1. Exam 30.01.2013 (11:30 - 13:00)

2. Exam 18.03.2013 (19:00 - 20:30)


Exam questions:


1. Definition part (5 points each)

Definition of 'Acquisition'

A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm. Acquisitions are often made as part of a company's growth strategy whereby it is more beneficial to take over an existing firm's operations and niche compared to expanding on its own. Acquisitions are often paid in cash, the acquiring company's stock or a combination of both.

explains 'Acquisition'

Acquisitions can be either friendly or hostile. Friendly acquisitions occur when the target firm expresses its agreement to be acquired, whereas hostile acquisitions don't have the same agreement from the target firm and the acquiring firm needs to actively purchase large stakes of the target company in order to have a majority stake.
In either case, the acquiring company often offers a premium on the market price of the target company's shares in order to entice shareholders to sell. For example, News Corp.'s to acquire Dow Jones was equal to a 65% premium over the stock's market price.
Read more: http://www.investopedia.com/terms/a/acquisition.asp#ixzz2F6fTlvNf

Definition of 'Barter'

The act of trading goods and services between two or more parties without the use of money. Bartering benefits companies and countries that see a mutual benefit in exchanging goods and services rather than cash, and it also enables those who are lacking hard currency to obtain goods and services.

explains 'Barter'

An example of a barter arrangement would be if someone built a fence for a cattle farmer in exchange for food. Rather than the farmer paying the builder, say, $1,000 for the fence, he would give the builder a similar value in beef.

Configuration Strategy – where and at what scale are primary activities conducted. Porter (1987) Lessard 2003 p.8-9  Configuration of core activities refers to the geographic focus of key activities, whether they are locally-focused, continentally-focused, or globally-focused. Being globally-focused does not necessarily imply that they are located away from the home base, merely that they are done in the right place (in terms of direct, transportation and coordination costs) and at the right scale.

Economies of scale refer to changes in the output of a single product type. With more output advantages of fix cost spread and other factors such as learning curve, lower resource prices etc. at larger production are arise.

Economies of scope exist where a firm can produce two and products at a lower per unit cost than would be possible if it produced only the one. Precondition is that one or more manufacturing or supporting steps can be performed in the same or similar way using same resources.

Whereas economies of scale refer to changes in the output of a single product type, economies of scope refer to changes in the number of different types of products.

Foreign Direct Investment - Direct investments in productive assets by a company incorporated in a foreign country, as opposed to investments in shares of local companies by foreign entities.

Franchising - Arrangement where one party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade-name as well as certain business systems and processes, to produce and market a good or service according to certain specifications. The franchisee usually pays a one-time franchise fee plus a percentage of sales revenue as royalty, and gains (1) immediate name recognition, (2) tried and tested products, (3) standard building design and décor, (4) detailed techniques in running and promoting the business, (5) training of employees, and (6) ongoing help in promoting and upgrading of the products. The franchiser gains rapid expansion of business and earnings at minimum capital outlay.

A global supply chain is made up of the interrelated organizations, resources, and processes that create and deliver products and services to end customers. In the instance of global supply chains, it is extended around the world.

The facilities, functions, and activities involved in producing and delivering a product or service, from suppliers to customers. www.freequality.org

Intercultural competence is the ability to communicate successfully with people of other cultures. In interactions with people from foreign cultures, a person who is interculturally competent understands the culture-specific concepts of perception, thinking, feeling, and acting. Intercultural competence is also called "cross-cultural competence". http://en.wikipedia.org/wiki/Intercultural_competence

Joint-Venture - New firm formed to achieve specific objectives of a partnership like temporary arrangement between two or more firms. JVs are advantageous as a risk reducing mechanism in new-market penetration, and in pooling of resource for large projects. They, however, present unique problems in equity ownership, operational control, and distribution of profits (or losses). Research indicates that two out of five JV arrangements last less than four years, and are dissolved in acrimony. http://www.businessdictionary.com/definition/joint-venture-JV.html#ixzz2F75OOX7E

Local Content - When a foreign company makes products in a different country, the materials, parts etc. that have been made in that country rather than imported. A minimum level of local content is sometimes a requirement under trade laws when giving foreign companies the right to manufacture in a particular place. http://lexicon.ft.com/Term?term=local-content

Merger - Voluntary amalgamation of two firms on roughly equal terms into one new legal entity. Mergers are effected by exchange of the pre-merger stock (shares) for the stock of the new firm. Owners of each pre-merger firm continue as owners, and the resources of the merging entities are pooled for the benefit of the new entity. If the merged entities were competitors, the merger is called horizontal integration, if they were supplier or customer of one another, it is called vertical integration. http://www.businessdictionary.com/definition/merger.html#ixzz2F8oROQZf

Multinational company – see website

Offshoring - The moving of various operations of a company to another country for reasons such as lower labor costs or more favorable economic conditions in that other country.  http://www.businessdictionary.com/definition/offshoring.html#ixzz2F8poIMiF


OLI Paradigm - The OLI Paradigm is a mix of 3 various theories of foreign direct investment, that concentrating on a various question.

