Strategic Management and Business Policy

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Dr. PARK’s Lecture Notes
[BUS495]
Strategic Management & Business Policy
Note : Every class, you should keep this lecture notes with you!
Dr. PARK, Young-Eun
Assistant Professor
Prince Sultan University, in Saudi Arabia
Biography:
Dr. Park is an assistant Professor of Management Department in College of Business Administration
and also Associate Director of Strategic Planning & Development Center at Prince Sultan University
in Riyadh, Saudi Arabia. She has received her Doctoral (Major: Strategy & International Business)
and Master’s degrees from Seoul National University in Korea. She has also completed a Postdoctoral fellowship supported by Korean Government. Dr. Park has over 18 years of combined,
distinguished career in academia, government and in business. She was granted several Excellence
Awards for Research Papers and she has authored several books and numerous academic papers in
ISI/SCOPUS indexed Journals. She is an active Editorial board member of several international top
journals including ISI/SCOPUS. Her main research area is the study of Multinational Enterprises’
international business and building strategies with knowledge based view, in addition, Teaching &
Learning in Higher Education.
For further information, please contact: ypark@psu.edu.sa, or
Visit Dr. Park’s office (A345 at Building1), Strategic Planning & Development Center at PSU.
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■ ICEBREAKING
1. Greetings & Introducing (Self-Introduction)
Please, fill out the form and submit this page to Dr. Park
1) Biographical Details
Name : Birth Date :
Nationality : Major :
Phone : Email :
Address :
2) Education
School name Dates Attended Concentration of Study
(High school)
(Univ.) Major :
3) Experience
Organization name Dates Attended Concentration of Work
(any experience like part time work)
4) Etc. (Very IMPORTANT! PLEASE Answer the questions below)
Future Goal
Strengthens & Weakness
Favorite Saudi company, why?
Favorite Global company, why?
Comments for class
* Once you are done, upload the file for submission on LMS!
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■ Introduction: Business House
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“Strategic Management & Business Policy” Course Outline
Module 1 : Overview of Strategic Management
Session1. Introduction and Overview of Strategic Management
Session2. Ch1. Understanding Strategy (Movie Talk & Individual Assignment 1%)
Session3. Ch1. SM & Competitive Advantage
1st Quiz unified (7%, CH1, Thu, 17th of Sep 2020, 12-12:20pm)
Session4. Ch2. Evaluating a firm’s External environment
Session5. Ch3. Evaluating a firm’s Internal Capacities
2nd Quiz unified (8%, CH2&3, Sun, 4th of Oct 2020, 12-12:30pm)
Module 2 : Formulating Strategy (Business & Corporate Level)
Session6. Ch6. Corporate level’s strategy (Case analysis & Discussion : Samsung)
(Flipped Learning 5% : Group 1, 2)
Session7. Ch5. Business level’s strategy (Case analysis & Discussion : 3M, Ryanair)
(Flipped Learning 5% : Group 3, 4)
Session8. Major unified (20%, CH5&6, Tue, 20th of Oct 2020, 12-1pm)
Session9. Ch7. International Strategy
(Flipped Learning 5% : Group 5, 6, 7)
Module 3 : Implementing Strategy
Session10. Ch10. Organizational Designs
Session11. Ch9. Corporate Governance (or Guideline session for ‘Team’s Final Project)
Session12. Ch11. Strategic Leadership
Session13. Team’s Final Project (15%)
Session14. Team Paper Submission & Presentation (Deadline : Further Notice)
Session15. Study Week
Final Exam (40%, Comprehensive Exam) Further Notice
NOTE—This is a tentative schedule and subject to change.
However, the exam date is fixed and will not be changed in any case.
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“Strategic Management & Business Policy”
Course Assessment
Assessment Assessment Task
Proportion of
Assessment
Main platform
&
Communication
tools
LMS + Google Meet +
Etc.(MS Team or Google Classroom)
(not WhatsApp or email)
[Important
Notice]
Regarding exam & attendance
1. The fixed, unified exam dates will not be
changed in any case.
2. postponing any exams with any reasons: 20%
deduction from your marks you get
3. if you don’t have any official document, please
don’t say to me about your absence in advance.
