5CO02

Evidence-based practice

Learner Assessment Brief

Version 2021. 1 February 2021

Level 5 Associate Diploma in

▪ People Management

▪ Organisational Learning and Development

Please write clearly in block capitals.

Centre number

Learner number

Learner surname

Learner other names

Assessor name

Assessor signature

Internal quality assurer name

Internal quality assurer signature

Assignment start date

Assignment end date

Assignment submission date

Assignment re-submission date for

centre marking (only one re-submission

allowed)

Level 5 Associate Diploma

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5CO02

Evidence-based practice

This unit assignment addresses the significance

of capturing robust quantitative and qualitative

evidence to inform meaningful insight to

influence critical thinking. It focuses on

analysing evidence through an ethical lens to

improve decision-making and how measuring

the impact of people practice is essential in

creating value.

CIPD’s insight

Evidence-based practice is about making better

decisions, informing action that has the desired

impact. An evidence-based approach to

decision-making is based on a combination of

using critical thinking and the best available

evidence. It makes decision makers less reliant

on anecdotes, received wisdom and personal

experience – sources that are not trustworthy

on their own.

It is important for People Practitioners to adopt

this approach because of the huge impact

management decisions have on the working

lives of people in all sorts of organisations

worldwide. Managers have an obligation to find

the best evidence when making important

decisions to strengthen the well-being of their

workers as well as ensuring their organisation’s

success.

Level 5 Associate Diploma

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Case study

Your company has been invited to submit a briefing paper for a regional People Practice event that

will share insights and good practice on a range of people practice processes and practices. The

topic area that your manager has chosen is ‘evidence-based practice’ and has selected you to

represent the company by creating the briefing paper for the event.

In addition, your manager has asked you to analyse and review three sets of performance data in

readiness for the forthcoming heads of department meeting.

Preparation for the Tasks:

▪ At the start of your assignment, you are encouraged to plan your assessment work with

your Assessor and where appropriate agree milestones so that they can help you monitor

your progress.

▪ Refer to the indicative content in the unit to guide and support your evidence.

▪ Pay attention to how your evidence is presented, remember you are working in the People

Practice Team for this task.

▪ Ensure that the evidence generated for this assessment remains your own work.

You will also benefit from:

▪ Acting on formative feedback from your Assessor.

▪ Reflecting on your own experiences of learning opportunities and training and continuing

professional development.

▪ Reading the CIPD Insight, Fact Sheets and related online material on these topics.

Level 5 Associate Diploma

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Task One: Briefing Paper

You have been asked to prepare a briefing paper that is to be given to people practitioners at a

regional event, to share insights and good practice. The paper needs to provide understanding of

approaches that can be taken to support effective critical thinking and decision-making within the

HR remit.

Your Briefing Paper needs to:

▪ provide an evaluation of the concept of evidence-based practice and assess how evidence-

based practice approaches can be used to support sound decision-making and judgments

for people practitioners across a range of people practices and organisational issues. (1.1)

▪ evaluate two micro and two macro analysis tools or methods that can be used in people

practice to explore an organisation’s micro and macro environment, and how those

identified might be applied to diagnose future issues, challenges and opportunities. (1.2)

▪ explain the principles of critical thinking and give examples of how you apply these yourself

when relating to your own and others’ ideas, to assist objective and rationale debate. (1.3)

▪ assess at least two different ethical theories and perspectives and explain how an

understanding of these can be used to inform and influence effective decision-making. (1.4)

▪ explain a range of decision-making approaches that could be used to identify possible

solutions to a specific issue relating to people practice. (2.3)

▪ as a worked example to illustrate the points made in 2.3, take this same people practice

issue, explain the relevant evidence that you have reviewed, and use one or more decision-

making tools to determine a recommended course of action, explaining the rationale for that

decision and identifying the benefits, risks and financial implications of the suggested

solution. (2.2 & 2.4)

▪ compare and contrast a range of different ways and approaches that are used to measure

financial and non-financial performance within organisations. (3.1)

It is essential that you refer to academic concepts, theories and professional practice for the tasks

to ensure that your work is supported by analysis. Please ensure that any references and sources

drawn upon are acknowledged correctly and supported by a bibliography.

Your evidence must consist of:

▪ Briefing paper (approximately 2900 words) refer to CIPD wordcount policy.

Level 5 Associate Diploma

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Task two: Data analysis and review

In preparing for the forthcoming department heads meeting your manager has asked you to

prepare a range of information and interpretations for use at the meeting

Below are two sets of data that have been collected by a 360-degree review for Department ‘A’.

Table 1, is the feedback that has been elicited from employees on their line-managers and table 2

is from the customers that use the services and goods from Department A.

Use one analytical tool to review the two data sets to reveal any themes, patterns and trends (2.1).

Table 1.

360 Feedback from employees on their line-manager

(Department A total of 256responses were received, 32 did not respond).

Agreed that they were positively

supported by their line manager in

the role that they perform.

100 Disagreed that they were positively

supported by their line manager in

the role that they perform.

156

Agreed that performance targets

set by their line manager were

achievable.

45 Disagreed that performance targets

set by their line manager were

achievable.

211

Agreed that the amount of learning

and development that they

received helped them achieve

current and future working

practices.

95 Disagreed that the amount of

learning and development that they

received helped them achieve

current and future working

practices.

161

Agreed that their line manager was

empathetic to my work/life balance.

