Larry Eimer BUS 675 4/15/22 1. Widener’s School of Business Administration is considering whether it should offer its MBA program globally. Apply the ADDING framework to determine whether or not it...

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Larry Eimer BUS 675 4/15/22 1. Widener’s School of Business Administration is considering whether it should offer its MBA program globally. Apply the ADDING framework to determine whether or not it would be worthwhile for the SBA to enter international markets with an MBA program. To decide whether it will be worth it or not, for Widener SBA to offer the MBA program globally, I applied the ADDING framework, which is a series of questions you must ask yourself as a business before making a big decision. The first being does the volume increase profit. Offering the program in a new market will result in profit, as a new demographic of students are now enrolled at the university, which they wouldn’t have had the opportunity to before this change. The next questions are will costs increase or decrease and does going global effect WTP. To successfully begin offering the MBA program globally, costs would increase to be able to have the same quality of connection, communication, and access to faculty as the existing MBA programs. This does affect their willingness to pay because they would know costs will raise if the administration goes through with this. When looking at industry attractiveness, going global has been a trend in the industry, however, is not something that is a must, but more of an option. The more that schools successfully do this, the more schools will look to implement a global MBA program. Risk increases when doing this because it is a big investment that doesn’t always work out and often underperform. Lastly, the firm will gain knowledge on international markets and increase capabilities. Overall, I believe that it would not be worthwhile now to begin an international program given the risk. It needs to be the right fight and have the right strategy. Continuing to grow the current SBA MBA programs will be more beneficial now. 2. Widener’s School of Business Administration (SBA) is trying to decide in which global markets to offer its MBA program. (a) Perform a CAGE analysis to explain what factors should be considered when deciding where to offer the MBA. (b) Pick a suitable market based on your CAGE analysis and explain why this would be good market for the SBA to enter. A CAGE analysis considers different distances between the home and target countries. Cultural, administrative, geographic, and economic. The cultural distance can determine the relationships between global students and the school. Understanding someone else’s culture is very important and can go a long way. This includes language, religion, daily lifestyle, etc. Administrative distance involves the difference in the country’s laws and policies. This wouldn’t be as much of a factor for the students, but more for the university knowing the other countries laws. Geographically, a location that has already established a market for grad school and college education, will be heavily considered. A market where students already have global programs from institutions like Widener will be where the SBA targets. Physical distance will also be a factor. Lastly, the economic distance is the difference between the country's incomes. Offering the program in a market that can afford tuition is also critical. As a result, this will affect the willingness to pay. The market I chose for the SBA to enter is Greece. I chose them because they already have established MBA programs, so a market is already set. The geographic distance is far of course but the communication would be good. Greece is a country that understands and speaks English well. They are also successful economically. With all those factors considered, I chose Greece as the market to enter. Global Strategy Managing for Results Through Global Strategy How to Find and Leverage Global Opportunities for Superior Results 1 The Problem Globalization is the trend, but… Is it a mandate or an option? Can it enhance value? Multinationals’ global operations often under-perform domestic operations Why? Wrong focus - market size & similarities → growth, but bigger is not always better Fit/integration & an effective strategy is still relevant An example: eBay entering China failed twice 2 eBay in China EachNet acquisition in 2003 ($180 mil) Founded in 1999 70% market share by 2003, but… Enter a local rival to lead the market – TaoBao of Alibaba.com Tom Online joint venture in 2006 ($40 mil) EachNet separated from this global platform by 2007 www.eBay.cn in 2007 for international trade A platform to link local entrepreneurs to buyers worldwide (finally a success) 3 Key Questions to Ensure Superior Global Performance Will going global improve our results? i.e. Why enter international markets? The ADDING Value Scorecard What global markets should we enter? CAGE Analysis What is the best global strategy for us? Aggregation, adaptation, or arbitrage 4 1. The ADDING Value Scorecard Economic Value Volume Margin Risk Knowledge C.A. Cost Differentiate Industry Attractiveness Does going global add value? See notes section See notes section for more details. Back to considering competitive advantage (CA) and unpacking the elements. Unpacking economic value moves beyond just considering market size (i.e. potential volume) to a consideration of decreasing costs, enhancing the differentiation source of advantage, and improving industry attractiveness. 