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IB 2.2 Silicon valley
IB 2.2 Silicon valley
IB 2.2 Silicon valley
IB 2.2 Silicon valley
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IB 2.2 Silicon valley

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  • Thomas WestcottLegal AdvisorUNCTAD
  • Transcript

    1. International Business<br />To add<br />
    2. Another View<br />
    3. Explaining Internationalization<br />Early contribution of ‘Uppsala model’: Johanson & Wiedersheim-Paul 1975; Johanson & Vahlne 1977<br />Key insight: internationalization is an incremental commitment, in terms of (a) geographical sequence and (b) entry mode choice, due to the gradual accumulation of experiential knowledge of foreign markets reducing the uncertainty effect<br />interplay between knowledge and commitment the key driver<br />
    4. Distinctiveness of Uppsala model<br /> ‘We do not believe that [internationalization] is the result of a strategy for optimum allocation of resources to different countries where alternative ways of exploiting foreign markets are compared and evaluated. <br />We see it rather as the consequence of a process of incremental adjustments to changing conditions of the firm and its environment.’ (Johanson and Vahlne 1977, p. 35)<br />
    5. Empirical basis for model: e.g.<br />PHARMACIA: <br />9 overseas affiliates at the time. <br />In the case of 8, the firm had received orders from foreign market, then signed an agency/licensing agreement. <br />After a few years, established sales subsidiary (or made an acquisition in 1 case).<br /> In two countries began manufacturing, but only less complicated production at first. <br />In case 9, started a sales subsidiary almost immediately, but company decision-maker had prior country experience. <br /> (Johanson & Vahlne 1977)<br />
    6. Incremental pattern (1): ‘Establishment chain’<br />No regular export<br />Direct exporting, via independent agent/distributor<br />Establishing foreign sales subsidiary<br />Foreign production/ manufacturing<br />Johanson & Wiedersheim-Paul 1975; Johanson & Vahlne 1977; cf Bilkey & Tesar 1977, Cavusgil 1980, Czinkota 1982<br />
    7. Psychic distance <br />
    8. Why these patterns? A process explanation<br />‘the firm develops knowledge when it operates in the market, <br />this knowledge enables the firm to better see and evaluate business opportunities, consequently, to make new market commitments. <br />In their turn, these commitments lead to learning and the ability to identify new market opportunities, and so on.’ (Johanson and Vahlne 2003, p. 9)<br />
    9. The Uppsala model<br />STATE ASPECTS<br />CHANGE ASPECTS<br /> Market (Experiential) <br />Knowledge<br />Commitment<br /> Decisions<br />Current <br />Activities<br /> Market <br />Commitment<br />Johanson & Vahlne 1977, p. 37<br />
    10. The Uppsala model<br /><ul><li>Lack of market/operations knowledge =main obstacle to internationalization
    11. Can only be acquired through first-hand experience
    12. Includes i.e. getting to know customers, suppliers, government agencies
    13. Includes firm’s internationalization knowledge: firm’s own resources and ability to develop international operations
    14. Reduces uncertainty associated with foreign market commitment
    15. Provides framework for perceiving and formulating business opportunities</li></ul>Johanson & Vahlne 2003, p. 10<br />STATE ASPECTS<br />CHANGE ASPECTS<br /> Market (Experiential) <br />Knowledge<br />Commitment<br /> Decisions<br />Current <br />Activities<br /> Market <br />Commitment<br />Johanson & Vahlne 1977, p. 37<br />
    16. The Uppsala model<br />STATE ASPECTS<br />CHANGE ASPECTS<br /> Market <br />Knowledge<br />Commitment<br /> Decisions<br />Result of the conception of business opportunities, which in turn are a result of market (experiential) knowledge.<br />Johanson and Vahlne 2003, p. 12<br />Current <br />Activities<br /> Market <br />Commitment<br />Johanson & Vahlne 1977, p. 37<br />
    17. The Uppsala model<br /><ul><li>Largely consist of ‘everyday contact with customers, intermediaries, suppliers, authorities and other individuals and organisations important to their firm’
    18. ‘current activities evidently have a continuous impact on internationalisation, occasionally being interrupted by discontinuities…’
    19. By interacting with other firms in a market, the firm learns about their needs and situation
    20. Interaction builds trust, which is an important element in commitment building</li></ul>(Johanson and Vahlne 2003:11)<br />STATE ASPECTS<br />CHANGE ASPECTS<br /> Market <br />Knowledge<br />Commitment<br /> Decisions<br />Current <br />Activities<br /> Market <br />Commitment<br />Johanson & Vahlne 1977, p. 37<br />
    21. The Uppsala model<br /><ul><li>Market commitment: i.e. not just investment, but also marketing and sales  e.g., after-sales service commitments
    22. Amount of commitment: i.e. level of investment
    23. Degree of commitment: extent to which commitment cannot easily be withdrawn, and is defended by the firm
    24. Degree of commitment dependent on firm’s resources and capabilities at home</li></ul>Johanson and Vahlne 2003, p. 12<br />STATE ASPECTS<br />CHANGE ASPECTS<br /> Market (Experiential) <br />Knowledge<br />Commitment<br /> Decisions<br />Current <br />Activities<br /> Market <br />Commitment<br />Johanson & Vahlne 1977, p. 37<br />
    25. Hall<br />
    26. Dimensions of National Culture<br />
    27. Multiple of Cultureor ‘interfaces’ (Saner)<br />
    28. The Contexts ofInternational Negotiations<br />
    29. Influence of Culture on Negotiation: Managerial Perspectives<br />Definitions of negotiation<br />Negotiation opportunity<br />Selection of negotiators<br />Protocol<br />Communication<br />Time sensitivity<br />Risk propensity<br />Groups versus individuals emphasis<br />Nature of agreements<br />Emotionalism<br />
    30. Cultural Categories<br />
    31. National Communication Patterns<br />Finland <br /> USA<br />Germany<br />
    32. USA<br />Germany<br />Japanese<br />Arabic<br />
    33. Japanese Business <br />
    34. II. Samurai’s Rule<br />III. Modern-ization<br />I. Emperor’s Rule<br />IV. Postwar<br />1603<br />X<br />WAR<br />1867<br />Rapid recovery and growth<br />NARA<br />Centralization<br />MEIJI<br />Westernization,industrialization,militarilization<br />EDO<br />Tokugawa Shogunate<br />KAMAKURAMUROMACHISENGOKU<br />HEIAN<br />Nobles,Decentralization<br />× 645<br />Internal wars, dynamic & fluid society<br />Peace, isolation, conservative class society<br />Taika Reform<br />Clan fights<br />Hunting & gathering<br />xxxx<br />xxxx<br />xxx<br />WEST!!!<br />Chinese culture &political system<br />WEST: guns &Christianity<br />US occupation1945-52<br />Rice<br />Buddhism<br />
    35. Japan’s Multi-layered Identity<br />P.4<br />Pre-historic Japan<br />先史時代の日本<br />Rice cultivation<br />Buddhism, China<br />Heian & Samurai Culture<br />Guns & Christianity<br />Edo Culture<br />Note: Colored areas indicate external impacts<br />Western influence<br />
    36. Wartime controlled economy<br />Energy saving & lean management<br />Recovery period<br />Postwar recovery period<br />Bubble economy<br />High-growth period<br />Heisei recession<br />Process management methodology<br />Japanese style management<br />American style management method<br />Strategy & marketing<br />Market-based flexible manufacturing<br />American style global management<br />Productivity improvement<br />1960~<br />1970~<br />1980~<br />1990~<br />2000~<br />1950~<br />1940~<br /><Japanese Economy Trends><br /><Management Innovation History><br />Japanese Economy and Management Innovation<br />
    37. Japanese keiretsu<br /><ul><li>Types
    38. Horizontal keiretsu
    39. Vertical keiretsu
    40. Characteristics
    41. Extensive share cross-holdings
    42. Personnel swaps
    43. Strategic coordination
    44. Commercial transactions</li></li></ul><li>Yataro Iwasaki(1835-85)Mitsubishi Zaibatzu<br />PP.45-46<br />三菱<br />Seisho(政商) from Tosa, founder of Mitsubishi Zaibatsu<br />Shipping company--grew fast with government support (receiving gov’t ships, contract for military transport)<br />Established Nippon Yusen (NYK Line), fierce battle with Kyodo Unyu (anti-Mitsubushi company), 1883-85<br />Expanded to many areas: trade, banking, shipbuilding, coal, mining (later, more)<br />Mechanical factory in Nagasaki, ca 1885<br />Bakufu’s Steel Mill in Nagasaki, transferred to Mitsubishi in 1884<br />
    45. Mitsubishi Heavy Industries<br />Mitsubishi<br />Corporation<br />Bank of Tokyo-Mitsubishi<br /> Automotive<br /> Mitsubishi Fuso Truck Bus<br /> Mitsubishi Motors<br /> Shin Caterpillar Mitsubishi<br /> Finance & insurance<br /> DC Card<br /> Diamond Lease<br /> Meiji Life <br /> Mitsubishi Auto Credit<br />Mitsubishi Securities <br /> Mitsubishi Trust & Banking<br /> Tokio Marine and Fire<br /> Industrial equipment<br /> Mitsubishi Electric<br /> Mitsubishi Kakoki<br /> Mitsubishi Precision<br /> Toyo Engineering Work<br /> Electronics & telecom<br /> IT Frontier<br /> Mitsubishi Research Inst<br /> Mitsubishi Space Software<br />Nikon<br /> Space Communications<br /> Industrial materials<br /> Asahi Glass<br /> Dai Nippon Toryu<br /> Mitsubishi Aluminum<br /> Mitsubishi Cable Indus<br /> Mitsubishi Materials<br /> Mitsubishi Plastics<br /> Mitsubishi Rayon<br /> Mitsubishi Shindoh<br />Mitsubishi Steel<br />Transportation & dist<br /> Mitsubishi Logistics<br /> Mitsubishi One Transport<br /> NYK Line<br />Resources & energy<br />Nippon Oil<br />Mitsubishi LPG<br />Mitsubishi Nuclear Fuel <br />Mitsubishi Paper Mills<br />Chemical & pharmaceutical<br /> Dai Nippon Toryu<br /> Mitsubishi Chemical<br /> Mitsubishi Gas Chemical<br /> Mitsubishi Petrochemical<br /> Consumer goods & foods<br /> Kirin Beverage<br />Kirin Brewery<br /> Ryoshoku<br /> Real estate & construction<br /> Mitsubishi Estate<br /> P.S. Mitsubishi<br />Mitsubishi’s Horizontal Keiretsu<br />
    46. Major FDI Firms in Meiji Period<br />FDI was relatively small (cf. China, India). However, it played leading roles in tobacco, oil refining, electrical and general machinery, weapons, automobiles, glass, (aluminum). Later, zaibatsu mostly took over FDI technology and production.<br />Source: S.J.Bytheway (2005), pp.166-167<br />
    47. Post War Keiretsu<br />Mitsubishi<br />Bank of Tokyo<br />Mitsubishi/ Bank of Mits<br />Nikon<br />Kirin<br />Sutitomo<br />Sutitomo Bank<br />NEC<br />Mitsui<br />Toshiba<br />Fuyo<br />Fuji Bank<br />Marubeni<br />Dai-Ichi<br />Dai-Ichi Kangyo Bank<br />Cannon<br />Nissan (part)<br />Sanwa<br />Sanwa Bank<br />Kobe Steel<br />
    48. Production Methods & Kaizen<br />
    49. TaiichiOhno<br />
    50. Production Methods & Kaizen<br />
    51. Production Methods<br />
    52. Efficiency<br />Any production method relies on efficiency – this can be viewed in different ways:<br />Productivity – a measurement of output per unit of the factor used (labour, capital or land)<br />Total Output<br /> Productivity = -------------------<br /> Units of Factor<br />Technical Efficiency – output produced using the fewest possible inputs<br />Productive Efficiency – output produced at the lowest possible cost<br />
    53. Efficiency<br />Production decisions involve deciding methods for new production runs and analysis of existing methods.<br />Decisions may include:<br />Substitute machinery for labour? <br />Use of new technology? <br />Organisation of the production layout? <br />Change of production method?<br />
    54. Production Methods<br />As technology and analysis of production methodology has improved, methods have changed dramatically – what used to be labour intensive production methods are now capital intensive<br />
    55. Production Methods<br />The choice of production method and the factor inputs depends on such things as:<br /><ul><li> the nature of the product
    56. factor costs
    57. the scale of production</li></ul>Textile factory<br />Copyright: Stock.Xchng<br />
    58. Production Decisions<br />Market size and <br />Segment<br />One-Off Order?<br />Which method?<br />Complexity of design<br />Type of Product<br />Mass Market product?<br />Batch?<br />Factor Costs – <br />Land, Labour and <br />Capital<br />
    59. Production Methods<br />Job Production – One-off production - each item might have particular specifications<br />Flow Production – suitable for mass market products that are identical<br />Batch Production – each stage of the production process has an operation completed on it before moving on to the next stage – allows modifications to be made to products that otherwise are the same<br />
    60. Production Methods<br />Which is more efficient?<br />Operation 1<br />2<br />3<br />4<br />5<br />6<br />7<br />Finished Product<br />8<br />9<br />10<br />11<br />
    61. Production Methods<br />Or this?<br />1a<br />1b<br />1c<br />1d<br />4<br />Operation 1<br />2a<br />2b<br />2c<br />Finished product<br />3a<br />3b<br />3c<br />3d<br />
    62. Production Methods<br />Or this?<br />Cell 1<br />Cell 2<br />Cell 3<br />Finished Product<br />Finished Product<br />Finished Product<br />
    63. Production Methods<br />Answer <br />It could be any of them!<br />The design of the production space can influence:<br />Output levels<br />Factor use<br />Efficiency<br />Cost levels<br />Quality assurance procedures<br />
    64. Kaizen (Continuous Improvement)<br />
    65. Kanban<br />
    66. Kaizen (Continuous Improvement)<br />Japanese concept – not made redundant by the decline of the Japanese economy which may be due to other institutional factors!<br />Focus on gradual and continuous improvement<br />A whole business philosophy<br />Importance of EVERYONE buying into the concept and the vision<br />
    67. Kaizen<br /><ul><li>Efficient stock control methods help reduce costs and improve cash-flow
    68. Flexible working practices and empowerment – help increase efficiency, reduce costs and improve motivation</li></ul>Fundamental principles – often characterised as ‘lean production’ – reducing waste, zero defects, high quality control measures at all stages<br /><ul><li>Leadership seen as vital. Ability to communicate a clear vision, take people along with the vision and to think about where the company needs to be in 5, 10, 15 and 20 years time
    69. Punctuality in all aspects – delivery, supply, manufacture, etc.</li></li></ul><li>
    70. “4 P” Model of the Toyota Way<br />Problem<br />Solving<br />(Continuous <br />Improvement and Learning)<br /><ul><li>Continual organizational learning through Kaizen
    71. Go see for yourself to thoroughly understand the situation. (Genchi Genbutsu)
    72. Make decisions slowly by consensus, thoroughly considering all options; implement rapidly (Nemawashi)
    73. Grow leaders who live the philosophy
    74. Respect, develop and challenge your people and teams
    75. Respect, challenge, and help your suppliers</li></ul>People and Partners<br />(Respect, Challenge and Grow Them)<br />Adding Value to Customers &<br />Society<br /><ul><li>Create process “flow” to surface problems
    76. Level out the workload (Heijunka)
    77. Stop when there is a quality problem (Jidoka)
    78. Use pull systems to avoid overproduction
    79. Standardize tasks for continuous improvement
    80. Use visual control so no problems are hidden
    81. Use only reliable, thoroughly tested technology</li></ul>Process<br />(Eliminate Waste)<br />Philosophy<br />(Long-term Thinking)<br /><ul><li>Base management decisions on a long-term philosophy, even at the expense of short-term financial goals</li></li></ul><li> Base management decisions on a long term philosophy, even at the expense of short-term financial goals<br />Toyota mission:<br /><ul><li>Contribute to the economic growth of the country in which it is located (external stakeholders)
    82. Contribute to the stability and well being of team members and partners (internal stakeholders)
    83. Contribute to the overall growth of Toyota</li></li></ul><li>Principle One<br />“The most important factors for success are patience, a focus on long term rather than short-term results, reinvestment in people, product, and plant, and an unforgiving commitment to quality.”<br />-Robert B. McCurry, former Executive V.P., Toyota Motor Sales<br />
    84. “4 P” Model of the Toyota Way<br />Problem<br />Solving<br />(Continuous <br />Improvement and Learning)<br /><ul><li>Continual organizational learning through Kaizen
    85. Go see for yourself to thoroughly understand the situation. (Genchi Genbutsu)
    86. Make decisions slowly by consensus, thoroughly considering all options; implement rapidly (Nemawashi)</li></ul>Eliminate Waste through Flow<br />& Standardization<br /><ul><li>Grow leaders who live the philosophy
    87. Respect, develop and challenge your people and teams
    88. Respect, challenge, and help your suppliers</li></ul>People and Partners<br />(Respect, Challenge and Grow Them)<br /><ul><li>Create process “flow” to surface problems
    89. Level out the workload (Heijunka)
    90. Stop when there is a quality problem (Jidoka)
    91. Use pull systems to avoid overproduction
    92. Standardize tasks for continuous improvement
    93. Use visual control so no problems are hidden
    94. Use only reliable, thoroughly tested technology</li></ul>Process<br />(Eliminate Waste)<br /><ul><li>Base management decisions on a long-term philosophy, even at the expense of short-term financial goals</li></ul>Philosophy<br />(Long-term Thinking)<br />
    95. Waste<br />PRODUCT<br />BUILT & SHIPPED<br />CUSTOMER<br />ORDER<br />Time<br />PRODUCT<br />BUILT & SHIPPED<br />CUSTOMER<br />ORDER<br />Waste<br />Time (Shorter)<br /> is a manufacturing philosophy which shortens the time between the customer order and the product build / shipment by eliminating sources of waste.<br />Business as Usual<br />Lean Manufacturing<br />Lean Manufacturing<br />