112 Disagreed that their line manager

was empathetic to my work/life

balance.

144

Agreed that their line manager

actively promotes their self-

development and career

progression.

68 Disagreed that their line manager

actively promotes their self-

development and career

progression.

188

Agreed that the line manager is

approachable.

37 Disagreed that the line manager is

approachable.

219

Agreed that their line manager

avoids bias in attitude and

treatment of people

86 Disagreed that their line manager

avoids bias in attitude and

treatment of people

170

Agrees that their line manager

resolves conflict amongst team

members.

102 Disagreed that their line manager

resolves conflict amongst team

members.

154

Agrees that their line manager

delegates authority and

independence.

6 Disagreed that their line manager

delegates authority and

independence.

250

Agrees that their line manager

communicates reasons for

changes and decisions.

11 Disagreed that their line manager

communicates reasons for

changes and decisions.

245

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Table 2.

360 Feedback from customers

(Department A total of 145 responses were received, 256 did not respond).

Agreed that the goods and services

on offer were value for money

101 Disagreed that the goods and

services on offer were value for

money

44

Agreed that delivery of products

and services were timely from point

of sale to delivery.

45 Disagreed that delivery of products

and services were timely from point

of sale to delivery.

100

Agreed that the quality of goods

and services were acceptable

114 Disagreed that the quality of goods

and services were acceptable

31

Agreed that customer services

were assessable and responsive to

all calls.

34 Disagreed that customer services

were assessable and responsive to

all calls.

111

Agreed that all complaints were

dealt with in. a timely and

professional manner

54 Disagreed that all complaints were

dealt with in. a timely and

professional manner

91

Agreed that they the after sales

services were good.

27 Disagreed that they the after sales

services were good.

118

Agreed that their initial enquiry was

handled in a timely and

professional manner.

3 Disagreed that their initial enquiry

was handled in a timely and

professional manner.

142

Agreed that on receipt of goods

that packaging was acceptable in

protecting the goods.

143 Disagreed that on receipt of goods

that packaging was acceptable in

protecting the goods.

2

Agreed that they would

recommend the company to a

friend or business

98 Disagreed that they would

recommend the company to a

friend or business

47

Agreed that the range of products

and services was sufficient to

satisfy their requirements.

31 Disagreed that the range of

products and services was

sufficient to satisfy their

requirements.

114

▪ From this analysis, graphically present your findings using three or more different methods

(3.3).

▪ Identify the key systems and data used within effective people practices, to give insights by

measuring work and people performance (3.2)

▪ Explain how people practices add value in an organisation and identify methods that might

be used to measure the impact of people practices (3.4)

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The annual performance reviews for Department ‘A’ last year were scored using a ratings scale

from 6 = high performer to 1= low performer.

Any employee scoring 4 and above received a £400.00 bonus in their monthly pay.

The budget allocation per department for bonuses last year was £75,000.

Figures from Department ‘A’ for last year were:

– 112 employees received a score of 6

– 98 employees received a score of 5

– 35 employees received a score of 4

– 43 employees received a score of 3 or below

▪ Using a variety of measurement tools and techniques and the data provided in tables 1, 2 &

3, explain the likely impact and value of these aspects of people practice currently in place

in Department ‘A’. What other people practice measures might usefully be employed in

Department ‘A’? (3.4)

Your evidence must consist of:

▪ Data analysis and review documents (approximately 1000) refer to CIPD wordcount policy.

Level 5 Associate Diploma

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Assessment Criteria Evidence Checklist –

Use this as a checklist to make sure that you have included the required evidence to meet

the task. Please enter the evidence title and where it can be referred to. An example has

been provided for you.

Task 1 – Briefing paper

Assessment criteria

Evidenced

Y/N

Evidence reference

1.1 Evaluate the concept of evidence-based

practice including how it can be applied

to decision-making in people practice.

Briefing paper.

1.2 Evaluate a range of analysis tools and

methods including how they can be

applied to diagnose organisational

issues, challenges and opportunities.

1.3 Explain the principles of critical thinking

including how you apply these to your

own and others’ ideas.

1.4 Assess how different ethical perspectives

can influence decision making.

2.2 Review relevant evidence to identify key

insights into a people practice issue.

2.3 Explain a range of decision-making

processes to identify potential solutions

to a specific people practice issue.

2.4 Provide a rationale for your decision

based on evaluation of the benefits, risks

and financial implications of potential

solutions.

3.1 Appraise different ways organisations

measure financial and non-financial

performance.

Level 5 Associate Diploma

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Task 2 – Data analysis and review

Assessment criteria

Evidenced

Y/N

Evidence reference

2.1 Interpret analytical data using

appropriate analysis tools and methods.

Data analysis and review

presentation

3.2 Scrutinise key systems and data used to

inform people practice in relation to

measures of work and people

performance calculations.

3.3 Collate key findings for stakeholders from

people practice activities and initiatives.

3.4 Measure the impact and value of people

practice using a variety of methods.

Level 5 Associate Diploma

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Declaration of Authentication

Declaration by learner

I can confirm that this assessment is all my own work and where I have used materials from other sources, they have been properly acknowledged.

Learner name:

Learner signature:

Date:

Declaration by Assessor

I confirm that I am satisfied that to the best of my knowledge, the work produced is solely that of the learner.

