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Management Core
MGCR 382
John Saba

Perceived benefits of hosting Olympics  Economic growth  Boost to tourism  Chance to be in international spotlight  Catalyst for infrastructure improvement Olympics require large revenues – 2 key sources (selling broadcast rights [for television coverage] 47%, corporate sponsorships 45%), ticketing (5%), licensing (3%) What is international biz? IB consists of business transactions (incl. sales, investments, and transportation) b/w parties from more than 1 country. Parties involved may include:  Private individuals  Individual companies  Groups of companies  Gov agencies International vs domestic biz Domestic biz involves transactions occurring within the boundaries of a single country International …..cross national boundaries. IB creates new risk Cause: a foreign/host country environment often is diff from home country environment incl. diff economic conditions, political systems, legal systems, & national culture Effect: these create uncontrollable risks affecting firms (i.e. firms have little/no control over these factors 4 key risks of international biz 1. Cross-cultural risk – diff in lang, lifestyles, attitudes, customs, relig, negotiating & decision-making styles  Impede effective comm. & hinder effectiveness of foreign managers  Blunders – failure of international managers to understand impt diff in cultural values has had impt effects e.g. Arabs dislike deadlines & being told when to finish a job, they tend to feel threatened, but US/EU set deadlines to speed up production 2. Country risks – firm’s ops & profitability are potentially adversely affected by legal, political, economic, & geog environments in a foreign country.  Factors: i. Gov intervention, protectionism, BTE ii. Bureaucracy, red tape, admin delay, corruption  Legal systems – firms must adjust to diff (sometimes conflicting) legal systems & principles at 2 levels i. International law may determine how & whether firms can operate in certain countries ii. Domestic biz law includes regulations on both domestic & foreign country firms regarding matters such as taxation, employment,  Legislation unfavourable to foreign firm  Lack of legal safeguards for Intellectual PR  Political/economic systems (fair trade =/= free trade) i. Gov intervention may involve diff rules/laws that restrict market access &/or hinder biz transactions through  Protectionism, BTE, investments  Bureaucracy, red tape, admin delays  Limitations on amount of earned income that firms may repatriate from foreign ops ii. Social & political unrest & instability iii. Economic freedom differs e.g. HK & Singapore are known to have highest levels of economic freedom iv. Taxation policies, inflation, national debt & unbalanced I-trade, may encumber firm ops & performance  Geographic influences i. Transportation, comm., distribution channels within a country are affected by geog barriers ii. Adverse climatic conditions & the prob of natural disasters make it risker to invest & operate in some countries  E.g. Japan struck by triple disaster of earthquakes, tsunami, nuclear reactor meltdown in 2011  Effects: disruptions in global supply chain management in many industries e.g. 40%+ of mini-computer chips for automobiles manufactured worldwide come from a Japanese facility that was heavily damaged & near the nuclear reactor 3. Currency risks (i.e. financial)  Forces at least 1 party to convert its currency to another  Risk of unexpected & adverse exchange rate fluctuations can affect a firm by resulting in i. Uncertainty of returns (maybe lower profitability) ii. Reduced value of firm’s assets & liabilities 4. Commercial risk  Refers to firms’ potential loss/failure from poorly developed or executed business strategies, tactics, procedures  Failures in international markets cost > domestic biz blunders  Competitive environment i. Individual firm’s global competitiveness varies depending upon industry, country, firm’s global competitive strategy in turn, is influenced by a firm’s resources, experience & competitors faced in each mkt, and prices/differentiation  Blunders i. Managers forget that consumers diff from country-to-country ii. BUT sometimes unexpected events favour the firm e.g. condoms were good to protect rifle barrels from sand These 4 types of risks are always present but manageable – managers need to understand & anticipate their effects & take proactive action to reduce adverse effects Application of these skills in diff countries is more complex & demanding since it requires a multi-disciplina
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