IB Critical Thinking Questions [PDF]

Zitiervorschau

Permanent link: https://cdn.filestackcontent.com/ut7QuABxR1SHrF6rApK6

Question (Likes: 1, Dislikes: 0): An electronics firm is considering how best to supply the world market for microprocessors used in consumer and industrial electronic products. A manufacturing plant costs about $500 million to construct and requires a highly skilled workforce. The total value of the world market for this product over the next 10 years is estimated to be between $10 billion and $15 billion. The tariffs prevailing in this industry are currently low. Should the firm adopt a concentrated or decentralized manufacturing strategy? What kind of location(s) should the firm favor for its plant(s)?

Answer : Step 1

The firm should adopt a concentrated manufacturing strategy; $500 million up front fixed costs when the entire market over a decade for all companies in the industry is $10 to $15 billion makes a single factory a good idea. Since tariffs are low, this single factory could supply a lot of markets at little higher cost than multiple factories could. Step 2

The firm should favor putting the factory in places where there is little chance the factory will be nationalized or disrupted, where there is a highly skilled workforce, near the firm’s industrial/consumer electronics customer’s factories, and/or near significant transport nodes like railways or ports.

Permanent link: https://cdn.filestackcontent.com/p8LhkSxRTWsClSr8QB22

Question (Likes: 0, Dislikes: 0): A chemical firm is considering how best to supply the world market for sulfuric acid. A manufacturing plant costs about $20 million to construct and requires a moderately skilled workforce. The total value of the world market for this product over the next 10 years is estimated to be between $20 billion and $30 billion. The tariffs prevailing in this industry are moderate. Should the firm favor concentrated manufacturing or decentralized manufacturing? What kind of location(s) should the firm seek for its plant(s)?

Answer : Step 1

The firm should favor decentralized manufacturing. The start-up cost is a paltry $20 million in a $20-30 billion dollar market over a decade. Moderate tariffs provide a competitive advantage to firms that decentralize as each factory can be set up to serve each tariff blocked market. Also, there are plenty of moderately skilled workers. A firm does not need to centralize based on labor in this case. Step 2

The firm should put a factory on convenient transportation nodes inside each major market. This way it can ship goods to customers cheaply and the firm does not have to pay inter-market tariffs. Transportation nodes (New Orleans, Chicago, New York, London and Singapore) tend to have plenty of available workers as other firms put factories in these locations for this very reason.

Permanent link: https://cdn.filestackcontent.com/5yZVxTTtqd3ubS15XsEA

Question (Likes: 1, Dislikes: 0): A firm must decide whether to make a component part in-house or to contract it out to an independent supplier. Manufacturing the part requires a nonrecoverable investment in specialized assets. The most efficient suppliers are located in countries with currencies that many foreign exchange analysts expect to appreciate substantially over the next decade. What are the pros and cons of (a) manufacturing the component in-house and (b) outsourcing manufacturing to an independent supplier? Which option would you recommend? Why?

Answer : Step 1

Advantages of manufacturing include possibly lower costs, facilitating the non-recoverable specialized investment, protecting the firm’s technology, and improving coordination of the production of the component with the production of the larger product. Advantages of buying include flexibility and possible lower costs. Step 2

They should make it rather than buy it. Step 3

While foreign manufacturers may be more efficient, their currencies are appreciating. Their exports will be more expensive, making buying less attractive on a long term basis, despite short term lower costs. There is no proprietary technology at stake here. The most important factor is the specialized asset. Other firms might not agree to make the unrecoverable investment out of fear they might get taken advantage of. As not to many firms will make the investment, we may be gouged by a monopolistic supplier. Therefore, they should make it.

Permanent link: https://cdn.filestackcontent.com/isgKxeVRDiaPJc2FnciA

Question (Likes: 1, Dislikes: 0): Reread the Management Focus on Philips in China, then answer the following questions: a. What are the benefits to Philips of shifting so much of its global production to China? b. What are the risks associated with a heavy concentration of manufacturing assets in China? c. What strategies might Philips adopt to maximize the benefits and mitigate the risks associated with moving so much production capacity offshore?