Assessor name:

Assessor signature:

Date:

Level 5 Associate Diploma

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5CO02

Evidence-based practice

Assessment Criteria marking descriptors.

Assessors will mark in line with the following assessment criteria (AC) marking descriptors, and will

indicate where the learner sits within the marking band range for each AC.

Assessors must provide a mark from 1 to 4 for each assessment criteria within the unit. Assessors

should use the mark descriptor grid as guidance so they can provide comprehensive feedback that

is developmental for learners. Please be aware that not all the mark descriptors will be present in

every assessment criterion, so assessors must use their discretion in making grading decisions.

The grid below shows the range for each unit assessment result based on total number of marks

awarded across all assessment criteria.

To pass the unit assessment learners must achieve a 2 (Low Pass) or above for each of the

assessment criteria.

The overall result achieved will dictate the outcome the learner receives for the unit, provided

NONE of the assessment criteria have been failed or referred.

Please note that learners will receive a Pass or Fail result from the CIPD at unit level. Referral

grades can be used internally by the centre.

Overall mark Unit result

0 to 23 Fail

24 to 30 Low Pass

31 to 39 Pass

40 to 48 High Pass

Level 5 Associate Diploma

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Marking Descriptors

Mark Range Descriptor

1 Fail Insufficient demonstration of knowledge, understanding or skills (as appropriate) required to meet the AC.

Insufficient examples included, where required, to support answers.

Presentation and structure of assignment is not appropriate and does not meet the assessment brief.

2 Low Pass Demonstrates an acceptable level of knowledge, understanding or skills (as appropriate) required to meet the AC.

Sufficient and acceptable examples included, where required, to support answers.

Required format adopted but some improvement required to the structure and presentation of the assignment.

Answers are acceptable but could be clearer in responding to the task and presented in a more coherent way.

3 Pass

Demonstrates good knowledge, understanding or skills (as appropriate) required to meet the AC.

Includes confident use of examples, where required, to support each answer.

Presentation and structure of assignment is appropriate for the assessment brief.

Answers are clear and well expressed.

4 High Pass Demonstrates a wide range and confident level of knowledge, understanding or skill (as appropriate).

Includes strong examples that illustrate the point being made, that link and support the answer well.

Answers are applied to the case organisation or an alternative organisation.

Answers are clear, concise and well argued, directly respond to what has been asked.

The presentation of the assignment is well structured, coherent and focusses on the need of the questions.

Includes clear evidence of the use of references to wider reading to help inform answer.

Level 5 Associate Diploma

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Marking grid

Task two: Assessment criteria Mark 1- 4

2.1 Interpret analytical data using appropriate analysis tools and methods.

3.2 Scrutinise key systems and data used to inform people practice in

relation to measures of work and people performance calculations.

3.3 Collate key findings for stakeholders from people practice activities and

initiatives.

3.4 Measure the impact and value of people practice using a variety of

methods.

Total for this task

Total marks for unit

Task 1 – Assessment criteria Mark 1 – 4

1.1 Evaluate the concept of evidence-based practice including how it can be

applied to decision-making in people practice.

1.2 Evaluate a range of analysis tools and methods including how they

can be applied to diagnose organisational issues, challenges and

opportunities.

1.3 Explain the principles of critical thinking including how you apply these

to your own and others’ ideas.

1.4 Assess how different ethical perspectives can influence decision making.

2.2 Review relevant evidence to identify key insights into a people practice

issue.

2.3 Explain a range of decision-making processes to identify potential

solutions to a specific people practice issue.

2.4 Provide a rationale for your decision based on evaluation of the benefits,

risks and financial implications of potential solutions.

3.1 Appraise different ways organisations measure financial and non-

financial performance.

Total for this task

312 Part 3

Regional Economic Integration • Reseal”cll Task 0 globalEDGE ~.glob&11e!Jlge.mSll.edll

..,.~ -«, -“.,.””” ‘f:”””’-

Use the globalEDGETMsite to complete the following exercises;

Exercise 1

Your company is seekingto expandbyopeningnew cus- tomer· representative and sales offices in the European Union (EU), The size of the investment is significant, and top-management wishes to have adearer picture of the current and probable future status of the EU. A col- league who spent some time living in the ED indicated that Eurostat might be a comprehensive source to assist in yourproject, After evaluating the stateoftheEU

based on the statistics and publications available,. pre- . parean executive summary describing the features you

consider as crucial in completing your report.

Exercise 2·

.:Trade agreements can impact. The cultural interactions between countries; In fact, the establishment of the Free

• TradeArea of the Americas (ETAA) can be considered a . threat as well as an opportunity for your company. Iden- .tify the main negotiating groups a country must consider whena member. Choose two negotiating groups and jus-

.tify their importance to member countries.

NAfTA and Mexican Trucking When the North American Free Trade Agreement (NAFTA) went into effect in 1994, the treaty specified that by 2000 trucks from each nation would be allowed to cross each other’s borders and deliver goods to their ultimate destination. The argument was that such a pol- icy would lead to great efficiencies. Before NAFTA, Mexican trucks stopped at the border, and goods had to be unloaded and reloaded onto American trucks, a pro- cess that took time and cost money. It was also argued that greater competition from Mexican trucking firms would lower the price of road transportation within NAFTA. Given that two-thirds of cross-border trade within NAFTA goes by road, supporters argued that the savings could be significant.