Once I get the official document from you (if you
have), I will remove your absence from the system,
not in advance. You should submit the official
document , next class, if you have an official excuse and
want to remove your absence (Definitely within 2 weeks).
Cause the Edugate system for absence will be closed after 2
weeks and then I cannot change the status. (It means I
cannot remove your absence)
1 1st Quiz (CH 1) Thu, 17th of Sep 2020, 12-12:20pm 7%
2 2nd Quiz (CH 2&3) Sun, 4th of Oct 2020, 12-12:30pm 8%
3 Major exam(CH 5&6) Tue, 20th of Oct 2020, 12-1pm 20%
4
1. Individual assignment 1 time (1%) Week2
2. Participation & Attitude (Behavior) (1%)
3. Attendance (3%): see the table
Number of Absence Marks
(Deduction)
No Absence ~ 3 times
(Based on 3 times-class a week:
SUN, TUE, THU Class)
0
5%
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NOTE— The date of each exam will be announced on the 1st day of the semester and will not be
changed in any cases.
No Absence ~ 2 times
(Based on 2 times-class a week:
MON, WED Class)
4 ~ 6 times (3 times-class a week)
3 ~ 4 times (2 times-class a week)
1
7 ~ 9 times (3 times-class a week)
5 ~ 6 times (2 times-class a week)
2
10 ~ 12 times (3 times-class a week)
7 ~ 8 times (2 times-class a week)
3
13 times ~ (3 times-class a week)
9 times ~ (2 times-class a week)
DN
5
Team Project
Flipped Learning 5%
6 Final Project: Strategy Analysis 15%
7
Final Exam
(Comprehensive Exam)
40%
Total Assessment 100%
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“Strategic Management & Business Policy”
Important Notices
1. Contact: LMS Message or by email officially (ypark@psu.edu.sa)
Note: Please, contact me only during office hours – at least daytime.
Additionally, please, don’t send me a private message (by whatsapp even you know
the number, I will not reply) “except emergency”.
2. Requirements: You should Keep Dr. Park’s Lecture notes and each chapter’s ppt
slides every class.
Note: no revision for all exams, all hints only in class
3. Course outline & Assessment:
Note: We will check the course outline to know our progress with lecture notes.
4. No makeup exam for all exams
Note: Only exception- “your” emergent surgery in the hospital
with official documents on the exam day, not parents, siblings, or relatives.
** postponing exams with any reasons: 20% deduction from your marks
*** Just visit clinic on the exam day is not allowed (only hospital) for the
approval of makeup exam by PSU Laws and policies.
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[Attachment] Course Syllabus BUS495
Prince Sultan University
College of Business Administration (CBA)
Department of Management
First SEMESTER 2020-2021
INSTITUTIONAL COURSE SYLLABUS
Course Code:
BUS495
Course Title:
STRATEGIC MANAGEMENT
AND BUSINESS POLICY
Course Instructor:
Dr. Park, Young-Eun
Email:
ypark@psu.edu.sa
Credit Hours:
3hrs
Course Location:
Please refer to Edugate system
Scheduled Office Hours: See the Office
Office Location: A345
(Strategic Planning & Development Center)
Co-Requisite: Pre-Requisite:
Mission Statement
CBA Vision
Our vision is to be a hallmark of excellence and innovation in business education in the Kingdom of
Saudi Arabia.
CBA Mission
Our mission is to create an innovative academic environment to promote excellence in business education, research,
and service in the Kingdom of Saudi Arabia through commitment to quality and continuous improvement in
accordance with international standards.
I. Course Description: This course introduces the students to the concepts and tools of strategic
management and exposes them to the actual practice of such concepts and tools through analysis of cases, and
interactive exercises. The major topics of emphasis in this course include key terms in strategic management,
business vision and mission, environmental analyses, strategy implementing, and strategy evaluation.
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It may help to view this course as having two broad components. First, students will be expected to understand and ap
preciate the processes and techniques associated with analysing environmental, industry, and company data in order t
o identify significant threats, opportunities, organizational capabilities, and strategy alternatives inherent in a specific
situation. Second, students will be expected to develop analytical, communication, teamwork, and leadership skills as
they attempt to contribute to a group strategy planning process. In both of these components, students should fully util
ize their knowledge of marketing, management, accounting, finance, statistics, management information systems, bus
iness law, economics, operations management, and other courses within the business curriculum, as well as from the l
iberal arts and sciences.