    96. Product Lead Time<br /><ul><li>Value Added Time is only a very small percentage of the Lead time.
    97. Traditional Cost Savings focused on only Value Added Items.
    98. LEAN FOCUSES ON NON-VALUE ADDING ITEMS.</li></li></ul><li>Before Lean: Organization By Machine Type With Convoluted Flow<br />No Organization and No Control<br />
    99. Empties +<br />production kanban<br />Empties + withdrawal<br />kanban<br />A<br />B<br />C<br />D<br />E<br />F<br />G<br />H<br />Customer Plant<br />Needed<br />Components + kanban<br />Newproduct<br />Preceding processes replenish what is taken away.<br />Downstream processes withdraw what they need when they need it.<br />PULL<br />Supplier Plant<br />
    100. Why Focus on Flow?<br />“If some problem occurs in one-piece-flow manufacturing then the whole production line stops. In this sense it is a very bad system of manufacturing. But when production stops everyone is forced to solve the problem immediately. So team members have to think, and through thinking team members grow and become better team members and people.”<br />Teruyuki Minoura, former President, Toyota Motor Manufacturing, <br /> North America<br />
    101. Lean Tools to Support Flow<br />5S-Visual Workplace <br />Total Productive Maintenance<br />Quick Changeover<br />Standardized Work<br />Quality Methods<br />
    102. Describe this area...<br />
    103. Describe this area...<br />
    104. What is TPM?<br />Total Productive Maintenance (TPM) is<br /> Productive Maintenance with EVERYONE’s participation<br />Maintenance=Teachers, Doctors of Equipment<br />Operators=Clean, inspect, routine repair<br />
    105. Why Quick Change Over? <br />Difference in average inventory level with more changeovers<br />Change Over<br />Average inventory levels<br />Inventory level<br />Time <br />The more quickly we changeover, the more our inventory levels decrease. This helps accomplish our goal of waste elimination.<br />
    106. Standardized<br />Work Chart<br />Detail of each <br />Process Step<br />Work Element Sheet<br />Detail of the Elements<br />of each Process Step<br />Takt<br />90s<br />1<br />2<br />3<br />4<br />5<br />Assembly Process #<br />StackChart<br />(Yamazumi)<br />A Visual Tool for Balancing Processes<br />Standard Work Tools<br />
    107. Standardized tasks are the foundation for continuous improvement and employee empowerment<br /> “Today’s standardization…is the necessary foundation on which tomorrow’s improvement will be based. If you think of “standardization” as the best you know today, but which is to be improved tomorrow-you get somewhere. But if you think of standards as confining, then progress stops.”<br />Henry Ford, Today and Tomorrow, 1926<br />
    108. “4 P” Model of the Toyota Way<br />The heart & soul of<br />The Toyota Way<br />Problem<br />Solving<br />(Continuous <br />Improvement and Learning)<br /><ul><li>Continual organizational learning through Kaizen
    109. Go see for yourself to thoroughly understand the situation. (Genchi Genbutsu)
    110. Make decisions slowly by consensus, thoroughly considering all options; implement rapidly (Nemawashi)
    111. Grow leaders who live the philosophy
    112. Respect, develop and challenge your people and teams
    113. Respect, challenge, and help your suppliers</li></ul>People and Partners<br />(Respect, Challenge and Grow Them)<br /><ul><li>Create process “flow” to surface problems
    114. Level out the workload (Heijunka)
    115. Stop when there is a quality problem (Jidoka)
    116. Use pull systems to avoid overproduction
    117. Standardize tasks for continuous improvement
    118. Use visual control so no problems are hidden
    119. Use only reliable, thoroughly tested technology</li></ul>Process<br />(Eliminate Waste)<br /><ul><li>Base management decisions on a long-term philosophy, even at the expense of short-term financial goals</li></ul>Philosophy<br />(Long-term Thinking)<br />
    120. People and Partners<br />Respect, Challenge, and Grow Them:<br />9. Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others <br />10. Develop exceptional people and teams who follow your company’s philosophy<br />11. Respect your extended network of partners and suppliers by challenging them and helping them improve<br />
    121. One-PieceFlow Demands Team Work!<br />x<br />x<br />x<br />x<br />x<br />Traditional Western Team<br />x<br />x<br />x<br />x<br />x<br />x<br />x<br />x<br />x<br />x<br />x<br />x<br />Need <br />help?<br />Need <br />help?<br />Toyota Way Team<br />X<br />Workcell<br />
    122. Principle Five: Stop & Fix Problems<br /> Mr. Ohno used to say that no problem discovered when stopping the line should wait longer than tomorrow morning to be fixed. Because when making a car every minute we know we will have the same problem again tomorrow.”<br />-Fujio Cho, President, Toyota Motor Corporation<br />
    123. 1<br />2<br />3<br />4<br />5<br />6<br />7<br />9<br />1<br />3<br />8<br />1<br />0<br />1<br />1<br />1<br />2<br />1<br />4<br />S<br />T<br />O<br />P<br />B<br />U<br />T<br />T<br />O<br />N<br />S<br />T<br />O<br />P<br />B<br />U<br />T<br />T<br />O<br />N<br />(<br />S<br />T<br />O<br />P<br />T<br />H<br />E<br />L<br />I<br />N<br />E<br />A<br />U<br />T<br />H<br />O<br />R<br />I<br />T<br />Y<br />)<br />(<br />S<br />T<br />O<br />P<br />T<br />H<br />E<br />L<br />I<br />N<br />E<br />A<br />U<br />T<br />H<br />O<br />R<br />I<br />T<br />Y<br />)<br />5<br />4<br />Abnormality<br />Station 5<br />Team Leader<br />
    124. Kaizen<br />Typical Toyota Organization to support Continuous Improvement<br />Team Size<br />Team Member<br />{ 5 - 8 }<br />Team Leader<br />{ 3 - 4 }<br />Group Leader<br />{ 5 - 8 }<br />Asst. Manager<br />{ 4 - 10 }<br />Manager<br />Source: Bill Costantino, former group leader, Toyota, Georgetown.<br />
    125. Bumper Trimming Job Breakdown Sheet<br />
    126. Auditing Standardized Work <br />
    127. Roles and Responsibilities<br />
    128. Toyota Way Principles in 4P Model<br />The dynamic of<br />The Toyota Way<br />Problem<br />Solving<br />(Continuous <br />Improvement and Learning)<br /><ul><li>Continual organizational learning through Kaizen
    129. Go see for yourself to thoroughly understand the situation. (Genchi Genbutsu)
    130. Make decisions slowly by consensus, thoroughly considering all options; implement rapidly (Nemawashi)
    131. Grow leaders who live the philosophy
    132. Respect, develop and challenge your people and teams
    133. Respect, challenge, and help your suppliers</li></ul>People and Partners<br />(Respect, Challenge and Grow Them)<br /><ul><li>Create process “flow” to surface problems
    134. Level out the workload (Heijunka)
    135. Stop when there is a quality problem (Jidoka)
    136. Use pull systems to avoid overproduction
    137. Standardize tasks for continuous improvement
    138. Use visual control so no problems are hidden
    139. Use only reliable, thoroughly tested technology</li></ul>Process<br />(Eliminate Waste)<br />Philosophy<br />(Long-term Thinking)<br /><ul><li>Base management decisions on a long-term philosophy, even at the expense of short-term financial goals</li></li></ul><li>Typical Improvement Opportunities Available<br />
    140. Improvement Approaches of Typical Companies<br />
    141. Toyota Leverages Opportunities at all Levels<br />
    142. Principle Twelve<br />Genchi Genbutsu<br />“Observe the production floor without preconceptions and with a blank mind. Repeat “why” five times to every matter.”<br /> -Taiichi Ohno <br />
    143. “No Problem” is problem<br />Problems are opportunities to learn<br />Hiding problems undermines the system<br />
    144. Learning from the Toyota Way<br />
    145. Characteristics of Effective Lean Transformation<br />Top Down Directive that this is the new way.<br />Bottom-up involvement in concrete projects with clear results.<br />Develop internal experts through learning by doing.<br />Expert sensei to guide the process and teach.<br />Learning philosophy: every project, activity, is a chance to learn.<br />Start with value stream transformation projects.<br />Build on successes to transform broader organization and culture over time---YEARS!<br />
    146. Why is this hard to do?<br />Traditional organizations in fire fighting mode <br />No clear vision of the future state<br />culture change is hard<br />Organizational change is disruptive<br />Management has to change its role from managing from the office to deeply understanding processes!<br />
    147. REVIEW<br />
    148. RtB<br />
    149. Offshoring<br />
    150. The Steroids<br />
    151. Cool Hunter<br />
    152. Next<br />
    153. Forces<br />Cluster<br />Competencies<br />
    154. Forces<br />
    155. Genzyme <br />Founded in 1981 <br />Scientists studying genetically inherited enzyme diseases<br />Global Market<br />Orphan Drugs<br />
    156. Genzyme’s Focus on “Orphan Drugs”<br />
    157. Genzyme’s Focus on “Orphan Drugs”<br />
    158. In 1983, the FDA established the “Orphan Drug Act,” giving seven years market exclusivity to developers of drugs for rare (<200,000 patients) diseases.<br />Also chose unusual strategy of doing its own manufacturing and sales rather than licensing to a large pharmaceutical company.<br />Diversified into side businesses to fund its R&D<br />Chemical supplies<br />Genetic counseling <br />Diagnostic testing<br />
    159. Genzyme’s Focus on “Orphan Drugs”<br />6-103<br />
    160. Foces<br />
    161. Assessing the Firm’s Current Position<br />Porter’s Five-Force Model <br />Whether a particular industry will be profitable <br />determine if an individual firm’s chances for success via a vis its competitors<br />
    162. Assessing the Firm’s Current Position<br />Degree of existing rivalry. Determined by number of firms, relative size, degree of differentiation between firms, demand conditions, exit barriers (for firm to leave the market)<br />Threat of potential entrants. Determined by attractiveness of industry, height of entry barriers (e.g., start-up costs, brand loyalty, regulation, etc.)<br />Bargaining power of suppliers. Determined by number of suppliers and their degree of differentiation, the portion of a firm’s inputs obtained from a particular supplier, the portion of a supplier’s sales sold to a particular firm, switching costs, and potential for backward vertical integration - firm produce its own supplies<br />Bargaining power of buyers. Determined by number of buyers, the firm’s degree of differentiation, the portion of a firm’s inputs sold to a particular buyer, the portion of a buyer’s purchases bought from a particular firm, switching costs, and potential for forward vertical integration - supplier enters firm’s business<br />Threat of substitutes. Determined by number of potential substitutes, their closeness in function and relative price.<br />6-107<br />
    163. Genzyme<br />
    164. Mitigating Circumstances<br />
    165. Clusters<br />
    166. Salmon<br />
    167. Salmon in Chile<br />
    168. Salmon Cluster<br />
    169. Salmon Cluster<br /><ul><li>Fertilization & incubation
    170. Freshwater breeding - smelt fattening
    171. Infrastructure of cages
    172. Tanks & recirculation systems
    173. Transport services
    174. Vaccines, antibiotics and pharmaceuticals
    175. Feed production &supply</li></li></ul><li>Salmon Clusters<br /><ul><li>Fertilization and incubation of ova
    176. Freshwater breeding - smolt fattening
    177. Infrastructure of cages and related services (maintenance of nets)
    178. Tanks and recirculation systems
    179. Transport services:
    180. Research and production of vaccines, antibiotics and other pharmaceutical products:
    181. Feed production and supply</li></li></ul><li>Theory of Industry Clusters<br />
    182. What are Industry Clusters? (Porter)<br />Geographic concentrations of competing, complementary, or interdependent firms<br />Common needs for talent, technology, and infrastructure<br />Dynamic, changing as the industries themselves or external conditions change<br />Centered on firms that sell outside the local, state, national market<br />Driving forces in a national, regional, state or metropolitan economy<br />
    183. What are Industry Clusters? (Porter)<br />Porter Definition<br />Geographic concentrations<br />Common needs<br />Dynamic, changing<br />Sell outside the local, state, national market<br />Driving forces economy<br />Chilean salmon<br />.<br />.<br />.<br />.<br />.<br />
    184. Competencies<br />
    185. Competency<br /> “A bundle of skills and technologies (rather than a single discrete skill or technology) that enables a company to provide a particular benefit to customers” - Hamel and Prahalad 1994, p. 199.<br />
    186. It provides consumer benefits <br />It is not easy for competitors to imitate <br />It can be leveraged widely to many products and markets. <br />
    187. Dunning–Kruger Effect<br />People reach erroneous conclusions and make unfortunate choices but their incompetence robs them of the metacognative ability to realize it<br />Illusory Superiority<br />
    188. Core Competencies at FedEx<br />FedEx<br />Logistics<br />management<br />Metacompetency<br />Package<br />tracking<br />Bar-code<br />technology<br />Wireless<br />communications<br />Network<br />management<br />Linear<br />programming<br />
    189. Levels of competition for competence<br />Levels<br />Canon<br />Develop precision mechanics,<br />fine optics, microelectronics,<br />and electronic imaging<br />Develop and acquire<br />constituent skills<br />and technologies<br />Bring competencies together<br />to develop laser printer engines<br />Synthesize<br />core competencies<br />Core product (engine) sold to<br />HP, Apple, etc.<br />Maximize<br />core product share<br />Maximize end <br />product share<br /> (own brand plus <br />OEM)<br />Canon printers and Canon parts<br />on competitors’ printers<br /> (own brand plus OEM)<br />
    190. Swatch<br />
    191. Swatch Activity<br />Summarize<br />Look at the three theories<br />Brainstorm and try to make connections where these theories apply and do not apply<br />Criticize the choices made, and/or give suggestions to the country<br />
    192. Theories<br />CwC<br />RtB<br />International Product Life Cycle Model<br />11/9: the fall of the Berlin Wall opening Windows <br />8/9: Netscape goes public<br />Work flow software: <br />Forces<br />Cluster<br />Competencies<br />Open SOurce<br />Dunning Kruger Effect<br />Uploading<br />Outsourcing<br />Offshoring<br />Supply-chaining<br />In-sourcing<br />In-forming<br />Steroids<br />Triple Convergence<br />Personalization<br />Strategic Alliance<br />democtatization<br />
    193. Case Study<br />
    194. Psychographic Segmentation<br />Divides a population into groups that have similar psychological characteristics, values, and lifestyles<br />Lifestyle<br />people’s decisions about how to live their daily lives, including family, job, social, and consumer activities<br />The most common method for developing psychographic profiles of a population is to conduct a large-scale survey<br />AIO statements<br />VALS and VALS 2 “Values and Lifestyles”<br />
    195. Western Psychographic Segmentation<br />