This provision was vigorously opposed by the Team- sters union in the United States, which represents truck drivers. The union argued that Mexican truck drivers had poor safety records, and that Mexican trucks did not adhere to the strict safety and environmental standards of the United States. To quote James Hoffa, the presi- dent of the Teamsters:

Mexican trucks are older, dirtier, and more dangerous than American trucks. American truck drivers are taken off the road if they commit a serious traffic violation in their personal vehicle. That’s not so in Mexico. Limits on the hours a driver can spend behind the wheel are ignored in Mexico.

Under pressure from the Teamsters, the United States dragged its feet on implementation of the truck-

ing agreement. Ultimately the Teamsters sued to stop implementation of the agreement. An American court rejected their arguments and stated the country must honor the treaty. So did a NAFTA dispute settlement panel. This panel ruled in 2001 that the United States was violating the NAFTA treaty and gave Mexico the right to impose retaliatory tariffs. Mexico decided not to do that, instead giving the United States a chance to honor its commitment. The Bush administration tried to do just that, but was thwarted by opposition in Con- gress, which approved a measure setting 22 new safety standards that Mexican trucks would have to meet be- fore entering the United States.

– In an attempt to break the stalemate, in 2007 the U.S. government set up a pilot program under which trucks from some 100 Mexican transportation companies could enter the United States, provided they passed American safety inspections. The Mexican trucks were tracked, and after 18 months, that program showed the Mexican carri- ers had a slightly better safery record than their U.S. counterparts. The Teamsters immediately lobbied Con- gress to kill the pilot program. In March 2009 an amend- ment attached to a large spending bill did just that.

This time the Mexican government did not let the United States off the hook. As allowed to under the terms of the NAFTA agreement, Mexico immediately placed tar- iffs on some $2.4 billion of goods shipped from the United States to Mexico. California, an important exporter of agri- cultural products to Mexico, was hit hard. Table grapes now faced a 45 percent tariff, while wine, almonds, and juices

Regional Econormc Integration Chapter 9 313.;:-

<would pay a 20 percent tariff. Pears, which primarily come }from Washington state, faced a 20 percent tariff (4 out of 10 f.Je8i~that the United Scuee eKpaftS’ go to Merica). Other products hit with the 20 percent tariff include ex- ports of personal hygiene products and jewelry from New York, tableware from Illinois, and oil seeds from North Dakota. The u.s. Chamber of Commerce has estimated that the current situation costs some 25,600 U.S. jobs. The U.S. government said it would try to come up with a new program that both addressed the “legitimate concerns” of Congress and honored its commitment to the NAFTA treaty. What that agreement will be, however, remains to be seen, and as of 2010, there was no agreement in sight 50

Case Discussion Questions

!i’\ What are the potential economi~ benefits of the U trucking provisions in the NAFTA treaty? Who

benefits? 2. What do you think motivated the Teamsters to

object to the trucking provisions in NAFTA? Are these objections fair? Why did Congress align itself with the Teamsters?

3. Does it make economic sense for the United States. to bear the costs of punitive tariffs as al- lowed for under NAFTA, as opposed to letting Mexican trucks enter the United States?

1. O. Gibson, “Round One to the Pub Lady,” The Guardian, February 4,2011, p. 5; J. W. Miller, ”European TV Market for Sports Faces Turmoil from Legal Ruling,” The Wall Stxeet ioumol, February 4, 2011; andJ. Wilson, ”What the Legal Wmngle Means for Armchair Fans,” The Daily Tele- graph, February 4,2011, p. 8.

2. Information taken from World Trade Organization web- site and current as of February 2011, wwwwto.org.

3. Ibid. 4. The Andean Pact has been through a number of changes

since its inception. The latest version was established in 1991. See “Free-Trade Free for All,” The Economist, Janu- ary 4, 1991, p. 63.

5. D. Swann, The Economicsof the Common Market, 6th ed. (London: Penguin Books, 1990).

6. See J. Bhagwati, “Regionalism and Multilateralism: An Overview,” Columbia University Discussion Paper 603, Department of Economics, Columbia University, New York; A. de la Torre and M. Kelly, “Regional Trade Arrangements,” Occasional Paper 93, Washington, DC: International Monetary Fund, March 1992; J. Bhagwati, “Fast Track to Nowhere,” The Economist, October 18, 1997, pp. 21-24; jagdish Bhagwati, Free Trade Today (Princeton and Oxford: Princeton University Press, 2002); and B. K. Gordon, “A High Risk Trade Policy,” Foreign Affairs 82 no. 4 (July/August 2003), pp. 105-15.

7. N. Colchester and D. Buchan, Europawer: The Essential Guide to Europe’s Economic Transformation in 1992 (London: The Economist Books, 1990), and Swann, Eco- nomics of the Common Market.

8. A. S. Posen, “Fleering Equality, The Relative Size of the EU and US Economies in 2020,” The Brookings Institu- tion, September 2004.

9. Swann, Economicsof the Common Market; Colchester and Buchan, Europower: The Essential Guide toEurope’s Economic Transfo17T1ationin 1992; “The European Union; A Survey,” The Economist, October 22,1994; “The EuropeanCommunity:

A Survey,” The Economist, July 3, 1993; and the European Union website at http://europa.eu.int.

10. E. 1- Morgan, “A Decade ofEC Merger Control,” Interna- tional Journal of Economics and Business, November 200 1, pp.451-73.