To succeed in this course, students will have to assume an active, participative role in the learning process. In many w
ays, this course will attempt to mirror the type of interactive communication and analytical processes that typically oc
cur in the business world as organizations struggle to attain the objectives of their stakeholders in an intensely compet
itive global environment. This course should be challenging, interesting, and relevant. It focuses specifically on the ty
pes of cross-functional problems, processes, and decisions that are faced by managers in all types of organizations.
II. Course Learning Outcomes:
Skills Course Learning Outcomes Measured by
Knowledge 1. Understand some of the most
important concepts and theories
of strategic management.
2. Recognize how these concepts
and theories can help to
understand various factors
necessary for cultivating a
competitive advantage in global
environments.
In-class discussion
Reading exercise Quizzes
Major exams and other written
tests
Skills 3. Analyse both the internal and
external environments of the firm
4. Evaluate potential alternative
strategies for corporations
5. Show a teamwork output in the
tasks given.
Case studies, Group project,
Class discussion
Exams including majors and
final exam
Group project,
Group presentation,
Group case studies
Competencies 6. Demonstrate ability to express
ideas and apply related
technology.
Report Writing,
Oral presentation,
In Class discussion
III. Tentative Weekly Course Schedule:
WEEK UNIT/ TOPIC CLO(s)
alignment
ASSIGNMENTS Number of
Contact
hours
1 Introduction 3
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2 Chapter1. Strategic Management:
Creating Competitive Advantage
 What is Strategy? And What is
Strategic Management?
 The Four key attributes of Strategic
Management
 Intended Vs Realized strategies
CLO 1 ASSIGNMENT1
(INDIVIDUAL)
3
3 Chapter1. Strategic Management:
Creating Competitive Advantage
 Strategic Management Process
 The role of Corporate Governance
 Coherence in Strategic Direction
CLO 1 1st QUIZ
(CHAPTER1)
3
4 Chapter2. Analyzing the External
Environment
 The role of Scanning,
Monitoring, CI and forecasting
 SWOT analysis
 The General Environment
 The Industry Environment
CLO 3 DISCUSSION 3
5 Chapter3. Assessing the Internal
Environment of the firm
 Value chain Analysis
 Application of VCA in Service
Sector
 Resource based view
 Evaluating Firm’s Performance
CLO 3 DISCUSSION 3
6 Chapter3. Assessing the Internal
Environment of the firm
 Resource based view
 Evaluating Firm’s Performance
CLO 3 DISCUSSION
2nd QUIZ
(CHAPTER 2&3)
3
7 Chapter 5. Business Level Strategy:
Creating and Sustaining CA
 Porter Generic Strategies
 Combination Strategies
 Industry Life Cycle Stages and
Strategies
 Turnaround Strategies
CLO 4,
CLO 5,
CLO 6
CASE STUDY
DISCUSSION
FLIPPED
LEARNING
3
8 Chapter 6. Corporate Level
Strategies
CLO 4, CASE STUDY
DISCUSSION
3
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 Diversification modes
 Related and Unrelated
Diversification and Market
powers
CLO 5,
CLO 6 FLIPPED
LEARNING
9 Chapter 6. Corporate Level Strategies
 Means to achieve
Diversification
 Strategic Alliances, Mergers
and Takeovers
 Antitakeover Tactics
CLO 4,
CLO 5,
CLO 6
MAJOR EXAM
(CHAPTER 5&6)
3
10 Chapter7. International Strategy:
Creating Value in Global Markets
 International ExpansionsMotivators and Risks
 Entry Modes of International
Expansion
CLO 2,
CLO 4,
CLO 5,
CLO 6
CASE STUDY
DISCUSSION
FLIPPED
LEARNING
3
11 Chapter9. Strategic Control and
Corporate Governance
 Tradition Approach to Strategic
Control
 Contemporary Approach to
Strategic Control
CLO 4,
CLO 5,
CLO 6
Team Project
Guideline Session
3
12 Chapter9. Strategic Control and
Corporate Governance
 Attaining Behavioural Control
 Guest Lecture on CG
CLO 4,
CLO 5,
CLO 6
3
13 Chapter10. Creating Effective
Organizational Designs