    196. Swatch: Psychographic Segmentation<br />6-10: Consider it "cool", because big kids have it (42% awareness!) <br />11 –15: ("teeny boppers") provides sense of identity <br />11 –15: ("young rockers") high awareness, but represents t.b. lifestyle <br />11-15: ("students") Swatch too wild for them, but they might buy it to fit in <br />16 –22: ("rockers") like the price, but dislike the male model geeks <br />16 –22: ("preppies") prefer a dressier watch <br />16- 22: ("trendies") hate it; "fast food of time pieces" (73% wear no watch) <br />22 –32: ("transitionaries") like its durability, disposability, price <br />22 –43: ("older casuals") watches used to tell time (4% awareness!) <br />• 33-43: ("weekend hippies") teen image (high awareness, but 43% have never seen a Swatch in real life <br />
    197. Japan Psychographic Segmentation<br />Integrators<br />Innovators/Adopters<br />Display, daring, exciting<br />Rykoshiki<br />Home, career, status<br />Traditional <br />Traditional dress, customs, cooperative<br />Pragmatics<br />Few commitments, uninformed<br />Sustainers <br />Lack money, education, sustain the past<br />
    198. Swatch<br />Positioning / Repositoning<br />
    199. Discussion<br />How do companies we have seen use psychographic segmentation in mix?<br />Think: Swatch, Unilever, NIN<br />
    200. Internationalization<br />
    201. Strategies for Operations Abroad<br />International<br />Control remains predominately with HQ in home county<br />Low pressure for local responsiveness-high pressure cost reductions <br />Multidomestic<br />Customize operations and products to each local market<br />High local responsiveness-low pressure cost reductions<br />
    202. Strategies for Operations Abroad<br />Global <br />Tendency to centralize main operational functions<br />Can mobilize world-wide resources<br />High cost reductions from economies of scale and experience curve-low customization to national borders<br />Transnational<br />Looking for ‘global learning’ from HQ to subsidiaries, in reverse and between subsidiaries<br />Cost reductions and product differentiation<br />
    203. Advantages and disadvantages of the four strategies<br />
    204. Discussion<br />How do Swatch and Unilever employ Global Strategies?<br />
    205. Global Strategy<br />To go global or not?<br />Compelling Reasons<br />Diversity of earnings<br />Exposure to new and emerging markets<br />Experience curve and access to the most demanding customers<br />
    206. Discussion<br />Why do Unilever and Swatch enter new markets? <br />How do Unilever and Unilever enter the markets? <br />What is unique is unique or different about their approach? <br />
    207. Global Company (2SMCG)<br />1. Standard Products and Marketing Mix<br />Core product and minimum marketing adaptations <br />Economies of scale benefits<br />Segmentation cross national borders <br />
    208. Global Company (2SMCG)<br />2. Sourcing all Assets on an Optimal Basis<br />Ability to source all assets in value chain in terms of availability or cost-competitiveness<br />Importance of assets deployment<br />
    209. Global Company (2SMCG)<br />3. Market Access in Line with Break-Even Volume<br />Size not as important as generation of sales to cover demands of infrastructure and investment<br />
    210. Global Company (2SMCG)<br />4. Contesting Assets<br />Ability to neutralize the assets and competencies of competitors<br />
    211. Global Company (2SMCG)<br />5. Global Orientation of Functions<br />R&D, procurement, production, logistics, marketing, human resources and finance functions internationalizedorganizational structure<br />
    212. Discussion<br /> To what degree are Unilever and Swatch global companies? <br />
    213. Discussion<br />
    214. Entrepreneurship<br />
    215. Entrepreneurs solve big problems<br />
    216. Japan<br />
    217. Most difficult problems do not have obvious solutions<br />
    218. <ul><li>Vision
    219. Determination
    220. Resourcefulness
    221. Creativity
    222. Willingness to change direction</li></ul>Entrepreneurs<br />Necessary Traits<br />
    223. Entrepreneurship creates positive change<br />Entrepreneurial Efforts<br />Employees<br />Consumers<br />Shareholders<br /><ul><li> Great opportunities
    224. Greater income
    225. New products, services
    226. Increased wealth</li></ul>Government<br />General Economy<br /><ul><li> Additional tax revenue
    227. Reduction in social benefit need
    228. Secondary and tertiary creation of opportunities</li></li></ul><li>Three Forms of Entrepreneurship <br /> Types of Entrepreneurship<br />Individual<br />Micro & Small Enterprises<br />Large Markets<br />Entrepreneurship driven by instincts to survive <br /><ul><li> Vegetable vendor
    229. Cattle rearing
    230. Tea Stall
    231. The area of microfinance
    232. Supported by small loans between USD $50 - $200
    233. Debt structure; short payback period
    234. Proven area for finance</li></ul>Small to medium businesses with scope and employment<br /><ul><li> 5-100 employees
    235. Relies on internal business sense to succeed
    236. Currently with limited financial support
    237. Need USD $20K to $250K
    238. Generally rely on personal funds, family, friends, and money lenders</li></ul>Large businesses with large scope and employment<br /><ul><li> Typically run by highly educated managers
    239. Exit markets well understood
    240. Significant conventional venture capital support
    241. Need USD millions in equity
    242. Primarily service export or urban focused
    243. Proven area for finance</li></li></ul><li>
    244. Entrepreneurial India<br />
    245. Look at Four<br />
    246. Entrepreneurial India- “Top Incubation Center”<br />1. Centre for Innovation, Incubation& <br /> Entrepreneurship (CIIE) - IIM Ahmedabad<br /><ul><li>Set up in 2001
    247. Since inception CIIE has 15-odd innovations grow out of the incubation centre in varied technologies</li></ul>2. Society for Innovation and Entrepreneurship (SINE)- IIT Bombay<br /><ul><li>Set up in 2004
    248. It currently has 16 companies under its incubation programme</li></li></ul><li>Entrepreneurial India- “Top Incubation Center”<br />3. Cell for Tech Innovation, Development & entrepreneurship support- IIT Chennai<br /><ul><li>Set up in 2000
    249. Organises national level competitions, ‘Breakthrough’ (general business plan competition) and ‘Genesis’ (social entrepreneurship plan competition)</li></ul>4. Society for Innovation and Development (SID) - IISc, Bangalore<br /><ul><li>Set up in 2006
    250. The investigator is given a seed capital for Rs 20 lakh a year for two years as soft loan for the approved plan</li></li></ul><li>Entrepreneurship Type<br />Synergy w/ Rural and Semi Urban India<br />Dis-synergy w/ Rural and Semi Urban India<br />Individual / Microfinance<br /><ul><li>Flexible, meets local requirements
    251. Demonstrated ability to scale numbers of individuals
    252. Microfinance an established and growing industry
    253. Limit to impact
    254. Skills of great entrepreneurs not dispersed to others
    255. Diminishing returns with market saturation</li></ul>Micro and small enterprise / informal sources<br /><ul><li>Can provide value added employment to multiple people
    256. Only need one entrepreneur for multiple increases in income
    257. Flexible – tailored to local market and infrastructure requirements
    258. Hamstrung by lack of capital and business building support
    259. Scale requirements limit flexibility
    260. Limited understanding of rural and semi-urban India
    261. Rural and semi-urban India unlikely to be attractive currently</li></ul>Large markets / mainstream venture capital<br /><ul><li>Can mobilize Fund quickly
    262. Brings most sophisticated business experience
    263. Commercial venture capital entrenched in India</li></ul>Micro and small enterprises are key, receive least support<br />
    264. Entrepreneurial India- “Industry-Academia Interface”<br />
    265. Micro Credit<br />
    266. Microfinance Institutions<br />Entrepreneurs<br />The Traditional Microfinance Lending Process<br />Banks and NGOs<br /><ul><li>Microfinance institutions typically get the money that they lend, from banks or non-governmental organizations, or both
    267. This can be expensive, as it is often borrowed with interest
    268. There may also be difficult application procedures to access debt capital from non-governmental organizations
    269. Some organizations can even find themselves shut out due to the region they operate in, particularly post-conflict regions
    270. Restrictions that microfinance institutions face ultimately affect the entrepreneurs, who rely on microfinance institutions to serve them</li></li></ul><li>You!<br />Microfinance Institutions<br />Entrepreneurs<br />The Kiva Microfinance Lending Process<br />With Kiva, you can be micro-lender<br />You can act as a banker and provide the funds to microfinance institutions that they then lend to entrepreneurs<br />
    271. Kiva<br /><ul><li>Kiva.org is a website which allows you to lend to an entrepreneur in the developing world who needs a loan
    272. Through Kiva, you loan as little as $25 to an entreprenuer at 0% interest</li></li></ul><li><ul><li>Browse
    273. Loan requests are funded within minutes</li></li></ul><li>Size of the loan and status<br />Picture of the entrepreneur<br />Summary of the business and loan, including when it is expected to be paid back <br />Description of the business and what the loan will be used for<br />Information on the microfinance institution which is managing the loan on the ground<br />
    274. The business page also shows you all of the other people around the world who are contributing to this loan<br />
    275. Kiva’s Microfinance Partners<br />Kiva has 89 Microfinance Partners in 42 countries and is still growing<br />Ukraine<br />Moldova<br />Bulgaria<br />Tajikistan<br />Azerbaijan<br />Afghanistan<br />Iraq<br />Gaza<br />Pakistan<br />Haiti<br />Mexico<br />Mali<br />Vietnam<br />Dominican Republic<br />Senegal<br />Cambodia<br />Nicaragua<br />Congo<br />Ghana<br />Uganda<br />Honduras<br />Togo<br />Nigeria<br />Ecuador<br />Kenya<br />Cameroon<br />Indonesia<br />Tanzania<br />Bolivia<br />Peru<br />Mozambique<br />Paraguay<br />Samoa<br />
    276. 172<br />Kiva Introduction: What are Kiva’s benefits?<br />Internet Lender<br /><ul><li>Transparent (“I know where my money is going”)
    277. Sustainable (“If repaid, I will re-lend to someone else”)
    278. Affordable (“I only need $25 to change someone’s life”)
    279. Unique (“I love microfinance and I want to participate”)</li></ul>Microfinance Institution<br /><ul><li>0% interest USD debt capital
    280. No liability: Client loss borne by Internet Lender
    281. Flexible repayment terms
    282. Exhibit your work to an international audience</li></li></ul><li>Chavez and Entrepeneurship<br />
    283. HAARP<br />
    284. How<br />
    285. Silicon Valley<br />Silicon Valley is a nickname for the southern part of the San Francisco Bay Area centered roughly on Sunnyvale. <br />coined by journalist Don C. Hoefler in 1971, <br />It was named "Silicon" for the high concentration of semiconductor and computer related industry in the area, and "Valley" for the Santa Clara Valley. <br />Fairchild Semiconductor really started and then fuelled it all<br />
    286. WWII<br />The First Electronic War<br />
    287. British and American Air War in Europe<br />28,000 Active Combat Planes40,000 planes lost or damaged beyond repair:18,000 American and 22,000 British79,265 Americans and 79,281 British killed<br />
    288. The German Air Defense SystemThe Kammhuber Line<br />Integrated Electronic air defense network<br />Covered France, the Low Countries, and into northern Germany<br />Protection from British/US bomber raids<br />Warn and Detect<br />Target and Aim<br />Destroy<br />
    289. German Air Defense System<br />
    290. Himmelbelt<br />Local Air Defense<br />Network<br />• Box ~30 x 20 miles<br />• Integrated network<br />of radars, flak,<br />fighters,<br />searchlights<br />Radars fed Himmelbett centers<br />• Operators worked from rows of<br />seats in front of a huge screen<br />• Fighters would fly orbits around<br />a radio beacon<br />– fighter controller talked it to the<br />vicinity of the target<br />• Fighters would turn on its radar,<br />acquire the target, and attack<br />
    291. Flak Radar Controlled Anti Aircraft Guns<br />15,000 Flak Guns<br />400,000 soldiers in flak batteries<br />Radar-directed flak to 30,000’<br />Fused for time<br />Fragmentation rounds<br />No Proximity Fuses<br />105 mm flak<br />
    292. Two<br />The Electronic Shield <br />Electronic Warfare<br />
    293. Harvard Radio Research Lab Signals Intelligence and Electronic Warfare<br />Reduce losses to fighters and flak<br />Find/understand German Air Defense<br />Electronic and Signals Intelligence<br />Jam/confuse German Air Defense<br />Radar Order of Battle<br />Chaff<br />Jammers<br />Top Secret 800 person lab<br />
    294. ELINT Understand German Air Defense<br />B-24J flights inside Germany to intercept German radar signals<br />Fitted with receivers & displays<br />Wire and strip recorders<br />Frequency, pulse rate, power, etc.<br />50 MHz to 3 GHz<br />
    295. Window/ChaffJam Wurzburg<br />Strips of aluminum foil<br />1/2 Wurzburg frequency<br />46,000 packets tossed out by hand<br />Each packet contained 2,000 strips <br />Automatic dispensers came later<br />First used July 1943<br />Raid on Hamburg<br />Shut down German air defense<br />Used 3/4’s of Aluminum Foil in the US<br />
    296. Blind German Early Warning Radar<br />Put Jammers on Airplanes<br />Carpet” AN/APT-2 Jammer<br />Confuse Wurzburg radar<br />Shut down flak<br />Shut down GCI<br />5 Watts<br />
    297. Fred Terman<br />Who Ran this Secret Lab and became<br />the Father of Electronic Warfare?<br />• Harvard Radio Research Lab<br />– Separate from MIT's Radiation Laboratory<br />– Ran all electronic warfare in WWII<br />– 800 people<br />– 1941-1944<br />• Director: Fredrick Terman - Stanford<br />
    298. Fred Terman<br />Stanford Professor of engineering 1926<br />encouraged his students, William Hewlett and David Packard to start a company<br />Dean of Engineering 1946<br />Provost 1955<br />
    299. Spook Entrepreneurship<br />
    300. Terman Strategy<br />Focus on microwaves and electronics<br />Not going to be left out of gov’t $’s this time<br />Recruits 11 former members of RRL as faculty<br />Set up the Electronics Research Laboratory (ERL)<br />“Basic” and Unclassified Research<br />First Office of Naval Research (ONR) contract 1946<br />By 1950 Stanford was the MIT of the West<br />
    301. Korean WarSpook Work Comes to Stanford<br />• Applied Electronics Laboratory (AEL)<br />– “Applied” and Classified Military programs<br />– Doubles the size of the electronics program<br />– Separate from the unclassified Electronics<br />Research Laboratory<br />– Made the university, for the first time, a full<br />partner in the military-industrial complex<br />
    302. Cold War and Research<br />The Cold War battlefield moves 500 miles east<br />Fear of a “nuclear Pearl Harbor”<br />Countermeasures, Elint and Sigint, become critical<br />Stanford becomes a center of excellence for the NSA,CIA, Navy, Air Force<br />
    303. The Cold War is an Electronic War<br />
    304. Stanford Helps Understand theElectronic Order of Battle<br />Where are the Soviet radars?<br />Consumers; SAC, CIA.<br />Details of the radars<br />NSA/CIA to contractors<br />Periphery of Soviet Union known<br />
    305. U-2 Sigint Platform (1956)Stanford and Silicon Valley<br />System IV<br />150 - 40,000 MHz<br />Stanford Electronics Laboratories<br />Ramo Woolridge<br />E/F Band ELINT recorder (1956)<br />A Band ELINT recorder (1959)<br />E/F Band Jammer (1959)<br />Granger Associates<br /> Watkins Johnson<br />– QRC -192 Elint receiver<br />– 50 -14,000 MHz<br />Communications receiver<br />– 100-150 MHz/3 channel tape recorder<br />