FDI= O + L + I,

"O"- Ownership Advantages (or FSA - Firm Specific Advantages).

This firm specific advantage is usually intangible and can be transferred within the multinational enterprise at low cost (e.g., technology, brand name, benefits of economies of scale). The advantage either gives rise to higher revenues and/or lower costs that can offset the costs of operating at a distance in an abroad location.

A Multinational enterprise operating a plant in a foreign country is faced with additional costs paralleled to a local competitor.

The additional costs could be specified:

  1. a failure of knowledge about local market conditions
  2. legal, institutional, cultural and language diversities
  3. the increased costs of communicating and operating at a distance

Consequently, if a foreign firm is to be successful in another country, it must have some kind of an advantage that vanquishes the costs of operating in an abroad market. Either the firm must be able to earn higher revenues, for the same costs, or have lower costs, for the same revenues, than comparable native firms. Since merely abroad firms have to pay "costs of foreignness", they must have other methods to earn either higher revenues or have lower costs in order to able to stay in business.

Profit = Total revenues - Total costs - Cost of operating at a distance.
The Multinational enterprise must have some separate advantages with its competitors, if it wants to be profitable abroad. Advantages must be particular to the firm and readily transferable between countries and within the firm. These advantages are called ownership or core competencies or firm specific advantages (FSAs).

The firm has a monopoly over its firm specific advantages and can utilize them abroad, resulting in a higher marginal return or lower marginal cost than its competitors, and thus in more profit.
Three basic types of ownership advantages (or Firm Specific Advantages) for a multinational enterprise that it can possess:

  1. monopolistic advantages that receive to the Multinational enterprise in the form of privileged access to output and input markets through ownership of scarce natural resources, patent rights, and the like.
  2. technology, knowledge broadly defined so as to contain all forms of innovation activities
  3. economies of large size (advantages of common governance) such as economies of learning, economies of scale and scope , broader access to financial capital throughout the Multinational enterprice organization, and advantages from international diversification of assets and risks.


"L" - Location Advantages (or Country Specific Advantages - CSA).

The firm must use some foreign factors in connection with its native Firm Specific Advantages (FASs) in order to earn full rents on these FSAs. Therefore the locational advantages of different countries are key in determining which will become host countries for the Multinational enterprises.
Clearly the relative attractiveness of various locations can change over time so that a host country can to some extent engineer its competitive advantage as a location for foreign direct investment.
The country specific advantages (CSAs) can be separate into three classes:

  1. E - Economic advantages consist of the quantities and qualities of the factors of production, transport and telecommunications costs, scope and size of the market, and etc.
  2. P - Political Advantages include the common and specific government policies that influence inward Foreign Direct Investment flows, intrafirm trade and international production.
  3. S - Social, cultural advantages include psychic distance between the home and host country, language and cultural diversities, general attitude towards foreigners and the overall position towards free enterprise.

and finally,

"I" - Internalization Advantages (IA).

The Multinational enterprises have several choices of entry mode, ranking from the market (arm's length transactions) to the hierarchy (wholly owned subsidiary). The Multinational enterprises choose internalization where the market does not exist or functions poorly so that transactions expenses of the external route are high. The subsistence of a particular know-how or core ability is an asset that can give rise to economic rents for the firm. These rents can be earned by licensing the Firm Specific Advantages to another firm, exporting products using this Firm Specific Advantages as an input, or adjustment subsidiaries abroad. http://www.investmentsandincome.com/investments/oli-paradigm.html



Outsourcing - A practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally. www.investopedia.com/terms/o/outsourcing.asp

The contracting or subcontracting of noncore activities to free up cash, personnel, time, and facilities for activities in which a company holds competitive advantage. Companies having strengths in other areas may contract out data processing, legal, manufacturing, marketing, payroll accounting, or other aspects of their businesses to concentrate on what they do best and thus reduce average unit cost. Outsourcing is often an integral part of downsizing or reengineering. Also called contracting out.  http://www.businessdictionary.com/definition/outsourcing.html#ixzz2F8sYeWfs

- Passive subcontracting = outward processing is the handling, processing and repair of goods that are transferred on the open market of the economic zone in foreign economic territories and imported refined or completed again.

The coating is a form of outsourcing certain processes from his own resources to a foreign company and then gets a special meaning when it comes to cross-border cooperation. As a reason for outward processing (PV) today is mostly exploiting a gap in pay for the outsourcing of labor-intensive processing or working processes in the foreground. Labor-intensive industries such as textiles and clothing industry have gained long experience in Southern Europe, Eastern Europe, Asia and developing countries.

