Period: 2 - February/March 2004
Time: Tuesday/Thursday 14:00-16:00
Location: Henry Angus Building, Room 213
 
Instructor: Prof. Werner Antweiler
Office: Henry Angus Building, Room 264
Phone: (604) 822-8484
E-mail: werner@pacific.commerce.ubc.ca

Friday, April 2, 2004: The exam and final grades have been posted today. See the section "Grades" for further information. To query your grades, use your student number as the username, and your assigned password from the PDF file retrieval system. Click on the "Grades" link on the left to get to the form. If you do not have an assigned password yet, you can request your password and it will be sent to your registered e-mail account.

Download the course outline for the Feb/Mar 2004 period [PDF file]

Objective & Overview

This module focuses on the decision-making process of multinational enterprises (MNEs). After a review of the facts surrounding "globalization," we will look at the value chain of MNEs and develop a framework for making strategic and operational decisions about foreign investments. In entering a new foreign market, the key decision is to select the most appropriate entry mode: when should an MNE consider exporting, when should it license, or in which case should it invest? When the investment option is pursued, should an MNE pursue a joint venture, an acquisition of a brownfield plant, or construction of a greenfield plant? We then turn to the MNE's relationship with its partners (upstream and downstream), its rivals, and government in the host country.

This module will cover a string of practical challenges for multinational enterprises. There is a multitude of instruments through which governments try to influence the location decisions of MNEs, including subsidies, tax breaks, industrial parks, and special customs zones. MNEs are also concerned with differential tax rates across countries and the domestic treatment of foreign income. Governments also impact MNEs through their intellectual property right regimes. This issue is of great significance for high-tech industries such as software development and pharmaceuticals. Further sessions in BAIM 501 will address strategies for international marketing, choosing organizational structures, and managing human resources abroad. A final session will touch on a variety of ethical concerns, including corruption and environmental standards.

This module is related to another MBA module, BAIM 500 -- The International Trading Environment. Students wishing to enrol in BAIM 501 are strongly encouraged to take BAIM 500, because the central conceptual framework used in BAIM 501 relates to discussions of international trade and international finance in BAIM~500.

 

Readings

There is no textbook for this course. However, the online book Elements of Multinational Strategy by Prof. Keith Head is a compact source of information for both BAIM 500 and BAIM 501, and is thus highly recommended reading. BAIM 500 students are encouraged to selectively print the sections relevant for this module.

Assigned Readings

[1] Edmund Faltermayer: U.S. companies come back home, Fortune, December 1991

[2] Keith Bradsher: Toyota and Chinese Carmaker in Venture, New York Times, August 2002

[3] Tara Parker-Pope: Custom-Made: The most successful companies have to realize a simple truth: All consumers aren't alike Wall Street Journal, September 1996

[4] Greg Steinmetz and Tara Parker-Pope: Nestle: All Over the Map Wall Street Journal, September 1996

[5] Bob Hagerty: Multinationals in China Use Pay Packages to Lure Talent, Wall Street Journal, April 1997

[6] Tim Weiner: Mexico's Corrupt Oil Lifeline, New York Times, January 2003

[A] James R. Markusen: The Boundaries of Multinational Enterprises and the Theory of International Trade, Journal of Economic Perspectives 9(2), Spring 1995, 169-189

[B] Robert C. Feenstra: Integration of Trade and Disintegration of Production in the Global Economy, Journal of Economic Perspectives 12(4), Autumn 1998, 31-50

[C] Charles W. Hill: International Business, Chapter 14, 3rd edition, McGraw-Hill, pages 426-452

[D] Briance Mascarenhas; Alok Baveja; Mamnoon Jamil: Dynamics of Core Competencies in Leading Multinational Enterprises, California Management Review 40(4), Summer 1998, 117-132

[E] Pankaj Ghemawat and Fariborz Ghadar: The Dubious Logic of Global Megamergers, Havard Business Review, July/August 2000, 65-72

[F] Laura Alfaro: Foreign Direct Investment, HBS Note 9-703-018; October 28, 2002

[G] Dennis J. Encarnation and Sushil Vachani: Foreign Ownership: When Hosts Change the Rules, Harvard Business Review, September/October 1985, 152-159

[H] David Arnold: Midway: Licensing, Distributing, and Building Brands in China, HBS Case, 9-502-032; February 15, 2002

[I] Paul Beamish: Note on International Licensing, Ivey School, 9A96G008

 

Syllabus

# Date Topic Assigned Readings and
Lecture Notes
1 Tue, Feb 24 What is driving globalization? Why do MNE's exist? Lecture Notes, [A], [B]
2 Thu, Feb 26 Entry Mode and Foreign Direct Investment Lecture Notes, [1], [2], [C], [I]
3 Tue, Mar 2 Cross-Border Acquisitions and Mergers Lecture Notes, [D], [E], [F]
4 Thu, Mar 4 Government Involvement and International Taxation Lecture Notes, [G]
5 Tue, Mar 9 Intellectual Property Rights Lecture Notes
6 Thu, Mar 11 International Marketing (I) Lecture Notes, [3], [4], [H]
7 Tue, Mar 16 Cases; International Marketing (II) Lecture Notes, [6]
8 Thu, Mar 18 International Business Ethics;
Organization, Control, and Expatriate Managers
Lecture Notes, [5], [I]
9 Tue, Mar 23 Team Presentations (Groups A-C)
10 Thu, Mar 25 Team Presentations (Groups D-F)
  Tue, Mar 30 Final Exam (14:00-16:00, HA 213)

Items in square brackets refer to material contained in the BAIM 501 Reading Package. Numbered items are newspaper and journal articles re-typeset for this course. Lettered items are reprints of textbook chapters, Harvard Business School cases, and journal articles. Lecture notes are made available as PDF files on the day following the session. Access to the lecture notes is restricted to registered students of this course. Access from within the .ubc.ca domain only requires a student number. If you access the material off-campus you need an additional password that you can request to be sent to your SIS-registered e-mail address. If your e-mail address is not yet registered in the SIS, please visit the online Student Service Centre and register your e-mail address.