    306. Stanford Joins the “Black” World<br />Electronics Research Laboratory<br />“Basic” and Unclassified Research<br />Applied Electronics Laboratory (AEL)<br />“Applied” and Classified Military programs<br />Merge and become the Systems Engineering<br />Lab (SEL) in 1955<br />Same year Terman becomes Provost<br />
    307. Terman Changes the Startup/University Rules<br />Silicon Valley as We Know it Starts Here<br />Graduate students encouraged to start companies<br />Professors encouraged to consult for companies<br />Terman and other professors take board seats<br />Technology transfer/IP licensing easy<br />Getting out in the real world was good for your academic career<br />
    308. Stanford’s Role<br />Interaction with industry (via legacy just discussed)<br />Research funding and creativity<br />Silicon Valley as a nearby planting ground for ideas<br />Role of students as inventors, as disseminators, and as part of the workforce<br />Encouraging entrepreneurship …<br />
    309. Microwave Valley - Components<br />Klystrons, Carcinotrons, & Traveling Wave Tubes<br />Eitel-McCullough (1934)<br />Varian Associates (1948)<br />Litton Industries (1946)<br />Huggins Laboratories (1948)<br />Stewart Engineering (1952)<br />Watkins-Johnson (1957)<br />Microwave Electronics Co. (1959)<br />
    310. 1966<br />Hewlett-Packard entered the general purpose computer business with its HP-2115 for computation, offering a computational power formerly found only in much larger computers. It supported a wide variety of languages, among them BASIC, ALGOL, and FORTRAN.<br />HP-2115<br />
    311. Spook Innovation<br />
    312. Radio Dishes Get Funded<br />Attach ELINT receivers to Bell Labs<br />60’ radar antenna in New Jersey<br />Use “matched filter” techniques<br />Developed at Stanford<br />• Build steerable antenna at Sugar<br />Grove Virginia<br />• Pay for and build Stanford “Dish”<br />Hide relationships via “cover agencies”<br />
    313. Project Grab 1960-1962<br />ELINT in Space<br />No more overflights<br />Collect radar emissions from<br />Soviet air defense radars<br />Built by the Naval Research Laboratory<br />Used by SAC for EOB then given to the NRO<br />
    314. Microwave Valley - Systems<br />Some Stanford Alum’s<br />Sylvania Electronics Defense Laboratory (1953)<br />Countermeasures, search receivers, converters<br />Hired faculty as consultants, including Terman<br />GE Microwave Laboratory (1956)<br />Granger Associates (1956)<br />Electronic Systems Laboratories (ESL) (1964)<br />Sylvania EDL director William Perry founder<br />Argosystems (1969)<br />
    315. Terman and the Cold WarSilicon Valley’s 1st Engine of Entrepreneurship<br />
    316. Valley Attracts Financial Attention1st West Coast IPO’s<br />1956 Varian<br />1957 Hewlett Packard<br />1958 Ampex<br />
    317. The Rise of Risk Capital<br />“The Group” 1950’s<br />• First Bay Area “Angels”<br />– Reid Dennis<br />– William Bryan<br />– William Edwards<br />– William K. Bowes<br />– Daniel McGanney<br />~ 10 deals $75 -$300K<br />
    318. Summary<br />• Terman/Stanford/Government responsible for<br />entrepreneurial culture of Silicon Valley<br />• Military primed the pump as a customer for key<br />technologies<br />– Semiconductors, computers, Internet<br />– But very little technical cross pollination<br />• Venture Capital turned the valley to volume corporate<br />and consumer applications<br />
    319. Hewlett Packard and Wozniack<br />Steven Paul Jobs, Stephen Gary Wozniak and Ronald Gerald Wayne founded Apple Computer.<br />In 1976, Ronald Wayne resigns from Apple Computer with only a one time payment of $80.<br />Hewlett Packard grants Gary Wozniak the permission to create the Apple I.<br />
    320. Japan<br />
    321. Rice Markets And Taxes<br />Taxes<br />Jomen (fixed amount) system<br />Stabilization<br />Transport<br />Roads<br />Trade Routes<br />Sekisho (passport Controls)<br />Trade Cartels<br />Futures markets<br />
    322. Rich Merchants in Edo Period (Gosho)<br />Sumitomo<br />-16c Adopt Western copper refining, copper trade (Kyoto)-17c Move to Osaka<br />-Besshi Copper Mine (under Bakufu’s commission)<br /><Transition to Meiji><br />Manager: Saihei Hirose<br />-Avoiding gov’t confiscation-Introducing Western mining technology to renovate Besshi<br />-Business diversification<br />MITSUI<br />-17c From Matsuzaka<br />-Kimono trade & money exchange in Edo, Kyoto, Osaka – huge success<br /><Transition to Meiji><br />Manager: Rizaemon Minomura<br />-Cope with bakufu policy<br /> to protect Mitsui business<br />-Support and work with<br /> new government<br />-Internal reform: from gosho to zaibatsu<br />-1876 Establish Mitsui Bank & Mitsui Trading Company<br />
    323. The Black Ships<br />
    324. Negative Consequences<br />Comprehensive commercial treaties<br />treaties which the bakufu signed with the West were unequal treaties <br />Japan had no right to decide tariffs (set at 5%)<br />Japanese court could not judge foreign criminals in Japan.<br />Japanese Indemnification for Political Problems<br />Inflation: Samari Impoverished<br />Arms<br />
    325. Positive Consequences<br />New ideas, technology, industry and systems<br />Silk and tea suddenly found huge overseas markets.<br />Western Goods<br />Yokohama merchants<br />
    326. Trade 1876-80<br />
    327. Japanese Respose<br />Initially, avoid colonization by the West<br />Rapid modernization and Westernization<br />Become “first-class” nation on a par with West<br />Fukoku Kyohei (富国強兵) - Rich Country, Strong MilitaryShokusan Kogyo(殖産興業) - Increase Products, Build Industries<br />
    328. Konosuke Odaka: World of Craftsmen, World of Factories(NTT Publishing, 2000)<br />In Japan’s early factories, traditional shokunin (craftsmen) and modern shokko (workers) coexisted.<br />Craftsmen were proud, experienced and independent. They were the main force in initial technology absorption.<br />Workers received scientific education and functioned within an organization. Their skills and knowledge were open, global and expandable.<br />Over time, craftsmen were replaced by workers. Experience was not enough to deepen industrialization.<br />
    329. Monozukuri (Manufacturing) Spirit<br />Mono means “thing” and zukuri (tsukuri) means “making” in indigenous Japanese language.<br />It describes sincere attitude toward production with pride, skill and dedication. It is a way of pursuing innovation and perfection, disregarding profit or balance sheet.<br />Many of Japan’s excellent manufacturing firms were founded by engineers full of monozukuri spirit.<br />Akio Morita (Sony’s co founder)1921-1999<br />Sakichi Toyota1867-1930<br />Konosuke Matsushita1894-1989<br />Soichiro Honda1906-1991<br />
    330. Four<br />
    331. Steps to Managing Export Operations<br /><ul><li>Step 1 -Segment World markets
    332. Product Quality and Product feature segmentation
    333. Factors influencing segmentation
    334. Purchasing power
    335. Consumer tastes
    336. Weather conditions
    337. Level and dispersion of wages and technical skills
    338. Important factors in analysis
    339. Emerging demand met by innovations in product technology in one country that are mirrored in other countries
    340. Deregulation and restructuring of markets
    341. Government policies and programs </li></ul>Slide 4-2<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    342. Steps to Managing Export Operations (contd..)<br /><ul><li>Step 2 - Select an Entry Strategy to Promote Sustainable Competitive Advantage
    343. Standardized product to all markets
    344. Product- Life cycle strategy
    345. Localized market strategy
    346. A combination of strategies can also be followed
    347. Step 3 - Take a long-run Perspective
    348. Initial costs must be viewed as investments
    349. Returns on investments will not be immediate in export markets</li></ul>Slide 4-3<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    350. Pricing in Export Markets<br /><ul><li>Strategy 1 - Requiring prices in export markets that yield higher returns than are available in domestic markets
    351. Based on the belief that export operations are more risky relative to domestic sales - can result in uncompetitive prices.
    352. Strategy 2- Pricing to yield similar returns in domestic and export markets
    353. Based on the viewpoint that export markets do not necessarily differ from domestic markets
    354. Strategy 3 - Pricing to yield lower returns, or even losses, in export markets—at least in the short run
    355. Reflects an approach that views export markets as the potential growth markets of the future - firm vulnerable to antidumping action
    356. Strategy 4 - Pricing to sell production in excess of the needs of the domestic market so long as these sales make a contribution to fixed overhead and profit
    357. View of export markets as a dumping ground for production in times of excess capacity - firms very vulnerable to anti-dumping actions </li></ul>Slide 4-4<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    358. Stages of Export Market Involvement<br /><ul><li>Stage 1 – Unplanned entry
    359. Unsolicited order from abroad, overproduction, declining domestic sales, pressures, “follow the leader” behavior, government-sponsored trade fairs, and funded export missions
    360. Stage 2 – Systematic evaluation of the impact of exports
    361. Stage 3 - Exports become a major factor in the firm’s strategy and operations. </li></ul>Slide 4-5<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    362. Trade Intermediaries<br /><ul><li>Import Traders
    363. For every export, there is an import
    364. Pure importers are market connectors; they create value through linking producers abroad to buyers in the domestic market
    365. Pure importers usually have an advantage such as knowledge of the domestic market and practices
    366. Export Traders
    367. They are also market connectors
    368. Their advantages lie in knowledge of markets in particular countries or in knowledge of worldwide markets for particular products.
    369. Trading Houses
    370. Pure import operations and pure export operations are joined together in the trading houses </li></ul>Slide 4-6<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    371. Vital Questions to be asked<br /><ul><li>Does our product and firm have a sustainable competitive advantage in export markets and, if so, why?
    372. What are the export markets and the segments of those markets that will value our product sufficiently (relative to other competing products) to offset our costs of production and distribution?
    373. Should the firm export a standard product with a standard marketing mix worldwide or should it tailor its products and marketing mix to individual export markets?
    374. What natural and government-imposed trade barriers impede linking production in one country to purchase in another, and what factors might facilitate this linkage?
    375. What are the most appropriate channels of distribution for our product to achieve our goals in export markets?</li></ul>Slide 4-7<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    376. Present day export trade<br /><ul><li>Tariff and nontariff barriers to trade have fallen globally and free trade areas have developed.
    377. Firms often now analyze trade opportunities on a regional, and sometimes even broader basis
    378. Products are often not sent directly from one home production site to an export market abroad. Inputs are sourced in a number of countries and assembled in other countries, and the final product is sold in yet other countries
    379. Trade intricately linked with foreign investment, joint ventures, licensing, franchising, contract production, and component sourcing </li></ul>Slide 4-8<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    380. Countertrade<br /><ul><li>A special form of exporting is countertrade, the linked exchange of goods for goods in international trade
    381. Countertrade covers - Barter ,Counterpurchase, Compensation or buyback, Production sharing, Industrial offsets, Switches, Unblocking funds and Debt for equity swaps
    382. Can be complicated and costly to negotiate and execute
    383. Important characteristics of countertrade contracts need to be attended to carefully by an exporter
    384. Generally countertrade is an inefficient form of trade. It creates costs and risks for both importers and exporters </li></ul>Slide 4-9<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    385. Major Project Development<br /><ul><li>Importance and investment increased during the 1990s –likely to continue to increase in the future.
    386. Generally for infrastructure development - electricity generation, telecommunications, water and sewage treatment facilities, and even roads and ports.
    387. Types of Major projects
    388. Turnkey projects
    389. Firm undertakes to construct a major project, then turns it over to its owners when it is in full operation
    390. Build, operate, and transfer projects (BOT)
    391. Firms bid for the right to construct the project, the winning firm also operates the facility after it is completed.
    392. Ownership is limited to a certain time period, after which the project is transferred to another organization
    393. Build, operate, and own projects (BOO)
    394. Firms bid for the right to construct the project.
    395. The winning firm also operates the facility after it is completed. . </li></ul>Slide 4-10<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    396. Exports, Imports, and International Finance<br /><ul><li>Important aspects for exporters/importers
    397. Effect of the real exchange rate on competitive advantage,
    398. Effect of variations in the nominal exchange rate on export and import profitability
    399. Pricing of the goods in the importers currency
    400. Countered by setting up currency hedge
    401. Use of forward contracts
    402. Effect of trade on financing needs and sources
    403. Irrevocable letter of credit (LoC) used to overcome uncertainty</li></ul>Slide 4-11<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    404. Six<br />Licensing<br />
    405. What is Licensing?<br /><ul><li>Licensing is a contractual arrangement whereby the licensor (selling firm) allows its technology, patents, trademarks, designs, processes, know-how, intellectual property, or other proprietary advantages to be used for a fee by the licensee (buying firm).
    406. It is a strategy for technology transfer.
    407. Franchising is an organizational form where the franchisor of a service, trademarked product, or brand name allows the franchisee to use the same in return for a lump sum payment and/or royalty, while conforming to required standards of quality, service, and so forth. </li></ul>Beamish, Morrison, Inkpen and Rosenzweig<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    408. When is Licensing employed?<br /><ul><li>Used both in technology intensive and non technology-intensive industries (eg. Computer software, food, sport teams, publishing)
    409. A licensor lacks the capital knowledge of foreign markets required for exporting or FDI, but wants to earn additional profits with minimal commitment.
    410. Host-country governments restrict imports or FDI, or both; or the risk of nationalization or foreign control is too great.