Answer : Step 1

a) Philips benefits from cheap labor, educated labor, reduced uncertainty due to an exchange rate pegged to the dollar, and access to many markets around the world due to China’s entry into the World Trade Organization. Step 2

b) If China’s government collapses, decides to nationalize the company, goes to war, etc. then the effects will be devastating on Philips business. Philips is highly, almost totally, dependent on China. Step 3

c) Philips could spread out the company supply chain to Singapore, Japan, Taiwan, India, Thailand, etc. These countries have a lot of the benefits of China, with the additional benefit of not being China.

Permanent link: https://cdn.filestackcontent.com/fhC7elKOTkacpvBXlwql

Question (Likes: 2, Dislikes: 1): Explain how an efficient logistics function can help an international business compete more effectively in the global marketplace.

Answer : Step 1

For most international business, particularly manufacturing or distribution business, the cost of materials is one of the most expensive parts of the company budget. A more efficient logistics function both provides necessary materials at the lowest price; it does so in a manner suited to the customer. The increased sales and reduced costs results in a competitive advantage for the firm with a more efficient logistics function, thereby enabling said firm to compete better in the global marketplace.

Permanent link: https://cdn.filestackcontent.com/g0JMxmmcTPaV7rjgt99y

Question (Likes: 2, Dislikes: 0): What type of interorganizational relationship should a global company consider in the (a) inbound portion of its supply chains if the goal is to buy commodity-oriented component parts for its own production and (b) outbound portion of its supply chains if the goal is to establish a strong partnership in reaching end-customers?

Answer : Step 1

Supply chain management: Supply chain management is integrating and coordinating goods and services flowing. It includes goods to flow from the raw materials inventory over to finished goods inventory through inventory of work in process. Step 2

Inter-organizational relationship: Inter-organizational relationship is the term that explains the relationship within the organization and the teamwork among their community organizations for the growth and survival of the company. Step 3

a) Inter-organizational relationship in inbound portion of supply chain: Inbound portion of supply chain refers to buying component parts for production. Inbound portions has three parties, they are vendor, supplier, and partners. The inter-organizational relationship should be considered in the inbound portions are coordination, integrations, and transactional relationship. This will make the inbound portion efficient and effective. Transactional relationship is the relationship of the firm with the supply chain partners based on the exchange of products or services for an agreed price. This exists over a long period. Step 4

b) Inter-organizational relationship in outbound portion of supply chain: Outbound portion of supply chain refers to the establishment of strong relationship with the end customers by delivering quality goods and services. Outbound portions have three scenarios such as buyer, customer and client. The inter-organizational relationship that should be considered in the outbound portions includes coordination, integration, and transactional relationship with trust and commitment to deliver quality products. Step 5

Conclusion: Efficient supply chain will result in the effective and profitable business. Trust and commitment are the two keys of interorganizational relationships. A firm that engages in obtaining raw materials from the supplier is known as inbound portions. The firm that makes the final goods to reach the end customer is known as outbound portions of supply chain process.

Permanent link: https://cdn.filestackcontent.com/nOvvfscRcSEiJmnsvHWU

Question (Likes: 4, Dislikes: 0): Imagine you are the marketing manager for a U.S. manufacturer of disposable diapers. Your firm is considering entering the Brazilian market. Your CEO believes the advertising message that has been effective in the United States will suffice in Brazil. Outline some possible objections to this plan. Your CEO also believes that the pricing decisions in Brazil can be delegated to local managers. Why might she be wrong?

Answer : Step 1

While babies’ behinds serve the same function in all cultures, and the product's technical standards may be similar, sensitivity to bodily functions does vary across cultures. Thus, the advertising message may need to be changed for different attitudes towards what is appropriate advertising. Likewise, where it might be progressive to show an ad with a male changing a diaper in some countries, in other countries this message could be lost or misinterpreted. Another consideration would be the noise level created by the advertising message of competitor's products, which may well be different in Brazil. While local demand and price elasticity decisions should play an important role in Brazil, pricing should not be left solely to the discretion of the local managers. Since this is a global business, your firm will likely be competing in Brazil with some of the same competitors as elsewhere. Thus pricing decisions in one country can have an impact on pricing and competition in other markets. Similarly, your firm may want to position and price the brand similarly across different South American countries.