11. W. Drozdiak, “EU Allows Vivendi Media Deal,” Washington Post, October 14, 2000, p. E2; D. Hargreaves, “Business as Usual in the New Economy,” Financial Times, October 6, 2000, p. 1; and D. Hargreaves, “Brussels Clears AOL- Time Warner Deal,” Financial Times, October 12, 2000, p.12.

12. “The European Community: A Survey.” 13. Tony Barber, “The Lisbon Reform Treaty,” FT.com,

December 13, 2007. 14. “One Europe, One Economy,” The Economist, Novem-

ber 30, 1991, pp. 53-54; and “Market Failure: A Survey of Business in Europe,” The Economist, June 8, 1991, pp.6-1O.

15. Alan Riley, “The Single Market Ten Years On,” European Policy Analyst, December 2002, pp. 65-72.

16. C. Randzio-Plath, ”Europe Prepares for a Single Financial Market,” Intereconomic, May-June 2004, pp. 142-46; T. Buck, D. Hargreaves. and P. Norman. “Europe’s Single Financial Market,” Financial Times, January 18, 2005, p. 17; “The Gate-keeper,” The Economist, February 19, 2005, p. 79; P. Hofheinz, “A Capital Idea: The European Union Has a Grand Plan to Make Irs Financial Markers More Efficient,” The Wall Street Journal, October 14, 2002,p. R4; and “Banking on McCreevy: Europe’s Single Market,” The Economist, November 26, 2005, p. 91.

17. See C. Wyploze, “EMU: Why and How It Might Hap- pen,” Journal of Econamic Perspectives 11 (1997), pp. 3-22; and M. Feldstein, “The Political Economy of the Euro- pean Economic and Monetary Union,” Journal of Eco- nomic Perspectives 11 (1997), pp. 23-42.

18. “One Europe, One Economy”; and Feldstein, “The Political Economy of the European Economic and Monetary Union,”

“(;-

Entry Strategy and Strategic Alliances Chaptert5 511

Entry strategy and Strategic Alliances

…Use the globalEDGETM site to complete thefollowing exercises:

Exercise 1

A vital element in a successful international market entry strategy is an appropriate fit of skills and capabilities .

• between partners, As such, the Entrepreneur magazine annually publishes a ranking of the “Top Global Franchises.” Provide a list of the top 1o companies that

. pursue franchising as a mode of international expansion. Study one of these companies in detail and provide a description of its business model, its international .. expansion pattern, desirable qualifications. in possible franchisees, and the support and training typically.

General Electric’s Joint Ventures Historically at General Electric, if you wanted to enter a foreign market, you either acquired an established firm in that market or you went alone, establishing a greenfield subsidiary. Joint ventures with a local company were almost never considered. The prevailing philosophy was that if GE didn’t have full control, you didn’t do the deal. However, times have changed. Since the early 2000s joint ventures have become one of the most powerful strategic tools in GE’s arsenal. To enter the South Korean market, for example, GE Money, the retail lending arm of GE’s financial services business, formed joint ventures with Hyundai to offer auto loans, mortgages, and credit cards. GE has a 43 percent stake in these ventures. Simi- larly, in Spain it has formed several joint ventures with local banks to provide consumer loans and credit cards to Spanish residents, and in Central America it has a joint venture with BAC-Credomatic, the largest bank in the region.

There are several reasons for the switch in strategy. For one thing, GE used to be able to buy its way into majority ownership in almost any business, but prices for acquisitions have been bid so high that GE is reluctant to acquire for fear of overpaying. Better to form a joint venture, so the thinking goes, than risk paying too much for a company that turns out to have problems that are discovered only after the acquisition. Just as importantly,

provided by the franchiser. Are there areas where improvement can be made for the company to maintain competitiveness? Provide sufficient justification for your. position.

Exercise 2

.. The U.S. Commercial Service prepares reports known as . the “Country Commercial Guide” for countries of interest

. to U.S. investors. Utilize the Country Commercial Guide for Russia to gather information on this country’s . energy and mining industry. Considering that your com- pany has plans to enter Russia in the foreseeable future, select the most appropriate entry. method. Be sure to support your decision with the information collected.

GE now sees joint ventures as a great way to dip its toe into foreign markets where it lacks local knowledge. Also, in certain nations, China being an example, eco- nomic, political, legal, and cultural considerations make joint ventures an easier option than either acquisitions or greenfield ventures. GE believes it can often benefit from the political contacts, local expertise, and business relationships that the local partner brings to the table, to say nothing of the fact that in certain sectors of the Chinese economy and some others, local laws prohibit other entry modes. GE also sees joint ventures as a good way to share the risk of building a business in a nation where it lacks local knowledge. Finally, under the leadership of CEO Jeffrey Immelr, GE has adopted aggressive growth goals, and it feels that entering via joint ventures into nations where it lacks a presence is the only way of attaining these goals. Fueled by its large number of joint ventures, GE has rapidly expanded its international presence over the past decade. For the first time, in 2007 the company derived the majority of its revenue from foreign operations.

Of course, General Electric has done joint ventures in the past. For example, it has a long-standing 50-50 joint venture with the French company Snecma to make engines for commercial jet aircraft, another with Fanuc of Japan to make controls for electrical equipment, and

512 Part 5 The Strategy and Structure of International Business

a third with Sea Containers of the United Kingdom, which has become one of the world’s largest companies leasing sliipping containers. But all of these ventures came about only after OE had explored other ways to gain access to particular markets or technology. While OE formerly used joint ventures as the last option, they are now often the preferred entry strategy.