    411. A firm wishes to test the potential for future direct investment.
    412. The technology involved is not central to the licensor’s core business. Generally only peripheral technologies are licensed.</li></ul>Slide 6-3<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    413. When is Licensing employed? (contd..)<br />High prospects of technology “feedback” or “flowback”<br />The licensor wishes to exploit its technology in secondary markets that may be too small to justify larger investments; the required economies of scale may not be attainable.<br />The licensee is unlikely to become a future competitor.<br />Rapid pace of technological change such that the licensor can remain technologically superior to the licensee. If the technology may become obsolete quickly, there is pressure to exploit it fully while the opportunity exists.<br />Slide 6-4<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    414. Licensing Related Issues<br />Risks<br />Dissipation of proprietary advantage<br />Tarnishing of reputation due to lack of quality<br />Profits may not be maximized<br />Difficulty in enforcement of license terms<br />Intellectual Property Rights <br />IP legislations nonexistent or not enforced<br />“Reluctant Licensing” – attempts to offset piracy<br />Slide 6-5<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    415. Licensing Related Issues (contd..)<br />Costs of Licensing<br />Protection costs<br />License Agreement costs<br />Agreement Maintenance costs<br />Unattractive markets for Licensing<br />Governmental regulatory schemes<br />Restrictions imposed on duration and exclusive rights to territories<br />Foreign exchange controls and tax on royalty fees<br />Slide 6-6<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    416. Elements of License Agreement<br />A clear and correct description of the parties to the agreement<br />A preamble or recitals describing the parties, their reasons for entering into the arrangement, and their respective roles.<br />A list of defined terms for the purposes of the particular contract to simplify this complex document and to eliminate ambiguity.<br />A set of schedules, in an exhibit or appendix, where necessary, to segregate lengthy detailed descriptions of any kind.<br />Explicit description of the grant that is fundamental to the agreement and the nature of the rights being granted to the licensee.<br />Description of any geographical limitations on the licensee’s manufacturing, selling, or sublicensing activities.<br />Slide 6-7<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    417. Elements of License Agreement (contd..)<br /> A description of any exclusive rights to manufacture and sell that may be granted including rights to sublicense.<br />The terms relating to the duration of the agreement and its extension or review.<br />Provisions for the granting of rights to downstream refinements or improvements made by the licensor in the future.<br />Provisions for “technological flowback” agreements. <br />Details regarding the royalties or periodic payments based on the use of licensed rights.<br />Specification of minimum performance requirements and other protection clauses<br />Slide 6-8<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    418. Some Licensing Announcements<br />Starbucks, the U.S. coffee chain, hopes to have 500 branches in Asia by 2003 through licensing agreements<br />Licensed properties account for nearly half of the $4 billion in home decorating retail sales sold for the Halloween season.<br />Palm makes new licensing deals with Intel, Motorola and Texas Instruments, to expand the Palm operating system into all kinds of mobile devices from handhelds to cell phones and perhaps even wristwatches.<br />On June 26, 2001, hundreds of independent record companies in Britain and Europe signed a licensing agreement with Napster to immediately make thousands of tracks available to computer-users worldwide.<br />Slide 6-9<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    419. Eight<br />Strategy<br />
    420. The Changing World<br />Globalization is the buzzword!<br />Change in traditional approaches towards more innovative strategies<br />Firms forced to trade off between globalization and localization<br />Transformation is slow mainly due to anti-globalization protests and the Internet<br />Slide 8-2<br />Beamish, Morrison, Inkpen and Rosenzweig <br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    421. Pressures towards Globalization<br />Broad factors making global competition possible <br />Freer Trade<br />GATT, WTO agreements<br />Creation of free trade zones, regional trading blocks like EU, ASEAN<br />Global financial services and capital markets<br />Growth seen in FDIs<br />Growth of Overseas venture capitalists and trans-national banks<br />Advances in communications technology<br />Ease of organizational control<br />The Internet<br />Facilitates ease of communication<br />CRM, EDI systems are now in place in many companies<br />Internet exchanges link buyers and sellers worldwide and have opened up new markets<br />Slide 8-3<br />Beamish, Morrison, Inkpen and Rosenzweig <br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    422. Pressures towards Globalization (contd..)<br />Industry Specific Factors<br />Universal customer needs<br />Global customers<br />Many MNCs sell to other MNCs and need to keep up with the international expansion of the customers<br />Global competitors<br />High investment intensity<br />High investments required for R&D, advertising due to increased competition<br />When investment intensity is high, many companies are eager to amortize expenses by selling products globally<br />Pressures for cost reduction<br />Economies of scale and learning are important in price-sensitive markets<br />Slide 8-4<br />Beamish, Morrison, Inkpen and Rosenzweig <br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    423. Pressures towards Localization<br />Country specific Factors<br />Trade barriers<br />Tariffs, subsidizing domestic production, voluntary export restrictions, competing technical standards<br />Cultural differences<br />Cultural and religious beliefs, purchasing power, weak enforcement of laws<br />Nationalism<br />The Internet<br />Anti-globalization activism<br />Slide 8-5<br />Beamish, Morrison, Inkpen and Rosenzweig <br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    424. Pressures towards Localization (contd..)<br />MNC-Specific Pressures<br />Organizational resistance to change<br />Logistics limitations<br />Management skills and competencies <br />Slide 8-6<br />Beamish, Morrison, Inkpen and Rosenzweig <br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    425. Business Strategies<br />Exhibit 8-1 <br />Mapping Industries<br />High<br />Semiconductors<br />Telecommunications<br />Watches<br />Global Industries<br />Aerospace<br />Civil Aircraft<br />Automobiles<br />Need for Vertical Integration<br />Regional Industries<br />White Goods<br />Packaged Foods<br />Multidomestic Industries<br />Cement<br />Funeral Homes<br />Low<br />High<br />Need for Local Responsiveness<br />Slide 8-7<br />Beamish, Morrison, Inkpen and Rosenzweig <br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    426. Key Recommendations for Managing the Formulation Process <br />Invest Heavily in Data Collection<br />Use multiple data sources, tap external sources and develop internal sources to overcome suspect data<br />Determine the Potential for Critical Scale Economies <br />Weigh the Value of other Globalization Benefits<br />Rotate Country Managers More Frequently to Help Them Develop a Global Vision <br />Be Prepared to Reassess your Performance Measurement System and Reward System <br />Take a Balanced Approach <br />Slide 8-8<br />Beamish, Morrison, Inkpen and Rosenzweig <br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    427. Twelve<br />Govt Relations<br />
    428. Sources of Trade Regulation<br />GATT and WTO<br />Set up to deal with tariffs and non tariff barriers to trade<br />Tokyo Round in mid 1970s<br />Tariff barriers reduced significantly<br />Partial success with non-tariff barrier reduction mainly due to complexity and sensitivity<br />Uruguay Round – 1986-1993<br />Challenging problems addressed – technical barriers, trade in services, intellectual property rights, trade in technology etc.<br />More member countries – 117<br />Problems of developing countries addressed<br />WTO formed – meets every 2 years<br />Slide 12-2<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    429. Trade Agreements and Associations<br />U.S. – Canada Free Trade Agreement<br />Formed January 1988 – world’s largest free trade area<br />Dispute resolution mechanisms established<br />NAFTA formed with Mexican representatives<br />Association of Southeast Asian Nations<br />ASEAN formed August 1967 with 5 member states, presently has 10 members <br />Regarded as a loose economic cooperation channel but expected to change, FTA with China expected<br />Move towards ASEAN FTA<br />Slide 12-3<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    430. Trade Agreements and Associations (contd..)<br />Asia-Pacific Economic Corporation<br />APEC established 1989, presently has 21 members<br />Primary vehicle for open trade and economic cooperation<br />Agreement to develop free trade yet to be reached<br />ANDEAN and MERCOSUR<br />Composed of South American nations with an objective of setting a common external tariff<br />European Union<br />Slow process of European integration<br />Founded on the principle of supranationality<br />Slide 12-4<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    431. Opportunities and Threats <br />Exhibit 12- 1<br />Opportunities and Threats from Government Actions<br />Slide 12-5<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    432. Political Strategy<br />Essential for a firm to form and implement political strategy<br />Formulation <br />Objectives<br />Issues<br />Stakeholders (allies, opponents, targets)<br />Position/Case (“public interest”) <br />Implementation <br />Timing<br />Techniques <br />Direct (negotiate, litigate)<br />Indirect (advocacy advertising, political contributions)<br />Vehicles (e.g. coalition, Government Relations department, consultants)<br />Style (e.g., confrontation or conciliation)<br />Slide 12-6<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    433. Impact of International Business-Government InteractionObjectives and Motivations of MNC-SOE Alliances and Acquisitions<br />Objectives of MNCs<br />Increase profits, reduce potential risks and achieve economies of scale<br />Control/preempt competition, expand market share, achieve first mover advantage<br />Obtain lower-cost production or distribution facilities<br />Develop or adapt technology jointly, obtain new labor or technology resources<br />Expand domestic sales through overseas operations<br />Obtain new labor or technology resources<br />Objectives of SOEs or Privatized Enterprises<br />Ensure survival and financial viability<br />Gain competitiveness and become profitable<br />Acquire new technology and improve managerial competence<br />Objectives of Governments<br />Generate public revenues from SOE sales<br />Reduce subsidies to loss making SOEs, foreign debts and public budget deficits<br />Strengthen private sector, increase national productivity and stimulate growth<br />Expand shareholding among citizens and reduce government role in economy<br />Slide 12-7<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    434. Proactive Management of Relations<br />MNE’s Perception of Government Policy<br />Exhibit 12-4<br />MNE’s approach to <br />Government Policy<br />Viewed as Potentially Influenced<br />by MNE Managers<br />Viewed as outside the Influence<br />Of MNE Managers<br />To achieve <br />Benefits of<br />integration<br />MNE’s objectives in Business – Government <br />Interactions<br />To achieve <br />Benefits of<br />National <br />Responsiveness<br />Slide 12-8<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    435. Bargaining Power<br />Discriminatory enforcement occurs due to differing characteristics of subsidiaries – Bargaining Power<br />Sources of Bargaining power for host country<br />Growing capability to replace the MNE’s products<br />Control over access to raw materials, labor and capital<br />Sources of Bargaining power for MNE<br />Vertical integration<br />Slide 12-9<br />Beamish, Morrison, Inkpen and Rosenzweig<br />INTERNATIONAL MANAGEMENT 5/e<br />McGraw-Hill<br />McGraw-Hill<br />© 2003 The McGraw-Hill Companies, Inc. All rights reserved.<br />
    436. Lockout<br />Acquiring Technology Cheaply.<br />Innovating.<br />Selling Product Below Cost.<br />Build market share.<br />Adquiriendo Tecnología Barato. <br />Innovación. <br />Venta Del Producto Debajo Del Coste. <br />Cuota de mercado de la estructura.<br />
    437. Lockout Case: VCR<br />En los años 80, Japón demandó el mercado global del VCR para sí mismo por los competidores potenciales de debajo-tasacio'n. Adquirieron una patente para el proceso del VCR de una compañía americana que no podría encontrar una manera de hacer un beneficio a corto plazo en el VCR. <br />Las compañías japonesas entonces comenzaron a vender VCRs debajo de coste para construir la cuota de mercado y pronto vendían en un tan alto volumen que sus costes declinaron a un nivel provechoso. <br />Las economías japonesas de la escala eran tan grandes que los competidores extranjeros eran bloqueados fuera del mercado.<br />In the 1980s, Japan claimed the global VCR market for itself by under-pricing potential competitors. They acquired a patent for the VCR process from an American company that couldn’t find a way to make a short-term profit on the VCR. <br />Japanese companies then began selling VCRs below cost to build market share & soon were selling at such a high volume that their costs declined to a profitable level. <br />Japanese economies of scale were so great that foreign competitors were locked out of the market.<br />
    438. Part 1: The Strategic Imperatives<br />Ch 1Expanding Abroad: Motivations, means & Mentalities<br />INB / MGT 352 <br />International Management<br />Spring 2008<br />Transnational Management, Text, Cases, and Readings in Cross-Border Management, Christopher Barlett, Sumantra Ghoshal & Palu Beamish, 5th Edition, 2008<br />
    439. Definition of a Multinational Enterprise (MNE)<br />MNE have “substantial direct investment” in foreign countries (1) and “actively” (not passively) manage and coordinate these offshore assets, and their operations as integral parts of the company, both strategically an organizationally. <br />MNEs include ExxonMobil, Royal Dutch Shell, BP, Toyota, Ford, DaimlerChrysler, GE, Wal-Mart, GM, ChevronTexaco<br />In addition, definition of MNEs includes Intel, Unilever, Samsung, Singapore Airlines, McKinsey & Co., and Starbucks<br />Note 1: These are not simply trading relationships of an import/export business.<br />
    440. Explosive Growth (MNE)<br />Number of International Companies <br />UNCTAD - United Nations agency in charge of all matters relating to FDI and international corporations.<br />1995 – 45,000 parent companies with 280,000 foreign affiliates ($7 trillion in sales)<br />2004 – 70,000 parent companies with 690,000 foreign affiliates ($19 trillion in sales) <br />
    441. Economic Importance of MNEs<br />MNEs are equivalent in economic importance to medium-sized economies of Chile, Hungary, or Pakistan<br />MNEs have considerable influence<br />Employ high percentage of business graduates<br />Pose the most complex strategic and organizational challenges for their managers<br />
    442. Top 500 MNEs<br />70% of world trade<br />85% of world automobiles<br />70% of computers <br />35% of toothpaste<br />65% of soft drinks<br />
    443. Largest 100 MNE<br />In 2003, excluding banking and finance, the largest 100 MNEs accounted for over<br />$ 8 Trillion in worldwide assets, of which <br />$4.0 trillion was located outside there respective home countries.<br />
    444. Motivations (the ‘Why’) of MNE Int’l Expansion<br />Traditional Motivations<br />Securing key supplies (aluminum, rubber, oil, etc.)<br />Market-seeking behavior (Nestle, Bayer, Ford)<br />Access to low-cost factors of production (clothing, electronics, household appliances, watches, <br />Emerging Motivations<br />Scale economies <br />Economies of scale and scope<br />Economies of scope<br />Ballooning R&D investments<br />Shortening product life cycles<br />Scanning and learning capability<br />Competitive positioning<br />
    445. Motives to Go International<br />Market-Seeking<br />Motives<br />The Historically Indigenous Firm<br />Cost-Reduction<br />Motives<br />Strategic<br />Motives<br />
    446. Global Strategy: An Organizing Framework<br />
    447. What Forces Drive MNEs Toward Global Integration & Coordination?<br />Economies of scale<br />Economies of scope<br />National differences in the availability & cost of productive resources<br />
    448. Economies of scale <br />How do new technologies make an economy of scale possible?<br />Why are capital-intensive industries susceptible to economies of scale?<br />How do I quantify an economy of scale?<br />What might threaten the benefits sought under an economy of scale?<br />
    449. Economies of scope<br />What is an economy of scope?<br />What factors or changes might “enable” an economy of scope to develop?<br />What threats to an economy of scope could exist?<br />
    450. MNE Advantages Int’l Operations<br />Ensuring critical supplies<br />Entering new markets <br />Tapping low-cost factors of production<br />Leveraging their global information access<br />Capitalizing on competitive advantage of multiple market positions<br />Use strength to play strategic game of “global chess”<br />
    451. Means (the How?) of Internationalization: Prerequisites and Processes<br />Prerequisites for Internationization<br />
    452. Scale Economies: Use of Scale for <br />Competitive Advantage – Higher Volume<br /> Inhibits Flexibility<br /> Political Risks<br /> Resource Risks<br /> Competitive Risks<br />Scope Economies: Cost of Joint Production<br /> For Two or More Products<br /> Provides Sharing of Physical Resources<br /> Provides for Shared External Relationships<br /> Provides for Shared Knowledge<br />
    453. Tremendous Growth in International Trade & Commerce<br />
    454. Foreign Market Entry Modes<br />Foreign Market Entry Modes<br />Wholly-owned <br />subsidiaries<br />Joint Venture <br />(e.g., w/local partner)<br />Franchising<br />Level of control over foreign services<br />Licensing<br />Export <br />(e.g., through agent<br />or distributor)<br />Indirect export<br />Amount of resources committed to foreign market<br />
    455. International Mindsets<br />Specific pressures will affect competition in industries and firms that cross national boundaries causing<br />a “global orientation” that relies on coordination of worldwide activities to maximize the collective organization, and<br />a “multidomestic orientation” that responds to individual country opportunities and constraints.<br />Increasingly, there are pressures for international companies to be both globally efficient and locally responsive. <br /> These pressures derive from environmental changes such as new technologies, unanticipated competition, and the convergence of industry boundaries. <br /> In such situations, firms exhibit a “transnational mindset” to simultaneously gain efficiency and local market benefits.<br />
    456. International Mindsets<br />Multinational Systems<br />International Systems<br />Businesses that follow an international strategy tend to have distributed GIS in which systems in the central headquarters are connected to those in the foreign operations.<br />Businesses that follow a multinational strategy tend to have decentralized, or independent, information systems for their central headquarters and different foreign operations.<br />Transnational Systems<br />Global Systems<br />Business that follow the transnational strategy require complex, integrated GIS in which the central headquarters and all the foreign operations participate equally<br />Businesses that follow a global strategy ten to have highly centralized GIS determined by the central headquarters.<br />
    457. Foreign Market Entry Modes<br /><ul><li>Exporting
    458. Countertrade
    459. Contract manufacturing
    460. Licensing
    461. Franchising
    462. Turnkey projects
    463. Non-equity strategic alliances
    464. Equity-based ventures such as wholly-owned subsidiaries and equity joint ventures</li></li></ul><li>Motives to Go International<br />Market-Seeking<br />Motives<br />The Historically Indigenous Firm<br />Cost-Reduction<br />Motives<br />Strategic<br />Motives<br />
    465. 1-293<br />Evolutionary Stages<br />Stage 1: Foreign Inquiry<br />Stage 2: Export Manager<br />Stage 3: Export Department and Direct Sales<br />Stage 4: Sales Branches and Subsidiaries<br />Stage 5: Assembly Abroad<br />Stage 6: Production Abroad<br />Stage 7: Integration of Foreign Affiliates<br />
    466. International Strategy<br />Assets, responsibilities decentralized<br />Formal control systems<br />HQ<br />International mentality<br />4-294<br />
    467. International Strategy<br />Assets, responsibilities decentralized<br />Formal control systems<br />HQ<br />International mentality<br /><ul><li>Main role is to support the domestic parent company in different ways, such as contributing incremental sales to domestic manufacturing operations
    468. Products developed for domestic market sold abroad
    469. Technology and other knowledge are transferred from parent company to overseas operators
    470. Offshore manufacturing represents a means to protect company’s home market
    471. Companies with this mentality regard themselves fundamentally as domestic with some foreign appendages
    472. Managers assigned to overseas operations are often domestic misfits who happen to know a foreign language or have previously lived abroad
    473. Decisions related to foreign operations tend to be made in an opportunistic or ad hoc manner</li></ul>4-295<br />
    474. HQ<br />An “International Business Strategy” Deploying Global Information Systems (GIS)<br />International Strategy<br />International Diagram<br />Involves transferring knowledge and skills from the central headquarters to the foreign operations.<br />Assets, responsibilities decentralized<br />Formal control systems<br />International mentality<br />GIS Deployment Strategy<br />International Strategy<br />Businesses that follow an international strategy tend to have distributed GIS in which systems in the central headquarters are connected to those in the foreign operations.<br />4-296<br />4-296<br />
    475. Multinational Strategy<br />Loose controls; strategic decisions remote<br />HQ<br />Financial reporting flows<br />
    476. Multinational Strategy<br />Loose controls; strategic decisions remote<br />HQ<br />Financial <br />Reporting flows<br /><ul><li>A multinational strategic mentality develops as managers begin to recognize and emphasize the differences among national markets and operating environments
    477. Companies adopt a more flexible approach to their int’l operations by modifying their products, strategies, and even management practices country by country
    478. As they develop national companies that are increasingly sensitive and responsive to their local environments, these companies undertake a strategic approach that is literally multinational: Their worldwide strategy is built on a foundation of the multiple, nationally responsive strategies of the company’s worldwide subsidiaries.