Permanent link: https://cdn.filestackcontent.com/Oais3GmlQncqU8R2jqDb

Question (Likes: 0, Dislikes: 0): Within 20 years, we will have seen the emergence of enormous global markets for standardized consumer products. Do you agree with this statement? Justify your answer.

Answer : Step 1

One could either choose to agree or disagree, while the best answer would likely hedge it somewhere in the middle. There are already enormous global markets for products like Coke and Levis, but it is questionable whether there will ever be a global consumer market for Norwegian lutefisk. More global consumer markets will likely emerge, but there will continue to be national distinctions for many products.

Permanent link: https://cdn.filestackcontent.com/8ddmlWbRwSb6I69NHNgC

Question (Likes: 5, Dislikes: 0): You are the marketing manager of a food products company that is considering entering the Indian market. The retail system in India tends to be very fragmented. Also, retailers and wholesalers tend to have long-term ties with Indian food companies, which makes access to distribution channels difficult. What distribution strategy would you advise the company to pursue? Why?

Answer : Step 1

The firm should sell to either wholesalers or import agents. Because the retail system in India is very fragmented, it would be very expensive for the firm to make contact with each individual retailer. As a result, it would be more economical for the firm to sell to wholesalers or import agents. Import agents may have long-term relationships with wholesalers, retailers, and/or other import agents. Similarly, wholesalers may have long-standing relationships with retailers and, therefore, be better able to persuade them to carry the firm’s product than the firm itself would.

Permanent link: https://cdn.filestackcontent.com/6uo751YUQYa4XwKB1TvG

Question (Likes: 0, Dislikes: 0): Price discrimination is indistinguishable from dumping. Discuss the accuracy of this statement.

Answer : Step 1

In some specific instances this statement is correct, but as a general rule it is not. When a firm is pricing lower in a foreign country than it is in its domestic market, it can be difficult to distinguish dumping from price discrimination unless it is clear that the firm is selling at below cost in the foreign market. Yet when costs are reasonably well known and all prices are above these, or if the firm is pricing lower in its domestic market than in foreign markets, it can be reasonably concluded that price discrimination rather than dumping is occurring.

Permanent link: https://cdn.filestackcontent.com/r2jzWiCWQ2iXhP9uFOA7

Question (Likes: 1, Dislikes: 0): You work for a company that designs and manufactures personal computers. Your company’s R&D center is in North Dakota. The computers are manufactured under contract in Taiwan. Marketing strategy is delegated to the heads of three regional groups: a North American group (based in Chicago), a European group (based in Paris), and an Asian group (based in Singapore). Each regional group develops the marketing approach within its region. In order of importance, the largest markets for your products are North America, Germany, Great Britain, China, and Australia. Your company is experiencing problems in its product development and commercialization process. Products are late to market, the manufacturing quality is poor, costs are higher than projected, and market acceptance of new products is less than hoped for. What might be the source of these problems? How would you fix them?

Answer : Step 1

The dispersion of activities makes sense - products are produced in the lowest cost location and marketed by people familiar with local conditions. (The R&D in North Dakota must be a historical fluke.) Yet this makes the coordination task extremely complex, and information required for successful commercialization is likely not being effectively communicated among all the appropriate people. Greater cross-functional integration in the new product development process should help to improve product development and commercialization.

Permanent link: https://cdn.filestackcontent.com/h0GClRAyR16Ix2KElj4h

Question (Likes: 0, Dislikes: 0): Reread the Management Focus on Levi Strauss, and then answer the following questions: a. What marketing strategy was Levi Strauss using until the early 2000s? Why did this strategy appear to work for decades? Why was it not working by 2004? b. How would you characterize Levi Strauss’s current strategy? What elements of the marketing mix are now changed from nation to nation? c. What are the benefits of the company’s new marketing strategy? Is there a downside? d. What does the Levi Strauss story tell you about the “globalization of markets”?

