Idaho State University

Fall 2014
IS 3301 Seminar: International Studies
Section 01: Tue and Thur 11am 12:15pm, REND 120
King Yik
Take-home Test 2
Due by email to yikking@isu.edu before 11:59pm, Tuesday, Nov 11, 2014.
This is a take-home test. It is open book and open notes, but you need to complete it yourself without help from
anybody. Please type your answers directly into this file. When you are done, save it and email it back to me at
yikking@isu.edu before 11:59pm on Tuesday, Nov 11, 2014.
Name: _____________________
1.
Refer to the slides in Innovation and the third world on the class website. Summarize why Iqbal Quadir believed
that foreign aid had not been effective in fighting poverty in poor countries and why he believed cell phones might
help.
Answer:

2.
Summarize the advantages and disadvantages of using a wholly owned subsidiary as an entry mode. Do NOT just
repeat the key points from the notes. Expand and present them in complete sentences.
Answer:

3.
Complete the decision tree on the next page by:
Filling in the three blanks, and
Answering the four What do you do here? questions. Type your answers directly into respective boxes.
Answer:

The Foreign Entry Strategy Decision Sequence

(Modified from Gunter Dufey and R. Mirus, Foreign Direct Investment: Theory and Strategic
Considerations, Unpublished, University of Michigan, May 1985.)
If you are supplying to a foreign market, since you are foreign,
you are at an inherent disadvantage compared to firms local to
the foreign market. Does your firm have ownership advantage
of something like technology, copyright, trademark or business
system to allow you to overcome that inherent disadvantage?
No

Yes

Yes, your firm has the _____________ advantage

of something to allow you to overcome the
inherent disadvantage of being foreign. Your firm
can supply to the foreign market. But do you want
to do it yourself internally or do you want to rely
on an external party to supply to the foreign market
for you? In other words, do you have the
internalization advantage to use your technology,
copyright or trademark in house?

What do you do
here?

No

What do you do here?

Yes

Yes, you have the ______________

advantage to supply to the foreign
market yourself. But where do you want
to produce, at home or in the foreign
country? In other words, does the
foreign market have a location
advantage over the home location?

No, the foreign market

does not have a location

Yes, the foreign market

has a location advantage.

What do you do here?

Yes, you have the foreign

_____________ advantage. What do
you do here?

4.
Read the following news article and then answer these two questions.
a. According to the article, why did Geely, a firm from China, which is an emerging economy, acquire
Manganese Bronze of Britain, which is a developed economy?
b. What are some of the motivations for emerging economies to make foreign direct investment in developed
countries? You can include motivations not mentioned in the new article below.
Geely buys Manganese Bronze for 11m
Financial Times
Last updated: February 1, 2013 4:34 pm
By Patti Waldmeir in Shanghai and John Murray Brown in Birmingham
Manganese Bronze, maker of London black cabs for more than six decades, has been sold to Geely, adding
another well known European brand to the private Chinese carmaker that already owns Volvo. Geely, which already
owned 20 per cent of the black cab maker, bought Manganese Bronze for only 11m after it went into
administration last October.
The Chinese company, which was Manganese Bronzes largest creditor, said it would continue to assemble the
companys TX4 model at the Manganese Bronze plant in Coventry. The acquisition came after Geely refused to
provide funding to keep Manganese Bronze afloat.
Daniel Li, the chairman of Geely UK, said the Chinese company planned to use the Manganese Bronze operation as
a base to sell Geely cars into the European market. He said the purchase would give the Chinese company a solid
foundation, not only for its location but also the dealer network.
Mr Li said the Coventry plant, which employs 107 people, could get even bigger. He indicated that Geely expects
to invest 30m-50m in the Coventry plant over the next 5 years to bring new models into production. Peter
Johansen, group finance officer of Manganese Bronze who becomes executive vice-president of Geely UK, said
cab production, which has been suspended since October, would resume in the next few weeks. The company last
made a profit in 2007. But Mr Johansen predicted a return to profitability within three years and quite possibly
two if the UK economy picks up. The company hopes to bring its new TXN vehicle a smaller private hire taxi
for the UK and global markets into production by 2017.
David Bailey, automotive expert at Coventry University, described the acquisition as probably the best-case
scenario in terms of rescuing the firm and saving remaining jobs in Coventry. The London cab takes its place
alongside Weetabix, the famous British breakfast cereal, in the list of has-been brands that could get a new lease of
life under Chinese ownership.
We are determined to restore the fortunes of this totemic marque which is known, recognised and admired all
around the world, said Li Shufu, chairman and founder of Geely. Geelys priority will be to re-establish the
manufacture, sale and servicing of new and current vehicles on broadly the same basis as existed before the
business went into administration, the Chinese company said in a statement. The deal was agreed with PwC, the
administrators of the British business.
I think this is another step in Geelys effort to accelerate their development through M&A, said Bill Russo, head
of Synergistics auto consultancy in Beijing and former head of Chrysler in China. Geely is building a portfolio of
brands and technical capabilities . . . and a capability to integrate foreign knowhow into their business: a skill set
that will be increasingly important in a hyper-competitive global automotive industry.
Geely is still struggling to digest its 2010 acquisition of Volvo, the famous Swedish marque. Volvo sales in China
have so far been disappointing: in the 11 months to the end of November last year it sold just 37,633 cars in China,
5

9 per cent fewer than in the previous year, at a time when other luxury carmakers in China were recording doubledigit growth.
Answer:
a.

b.

5.
Go to the class website on Moodle. Under week Nov 3 to Nov 9, there is an item named cost benefit analysis
example for test 2. It is a PowerPoint file. Download it. Read the whole file. It is very similar, but not identical to,
what I have gone through in class.
Complete Tables 1, 2, 3, 4, and 5 by typing your answers directly into the respective boxes. When you are done,
save the file and then email it to me at yikking@isu.edu before 11:59pm on Tuesday, Nov 11, 2014. You can (and
should) use the examples I went through in class to help you complete these tables.