OE managers also note that there is no shortage of partners willing to enter into a joint venture with the company. The company has a well-earned reputation for being a good partner to work with. OE is well known for its innovative management techniques and excellent management development programs. Many partners are only too happy to team up with GE to get access to this know-how. The knowledge flow, therefore, goes both ways, with OE acquiring access to knowledge about local markets, and partners learning cutting-edge management techniques from GE that can be used to boost their own productivity.

Nevertheless, joint ventures are no panacea. GE’s agreements normally give even the minority partner in a joint venture veto power over major strategic decisions, and control issues can scuttle some ventures. In january 2007, for example, GE announced it would enter into a venture with Britain’s Smiths Group to make aerospace equipment. However, nine months later, GE ended talks aimed at establishing the venture, stating they could not reach an agreement over the vision for the joint venture. GE has also found that as much as it would like majority ownership, or even a 50150 split, sometimes it has to settle for a minority

.•.~~ ~.iQ~~.

~~~.’tffi..~c.””lf, •••••:

stake to gain access to a foreign market. In 2003, when GE entered into a joint venture with :f1yundaj to offer auto loans, it did so as a minority partner even though it would have preferred a majority position. Hyundai had refused to cede control over to GE.63

Case Discussion Questions

1. GE used to prefer acquisitions or greenfield ventures as an entry mode rather than joint ventures. Why do you think this was the case?

2. Why do you think that GE has come to prefer joint ventures in recent years? Do you think that the global economic crisis of 2008-2009 might have affected this preference in any way? If so, how?

3. What are the risks that OE must assume when it enters into a joint venture? Is there any way for GE to reduce these risks?

4. The case mentions that GE has a well-earned reputation for being a good partner. What are the likely benefits of this reputation to GE? If GE were to tarnish its reputation by, for example, opportunistically taking advantage of a partner, how might this impact the company going

(s) forward?5. In addition to its reputation for being a good part- ner, what other assets do you think GE brings to the table that make it an attractive joint-venture partner?

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1. S. Schifferes, “Cracking China’s Car Market,” BBC News, May 17, 2007; N. Madden, “Led by Buick, Carmaker Learning Fine Points of Regional China Tastes,” Automotive News, September 15, 2008, pp. 186-90; “GM Posts Record Sales in China,” Toronto Star, January 5, 2010, p. B4; and “GM’s Sales in China Top US,” Investor’s Business Daily, January 25,2011, p. A1.

2. For interesting empirical studies that deal with the issues- of timing and resource commitments, see T. Isobe, S. Makino, and D. B. Montgomery, “Resource Commit- ment, Entry Timing, and Market Performance of Foreign Direct Investments in Emerging Economies,” Academy of Management Journal 43, no. 3 (2000), pp. 468-84; and Y. Pan and P. S. K. Chi, “Financial Performance and Survival of Multinational Corporations in China,” Strategic ManagementJauma120, no. 4 (1999), pp. 359-74. A complementary theoretical perspective on this issue can be found in V. Govindarjan and A. K. Gupta, The Quest for Global Dominance (San Francisco: [ossev-Bass,

2001). Also see F Vermeulen and H. Barkeme, “Pace, Rhythm and Scope: Process Dependence in Buildinga Profitable Multinational Corporation,” Strategic Manage”: mentloumal23 (2002), pp. 637-54. —

3. This can be reconceptualized as the resource base of thE:, . – entrant, relative to indigenous competitors. For work tlliIl; focuses on this issue, see W. C. Bogner, H. Thomas, arid- . ). McGee, “A Longitudinal Study of the Competitive Pos~ tions and Entry Paths of European Finns in the U.S. Phai;’ maceutical Market,” StrategicManagementJoumal17 (1996J; . pp. 85-107; D. Collis, “A Resource-BasedAnalysis of Globel ” Competition,” Strategic Management Journal 12 (199l)~ pp. 49-68; and S. Tallman, “Strategic Management ModelS; and Resource-Based Strategies among MNEs in a HO$f Market,” StrategicManagementJoumal12 (1991), pp. 69.-82}

4. For a discussion of first-mover advantages, st:;€:- M. Lieberman and D. Montgomery, “First-Mover Adv~i’·:> rages,” Strategic Management Journal 9 (Summer Speci~~(~ Issue, 1988), pp. 41-58. … ,-

548 Part 6 Business Operations

disadvantages of using export credit insurance rather than: a letter of credit for exporting (a)a .’ luxury yacht from California to Canada, and (b) machine tools from New York to Ukraine?

4. How do you explain the use of countertrade? Under what scenarios might its use increase fur-

ther by2015?Under what scenarios might its ‘. use decline?

5. How might a company make strategic use of countertrade schemes as a marketing weapon to generate export revenues? What are the risks as- sociated with pursuing such a strategy?

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Exporting, Importing, and Countertrade

Use the globalEDGPM site to complete the following exercises:

Exercise 1

Exporting is an important way for small and large compa- nies to introduce products and develop new markets. In fact, the Internet is rich with ‘resources that offer guidance to companies wishing to expand their markets through exporting. The trade tutorials at the globalEDGE website provide links to these resources. Identify five sources and provide a description of the services avail- able for new exporters through each source.

Exercise 2

Understanding the specific terminology used in CH~_ …:’ _ import/export process is necessary prior to ny’s first international venture. Utilize the glclhalE1DCJE Glossary of International Business Terms to identify