Answer : Step 1

4897-17-6CTDQ AID: 1714 | 21/12/2012 RID: 1100 | 31/12/2012 a) Market strategy until 2000 and reason for its failure: Up until the early 2000’s, Company B was taking a universal marketing approach in many different countries. It was able to do this because their jeans had become a global symbol for a generation. With a new generation of consumers, however, the universal marketing approach stopped working as well. Step 2

b) Current strategy of Levi: Step 3

Company B’s current marketing strategy is a product of market segmentation. It is becoming successful again because it’s literally tailoring its jeans to local markets in different regions of the world. An example of this is seen in Japan, where tight fitting black jeans are the trend. Thus, Company B distributes more tight fitting black jeans to Japan and profits more than they would if they sold regular fit blue jeans due to the conditions in the local market. Step 4

c) Benefits of Levi’s new market strategy: The benefits in Company B’s new marketing strategy is that its profits have exponentially increased in some markets, while in other markets like the U.S. and Europe, its growth is still slow. However, its rapid growth in the emerging markets is expected to compensate for its slow growth in the U.S. and Europe markets moving forward. Step 5

d) Globalization of markets: Company B’s story tells us that the globalization of markets is doable, but a company needs to modify its approach from country to country (market to market) to be able to do so.

Permanent link: https://cdn.filestackcontent.com/L3ZtI8uRQ6pEYvJyvmtx

Question (Likes: 0, Dislikes: 0): What are the main advantages and disadvantages of the ethnocentric, polycentric, and geocentric approaches to staffing policy? When is each approach appropriate?

Answer : Step 1

In an ethnocentric staffing policy, management teams in the parent country of a company make all staffing decisions. This approach takes, for example, when executives in the parent country feel employees in the host country are not qualified to make staffing decisions. This happens a lot in third world countries. It also helps transfer over fundamental competencies from the parent country to the host country. In these senses, this approach would consider advantageous. However, a couple disadvantages to this approach would be the host country becoming resentful of the parent country, and a short-sidedness in the company’s response to cultural differences because this approach use less and less. Step 2

In a polycentric staffing policy, the company headquarters is still in the parent country. The difference between an ethnocentric staffing policy and a polycentric staffing policy is that in a polycentric policy, host country nationals manage subsidiaries. This accounts for cultural differences that the parent country nationals might not understand. A disadvantage to this policy is the limits that it imposes on host country nationals to move up in the company. Their progression within the company caps within their own country. Another disadvantage is that company headquarters is also isolated from the host country. This approach used when there is a large gap in cultural differences between the parent country and host country in order to approach the host country’s market with a more significant cultural impact. Step 3

In a geocentric staffing policy, positions fill based solely off merit; nationality is irrelevant in this policy. Many would consider this staffing policy to have the most advantages, the most important being that it allows a global company to use its resources efficiently and effectively. Furthermore, the culture of companies with this policy flourishes under this policy since strong networks built without national limitations. This approach can use when immigration laws do not limit employment opportunities.

Permanent link: https://cdn.filestackcontent.com/iuni4nyFRyqJGgqg1Urh

Question (Likes: 2, Dislikes: 0): Research suggests that many expatriate employees encounter problems that limit both their effectiveness in a foreign posting and their contribution to the company when they return home. What are the main causes and consequences of these problems, and how might a firm reduce their occurrence?

Answer : Step 1

The main cause for expatriate failure is the overall inability to adjust. A different country comes with a different culture to which most parent-country nationals (and their spouses) are not used. Thus, research shows that main culprit in expatriate failure is actually a failure in adjusting to culture. Other factors that contribute to expatriate failure are an expatriate’s emotional immaturity and inability to manage larger responsibilities overseas. Step 2

One way to prevent expatriate failure is to extensively screen potential expatriates before selecting one. A good screening should prove that a candidate is self-confident with good mental health. She should also have a willingness to communicate with others. This will prove effective when difficult concepts need to communicate to host nationals.