    479. Managers tend to be highly independent entrepreneurs, often nationals of the host country
    480. Using their local market knowledge and the parent company’s willingness to invest in these growing opportunities, these entrepreneurial country managers often can build significant local growth and considerable independence from headquarters
    481. Results in a very responsive marketing approaches in the different national markets, it also gives rise to an inefficient manufacturing infrastructure within the company
    482. Plants are built more to provide local marketing advantages or improve political relations than to maximize production efficiency
    483. Similarly, the proliferation of products designed to meet local needs contributes to a general loss of efficiency in design, production, logistics, distribution, and other functional tasks</li></li></ul><li>An “Multinational Strategy”<br />Loose controls; strategic decisions remote<br />HQ<br />Financial <br />Reporting flows<br />Multinational Strategy<br />Multinational Diagram<br />Central home base; decentralized production, sales, marketing in other countries. The business allows its foreign operations to function largely independently.<br />Multinational Strategy<br />GIS Deployment Strategy<br />Businesses that follow a multinational strategy tend to have decentralized, or independent, information systems for their central headquarters and different foreign operations.<br />
    484. Global Strategy<br />Tight controls; centrally driven strategy<br />HQ<br />One-way flows,<br />goods, information,<br />and resources<br />4-300<br />
    485. Global Business Strategies<br />Global Strategy<br />Tight controls; centrally driven strategy<br />HQ<br />One-way flows,<br />goods, information,<br />and resources<br /><ul><li>In an operating environment of improving transportation and communication facilities and falling trade barriers, some companies adopt a very different strategic approach for their int’l operations
    486. These companies think in terms of creating products for a world market and manufacturing them on a global scale in a few highly efficient plants, often at the corporate center
    487. Subscribe to Professor Levitt’s to make and sell “the same thing, the same way, everywhere”
    488. In an operating environment of improving transportation and communication facilities and falling trade barriers, some companies adopt a very different strategic approach for their int’l operations
    489. These companies think in terms of creating products for a world market and manufacturing them on a global scale in a few highly efficient plants, often at the corporate center
    490. The underlying assumption is that national tastes and preferences are more similar than different or that they can be made similar by providing customers with standardized products at adequate cost and with quality advantages over those national varieties they know
    491. Strategic approach requires considerably more central coordination and control than the others and is typically associated with an organizational structure in which various product or business managers have worldwide responsibility
    492. R&D and manufacturing activities are typically managed from headquarters, and most strategic decisions also take place at the center</li></li></ul><li>Global Strategy Example<br />
    493. Global Strategy<br />Loose controls; strategic decisions remote<br />Assets, responsibilities decentralized<br />Tight controls; centrally driven strategy<br />HQ<br />HQ<br />Complex controls; <br />high coordination skills, <br />Coordinated strategic <br />decision process<br />Heavy flows;<br />materials, people<br />Information &<br />technology<br />Formal control systems<br />HQ<br />One-way flows,<br />goods, information,<br />and resources<br />Financial <br />Reporting flows<br />HQ<br />International mentality<br />Distributed<br />capabilities,<br />resources &<br />decision making<br />Global Business Strategies<br />All use global information systems (GISs) in various ways …<br />Multinational Strategy<br />International Strategy<br />Transnational Strategy<br />4-303<br />4-303<br />
    494. A “MNE Business Strategy” Deploying Global Business Systems<br />Global Strategy Diagram<br />Tight controls; centrally driven strategy<br />HQ<br />One-way flows,<br />goods, information,<br />and resources<br />All use global information systems (GISs) in various ways …<br />Global Strategy<br />The central headquarters coordinates the activities of the foreign operations closely.<br />Transnational Strategy<br />GIS Deployment Strategy <br />Business that follow the transnational strategy require complex, integrated GIS in which the central headquarters and all the foreign operations participate equally<br />4-304<br />4-304<br />
    495. HQ<br />Transnational Strategy<br />Complex controls; <br />high coordination skills, coordinated strategic decision process<br />Heavy flows;<br />materials, people<br />information, technology<br />Distributed<br />capabilities,<br />resources &<br />decision making<br />4-305<br />
    496. Complex controls; <br />high coordination skills, <br />Coordinated strategic <br />decision process<br />Heavy flows;<br />materials, people<br />Information &<br />technology<br />HQ<br />Distributed<br />capabilities,<br />resources &<br />decision making<br />Transnational Strategy<br /><ul><li>The emerging requirement is for companies to become more responsive to local markets and political needs and pressures to develop global-scale competitive efficiency
    497. Key activities and resources are neither centralized in the parent company nor so decentralized that each subsidiary can carry out its own tasks on a local-for-local basis
    498. Instead, the resources and activities are dispersed but specialized, to achieve efficiency and flexibility at the same time
    499. These dispersed resources are integrated into an interdependent network of worldwide operations
    500. Transnational mentality recognizes the importance of flexible and responsive country-level operations – hence a return of “national” into the terminology
    501. Compared to multinational approach, it provides for means to link and coordinate those operations to retain competitive efficetiveness and economic efficiency, as is indicated by the prefix “trans”
    502. The resulting need for intensive, organization-wide coordination and shared decision-making implies that this is a much more sophisticated and subtle approach to MNE management</li></li></ul><li>A “Transnational Business Strategy” Deploying Global Business Systems<br />Complex controls; <br />high coordination skills, <br />Coordinated strategic <br />decision process<br />Heavy flows;<br />materials, people<br />Information &<br />technology<br />HQ<br />Distributed<br />capabilities,<br />resources &<br />decision making<br />All use global information systems (GISs) in various ways …<br />Transnational Strategy<br />Transnational Diagram<br />Truly global firm; no national headquarters; value-added activities managed from global perspective; optimizes supply & demand, taking advantage of local competitive strengths<br />Transnational Strategy<br />GIS Deployment Strategy<br />Business that follow the transnational strategy require complex, integrated GIS in which the central headquarters and all the foreign operations participate equally<br />4-307<br />4-307<br />
    503. Global “Chess” Between Large MNEs<br />Customers demand differentiation along with the level of cost & quality typical of global products<br />Host governments have more aggressive development & tax agendas<br />MNEs fight for flexibility to continuously change product designs, sourcing, and pricing<br />
    504. Multidomestic Strategy Example<br />
    505. Chapter 2: Understanding the International ContextResponding to Conflicting Environmental Forces<br />
    506. Three Conflicting Setsof External Demands<br />Forces for cross-border integration and coordination<br />Forces for national differentiation and responsiveness <br />Forces for worldwide innovation and learning<br />2-312<br />
    507. Forces for Global Integrationand Coordination<br />Economies of Scale<br />Economies of Scope<br />Factor Costs<br />Increasingly Liberalized Environment for Trade<br />Expanding Spiral of Globalization<br />2-313<br />
    508. Global Competitors as Change Agents<br />For industry globalization to take place:<br />Underlying drivers (economies of scale and scope, etc.) have to be in place<br />But always triggered by actions of one of two global “change agents”<br />Examples:<br />British Airways (airlines)<br />Starbucks (premium coffee shops)<br />ISS (cleaning services)<br />2-314<br />
    509. Global Industries<br />To borrow from Shakespeare:<br />Some industries are born global<br />Some are made global<br />Others have global-ness thrust upon them<br />2-315<br />
    510. Forces for Local Responsiveness<br />Cultural differences<br />Consumer tastes and preferences<br />Ways of doing business<br />National infrastructure<br />Technical standards (e.g., voltage, TV broadcast, etc.)<br />Distribution channels (e.g., supermarkets vs. bazaars)<br />Government demands<br />National laws and regulations<br />Host country pressures and demands<br />Local competitors<br />Appeal to nationalism<br />2-316<br />
    511. MNC-Host Government Relationship: A Study in Love/Hate<br />MNC<br />MNC<br />MNC<br />Sought for its capital, technology, management<br />Accommodated for its contributions to local social and economic needs<br />Courted for its global efficiency and world market access<br />Host Country Government<br />Resented for the nation’s dependence on it<br />Feared for its power and independence<br />Disliked for its impact on society<br />MNC<br />MNC<br />MNC<br />2-317<br />
    512. MNC<br />Host Government<br />Sources of Conflict<br /><ul><li>Motivators
    513. Strategic viability: global competitiveness
    514. Operational viability: profit
    515. Objectives
    516. Freedom to integrate operations globally
    517. Ability to market and ability to transfer resources freely across borders
    518. Measures</li></ul> (primarily financial)<br /><ul><li>Profit
    519. ROI
    520. Market share
    521. Motivators
    522. National independence: social, economic, political
    523. International competitiveness
    524. Objectives
    525. Protect national sovereignty from external influence
    526. Capture global benefits of export markets, efficient industrial base, leading edge technology
    527. Measures (social/economic/political)
    528. Social cost/benefit
    529. Political return
    530. Industrial policy “fit”</li></ul>2-318<br />
    531. MNC<br />Host Government<br />Sources of Power<br /><ul><li>No investment or exit option
    532. Access to needed resource (capital, technology, etc…)
    533. Willingness and ability to align with national priorities
    534. Development of local support (shareholders, suppliers)
    535. Position in global economy (market, scale, competitiveness)
    536. Home country support
    537. Legislative power: regulate operating and strategic decisions
    538. Market power-government as a customer
    539. Incentives, supports
    540. Attractiveness to competitors
    541. Local operations linkage to global position (“hostage”)
    542. Shift in power after investment (“obsolescing bargain”)</li></ul>2-319<br />
    543. Recent Backlash against Globalization<br />Early 1990s: Global integration forces dominated<br />Most host governments actively sought investment<br />Free Trade movement gathered pace<br />Late 1990s: Highly visible backlash<br />Anti-globalization movement (Seattle, Genoa, etc…)<br />Many developing countries are highly sceptical of benefits<br />Many MNEs currently rethinking their approach toward globalization<br />Need to better articulate benefits they bring<br />2-320<br />
    544. Forces for Worldwide Innovationand Learning<br />Increased need for rapid and coordinated worldwide innovation driven by:<br />Shortening product life-cycles<br />Increased cost of R&D<br />Emergence of global technology standards<br />Competitors’ ability to develop and diffuse innovation globally<br />2-321<br />
    545. Responding to Diverse Forces Simultaneously<br />Strength of forces vary by industry; three typical models<br />Global industries (consumer electronics)<br />Multinational industries (branded packaged goods)<br />International industries (telecom)<br />2-322<br />
    546. Consumer Electronics<br />Telecom Switching<br />Global Integration<br />Branded<br />Packaged Products<br />Cement<br />National Responsiveness<br />Global & National Forces: Industry Effect<br />2-323<br />
    547. Transition to Transnationality<br />By 1990s environmental forces undergoing change<br />New bases of competition emerging<br />New competitors rising on the basis of different competitive capabilities<br />Increasingly industries were becoming transnational<br />Companies needing to respond to all three diverse and competing sets of forces: global integration, national responsiveness, and worldwide learning<br />2-324<br />
    548. A Final Word: Risk of “Globalization Glaucoma”<br />Blindness to everything but global forces<br />Short-sightedness to localizing forces<br />“As the 1990s were drawing to a close, the world had changed course, and Coca-Cola had not. We were operating as a big, slow, insulated, sometimes even insensitive “global” company; and we were doing it in an era when nimbleness, speed, transparency and local sensitivity had become absolutely essential.”<br /> Douglas Daft, CEO, Coca-Cola, March 2000<br />2-325<br />
    549. International investment agreements:key issues and features<br />
    550. Topics for discussion<br />Definitions and scope<br />Admission and establishment<br />Four pillars of protection:<br /><ul><li>Standards of treatment
    551. Expropriation
    552. Transfers
    553. Settlement of disputes</li></ul>Liberalisation through NT and MFN<br />Transparency<br />
    554. Definitions and Scope<br />
    555. Scope of an IIA<br /><ul><li>Matter coverage: define those assets to which the treaty applies.
    556. Subject coverage: define those persons and legal entities to which the treaty applies.
    557. Geographical coverage: define the territory to which the treaty provisions apply.
    558. Temporal coverage: determine the date of entry into force of the IIA and its duration. </li></li></ul><li>Definition of “investment”<br />Depending on purpose of treaty, two main approaches:<br />A.     Open-ended asset-based definition : broad protection<br />Including usually:<br /><ul><li>Movable and immovable property
    559. Various types of interest in companies
    560. Claims to money and claims under a contract having a financial value
    561. Intellectual Property Rights
    562. Business concessions, including natural resources concessions</li></li></ul><li>Example of asset-based definition<br />BIT Ethiopia – Sudan 2000 Art. 1 Definitions<br />For the purpose of this Agreement: <br /> a) "Investment" means every kind of asset invested by Investors of one Contracting Party in the territory of the other Contracting Party, in accordance with the laws and regulations of the latter, and in particular, though not exclusively, includes: <br />(i) movable and immovable and any other rights such as mortgages, liens or pledges; <br />(ii) Shares, stocks and debentures of companies or interests in the property of such companies; <br />(iii) claims to money or to other assets or any performance having an economic value, <br />(iv) intellectual and industrial property rights, including rights with respect to copy rights, patents, trade marks, trade names, industrial designs, trade secrets, technical processes and know-how and goodwill; <br />(v) business concessions conferred by Law or under contract, including concessions to search for, cultivate, extract or exploit natural resource; <br />A change in the form in which assets or capitals have been invested or reinvested shall not affect their designation as "Investments" for the purpose of this Agreement. <br />
    563. Definition of “investment”<br />B.     Alternative definitions:<br /><ul><li>Closed list definition (finite list)
    564. Enterprise–based definition</li></ul> Focus on the “business enterprise” or the “controlling interests in a business enterprise”. Includes the establishment or acquisition of a business enterprise, as well as a share in a business enterprise, which gives the investor control over the enterprise<br /><ul><li>Tautological definition</li></ul> Definition of the term "investment" in economic terms. Covering every asset that an investor owns and controls, directly or indirectly, that has the characteristics of an investment. Approach complemented by explicit exclusion of several kind of assets<br />
    565. Investment - key issues<br /><ul><li>Claims of money: will all claims of money be covered? Even those claims of money not related to FDI? What about payments derived from commercial transactions or from the sale of goods and services?