. definitions of the following terms related to exporting.’: .,·•••• and importiug:ad valorem tariff, consignment, embargo.,: global quota, invisible barriers to trade, letter of mercantilism, and section 201.

Mil International Al Merritt founded MD International in 1987. A former salesman for a medical equipment company, Merritt saw an opportunity to act as an export intermediary for med- ical equipment manufacturers in the United States. He chose to focus on Latin America and the Caribbean, a region that he already had experience in. Also, trade barriers were starting to fall throughout the region as Latin governments embraced a more liberal economic ideology, creating an opening for entrepreneurs such as Merritt. Local governments were also expanding their spending on health care, creating an opportunity that Merritt was poised to exploit.

Merritt located his company in south Florida to be close to his market. Since then, the company has grown to become the largest intermediary exporting medical devices to the region. Today the company sells the prod- ucts of more than 30 medical manufacturers to some 600 regional distributors. While many medical equip-

ment manufacturers don’t sell directly to the region . because of the sizable marketing costs, MD can afford to because it goes into those markets with a broad portfolio of products.

The company’s success is in part due to its deep- rooted knowledge and understanding of the Latini American market. MD works very closely with teams of doctors, biomedical engineers, microbiologists, and mar~:’ keting managers across Latin America to understand_Y their needs and what the company can do for them. The> sale of products to customers is typically only the begin- ….. ning of a relationship. MD International also provides training to medical personnel in the use of devices and’ extensive after-sale service and support. ..

Along the way to becoming a successful exporter, MD’ International has leaned heavily upon export assistance ….. programs established by the U.S. government. For ex-‘ ample, in the early 2000s a shipment to Venezuela was

Exportma Importing, and Countertrade

held up by the Venezuelan customs seeking proof that the medical devices were not intended for military use. Within two days, staff at the U.S. Export Assistance Center in Miami arranged for the U.S. embassy in Venezuela to have a letter written and delivered to the customs officials, assuring them that the products had no military applications, and the shipment was released. Merritt has also worked extensively with the Expon- Import Bank to gain financing for its exports (the corn- pany needs to finance the inventory that it exports).

Despite these advantages, it has not all been easy going for MD International. Latin American economies have often been highly cyclical, and MD International has ridden those cycles with them. In 2001, for example, after several years of solid growth, an economic crisis in both Argentina and Brazil, coupled with a slowdown in Mexico, resulted in losses for the year and forced Merritt to lay off one-third of his staff and cut the pay of others, which included a 50 percent pay cut for himself. Things started to improve in 2002, and the weak dollar in the mid- 2000s also helped to boost expon sales. However, the global financial crisis of 2008 ushered in another tough period; although prior experience suggests that

Chapter 16 549

MD International can not only survive such downturns, but also come out stronger as weaker competitors fall by the wayside.”

Case Discussion Questions

1. How does an intermediary such as MD Intema- tiona Icreate value for the manufacturers that use it to sell medical equipment in fQreign mar- kets? Why do they want to use MD, Interna- tional rather than export directly themselves?

2. Why did MD International focus on Latin America? What are the benefits of this regional approach? What are the potential drawbacks?

3. What would it take for MD International to start exporting to other regions such as Asia or Europe? Given this, would you advise Al Merritt to continue his regional focus going forward or to add other regions?

~ How important has government assistance been l:J to MD International? Do you think helping

firms such as MD International represents good use of taxpayer money?

1. u.s. Department of Commerce website, “Vellus Products Inc.,” www.export.gov; C. K. Cultice, “Best in Show: Vellus Products,” World Trade, January 2007, pp. 70-73; and C. K. Cult ice, “Lathering up World Markets,” Busi~ ness America,” July 1997, p. 33.

2. R. A. Pope, “Why Small Firms Export: Another Look,” journal. of Small Business Management 40 (2002), pp. 17-26.

3. M. C. White “Marlin Steel Wire Products,” Slate Magazine, November 10, 2010.

4. S. T. Cavusgil, “Global Dimensions of Marketing,” in Marketing, ed. P. E. Murphy and B. M. Enis (Glenview, 1L: Scott, Foresman, 1985), pp. 577-99.

5. S. M. Mehta, “Enterprise: Small Companies Look to Cul- tivate Foreign Business,” The Wall Stseex Ioumol, July 7, 1994, p. B2.

6. P. A. Julien and C. Ramagelahy, “Competitive Strategy and Performance of Exporting SMEs,” Entrepreneurship Theory and Practice, 2003, pp. 227-94.

7. W. J. Burpitt and D. A. Rondinelli, “Small Firms’ Motiva- nons for Exporting: To Earn and Learn?” Journal of SmaU Business Management, October 2000, pp. 1-14; and J. D. Mittelstaedt, G. N. Harben, and W. A. Ward, “How Smaills Too Small?” Journal of SmaLl Business Management 41 (2003), pp. 68-85.

8. Small Business Administration, “The State of Small Business 1999-2000: Report to the President,” 2001; www.sba.gov/advo/stats/stateofsb99_00.pdf;and D. Ransom, “Obama’s Math: More Exports Equals More Jobs,” The Wall Street Journal. February 6, 2010.