Permanent link: https://cdn.filestackcontent.com/zm2Gn4WS1Ky4OpUAFmMg

Question (Likes: 0, Dislikes: 0): What is the link between an international business’s strategy and its human resource management policies, particularly with regard to the use of expatriate employees and their pay scale?

Answer : Step 1

Remember, staffing policy is related with selection of individuals for a particular job. While selecting the employees for the organization, a manager should analyze the skill and abilities of individual, so that, they match with the job requirements. In addition, staffing policy helps in promoting and developing the corporate culture. Step 2

Note that, there are three types of staffing policies in international business. They include: • Ethnocentric approach • Polycentric approach • Geocentric approach Step 3

Ethnocentric approach: Under ethnocentric staffing policy, parent country nationals are concerned with filling all key management positions. Advantages: • Transfer of skill and knowledge from parent country to foreign operations. • Maintain a unified corporate culture • Creates values by transferring core competencies to a foreign operation Disadvantages: • Limits advancements opportunities for host-country nationals • Increased employee turnover • Lower productivity • Leads to cultural myopia Step 4

Polycentric approach: This approach relates to recruitment of host-country nationals to manage the subsidiaries. Advantages: • Alleviates the cultural myopia • Decreases the employee turnover Disadvantages:

Limits career mobility Step 5

Geocentric approach: This approach is concerned with recruiting the best people for key jobs, regardless of nationality. Advantages: • Efficient use of human resources • Builds strong culture • Forms informal management networks Disadvantages: • Expensive approach Step 6

A firm’s HR policies can either be • Ethnocentric (parent-country nationals are paid to fill in international positions), • polycentric (foreign subsidiaries are managed by someone from that country), or • Geocentric (picking the best people for the jobs available, no matter their nationality) In terms of pay, companies that use ethnocentric or polycentric policies should determine pay on a country-specific basis. Those with geocentric policies can use the balance sheet approach to estimate the pay that would allow the same living standard in their respective countries to decide how much to pay international staff members. Step 7

To conclude, ethnocentric approach is compatible with an international strategy, polycentric approach is compatible with localization strategy and a geocentric approach is compatible with both standardization and transnational strategies.

Permanent link: https://cdn.filestackcontent.com/3PvZpppnTs2cNFOVUb69

Question (Likes: 0, Dislikes: 0): In what ways can organized labor constrain the strategic choices of an international business? How can an international business limit these constraints?

Answer : Step 1

Organized labor can limit international businesses’ strategic choices, but there are ways for the business to reduce these limits. Labor unions (organized labor) principally seek to get their members better conditions, pay, and job security. These labor unions limit the strategic choices of international businesses by establishing international labor unions, fighting for laws to limit the rights of international firms, and putting regulations in place through larger organizations like the United Nation to limit international businesses’ rights. Step 2

One of the tactics for reducing organized labor’s ability to limit multinational business rights is to centralize the control of labor relations. This allows international companies to more easily threaten to move labor to foreign countries, when there are disputes with the union. This allows large companies to come to a quick agreement and communicate these decisions to labor unions, which would not be an easy task, if labor relations were decentralized.

Permanent link: https://cdn.filestackcontent.com/4R2r4bKQE70lfR4teHAz

Question (Likes: 1, Dislikes: 0): Reread the Management Focus on McDonald’s global compensation practices. How does McDonald’s approach help the company take local differences into account when reviewing the performance of different country managers and awarding bonus pay?

Answer : Step 1

The global compensation approach to performance reviews and bonus pay for different country managers helps account for international differences in two key ways: First, the program allows for localized goals by allowing managers in each country to pick from a whole list of key business goals so that each country can localize and strategize for its own unique market’s needs. These countries then set their own targets and goals, which creates a country-specific bonus system when these managers hit their goals. Step 2

Second, the company has guidelines rather than forced ranking of individual employees. This allows the company to individualize performance evaluations based on the goals of each country’s specific market.