    566. Debt instruments: will all debt instruments be covered? What about those debt instruments with short-term maturity? Should there be a minimum maturity term specified?
    567. Intellectual property rights (IPRs): should a reference to a legal framework be included? Would only those IPRs provided in accordance to domestic legislation be considered an investment? Those IPRs existing pursuant international agreements?
    568. State Contracts: need for special treatment in definitions or substantive parts of the agreement.
    569. Exclusions: Public debt? Property acquired not for an economic activity (i.e. leisure houses)? Short term debt instruments?</li></li></ul><li>Definition of “investor”<br />A. Natural persons<br /><ul><li>Criteria of nationality
    570. Criteria of domicile or residence</li></li></ul><li>Natural persons - example<br />Nationality criterion: <br />BIT China - Germany, 2003,Art. 1 Definitions <br />2. the term "investor" means <br />(a) in respect of the Federal Republic of Germany: Germans within the meaning of the Basic Law for the Federal Republic of Germany, (…) <br />(b) in respect of the People’s Republic of China: natural persons who have the nationality of the People’s Republic of China in accordance with its laws, (…) <br />BIT Uganda – Mozambique, Art. 1 Definitions<br />4. "investor" of a Contracting Party shall mean: <br /> a) any natural person who is a national of that Contracting Party in accordance with its law…<br />Domicile or residence criterion: <br />BIT Canada -Argentina, 1991, Article 1- Definitions <br />b) The term "investor" means (i) any natural person possessing the<br /> citizenship of or permanently residing in a Contracting Party in accordance with its laws, (…) who makes the investment; (…).<br />
    571. Definitions - investor<br />B. Legal entities<br /><ul><li>Criteria to determine the nationality of the legal entity/investor:
    572. Country of organization or incorporation
    573. Country of seat
    574. Ownership and control
    575. Denial of benefits clause: (deny treaty protection to those companies that are controlled by investors of a non-Party (particularly with which the host country does not maintain diplomatic relations) and/or that have no substantial business activities in the territory of the party under whose laws it is constituted)</li></li></ul><li>Legal entities – example 1<br />Criterion of the “seat”:<br />BIT China - Germany, 2003 <br />Article 1: Definition <br />2. the term "investor" means (a) in respect of the Federal Republic of Germany: any juridical person as well as any commercial or other company or association with or without legal personality having its seat in the territory of the Federal Republic of Germany, irrespective of whether or not its activities are directed at profit; (…).<br />
    576. Legal entities – example 2<br />Criterion of ownership or control:<br />Andean Community - Decision 291 Regime for the<br />Common Treatment of Foreign Capital and Trademarks,<br />Patents, Licensing Agreements and Royalties <br />Article 1: … Foreign Enterprise: <br />an enterprise incorporated or established in the recipient country, in which national investors own less than fifty one percent of the equity capital or, if more than that, in the judgment of the competent national agency that percentage is not reflected in the technical, financial, administrative and commercial management of the enterprise.<br />
    577. Legal entities – example 3<br />Example of combined criteria:<br />BIT China - Germany, 2003<br />Article 1: Definition <br />2. the term "investor" means (b) in respect of the People’s<br />Republic of China: <br /> economic entities, including companies, corporations, <br /> associations, partnerships and other organizations,<br /> incorporated and constituted under the laws and regulations of and with their seats in the People’s Republic of China, irrespective of whether or not for profit and whether their liabilities are limited or not.<br />
    578. Legal entity – example 4<br />Extent of treaty protection:<br />US BIT Model, 2004<br />Article 17: Denial of Benefits <br />2. A Party may deny the benefits of this Treaty to an investor of the other Party that is an enterprise of such other Party and to investments of that investor if the enterprise has no substantial business activities in the territory of the other Party and investors of a non-Party, or of the denying Party, own or control the enterprise.<br />
    579. Admission and Establishment<br />
    580. Admission of foreign investment<br /><ul><li>Traditionally, right of States to control and limit addmission. Recent trend towards States deciding to limit this right.
    581. Two approaches in IIAs:
    582. Admission model: entry in accordance with laws and regulations of the host country: NO LIBERALIZATION
    583. Pre-establishment model: right of establishment. National treatment at the pre-establishment stage (approach of western hemisphere, Japan, Korea): LIBERALIZATION : removal of barriers to access</li></li></ul><li>Admission model<br /><ul><li>Host country discretion: laws and regulations relating to entry may change
    584. Once admitted, foreign investment is granted NT and MFN
    585. No exceptions in the treaty: no need.</li></li></ul><li>Examples of admission model: <br />Australia – India BIT1. Each Contracting Party shall encourage and promote favourable conditions for investors of the other Contracting Party to make investments in its territory. Each Contracting Party shall admit such investments in accordance with its laws and investment policies applicable from time to time. Tanzania – Netherlands BIT (2001) Art 2 Promotion and Protection of Investments“Each Contracting Party shall within the framework of its laws and regulations, promote economic cooperation through the protection in its territory of investments of investors of the other Contracting party. Subject to its right to exercise powers conferred by its laws or regulations, each Contracting Party shall admit such investments.”<br />
    586. Pre-establishment model<br /><ul><li>NT and MFN at all stages of the investment, including at the pre-establishment stage: ‘establishment, acquisition and expansion’.
    587. Lists of exceptions: all countries have closed sectors or non conforming measures.
    588. Mostly negative lists. Very few exceptions (TAFTA)
    589. The commitment is made in the Treaty, the national laws must be in conformity with Treaty obligations.</li></li></ul><li>Pre-establishment NT and MFN modelCanada-Lebanon BIT<br />Establishment of investment Each contracting Party shall permit establishment of a new business enterprise or acquisition of an existing business enterprise or a share of such enterprise by investors or prospective investors of the other Contracting Party on a basis no less favorable than that which, in like circumstances, it permits such acquisition or establishment by: (a) investors or prospective investors of any third state; (b) its own investors or prospective investors.Treatment of Established Investment  1. Each Contracting Party shall grant to investments and to returns of investors of the other Contracting Party treatment no less favourable than that which, in like circumstances, it grants to investments and returns of:  (a) investors of any third State; (b) its own investors. Each Contracting Party shall grant investors of the other Contracting Party, as regards the enjoyment, use, management, conduct, operation, expansion, and sale or other disposition of their investments or returns, treatment no less favourable than that which, in like circumstances, it grants to: (a) investors of any third State; (b) its own investors.<br />
    590. Fair and Equitable Treatment<br />
    591. 1. Fair and Equitable Treatment<br /><ul><li>Absolute standard (not relative)
    592. 3 approaches:</li></ul>Stand alone FET<br />FET in accordance with the principles of international law <br />FET combined with MFN/NT<br />
    593. Fair and Equitable Treatment: examples <br />Dutch model BIT“1. Each Contracting Party shall ensure fair and equitable treatment of the investments of nationals of the other Contracting Party and shall not impair, by unreasonable or discriminatory measures, the operation, management, maintenance, use, enjoyment or disposal thereof by those nationals. Each Contracting Party shall accord to such investments full physical security and protection. …”Kenya – United Kingdom BIT (1999), Art. 2 Promotion and Protection of Investment“(2) Investments of nationals or companies of each Contracting Party shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Contracting Party. Neither Contracting Party shall in any way impair by unreasonable or discriminatory measures the management, maintenance, use, enjoyment or disposal of investments in its territory of nationals or companies of the other Contracting Party”  <br />
    594. Fair and Equitable Treatment: examples<br />  <br />Uganda – Eritrea BIT (2001), Article 3 Treatment of Investment <br />(1). Each Contracting Party shall in its territory accord to investments made by investors of the other Contracting Party fair and equitable treatment which in no case shall be less favourable than that accorded to its own investors or to investors of any third state, whichever is the more favourable from the point of view of the investors. <br />(2) Each Contracting Party shall in its territory accordinvestors of the other Contracting Party, as regards their management, maintenance, use, enjoyment or disposal of their investment, fair and equitable treatment which in no case shall be less favourable than that accorded to its own investors or to investors of any third State, whichever of these standards is the more favourable from the point of view of the investor. <br />
    595. 2. International Minimum Standard of Treatment<br />Content of the clause in US and Canadian treaties<br /><ul><li>Clarification of the standard
    596. Explicit reference to international customary law (ICL)</li></ul>Relationship with other standards<br /><ul><li>Explicit clarification that the violation of any other obligation of the agreement does not entail the violation of the minimum standard of treatment – Same issue for State Contracts.</li></li></ul><li>Fair and Equitable Treatment US model BIT(2004)<br />1. Each Party shall accord to covered investments treatment in accordance with customary international law, including fair and equitable treatment and full protection and security.  2. For greater certainty, paragraph 1 prescribes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to covered investments. The concepts of “fair and equitable treatment” and “full protection and security” do not require treatment in addition to or beyond that which is required by that standard, and do not create additional substantive rights. The obligation in paragraph 1 to provide:  (a) “fair and equitable treatment” includes the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world; and (b) “full protection and security” requires each Party to provide the level of police protection required under customary international law. 3. A determination that there has been a breach of another provision of this Treaty, or of a separate international agreement, does not establish that there has been a breach of this Article.  <br />
    597. Expropriation<br />
    598. Expropriation protection<br />Content of the clause<br />Several categories of takings: <br />expropriations,<br />nationalizations, <br />direct or indirect<br />Regulatory takings: measures tantamount to expropriation<br />Creeping expropriations<br /><ul><li>Conditions for the expropriation to be lawful:
    599. Public purpose
    600. Non-discrimination
    601. Due process of law
    602. Compensations</li></li></ul><li>Expropriation - compensation<br />Possible standards of compensation:<br /><ul><li>The Hull formula (prompt, adequate, effective)
    603. Appropriate compensation
    604. Different valuation methods: book-value method, discounted cash-flow method,..</li></ul>Expropriation and Regulatory Takings: Necessary clarification of the obligation<br /><ul><li>General exception: public health and safety.
    605. The right to regulate for public purpose.</li></li></ul><li>Expropriation protection: Uganda – Eritrea BIT (2001)<br />Article 4 Expropriation (1) Investments of each Contracting Party shall not be nationalised, expropriated or subjected to measures having effect equivalent to nationalisation or expropriation (hereinafter referred to as ‘’expropriation’’) in the territory of the other Contracting Party except for expropriations made in the public interest, on a basis of non-discrimination, carried out under due process of law, and against prompt, adequate and effective compensation. (2) Such compensation shall amount to the fair market value of the investment expropriated immediately before the expropriation or impending expropriation became known in such a way as to affect the value of the investment. The fair market value shall include but not exclusively the net asset value thereof as certified by an independent firm of auditors. <br />(3) Compensation shall be paid promptly and include interest at a commercial rate established on a market basis from the date of expropriation until the date of payment. <br />
    606. Uganda – Eritrea BIT (2001) cont.<br /> (4) The expropriated investor shall have a right to prompt review under the law of the Contracting Party making the expropriation, by a judicial or other competent and independent authority of the Contracting Party, of its case, of the value of investment, and of the payment of compensation, in accordance with the principles set out in paragraph 1 of this Article. <br /> (5) When a Contracting Party expropriates the assets of a Company or an enterprise in its territory, which is incorporated or constituted under its law, and in which investors of other Contracting Party have an investment , including shareholding, the provisions of this Article shall apply to ensure prompt, adequate and effective compensation for those investors for any impairment or diminishment of the fair market value of such investment resulting from the expropriation. <br />
    607. Transfers<br />
    608. Free Transfer of Funds<br /><ul><li>Two types of transfers: inward and outward.
    609. Exceptions
    610. BOP safeguards: temporary derogations
    611. Transitional provisions: maintaining existing restrictions.</li></li></ul><li>Free Transfer of Funds<br />South Africa – Mauritius BIT (1998) <br />1. Each Contracting Party shall allow investors of the other Contracting Party the free transfer of payment relating to their investments and returns, which shall include in particular, though not exclusively - <br /> (a) profits, capital gains, dividends, royalties, interest, and other current income accruing from any investment; <br /> (b) the proceeds of the total or partial liquidation of any investment; <br /> (c) repayments made pursuant to a loan agreement in connection with investments; <br /> (d) licence fees in connection to matters in Article 1(1)(b); <br /> (e) payment in respect of technical assistance, technical services and management fees; <br /> (f) payments in connection with contracting projects; <br /> (g) earnings of nationals of the other Contracting Party who work in connection with an investment in the territory of the Contracting Party; <br /> (h) compensation paid pursuant to the provisions of Articles 4 and 5. <br />2. All transfers shall be effected without undue delay in any convertible currency at the market rate of exchange applicable on the date of transfer. In the absence of a market for foreign exchange, the rate to be used will be the most recent exchange rate applied to inward investments or the most recent exchange rate for conversion of currencies into Special Drawing Rights, whichever is the more favourable to the investor.<br />
    612. Dispute Settlement<br />
    613. <ul><li>Two types of Dispute Settlement mechanisms</li></ul>State-to-State: applies only between State partiesto the Agreement.<br /><ul><li>(like the DSU in the WTO, the ASEAN DSB) </li></ul>Investor-to-State: allows private investors to submit claims against a host State to international arbitration<br /><ul><li>(eg. NAFTA and BITs)</li></ul>Most IIAs contain both types of mechanisms<br />
    614. Investor-to-State mechanism <br /><ul><li>Consultations and negotiations (time-period)
    615. Most IIAs do not require exhaustion of local remedies
    616. In some, resort to local courts precludes subsequent submission to international arbitration: the fork in the road.
    617. Direct resort to international arbitration (institutional or ad hoc):
    618. ICSID Convention
    619. Ad hoc arbitration following UNCITRAL Arbitration Rules</li></li></ul><li> Investor-to-State mechanism <br /><ul><li>Constitution of tribunal (as per arbitral rules)
    620. Applicable law: IIA’s provisions; law of the host-State; investment contract, rules of international law.
    621. ICSID Convention (Article 42):absent agreement between parties, the tribunal shall apply the law of the host State and the applicable rules of international law.
    622. Arbitral awards: final and binding, but require exequatur(except in the case of ICSID awards)
    623. ICSID Members shall recognize and enforce the awards in their territory as if they were final judgements of a State court</li></li></ul><li>NT and MFN<br />
    624. Non discrimination: NT and MFN<br /><ul><li>National treatment: grant foreign investors, in like circumstances, treatment no less favourable than the treatment of nationals.
    625. Most-favoured-nation treatment: treat all foreign investors alike. No discrimination among foreign investors on the basis of nationality.</li></li></ul><li>National Treatment<br />1. The application “de jure” and “de facto” of the standard<br /><ul><li>Most agreements do not specifically limit the scope of the national treatment standard only to a “de jure” test. Thus, jurisprudence has found that the standard applies both to “de jure” and “de facto” discrimination.
    626. Approach may have a positive effect in fostering discipline in the domestic application of legislation
    627. However, it is important to examine administrative practice and existing legislation that may have a “de facto” discriminatory impact on foreign investment.</li></li></ul><li>National Treatment<br />2. Treatment “in like circumstances”<br />Comparison requires a comparator.<br />3. Best “in state treatment”<br /><ul><li>When negotiating with countries having federal systems of government, a situation may arise when one subnational unit discriminates among other subnational units from the same country.