There are labor costs low and production is not expensive by labor and environmental standards. Of course, the cost of transporting the fabrics and all the logistics will increase for firms in.

active subcontracting = inward processing - Foreign goods imported temporarily and processed inland.

The terms are mirror images: active contract work from the perspective of one country represents always as passive from the perspective of the other participating country

- Polycentric corporate orientation – see website

- Strategic corporate alliance - Agreement for cooperation among two or more independent firms to work together toward common objectives. Unlike in a joint venture, firms in a strategic alliance do not form a new entity to further their aims but collaborate while remaining apart and distinct.  http://www.businessdictionary.com/definition/strategic-alliance.html#ixzz2FCcGLUjN

Transaction costs are the costs incurred in making an economic exchange (the cost of participating in a market).

Transaction costs can be divided into three broad categories:

· Search and information costs are costs such as those incurred in determining that the required good is available on the market, which has the lowest price, etc.

· Bargaining costs are the costs required to come to an acceptable agreement with the other party to the transaction, drawing up an appropriate contract and so on. In game theory this is analyzed for instance in the game of chicken. On asset markets and in market microstructure, the transaction cost is some function of the distance between the bid and ask.

· Policing and enforcement costs are the costs of making sure the other party sticks to the terms of the contract, and taking appropriate action (often through the legal system) if this turns out not to be the case.

For example, the buyer of a new car faces a variety of different transaction costs. The search costs are the costs of finding a car and determining the car's condition. The bargaining costs are the costs of negotiating a price with the seller. The policing and enforcement costs are the costs of ensuring that the seller delivers the car in the promised condition. http://en.wikipedia.org/wiki/Transaction_cost

- Transnational Company – see website

II Section: Answer the following questions (10 points each):

1. Under what conditions should companies opt for cross-border acquisitions?

Answer: see OLI paradigm etc. Think about - what are cross-border acquisitions? Is it equal to FDI?

Ownership Advantages, Location – Economic, Political, Social, cultural, Internationalization


2. Write at least 6 criteria for measurement of the internationalization degree of a company.

Answer: different Foreign to total or Foreign to domestic ratios: invest, personal in host country (host to home total, host to home in host country), turn over, production, further key performance indicators for internationalization degree, like:

Internationalization Indicators

Structural Indicators


1. Relating to foreign activities

t Number of countries an enterprise is active in

t Number or proportion of foreign affiliates

t Number or proportion of non-capital involvements abroad (e.g. strategic alliances, franchised operations)

t Amount or proportion of foreign assets

t Amount or proportions of value added abroad

t Amount or proportion of sourcing abroad

t Number or proportion of foreign employees

2. Relating to governance structures

Number of stock markets on which a enterprise is listed

t Amount or proportion of shares owned by foreigners

t Number or proportion of non-nationals in the board of directors



Performance Indicators

1. Foreign Sales

t Demand: Amount of foreign sales by customer location

Exports from the home country

+Revenues of foreign affiliates

- their revenues from exports to the home country

t Supply: Amount of sales of foreign affiliates

Sum of revenues of foreign affiliates

2. Operating income abroad

Sum of operating income of foreign affiliates


Attitudinal Indicators

1. „Soft‟ indicators

t Ethno-, poly-, region- or geocentric management style according to:

organisational complexity, authority, decision making, communication flows,

recruiting, staffing,


2. „Hard‟ indicators

t International experience of top managers

Cumulative duration of the year’s top managers spent working abroad

weighted by the total years of their working experience


source: The Journal of Applied Business Research – May/June 2009 Volume 25, Number 3

3. What qualities characterize hidden champions?

Answer: They sell particular products in small niche markets, but their market share puts them in the "Top Three" among global companies in these markets; they earn annual revenue below $4 billion; and they face a low level of public awareness for their success.



4. When it may make sense from a business perspective to shift part of its production abroad? Justify your answer. Name at least 3 typical reasons.

Answer: cost, capacity, local awareness, legal requirements. See OLI paradigm etc.

5. Reproduce the integration variants for acquired company after acquisition.

Answer: see web page

6. A company from a country with high masculinity, short term orientated, low individualism, high corruption and high power index acquired a company in a country with low masculinity, long term orientated, high individualism, low corruption and low power index. What integration scenario for acquired firm can be expected under these conditions? Justify your answer.

Answer: combine possible integration variants for acquired company after acquisition with your knowledge of 5 Hofstede culture dimensions. Think about the causality: even if the companies are very different all 4 scenarios are possible under certain conditions.


You will get 10 questions from first category and 2 questions from second one.

Dictionaries are allowed on exam, but I’ll have to check each one for “non-dictionary” text.


