1.

Discuss the proactive and reactive reasons why a company would want to operate
internationally, and the motivations and benefits of a company that seeks global
alliance. (P. 237)
Ans.: Companies go international for different reasons; these reasons can be divided into 2
categories – reactive & proactive. Reactive reasons include globalization of competitors – a
situation when the competitors go international for a new market. If the organizations stayed
in the current market, it might result in having difficulties to enter the foreign market later on,
thus losing its competitive advantage. Trade barriers – such as tariff, quotas and buy-local
policies, which might increase the operation costs of the organization, might cause the
organizations move their business to those relatively low-cost countries, in order to stay
competitive in the market. Regulations and restrictions – in which the government’s
regulations and restrictions might increase the operation costs of the organizations. Hence the
company might want to operate in foreign country with less operation costs. Customer
demands – a situation when the company goes international because of its request from the
customers. Like McDonald’s who will ask its domestic supplier to follow it to foreign
ventures. On the other hand, proactive reasons include economies of scale – to produce in a
large amount in order to lower the cost; growth opportunities – one of the reason for going
international because the company believe that there is more customers overseas and
therefore can increase the profit; resources access and cost saving – by entering the foreign
markets, sometimes it is easier for some companies access to certain resources and lower the
transportation cost; incentives – some countries are willing to provide incentives such as tax
exemptions, tax holidays, subsidies, loans and the use of property. These decrease the risk
and increase the profit of the companies that enter the market. In conclusion, no matter which
reasons, companies go international normally because they want to stay competitive, gain
more market shares and lower the operation cost in order to increase the profit margin.

2. Describe the 6 steps in developing international and global strategies. (P. 243)
Ans.: There steps in developing international and global strategies are:
I. Establish mission and objectives
It can provide the direction of the company and a basis for strategic decision making. Global
objectives can be divided into 5 categories, which is marketing, production, finance,
profitability and research and development.
II. Assess external environment
Environmental scanning is the process of gathering information and forecasting relevant
trends, by gathering environment variables from 3 levels, global, regional and national.
III. Analyze internal factors
company needs to conduct an internal analysis and competitive analysis. These factors
include technological capability, distribution channels, promotion capabilities and low-cost
production.
IV. Evaluate global and international strategic alternatives
There are 2 levels of strategic alternatives: The 1 level is the global strategic alternatives,
which determines what overall approach to the global marketplace a firm wishes to take. The
2 level is the entry strategy alternatives, which can apply to any size of firm. Global
integrative strategies are the approaches under the entry strategy alternatives.
V. Evaluate entry strategy alternatives
Next the company needs to evaluate what risks they need to take by using different ways to
enter the target market. These methods, from low risks to high, are exporting, licensing,
franchising, contract manufacturing.
VI. Decide on strategy
The final step is to decide on the strategy, which means the company needs to consider one or
more entry strategies are used. It depended on the careful evaluation of the advantages and
disadvantages of each in relation to the firm’s capabilities.

3. Name and discuss the challenges in implementing global alliances. an example to

support your answer.
Ans.: Challenges of implementing global alliances,
Alliances: faster and less risky route to globalization
Problems relate with:
 Shared ownership
 Differences in national cultures
 Integration of vastly different structures and systems (coordination issue)
 Distribution of power
 Conflicts in decision making and control
 Can turn into competition (sensitive areas e.g. technology, skills would create mistrust
and secrecy)
1. In a highly competitive environment, alliances present a faster and less risky route to
globalization. It is extremely complex to fashion such linkages, however, especially
where many interconnecting systems are involved, forming intricate networks. Many
alliances fail or end up in a takeover in which one partner swallows the other.
2. Often, the form of governance chosen for multinational firm alliances greatly influences
their success, particularly in technologically-intense fields—pharmaceuticals,
computers, and semiconductors. Cross-border partnerships, in particular, often become a
“race to learn”—with the faster learner later dominating the alliance and rewriting its
terms. In a real sense, an alliance becomes a new form of competition.
3. All too often, cross-border allies have difficulty in collaborating effectively, especially
in competitively sensitive areas, creating mistrust and secrecy, which then undermine
 the purpose of the alliance. The difficulty that they are dealing with is the dual nature of
strategic alliances—the benefits of cooperation versus the dangers of introducing new
competition through sharing their knowledge and technological skills about their mutual
product or the manufacturing process.
4. The enticing benefits of cross-border alliances often mask their many pitfalls. In
addition to potential loss of technology and knowledge-skill base, other areas of
incompatibility often arise, such as conflicting strategic goals and objectives, cultural
clashes, and disputes over management and control systems.