 Strategy and Organizational
Structure
 Boundary less Organizations
 Other Common type of
Organizational Designs
CLO 4,
CLO 5,
CLO 6
PROJECT
DISCUSSION-II
3
14 Chapter11. Strategic Leadership:
Creating a Learning organization
 Element of effective
Leadership
 Emotional Intelligence
 Learning Organization
CLO 4,
CLO 5,
CLO 6
3
15  CASE Discussions and
Analysis
 Presentations
CLO 5,
CLO 6
3
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 FINAL EXAMS
IV. Student Assessment & Teaching Strategies:
Domain Assessment Teaching Strategy
Knowledge Quiz, Major Exam, Final Exam Direct Instruction which includes
Lectures, Discussions, Case
studies
Skills Major Exam, Final Exam, Project
Group Project, Group Assignments
Case-based teaching and discussion
In-class discussion
Having class group assignments
Competencies In-Class activities, group discussions,
Written Exams, Report writing
Oral presentation
In-class discussion
In-class activities using internet for
information
Flipped teaching
Videos
Digital library and online resources
Remark: This is the alignment of the SDGs (Sustainable Development Goals for Impact Ranking
of THE)’ to the course, BUS495 (Strategic Management & Business Policy). There is no doubt that the COVID-19 Pandemic has shaken the entire plans in Higher Education. However, it is also an excellent opportunity to make a healthier, more sustainable and super resilient world by building firm, better, sustainable development goals (SDGs). Notably, we can develop some transformative ways in our course in turbulent times as below.
SDG # SDG topic BUS495 Course Plan
Goal 3 Good health and well-being
– Team Research Project with a keyword of SDG
: Making research paper by developing a corporate strategy
and social responsibility with a keyword covering good
health and well-being after COVID-19 Pandemic.
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Goal 4 Quality Education
– Special care and Follow-up for students with disabilities
amid COVID pandemic
: Providing equal and fair educational opportunities online
(virtually and physically) with special care.
– Implementing advanced virtual platform and various
teaching tools for online class
Goal 17 Partnership for the goals
– Searching global partnership for COOP internship
program
: Particularly, this course is assigned to senior students
(graduating students) who are preparing for interviews of
COOP throughout the semester.
Accordingly, the instructor and students can cooperate to
discover global COOP opportunities.
For example, Building global partnership with some
Korean companies which have business transactions with
Saudi Arabia or Middle East.
V. Course Requirements
 Students must submit all the required course works (60%) to the course instructor as per
specified deadlines and pass the final exam (40%).
 Students have to attend all the exams including Quiz, Majors and Final on the specified date.
 No make-up exams will be given if the students absent from those exams.
 Students must attend at least 80% of the course.
VI. Schedule of Assessment (Grading)
Assessment Assessment Task
Week Due Proportion of Final
Assessment
1 Quizzes (2 times) 3,5 (7%+8%) 15%
2 Major Exam 8 20%
3 Individual Assignment (1time) 2 1%
4 Participation, Attitude (1%)
& Attendance (3%)
All weeks 4%
5 Flipped Learning (team-based) 6~12 5%
6 Team Project (team-based) 13~14 15%
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7 Final Exam
(Comprehensive Exam)
16 40%
Total Assessment 100%
*The course instructor reserves the right to alter this distribution, if an emerging situation so warrants.
** Absence’s mark: if you don’t have any official document, please don’t say to me in advance.
In any cases, I will check your absence in the Edugate system first when you are absent.
Once I get the official document from you (if you have), I will remove your absence from the
system, not in advance.