What is expected from your presentations (is subject of changing)


Please submit in addition to your presentation slides in power point also your remarks /explanations to the presentation slides: you say more relevant information as on your slides and it is important for judging a quality of your presentation.

Requirements to your presentations will slightly rise with each round and each presentation slightly because we should take in account the learn curve.

For each “piece” of theory you present, please show the practical implementation of it on your presentation-company.


Please follow the causality chain: end purpose of a usual business is sustainable profit – one of the goals/ ways to achieve it are international opportunities.


Then you think in a framework of our course:

1. For international business your company has to choose an entry / cooperation mode (from indirect export to fully owned subsidiary). For the next presentations (until I’ll tell that it is enough) please summarize the entry mode forms, advantages and risks of those forms.


2. Take EPRG factors table for your company (fill it out) and show the possible influence of each factor on international business designs / strategies


3. Take IMGT factors table and do the same as in 2.


4. As you know: to measure profit you have to see the possible /planed / forecasted outcome of you company designs on turn over and costs. Our text book implicitly expected that you know how to calculate design influences on turn over (price and volume strategies) and costs (internal controlling – overall production cost calculation (raw material, labor, machines, overhead). The book assumed as well that you know and can apply project management, organizational structures and processes in industrial environment and system analysis techniques to handle the necessary for task 4 topics.

Try to do your best to present “tangible” results for task 4 and don’t hesitate to ask me for assistance – I’ll explain it in the next weeks on your request.


5. Last but not least: our social factors - power distance, masculinity etc.

Please show them for your company (based on home country etc.) and show as in 2. and 3. the influence of each on the business designs / strategies of your company.



(6). For each task you can analyze:

a) the current retrospective situation of the chosen company,

b) what they should do according our book theory? and

c) what are the actual recommendations for your company to come from what they have done to what they should achieve according b)?


Think you in the role of company managers or internal consultants (staff function) or external consultants.



From now on questions will come also during your presentations and not only after it. We make it more reality like: members of manager board will not allways wait until you finish if they don’t understand, don’t agree or just don’t like what or how you are presenting! Be prepared for it. And again: you have to convince with your theoretical knowledge according our theory and with your practical concept again according to our theory!




Short information to the theoretical concepts for our course:



Typologies of multinational companies to Harzing

Advantages international company to Ghoshal

EPRG Typologie to Perlmutter

Integration after acquisition to Morosini 1980

Integration strategy after acquisition to Kutchker 2006


Don't forget to show 5 cultural dimensions and those impact on your company strategy in your particular case - market/product mix:

§ - Power Distance

§ - Uncertainty Avoidance

§ - Masculinity/Femininity

§ - Individualism/Collectivism

-  - Long term orientation

Book content to pay primary attention on for the exam questions:

() examples or less important

Chapter 15 – entry modes 428 – 438 + (439 - 447) 434 FDI

Chapter 19 – human resources with EPRG concept 546 – 549

Chapter 13 – international competitive strategy, (I)MultidomesticGT 390 following, 380 – 399 (400-407)

Chapter 6 – sociocultural forces 176-213 especially 207-209 cultural indicators

Chapter 14 – assessing & analyzing markets 410-419 + (420-427)

Chapter 17 – marketing 480-484 + 489-505, 503-504 indicators matrix

Chapter 18 - organizational design & control 524-528 (508-533)

Chapter 21 – operations & supply chain – 593-597 + 604-605 + (606-630)




Content points for seminar 17.10.2012


1. Registry in excel list of your groups (from your e-mails till 16.10.2012)


It’s enough to send me one e-mail per group with info in excel list for each of the group members.


For those who will not succeed to form a group of 5 students we will compile the groups during our seminar on 17.10.2012.



2. Coordination and setting of appointments for your presentations – all 3 runs. Each group of 5 students: 3 presentations = 30 min presentation + 30 min discussion. During first presentation – introduction of each presenting student – additional 10 minutes.


3. I’ll present you briefly a possible structure for working on your presentation and for design making on inter country market strategy:


Project Management: goal setting, purpose description, start/end time, project structure plan PSP, duration planning for each task and sequence chain setting, buffer calculation, resource assignment, resource demand and supply planning, planed cost and profit calculation.


System analysis: goal and purpose (endless number of models for the same object depended on goal and purpose), modeling object, system border, system elements, relevant in-/output (including environment/ share /stakeholders (acting subjects) influence – political, economic etc.), interrelations between system elements. Quasi closed and open systems. Regulation mechanisms.


4. How to consider the international compilation of the group as an influencing factor for business behavior? Questionnaire based on excel data form.


5. Your questions to your presentation company choice, any working topic, formal structure etc. – preferably electronically submitted via e-mail (also possible during our class time)