Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
uni econ
| Question | Answer |
|---|---|
| (PAP) Williamsons marginal utility model | Managers focus on own utility - not profit max Motivated by own self interest - salary, job security other monetary benefits Profit satisficing, spending on staff, discretionary spending, Organisational slack |
| (PAP) Morris growth max model 1 | Morris developed a dynamic balanced growth maximising strategy for firms. Higher growth rate - more spending on R and D + advertising - more profit retained - lower dividend + share price = risk of takeover Managers want job security |
| (PAP) Morris growth max model 2 | choose growth that max share price - satisfactory dividend - avoid takeover Shareholders want same steady growth - security of return |
| (PAP) Baumols sales max model | Wen managers salaries depend on revenue - focus on rev max - lowers profit - different interests. |
| Principle agent problem | Asymmetric info - moral hazard - hidden info managers pursue own goals - owners cant always watch over actions only see results |
| (PAP) Morris growth model assumptions | Assumes given price structure for firms Ignores the idea of oligopolistic interdependence Assumes firms can continuously grow by creating new products |
| What is an MNE | Any enterprise that has income generating assets in multiple countries |
| Cost orientated MNE - benefit | reduce costs of production - vertical integration - benefit from cheap labour, taxes, tariffs, transport |
| Market orientated MNE - benefit | promise of new markets which tend to be horizontally integrated |
| Extend product life cycle MNE - benefit | new introduction to market - Vernon's international product life cycle |
| Hymers theorem MNE - benefit | dual purpose oligopoly behaviour - exploit competitive adv - FDI normally oligopolists who set up subsidiaries to stifle competition |
| Problems faced to MNE | Language + cultural barriers Increase cost/risks - exchange rates political risk - disruption communication/co-ordination - transaction cost Attitudes from host - tax, regulations |
| Drawbacks to host country | Negative impact on B of P Exploitation of labour Environmental and welfare concerns |
| Cyert and Mach behavioural theory (PAP) | firms are build up of indusial interest groups goals depend on relative bargaining power allow slack when setting targets |
| consumer surplus/welfare | welfare derived by consumers and producers in specific markets - surplus difference between price and willingness to pay |
| what types of constraints control managers | internal and external |
| internal constraints | stock options and profit sharing, shareholder voting, non executives |
| stock options and profit sharing | tries to align financial outcomes with firms performance - makes agents partial owners |
| stock options and profit sharing issues | focus on the short term, encourages profit manipulation |
| shareholder voting | mostly common shareholders, usually takes place at AGM - decisions to change management and or policies, merger or liquidation |
| shareholder voting problem | many shareholders passive - don't vote just sell if unsatisfied, difficult as requires a majority |
| non executives | independent from management - provide separate perspective to try and align policies to long term goals - represent shareholders |
| non executives problems | often appointed by executives, usually not enough to make significant difference |
| Fama 1980 | suggests - mangers supply labour, reputation is important so long term market will settle up - no need for internal intervention |
| external controls | bidders in takeovers, external holders of large share blocks - voting right - corporate governance by GVT |
| corporate governance | combined code 1998 - recommendations - such as 3 non executives - outlines report guidelines- must be lodged with regulatory authority |
| Dunnings eclectic theory | theory based on adv gained by MNE's - Ownership, Locational, Internalization |
| Ownership adv | theory introduced by Hymer - for firms to successful overseas need a comp adv |
| Ownership examples | Asset based, Transaction + asset based, Advertising/branding - consumer goods, R+D prior investment - efficiency - producer goods |
| Locational advantage | why firms want to organise operations in different countries- cost based, fast growing markets - important for horizontally integrated |
| Internalisation | why firms operate in foreign location rather than contract third party - Coase 1937 - firms choose which minimises transaction costs - markets and hierarchy |
| Internalisation examples | decision based upon paradox of info - may wish to use own managerial expertise and marketing to maintain product standards - keep trade secrets, vertical MNE - avoid hazards in supply chain |
| Adv to host country | B of P, tech transfer, income tax, employment |
| Dis adv to host | uncertainty, control, environment and welfare concerns, transfer pricing |
Created by:
TDuck