 

Grades

Your grade for this module will determined as the weighted average of your class participation (25%), team project (25%), and final exam (50%).

To query your grades, use your student number as the username, and your assigned password from the PDF file retrieval system. Click on the "Grades" link on the left to get to the form. If you do not have an assigned password yet, you can request your password and it will be sent to your registered e-mail account.

 

Assignment

Outline

Students will participate in a team project that involves an in-class presentation during the last week of classes. The objective of the team project is to identify a foreign investment target for a Canadian-owned multinational enterprise, analyze the worthiness of the project, and make a presentation to the company's governing board (represented by the class audience) that will convince them to adopt the project. The investment target can be any type of acquisition or joint venture. The presentation should address the following questions:

  1. What are the MNE's objectives in pursuing investments abroad?
  2. Is the chosen target consistent with these objectives?
  3. Why invest in this country and not another? (Concretely, what is the potential of this new market, or what are the cost advantages of this production location?)
  4. How does the new investment complement prior foreign investments?
  5. Why choose the particular type of entry mode?
  6. Who are the competitors, and what are their potential counter-moves?
  7. How should the project be financed (internally or externally), and which organizational form should thus be selected?
  8. What are possible problems in the foreign country? Develop a best-case and a worst-case scenario.
  9. Which integration problems may arise?
  10. Will the new project require expatriate managers, or can the MNE rely on hiring local managers?
  11. How should the parent assess success or failure of the new project? Develop a set of criteria.
  12. If things go wrong, what is a suitable exit strategy? Are there irreversible costs to the project?

Allocation

Projects will be allocated on a first-come first-served basis. No two teams may pursue the same investment target, although two teams may choose the same MNE. With a class size of 24 (estimated) there will be 6 teams of 4 members each representing a country.

Evaluation

Presentations will be jointly evaluated by the instructor and peers. The audience will be required to rank all presentations and submit (anonymous) evaluation forms. The students' ranking will be combined with the instructor's ranking and will contribute no less than 50% of the weight.

Presentation

Experience shows that you should start your research as early as possible. While much informations appears on the web, you should not exclusively rely on this type of information. You can find much useful information in the David Lam Library, and access information through specialized data services available there or in the Koerner Library. Check out the Koerner Library's government section and the Data Library.

On each of the two presentation days we will have three presentations. Each presentation will be approximately 20-25 minutes long, followed by 10-15 minutes of discussions in which the audience can ask the presenters questions. Multimedia equipment (computers and beamers) will be made available. I strongly recommend that you rehearse your presentation at least once before your actual presentation. Make sure that you stay within your allotted time frame of 20 minutes for your presentations.

Tuesday, March 23: Teams A-C
Team Target Team Members
A Sara Lee Corp. Anna Algard; Saskia Blanco; Laurie Brucker; Luis Damy
B CREO Natasha Gill; Linda Tang; Catherine Kratz; Victor Lagunes
C Sandoz or Ciba-Geigy Elisabeth Collett; Rolf Muralt; Horatiu Muresan; Hemant Upreti
Thursday, March 25: D-F
Team Target Team Members
D Contiki Ian Fraser; Diego Ramirez; Wilson Wang; Jonathan Hodgson 
E (oil company) Chris Hall; Minnie Yao; Marc Sheppard; Matt Walton

 

Exam

There will be a 2-hour exam at the end of the module. The exam will be held in our regular class room in HA 213 on Tuesday March 30 during our regular meeting time (14:00-16:00).

The final exam consists of two parts. The first part contains groups of true/false responses related to twelve problem statements or questions. Each response must be checked if it is true or false. Each correct identification receives one point for a total of 60 points. The second part contains five short-answer questions, of which four must be answered. The least-liked question may be dropped. Each question is worth 15 points. The exam has 120 points in total.

 

Office Hours

My office is located in room 264 of the Henry Angus building. The best time to visit me without an appointment is Friday morning. I encourage students to make appointments if they want to see me. I also encourage the use of e-mail.

 

Announcements

 

Useful Links

Consult the links on the BAIM 500 home page. An updated list will appear here some time in late February or early March.

Government of Canada Resources
Invest in Canada
A collection of useful resources: economic data, reasons to invest in Canada, incentives and taxes, sectoral and regional information, and directories of contacts.
EDC Investment Monitor 2002 and EDC Investment Monitor 2003
This is a downloadable PDF file with statistics on Canada's investment inflows and outflows, produced by Export Development Canada.

Foreign Direct Investment
UNCTAD World Investment Report 2001 and UNCTAD World Investment Report 2003
(N.B.: these PDF files are over 10MB each.) UNCTAD is the primary source for FDI statistics. They also have an online database. Access is free, but registration is required.
FDI Links
A reference guide by the Columbia University Business & Economics Library

 


© 1998-2004 by Werner Antweiler and University of British Columbia.