You should submit the official document next class if you have an official excuse and want to remove
your absence (Definitely within 2 weeks). Cause the Edugate system for absence will be closed after 2
weeks and then I cannot change the status. (It means I cannot remove your absence)
Number of Absence Marks (Deduction)
No Absence ~ 3 times
(Based on 3 times-class a week: SUN, TUE, THU Class)
No Absence ~ 2 times
(Based on 2 times-class a week: MON, WED Class)
0
4 ~ 6 times (3 times-class a week)
3 ~ 4 times (2 times-class a week)
1
7 ~ 9 times (3 times-class a week)
5 ~ 6 times (2 times-class a week)
2
10 ~ 12 times (3 times-class a week)
7 ~ 8 times (2 times-class a week)
3
13 times ~ (3 times-class a week)
9 times ~ (2 times-class a week)
DN
DN Policy
Any student who earns 13 absences will be recommended for DN. The absences will be counted from the day first
of the official start of classes given in the semester calendar, no matter when the student has actually registered the
course. Besides, any student who is late by more than five minutes after the scheduled start of a class will be
marked absent, and such absences will also be counted for DN purpose.
Course Grading
Your grade for this unit will be based on the following:
Code Mark Range
A+ 95 to 100
A 90 to less than 95
B+ 85 to less than 90
B 80 to less than 85
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C+ 75 to less than 80
C 70 to less than 75
D+ 65 to less than 70
D 60 to less than 65
F Less than 60
VII. Learning Resources
A. References –
Textbook Required
Strategic Management: Text and Cases By Dess/ Eisner/ McNamara, McGraw Hill 8th Edition
Strategic Management: Text and Cases Paperback (10th edition ISBN-13: 978-1260575255)
Suggested Supplimentary Books
1. Fred R. David; Strategic Management Concepts and Cases, 13th Edition; Pearson, Prentice Hall; 2011.
2. Charles W. L. H and Gareth R. J (2011) Essential of Strategic Management, Cengage Learning
Suggested Readings / Articles
3. What is Strategy? (Porter, HBR, 1996)
4. How Competitive Forces Shape Strategy (Porter, HBR, 1979)
5. Competing on Resources: Strategy in the 1990’s (Collis & Montgomery, HBR, 1995)
6. Discovering New Points of Differentiation (MacMillan & McGrath, HBR, 1997)
7. From Competitive Advantage to Corporate Strategy (Porter, HBR, 1987)
8. Are You Paying Too Much for That Acquisition? (Eccles, Lanes, & Wilson, HBR, 1999)
9. Distance Still Matters: The Hard Reality of Global Expansion (Ghemawat, HBR, 2001)
10. Collaborative Advantage: The Art of Alliances (Kanter, HRB, 1994)
11. Why Incentive Plans Cannot Work (Kohn, HBR, 1993)
12. Rethinking Rewards (Perspectives in HBR, Nov-Dec, 1993)
B. Facilities Required–(lecture room, computing resources, laboratories, others)
Lecture room with Projector, White board.
C. Learning Management System – website address, instructions, required participation, etc.
LMS Moodle
VIII. Classroom Policies
A. Academic Integrity Policy (e.g. plagiarism or dishonesty)
It is each student’s responsibility to become fully aware of the policies regarding academic
dishonesty. Cheating, attempting to cheat, plagiarism or violating instructions and examination
regulations will result in the offender being punished in accordance with the student
disciplinary rules as issued by the university council.
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B. Attendance Policy
 Arriving on time; the College policy on lateness will be strictly applied.
 Not using any personal gadgets (e.g. IPods) in the classroom,
 Turning off your cell phone before entering the classroom.
 Not talking during class unless there is a discussion.
 Not wearing your sunglasses or your Abaya in class.
 Treating others in the class with respect.
C. Homework Submission Policy
All assignments must be submitted to the Instructor before the deadline of submission.
Passing the dead line will be subjected to marks deduction.
IX. My Assumptions (Optional)
Instructor’s Educational Philosophy: My education philosophy is very close to my life philosophy, each one of us
is blessed with some kind of uniqueness, we just need to identify it and harness it further. I see all my students as
capable, intelligent and motivated to work hard. There is great joy in thinking, probing, and growing. Your boss will
not always lay every assignment out in detail. Thus, I do not always provide you with everything may need to know
to complete an assignment. I expect that you will use good judgment, ask me to clarify points, and above all perform
to the best of your ability. You should understand that your best might not always result in an A+, as we are here to
learn. I will facilitate our class sessions – and we learn together. You will find that I am passionate about what we are
doing. I thoroughly enjoy the content of this course; it is both an interesting and important area of study. I believe in
making you understand the concept and application of the concept through various in-class activities, cases and group
discussions. I live by the saying of Bill Keane
“Yesterday is History,
Today is Present and
Tomorrow is Mystery
That’s why we call that present is gift”.