4. Describe any four of the typical organizational structures in which firms organize
their international activities
The four typical organizational structures for international activities are:
I. Domestic structure plus export department: a lot of small firms use export as way to
go global. This structure simply means the firms are using the services of an export
management company to start their international activities.
II. Domestic structure plus foreign subsidiary: this refers to the situation when the firms
want to further develop the foreign market. This structure is useful if the subsidiary
managers have high level of autonomy, and have the ability to response to the local
markets quickly. It works well when a firm have one or few subsidiaries in the countries
that are closed to the headquarter.
III. Global functional structure: it’s a structure for small firms with highly centralized
systems. It depends on the basis of company’s functions – production, marketing,
finance, etc. Foreign operations are integrated into the activities and responsibilities of
each department to gain functional specialization and economies of scale.
IV. Global product structure: this is an alternative structure developed from global
functional structure. Since the advantage from global functional structure might be lost
if the managers and the work systems do not have the necessary flexibility to respond to
local environment.

5. A) What are the major alternative staffing approaches for international

operations? Explain the relative advantages of each and the conditions under
which you would choose one approach over another.
B) Is there a trend for MNC to shift from one staffing approach to another?
Explain.
Ans.: Ethnocentric staffing approach is used at internationalization stage of strategic
expansion, with centralized structure. It is to fill key managerial positions with people from
headquarters – that is, parent-country nationals (PCNs). The advantages are that the PCNs are
familiar with the company goals, products, technology, policies, and procedures and therefore
can maintain close control of the subsidiaries.
Polycentric staffing approach is to hire local managers – host-country nationals (HCNs) to
fill key positions in their own country. It is a more effective approach when the company is
using a multinational strategy. The advantage of this approach is to act local. In other words,
HCNs are more familiar with the local culture, language, contacts, ways of doing business,
role models for upwardly mobile personnel.
Regiocentric staffing approach refers to the recruitment happened on a regional basis. The
advantage of this approach is that it can produce a mix of PCNs, HCNs, and third country
national (TCNs).
Most firms shift from ethnocentric staffing to polycentric or regiocentric staffing because
there is an increasing pressure from the local governments to hire locals; the cost of
expatriate staffing is higher; the locals’ managerial skills and techniques have been improved.

6. What is a virtual global management team? How do the team members interact?
Discuss the advantages and the challenges faced by these teams. Give some
suggestions as to how to maximize the effectiveness of virtual teams across borders.
Ans: Virtual global management team is a collection of managers in or from several countries
who must rely on group collaboration if each member is to experience optimum success and
goal achievement, interact by using computer – mediated communication systems to link
with each other across time, space, and organizational boundaries.
One of the advantages of these teams is that it enables people around the world to conduct
meetings and exchange information through the Internet, which can lead to 24-hour
productivity. Another advantage is that in such setting, knowledge is shared across business
units and across cultures. The third advantage is the lower cost of such setting. The
challenges of global management teams are geographic dispersal (the logistics of differences
in time and space), cultural differences; language and communications (cultural
misunderstandings) and technology.

7. Referring to Hofstede’s research on the cultural dimensions, what would culture on

uncertainty avoidance, power distance, individualism, and masculinity affect the
motivation of individuals (and groups) on the job? Give examples to support your
answer.
Ans.: Some of Hofstede’s major conclusions are that employees in countries that rank high
on power distance are more likely to prefer an autocratic leadership style and some
paternalism. Employees in countries that rank low on power distance are more likely to prefer
a consultative, participative leadership style and expect superiors to adhere to that style, such
as found in Costa Rica. This is also true of the related dimension of masculinity-femininity.
Sweden, the most feminine culture studied by Hofstede allows for more employee autonomy
and participation. Cultures with high uncertainty avoidance, such as Indonesia, generally like
leaders to provide direction and to keep change at a low level. The variations found in
cultures concerning individualism can be reflected in the expected leadership style and level
of participation. In Germany, a country somewhat high on individualism, the leadership style
is more individually-focus than in Japan, a highly collectivist culture.