    628. Important to ensure that the National Treatment standard applies with respect to a regional level of government, treatment no less favourable than the most favorable treatment accorded, in like circumstances, by that regional level of government to investments or investors of the Party from which it forms a part. </li></li></ul><li>National Treatment<br />4. Exceptions and reservations to national treatment<br />General exceptions based on reasons of public health, order and morals, and national security. Such exceptions are present in most regional and multilateral investment agreements, and also in a number of BITs. <br />Subject-specific exceptions which exempt specific issues from national treatment, such as intellectual property, taxation provisions in bilateral tax treaties, prudential measures in financial services or temporary macroeconomic safeguards. <br />Country-specific exceptions whereby a contracting party reserves the right to differentiate between domestic and foreign investors under its laws and regulations – in particular, those related to specific industries or activities – for reasons of national economic and social policy. Country-specific exceptions may overlap with subject-specific exceptions.<br />
    629. MFN Treatment<br />Additional specific issues:<br /><ul><li>The Maffezzini jurisprudence and subsequent cases
    630. Free rider issue: is there a free-rider problem in investment policy?
    631. REIO and other exceptions: taxation, other investment agreements.</li></li></ul><li>Other Issues<br />Transparency<br />
    632. Other issues<br /><ul><li>Governmental measures: home country measures, host country operational measures (limitation to operations and performance requirements), incentives
    633. Entry and sejourn of key foreign personel
    634. Transparency
    635. Environment and labour
    636. Implementation issues: ratification, entry into force, enactment/implementation of treaty obligations into national legislation, management of investment disputes</li></li></ul><li>Competencies<br />
    637. Competency<br /> “A bundle of skills and technologies (rather than a single discrete skill or technology) that enables a company to provide a particular benefit to customers” - Hamel and Prahalad 1994, p. 199.<br />
    638. It provides consumer benefits <br />It is not easy for competitors to imitate <br />It can be leveraged widely to many products and markets. <br />
    639. Dunning–Kruger Effect<br />People reach erroneous conclusions and make unfortunate choices but their incompetence robs them of the metacognative ability to realize it<br />Illusory Superiority<br />
    640. Consumers Perceptions<br />
    641. Innovation<br />
    642. What is Zara?<br />
    643. Largest Pure Play Retailer <br />
    644. Ortega<br />Selling<br />Zara is not a style of dressing as much as a style of buying, and hence, of selling.<br />Producing<br />Zara-Inditex has reinvented a form of producing<br />Anti-Personalization<br />No cult of personality<br />
    645. What is the entrepreneur?<br />
    646. Groupwork<br />Consider the following:<br />“Everybody copies everybody, since the bottom line is that inspiration must come from the same source – society itself . . . Success emerges not so much from the ability to imagine creatively, but rather from managing to interpret trends present or observed in the community, and . . . , the ability to convert this into a physical item in just a few weeks”<br />To what extend to you agree and disagree<br />
    647. “To everything there is a season.”<br />Most firms design a 'collection' for an entire season.<br />Place a huge order for stocking at the start of the season.<br />What do you suppose are their lead-times from design to manufacture to store: days, weeks, or months? <br />Months<br />H&M is #2, it's 3-5 months from creation to delivery.<br />
    648. If you get it wrong, you're hosed<br />Challenge<br />
    649. Scale<br />How many new items Gap & H&M produce in a season?<br /> 2,000-4,000<br />
    650. Jim Cramer: Fashion<br />Required Clothing<br />Reguiired accessory<br />
    651. Culture of Permanent Testing<br />
    652. Logistics<br />
    653. La Coruna warehouse is 5 million square feet = 90 football fields. <br />Nine times the size of Amazon's warehouse <br />Move about 2.5 million items a week. <br />Connected to 14 Zara factories through tunnels with ceiling-mounted rails.<br />
    654. Self-Start Production<br />
    655. Fast Fashion!<br /><ul><li>Cloth is ironed
    656. Products packed on hangers -- no ironing
    657. Price tags are affixed
    658. Unpack them & they're ready to be sold</li></li></ul><li>Is Galacia Important?<br />
    659. CwF + RtB<br />
    660. Connect with Clients<br />CwC<br />
    661. Zara admits and is even proud of the fact that many of their creations are inspired by their own customers.<br />Customer trends and preferences, along with their reactions to the products in the stores, are observed and communicated throughout the organization, almost in real time.<br />
    662. Cool Hunter<br />
    663. Managers<br />Zara’s store managers. <br />Personal digital assistants (PDAs) <br />Gather customer input. <br />Managers: 70 percent of salaries can come from commissions.<br />
    664. The Store Staff<br />As soon as the doors close, the staff turns into a sort of investigation unit in the forensics of trend spotting, looking for evidence in the piles of unsold items that customers tried on but didn’t buy. Are there any preferences in cloth, color, or styles offered among the products in stock?<br />PDAs are also linked to the store’s point-of-sale (POS) system that captures customer purchase information. <br />In less than an hour, managers can send updates that combine the hard data captured at the cash register with insights on what customers would like to see.<br />All of this valuable data allows the firm to plan styles and issue rebuy orders based on feedback rather than hunches and guesswork. The goal is to improve the frequency and quality of decisions made by the design and planning teams.<br />
    665. The Designers<br />Data on what sells and what customers want to see goes directly to “The Cube” (central command of the Inditex Corporation outside La Coruña0), where teams of some three hundred designers crank out an astonishing thirty thousand items a year versus two to four thousand items offered up at big chains like H&M (the world’s third largest fashion retailer) and Gap<br />Individual bonuses are tied to the success of the team, and teams are regularly rotated to cross-pollinate experience and encourage innovation.<br />
    666. RtB<br />
    667. Mandatory feature of the Inditex management model: the replacement of stock at least twice a week<br />Zara Tuesday<br />New Cool products every tuesday<br />
    668. ZARA<br />
    669. Market Entry Decisions<br />Foreign Market Selection<br />Timing & Order of Entry<br />Market Expansion Strategies<br />Mode of Entry Decisions<br />
    670. Choice of Entry Modes<br />Exporting<br /> Direct vs Indirect<br />Contractual Agreements<br />Licensing, Franchising, etc.<br />Equity Based<br />Joint Ventures<br />WOS<br />Strategic Alliance <br />
    671. Push<br />Encourage your position and current national opportunities<br />Pull<br />Attractive conditions and host mark<br />
    672. Zara Internationalization<br />But in general the choice was to move into a country on the basis of the idea that there was a market opportunity, a good location, or sometimes because a foreign party opened the track, sometimes making the offer of investment.<br />
    673. Zara Expansion<br />Reluctance and trial (1975 to 1988)<br />Started opening in Portugal<br />Captious Expansion(1989 to 1986)<br />one or two similar socioeconomic countries per year to market<br />Aggressive expansion (1997 - 2005)<br />
    674. Zara Entry Modes<br />Subsidiaries <br />expensive mode of entry high growth potential business risk countries IE EU<br />Joint venture<br />large competitive markets<br />Franchise<br />higher risk countries<br />
    675. Strategic partnerships <br />Zara is the only member of the group that’s sources all products from company plants <br />Other members of the group relying on relationships outsourcing companies or individuals.<br />Inditex sells the cloth and recives finished products<br />
    676. Acquisition <br />Dutti<br />Attempt to enter a different segment. <br />Different management cultures. <br />Difficult transition. <br />
    677. Acquisition <br />Stradivarius. <br />Offensive acquisition. <br />Protect the Bershka. <br />Similar management cultures. <br />Easy integration.<br />
    678. Zara International Marketing <br />Ethnocentric Strategy<br />Geocentric Strategy <br />
    679. Franchise<br />
    680. Franchise<br />Motivation<br />Conditions<br />
    681. Internationalization<br />But in general the choice was to move into a country on the basis of the idea that there was a market opportunity, a good location, or sometimes because a foreign party opened the track, sometimes making the offer of investment.<br />
    682. HAARP<br />
    683. Silicon Valley<br />Silicon Valley is a nickname for the southern part of the San Francisco Bay Area centered roughly on Sunnyvale. <br />coined by journalist Don C. Hoefler in 1971, <br />It was named "Silicon" for the high concentration of semiconductor and computer related industry in the area, and "Valley" for the Santa Clara Valley. <br />Fairchild Semiconductor really started and then fuelled it all<br />
    684. One<br />WWII The First Electronic War<br />
    685. British and American Air War in Europe<br />28,000 Active Combat Planes40,000 planes lost or damaged beyond repair:18,000 American and 22,000 British79,265 Americans and 79,281 British killed<br />
    686. The German Air Defense SystemThe Kammhuber Line<br />Integrated Electronic air defense network<br />Covered France, the Low Countries, and into northern Germany<br />Protection from British/US bomber raids<br />Warn and Detect<br />Target and Aim<br />Destroy<br />
    687. German Air Defense System<br />
    688. Himmelbelt<br />Local Air Defense<br />Network<br />• Box ~30 x 20 miles<br />• Integrated network<br />of radars, flak,<br />fighters,<br />searchlights<br />Radars fed Himmelbett centers<br />• Operators worked from rows of<br />seats in front of a huge screen<br />• Fighters would fly orbits around<br />a radio beacon<br />– fighter controller talked it to the<br />vicinity of the target<br />• Fighters would turn on its radar,<br />acquire the target, and attack<br />
    689. Flak Radar Controlled Anti Aircraft Guns<br />15,000 Flak Guns<br />400,000 soldiers in flak batteries<br />Radar-directed flak to 30,000’<br />Fused for time<br />Fragmentation rounds<br />No Proximity Fuses<br />105 mm flak<br />
    690. The Electronic Shield <br />Electronic Warfare<br />Two<br />
    691. Harvard Radio Research Lab Signals Intelligence and Electronic Warfare<br />Reduce losses to fighters and flak<br />Find/understand German Air Defense<br />Electronic and Signals Intelligence<br />Jam/confuse German Air Defense<br />Radar Order of Battle<br />Chaff<br />Jammers<br />Top Secret 800 person lab<br />
    692. ELINT Understand German Air Defense<br />B-24J flights inside Germany to intercept German radar signals<br />Fitted with receivers & displays<br />Wire and strip recorders<br />Frequency, pulse rate, power, etc.<br />50 MHz to 3 GHz<br />
    693. Window/ChaffJam Wurzburg<br />Strips of aluminum foil<br />1/2 Wurzburg frequency<br />46,000 packets tossed out by hand<br />Each packet contained 2,000 strips <br />Automatic dispensers came later<br />First used July 1943<br />Raid on Hamburg<br />Shut down German air defense<br />Used 3/4’s of Aluminum Foil in the US<br />
    694. Blind German Early Warning Radar<br />Put Jammers on Airplanes<br />Carpet” AN/APT-2 Jammer<br />Confuse Wurzburg radar<br />Shut down flak<br />Shut down GCI<br />5 Watts<br />
    695. Fred Terman<br />Who Ran this Secret Lab and became<br />the Father of Electronic Warfare?<br />• Harvard Radio Research Lab<br />– Separate from MIT's Radiation Laboratory<br />– Ran all electronic warfare in WWII<br />– 800 people<br />– 1941-1944<br />• Director: Fredrick Terman - Stanford<br />
    696. Fred Terman<br />Stanford Professor of engineering 1926<br />encouraged his students, William Hewlett and David Packard to start a company<br />Dean of Engineering 1946<br />Provost 1955<br />
    697. Spook Entrepreneurship<br />
    698. Terman Strategy<br />Focus on microwaves and electronics<br />Not going to be left out of gov’t $’s this time<br />Recruits 11 former members of RRL as faculty<br />Set up the Electronics Research Laboratory (ERL)<br />“Basic” and Unclassified Research<br />First Office of Naval Research (ONR) contract 1946<br />By 1950 Stanford was the MIT of the West<br />
    699. Korean WarSpook Work Comes to Stanford<br />• Applied Electronics Laboratory (AEL)<br />– “Applied” and Classified Military programs<br />– Doubles the size of the electronics program<br />– Separate from the unclassified Electronics<br />Research Laboratory<br />– Made the university, for the first time, a full<br />partner in the military-industrial complex<br />
    700. Cold War and Research<br />The Cold War battlefield moves 500 miles east<br />Fear of a “nuclear Pearl Harbor”<br />Countermeasures, Elint and Sigint, become critical<br />Stanford becomes a center of excellence for the NSA,CIA, Navy, Air Force<br />
    701. The Cold War is an Electronic War<br />
    702. Stanford Helps Understand theElectronic Order of Battle<br />Where are the Soviet radars?<br />Consumers; SAC, CIA.<br />Details of the radars<br />NSA/CIA to contractors<br />Periphery of Soviet Union known<br />
    703. U-2 Sigint Platform (1956)Stanford and Silicon Valley<br />System IV<br />150 - 40,000 MHz<br />Stanford Electronics Laboratories<br />Ramo Woolridge<br />E/F Band ELINT recorder (1956)<br />A Band ELINT recorder (1959)<br />E/F Band Jammer (1959)<br />Granger Associates<br /> Watkins Johnson<br />– QRC -192 Elint receiver<br />– 50 -14,000 MHz<br />Communications receiver<br />– 100-150 MHz/3 channel tape recorder<br />
    704. Stanford Joins the “Black” World<br />Electronics Research Laboratory<br />“Basic” and Unclassified Research<br />Applied Electronics Laboratory (AEL)<br />“Applied” and Classified Military programs<br />Merge and become the Systems Engineering<br />Lab (SEL) in 1955<br />Same year Terman becomes Provost<br />
    705. Terman Changes the Startup/University Rules<br />Silicon Valley as We Know it Starts Here<br />Graduate students encouraged to start companies<br />Professors encouraged to consult for companies<br />Terman and other professors take board seats<br />Technology transfer/IP licensing easy<br />Getting out in the real world was good for your academic career<br />
    706. Stanford’s Role<br />Interaction with industry (via legacy just discussed)<br />Research funding and creativity<br />Silicon Valley as a nearby planting ground for ideas<br />Role of students as inventors, as disseminators, and as part of the workforce<br />Encouraging entrepreneurship …<br />
    707. Microwave Valley - Components<br />Klystrons, Carcinotrons, & Traveling Wave Tubes<br />Eitel-McCullough (1934)<br />Varian Associates (1948)<br />Litton Industries (1946)<br />Huggins Laboratories (1948)<br />Stewart Engineering (1952)<br />Watkins-Johnson (1957)<br />Microwave Electronics Co. (1959)<br />
    708. 1966<br />Hewlett-Packard entered the general purpose computer business with its HP-2115 for computation, offering a computational power formerly found only in much larger computers. It supported a wide variety of languages, among them BASIC, ALGOL, and FORTRAN.<br />HP-2115<br />
    709. Spook Innovation<br />
    710. Radio Dishes Get Funded<br />Attach ELINT receivers to Bell Labs<br />60’ radar antenna in New Jersey<br />Use “matched filter” techniques<br />Developed at Stanford<br />• Build steerable antenna at Sugar<br />Grove Virginia<br />• Pay for and build Stanford “Dish”<br />Hide relationships via “cover agencies”<br />
    711. Project Grab 1960-1962<br />ELINT in Space<br />No more overflights<br />Collect radar emissions from<br />Soviet air defense radars<br />Built by the Naval Research Laboratory<br />Used by SAC for EOB then given to the NRO<br />
    712. Microwave Valley - Systems<br />Some Stanford Alum’s<br />Sylvania Electronics Defense Laboratory (1953)<br />Countermeasures, search receivers, converters<br />Hired faculty as consultants, including Terman<br />GE Microwave Laboratory (1956)<br />Granger Associates (1956)<br />Electronic Systems Laboratories (ESL) (1964)<br />Sylvania EDL director William Perry founder<br />Argosystems (1969)<br />
    713. Terman and the Cold WarSilicon Valley’s 1st Engine of Entrepreneurship<br />
    714. Valley Attracts Financial Attention1st West Coast IPO’s<br />1956 Varian<br />1957 Hewlett Packard<br />1958 Ampex<br />
    715. The Rise of Risk Capital<br />“The Group” 1950’s<br />• First Bay Area “Angels”<br />– Reid Dennis<br />– William Bryan<br />– William Edwards<br />– William K. Bowes<br />– Daniel McGanney<br />~ 10 deals $75 -$300K<br />
    716. Summary<br />• Terman/Stanford/Government responsible for<br />entrepreneurial culture of Silicon Valley<br />• Military primed the pump as a customer for key<br />technologies<br />– Semiconductors, computers, Internet<br />– But very little technical cross pollination<br />• Venture Capital turned the valley to volume corporate<br />and consumer applications<br />
    717. Hewlett Packard and Wozniack<br />Steven Paul Jobs, Stephen Gary Wozniak and Ronald Gerald Wayne founded Apple Computer.<br />In 1976, Ronald Wayne resigns from Apple Computer with only a one time payment of $80.<br />Hewlett Packard grants Gary Wozniak the permission to create the Apple I.<br />

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