threats
      - institutional investor monitoring
- - - - Align managers & shareholders
      - Reduce agency problems
    - - Board of Directors Monitoring
      - Executive Compensation (Stock Options)
      - Market for Corporate Control (Takeover threats)
      - Monitoring by Institutional Investors
  - - - Goes beyond short-term financial metrics
      - Financial
        
        EVA, profitability, growth
      - Customer
        
        differentiation, cost, response
      - Operations
        
        fulfillment, demand management
      - Organizational
        
        leadership, learning, change
    - - Stakeholders
      - Long-run Value Creation
      - Examples
        
        Apple,Amazon,Google,Alibaba,Coursera
      - Partnerships
- - - - Economic Responsibility
        
        Legal Responsibility
        
        Ethical Responsibility
        
        Philanthropic Responsibility
    - - Shareholder Orientation
        
        increase profits so long as it stays within the rules of the game.
      - Stakeholder Orientation
        
        responsible not only to shareholders but to all stakeholders
        
        Stakeholder Impact Analysis
        
        Step 1: Identify stakeholders
        
        Step 2: Understand their interests and claims
        
        Step 3: Assess opportunities and threats
        
        Step 4: Define economic, legal, ethical, and philanthropic responsibilities
        
        Step 5: Decide actions to address stakeholder concerns
    - - Firms that engage in CSR tend to perform better financially
      - Firms can do well ($) by doing good (CSR)
      - Firms unite sustainability and scorecards to align stakeholders for lasting success.
    - - High CSR orientation
        
        Spain, Germany, China, Brazil
      - Low CSR orientation
        
        UAE, Japan, India
  - - - In public firms, shareholders (owners) and managers (controllers) are distinct.
        
        Will managers act in shareholders’ best interests?
    - - Principal
        
        Pays for tasks to be done
      - Agent
        
        Executes tasks
      - Agency Costs
        
        Occur when agents pursue self-interest rather than principals’ interests.
        
        Incentive costs
        
        Monitoring costs
        
        Enforcement costs
    - - Agents possess information that principals lack.
      - Adverse Selection
        
        Misrepresenting ability before hiring
      - Moral Hazard
        
        Shirking or self-serving behavior after hiring
      - Example
        
        Insider trading cases (ImClone, Galleon Group)
    - - Board Oversight
        
        Evaluate, incentivize, and monitor CEO and management
      - Stock Options
        
        Align managers’ interests with shareholders, though excessive use may lead to manipulation
      - Institutional Investors
        
        Large shareholders monitor management closely
      - Debt Pressure
        
        Forces efficiency and reduces wasteful spending
      - Market for Corporate Control
        
        Poor management risks takeover
      - Managerial Labor Market
        
        Good performance enhances career prospects
      - CEO-Chair Separation
        
        Prevents excessive concentration of power
      - M-form Structure
        
        Headquarters monitors divisional performance