5 Components of ADDING Value Add volume Will volume increase profitability? → Bigger is not always better Decrease costs Will costs increase or decrease? Differentiation Does going global affect WTP? Industry Attractiveness Will attractiveness improve industry attractiveness → the 5 Forces? Normalize risk Will risk increase or decrease? Gain knowledge Will the firm acquire new knowledge/resources/capabilities? 6 2. Which global markets to enter? Country Portfolio Analysis (CPA) - GOOD Attractiveness determined by: Unilateral factors: Economic indicators related to market size, consumer wealth, and consumption rates Multilateral factors: Tariffs, insularity, home bias, or remoteness Problem – does not consider all dimensions of “distance” Misses out on bilateral differences that are specific to country-pair/industry/company CAGE Analysis - BETTER 7 CAGE Analysis Considers distance between home and target country on 4 dimensions. Cultural distance Administrative distance Geographic distance Economic distance Impact of each type is felt differently by different industries and firms 8 Differences Matter Differences between countries affect the success of global strategy A business model that succeeded in one country may not succeed in another Example: eBay’s problems in China Importance of face-to-face meetings, liability of foreignness (cultural) Government style, censorship, suspicious of foreign entities (administrative/legal) Local presence (geographic) Auction/pricing differences, bartering (economic) 9 Cultural Distance Language, religious/social norms/values Influences consumer choices, business actions, societal sanctions Greater impact on products that have: High linguistic content (e.g. multi-media) Cultural identity (e.g. food, sports) Country-specific quality perceptions (wine) Preferences/attributes that vary by country 10 Administrative Distance Laws, policies, institutions, treaties, historical ties, political beliefs, currency Influences government restrictions, legal enforcement, protectionism Greater impact on firms/industries that: Produce staples/entitlement products Affect national security, economy, or pride Sell to govt., exploit resources, build infrastructure 11 Geographic distance Physical remoteness, climate, lack of common border, sea access, transport or communication infrastructure Affects transportation costs Greater impact on products that: Have low value-to-weight ratio Are fragile or perishable Require communication, supervision 12 Economic distance Differences in income, capital costs and access, natural resources, education, labor productivity, infrastructure Affects costs and WTP Greater impact on products that are: Income-elastic Labor intensive or distribution intensive Dependent on infrastructure (e.g. phones) 13 Example: India or China? Cultural distanceAdmin. distance IndiaEnglish spoken Ethnic tensionCommon law Democratic Corruption ChinaHomogenous Language Communism Infringement Geographic distance Econ. distance Poor transportation & communication links DistantMore educated Income disparity Poor infrastructure Better transportation & communication links DistantLarger market Better infrastructure (e.g. distribution systems U.S. Call centers in India versus U.S. manufacturing in China See notes section for more details. Blue check marks indicate closeness between India and the U.S. Gray check marks indicate closeness between China and the U.S. 14 3. What kind of global strategy? Arbitrage Exploiting CAGE differences between countries by locating value chain activities in different locations Adaptation Customizing product/process in response to CAGE differences Aggregation Achieving economies of scale by grouping similar countries into regions Consider fit/integration with existing activities 15 Approaches to Adaptation → Variation Mix of features, policies, etc. to meet various needs Focus Meet segments with similar needs to ↓need for variation Externalization Joint ventures, franchises, etc. Design Modular/changeable product Innovation Adapting to the local environment 16 Aggregation → Use regional strategies based on the situation Home base Main operations at home – supply worldwide Portfolio Operations in important markets Hub Regional bases provide resources /services to country operations Platform ↓ number of basic offerings that are offered worldwide Mandate Some regions supply a product or perform a role for entire organization ↓ redundancy & ↑ efficiency/scale where possible 17 Which global strategy to select? The firm’s particular circumstances suggests which strategy to favor, for example: Arbitrage – when labor costs are high Adaptation – when advertising is key Aggregation – economies of scale are key Maybe a combination? What factors determine if this is possible? 18
Answered Same DayApr 17, 2022

Answer To: Larry Eimer BUS 675 4/15/22 1. Widener’s School of Business Administration is considering whether it...

Sudipta answered on Apr 17 2022
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Hello Larry, thanks for the post. I agree with the statement as you mentioned that off
ering an MBA program    m globally will increase the cost. However, I would like to align the concept of economic distance in this context. For example, if a business school offers an MBA program globally, then the school will be earning more for offering the program to some countries which are located at a greater distance. To earn that additional benefit,...
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