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Technical Test Answers Set 2.docx

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Pat Lemieux

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Tech Test Answers Set #2 1. According the article” The end of Corporate Imperialism” by Prahalad and Lieberthal, the authors identify a need for MNCs to transform. What kind of transformation are the authors referring to and to what end. Please define and describe three (3) factors that would influence this transformation from the material covered in BU481 and/ or BU491? - To be successful in the emerging markets, companies need to have a new way of thinking - The more the company understands the nature of the markets, the more they will have to rethink and reconfigure every element of their business models: - Success in the emerging markets will require innovation and resource shifts on such a scale that life within the multinationals themselves will inevitably be transformed. - Innovation o Increasingly, as multinationals develop products better adapted to the emerging markets, they are finding that those markets are becoming an important source of innovation. The big emerging markets will also have a significant influence on the product development philosophy of the MNCs. o New product introductions will have to take into consideration non-traditional centers of influence. - Resource Shifts o As corporate imperialism draws to a close, multinationals will increasingly look to emerging markets for talent o A major shift in geographical resources will take place within the next five years. (i.e. Philips is already downsizing in Europe and reportedly employs more Chinese than Dutch workers) Three factors that would influence this change: - If the foreign market requires a different company structure to effectively access the markets, could require shift in resource use or specific innovation in a certain area to compete with domestic - The distribution networks in the market may demand a change in the companies way of distributing their products in order to effectively reach the market, this would be a major resource shift depending on the change. - Requirement for local and global leadership may change with emerging markets, which combination is best for fostering development; HR resource allocation would be affected by this. - Industry barriers in new countries would also have impacts on how and where the company can make resource shifts, and whether certain innovation is worth it. 2. According the article” The end of Corporate Imperialism” by Prahalad and Lieberthal, please define and describe “corporate imperialism” .How does this concept help to better understand past MNC international strategies. Please describe two implications from this international strategy approach for MNCs? Please provide an example described in the article or discussed in class. Corporate imperialism is defined as: Having a narrow and arrogant perspective, assuming that current product offerings (but lower-quality) in one’s own country can be successful in another country failing to realize developing countries have their own unique needs and characteristics. ; imposing Western models of commerce on developing countries. For years, executives have assumed they could export their current business models around the globe. o This concept helps to better understand past MNC international strategies because using this mindset, companies would assume that the big emerging markets were new markets for their old products. They anticipated an easy to achieve increase in incremental sales for their existing products or the chance to squeeze profits out of their old technologies. This thinking has lead to companies only being able to obtain small segments of relatively affluent buyers. As a result they miss the very real opportunity to reach much larger markets that make up the lower parts of the socioeconomic pyramid (BOP market) - Many multinationals did not consciously look at emerging markets as sources of technical and managerial talent for their global operations. Due to this imperialist mind- set, MNCs have achieved only limited success in those markets. The implications for MNCs are: - They must realize that success in the emerging markets will require innovation and resource shifts. Therefore, as MNCs achieve success in those markets, they will also bring corporate imperialism to an end. - As MNCs try to understand the nature of these markets, the more they will have to rethink and reconfigure every element of their business models. - Successfully reaching these broader markets will require developing a deep and unbiased understanding of the characteristics and needs of these developing markets. Example: Revlon is an example from the article, where they introduced their western beauty products to China in 1976 and India in 1994, where only the top-tier valued and could afford Revlon’s brand, they underestimated the different cultural characteristics of the markets. 3. A “culture” is shaped or influenced over time by numerous factors. Please identify and describe five (5) of those factors. Please identify and describe three (3) areas where these factors can have an impact the strategy of a firm contemplating or executing an international strategy. The factors involved in cultural distance are: - Different Languages o Trade between countries with similar languages is three times more likely. In terms of products with high linguistic value as TV, companies will find a large distance and unless they can cater to that language will not compete in the market. o Note: language is a clear and simple distance to identify o Star-TV they assumed that Chinese would be OK with English language programming and clearly they were not. (See social norms for TV copyright too). - Different Ethnicities; lack of connective ethnic or social networks o There is no article elaboration specific to this topic; I’m assuming the other 3 are the 3 that the question is looking for. It’s on page 142 of the article if you care to look. - Different religions o When a product touches a deeper nerve it can trigger associations with a consumer’s identity as a member of a community. In these cases, cultural distance affects entire categories of products. o The food industry is sensitive to religious attributes. Hindus do not eat beef as it is forbidden. Typically this is easy to identify but sometimes there are surprises, like how much baggage rice carries in Japan… (They did not elaborate here). o As a manager need to do research (maybe spend time there) to see how your product may be received… also for marketing - Different social norms o These are deeply rooted systems of unspoken principles that guide individuals in their everyday choices and interactions o Note: They are often invisible or very hard to identify (unlike language) - Different Government structures o Government structures and how they operate can have a significant impact on the culture and their characteristics. Government can sometimes likely dictate what most of the culture will value and how they will act in certain situations. - Example given is that of Copyright in China – it is ok in China by their
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