9. A. O. Ogbuehi and T. A. Longfellow, “Perceptions of U.S. Manufacturing Companies Concerning Exporting,” Journal of Small Business Management, October 1994, pp. 37-59; and U.S. Small Business Administtation, “Guide to Exporting,” www.sba.gov/oit/info.Guide- to Exportlng/index.html.

10. R. W. Haigh, “Thinking of Exporting!” Columbia Joumal of World Business 29 (December 1994), pp. 66-86.

11. F. Williams, ”The Quest for More Efficient Commerce,” Financial Times, October 13, 1994, p. 7.

12. ]. Sparshott, “Businesses Must Export to Compete,” The Washington Times, September 1, 2004, p. C8; “Entrepre- neur of the Year 2001: Donald Gallion, FCX Systems,” The State Journal, June 18, 2001, p. SlO; and T. Pierro, “Exporting Powers Growth of FCX Systems,” The State Journal, April 6, 1998, p. 1.

13. See Burpitt and Rondinelli, “Small Firms’ Motivations for Exporting”; and C. S. Katsikeas, L. C. Leonidou, and N. A. Morgan, “Firm Level Export Performance Assessment,” Academy of Marketing Science 28 (2000), pp. 493-511.

dispersed supply chain. What are the causes of these problems? What can a company like Boeing do to make sure such problems do not occur in the future?

3. Some critics have claimed that by outsourcing so much work, Boeing has been exporting American jobs overseas. Is this criticism fair? How should the company respond to such criticisms?

Cases 669

1. J. L Lunsford, “Jet Blues,”The Wall Street]oumal, December 7,2007, p. AI; J. Gapper, “A Cleverer Way to Build a Boe- ing,” FinancialTimes,July 9, 2007, pLl.]. Teresko, “The Boeing 787: A Matter of Materials,” Industry Week, Decem- ber 2007, pp. 34-39; and P Sanders, “Boeing Takes Control of Plants,” The Wall Street}oumal, December 23, 2009, p. B2.

“,S~~IO- Adopting International! Accmultil!!g Stlilndardll T Following a European Union mandate, from January 1, 2005, onward, some 7,000 companies whose stock is pub- licly traded on European stock exchanges were required to issue all future financial accounts in a format agreed upon by the International Accounting Standards Board (IASB). In addition, some 65 countries outside of the EU have also committed to requiring that public companies issue accounts that conform to IASB rules. Even American accounting authorities, who historically have not been known for cooperating on international projects, have been trying to mesh their rules with those of the IASB.

Historically, different accounting practices made it very difficult for investors to compare the financial statements of firms based in different nations. For example, after the 1997 Asian crisis, a UN analysis concluded that before the crisis two-thirds of the 73 largest East Asian banks hadn’t disclosed problem loans and debt from related parties, such as loans between a parent and its subsidiary. About 85 per- cent of the banks didn’t disclose their gains or losses from foreign currency translations or their net foreign currency exposures, and two-thirds failed to disclose the amounts they had invested in derivatives. Had this accounting in- formation been made available to the public-as it would have been under accounting standards prevailing at the time in many developed nations-it is possible that prob- lems in the East Asian banking system would have come to light sooner, and the crisis that unfolded in 1997 might not have been as serious as it ultimately was.

In another example of the implications of differences in accounting standards, a Morgan Stanley research project found that country differences in the way corporate pension expenses are accounted for distorted the earnings state- ments of companies in the automobile industry. Most strik- ingly, while U.S. auto companies charged certain pension costs against earnings and funded them annually, Japanese auto companies took no charge against earnings for pension costs, and their pension obligations were largely unrecorded. By adjusting for these differences, Morgan Stanley found that the U.S. companies generally understated their earn- ings, and had stronger balance sheets, than commonly sup- posed, whereas Japanese companies had lower earnings and weaker balance sheets. By putting everybody on the same

I

footing, the move toward common global accounting stan- dards should eliminate such divergent practices and make cross-national comparisons easier.

However, the road toward common accounting stan- dards has some speed bumps. In November 2004, for ex- ample, Shell, the large oil company, announced that adopting international accounting standards would reduce the value of assets on its balance sheet by $4.9 billion. The reduction primarily came from a change in the way Shell must account for employee benefits, such as pensions. Similarly, following IASB standards, the net worth of the French cosmetics giant L’Oreal fell from 8.1 billion to 6.3 billion euros, primarily due to a change in the way certain classes of stock were classified. On the other hand, some companies will benefit from the shift. The UK-based mobile phone giant Vodafone, for example, announced in early 2005 that under newly adopted IASB standards, its reported profits for the last six months of 2004 would have been some $13 billion higher, primarily because the com- pany would not have had to amortize goodwill associated with previous acquisitions against earnings. 1

3.

What are the benefits of adopting international accounting standards for (a) investors and (b) business enterprises? What are the potential risks associated with a move in a nation toward adoption of international accounting standards? In which nation is the move to adoption of IASB standards likely to cause revisions in the reported financial performance of business enterprises, the . United States or China? Why?

1. E. McDonald, “What Happened?” The WalLStreet]ournaI, April 26, 1999, p. R6; P.Grant, “IFRS Boosts Vodafone Profits by Sterling 6.8 Billion,” Accounrancy Age, January 20, 2005; and G. Hinks, “IFRS to Wipe $4.7 billion off Shell’s Balance Sheet,” Accountancy Age, November 23,2004.