I hope that you enjoy your studies today in Strategic Management (BUS495)
Learning is a journey that we should seek with pleasure. Good Luck!
Dr. PARK
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“Strategic Management & Business Policy”
The Guidelines for Team Project (20%=5+15) Written by Dr. PARK
Team Project (Total 15%): Flipped Learning (5%) + Strategy Analysis (15%)
(Read it Carefully & Follow each step for the team project)
In the first session, students will be divided into groups. Each group will have tasks to deliver: Please
note that it is essential to work as a team as the final mark given will be the same to all group
members.
1. Flipped Learning (5%): Strategy Application in our real life
1) One chapter among Ch. 5, 6, 7 will be assigned to each group for flipped learning at the beginning
of the semester.
Group Chapter Topics
Group1, Group2 Chapter 5 Differentiation,
Overall Cost leadership (Low-cost strategy)
Focus strategy
Group3, Group4 Chapter 6 Related Diversification vs. Unrelated Diversification
Group5, Group6, Group7 Chapter 7 International strategies (Globalization vs. Localization)
2) Then, all group members must work together to prepare their own materials. Please see below.
Each group must consider grading rubrics & include those contents below in the ppt file.
3) Don’t forget to submit the files (soft copy in Moodle before the class)
The deadline: Every Sunday, All flipped learnings are scheduled every Sunday or Monday.
4) Each group will present in Sun or Monday-class on the week dedicated.
Each presentation should not exceed 15 minutes with discussion totally.
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Grading Rubrics for flipped learning (5 marks)
Rubric Assessment
Perfect
Scores
Given
Scores
1. ‘One page Chapter summary (a kind of mind map visualized)
Example 1)
Example 2)
1
2. ‘Appropriate cases among real companies in Saudi (preferably)’ which can
show the strategy of chosen chapter.
(Please Search it from news articles or magazines, and then attach the files
with a source)
* Each member must provide 1 case and put the provider’s name on the case.
(It means) if your group members are 4 people, your team must include 4 cases in
your presentation file.
1
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Example 1) News article (Source: ARABNEWS)
https://www.arabnews.com/node/1647236/business-economy provided by Dr. Park
Example 2) Video Material (Source: YouTube)
https://www.youtube.com/watch?v=g3so6AJe4UQ provided by Dr. Park
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3. ‘Related photo materials’ which can show the strategy in chosen chapter.
You can take a picture yourself or search it from online.
* Each member must provide more than 2 photos and put the provider’s name on the
photos. (It means) if your group members are 4 people, your team must include 8
photos in your presentation file.
Example) Overall Cost leadership Strategy (Low-cost Strategy)
(Photos Taken by Dr. Park)
1
4. ‘Critical and practical’ discussion questions (at least 4 questions) to discuss
the main topics or objectives
(Please, don’t make a test question for knowledge.
It aims to apply into practice for critical thinking and application)
1
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Example) Discussion Questions
1. In the era of Corona (Amid COVID-19 and After this pandemic),
What are the most challenging factors or situations for Carrefour?
How does Carrefour should modify their strategy in consideration of the situation?
Discuss it in detail from a strategic perspective.
2. In the post-corona era, suppose a competitor’s scenario in strategy. And discuss
how to confront this narrative in consideration of the competitor.
3. …
4. …
5. Presentation & Deadline
5-1) Make sure that all members deliver the contents effectively & efficiently.
(Make any creative ideas to engage students for attention and deliver main contents)
5-2) Submission by uploading on LMS before the deadline on the week
dedicated.
(Before the Sunday or Monday class).
0.5
0.5
TOTAL 5
marks
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2. Final Project (15%): Strategy Analysis of a pair of company
(Read it Carefully & Follow each step for the ‘Strategy Analysis’)
1. Choose a pair of company in the list below.
1) Each group must choose a pair of company (one industry) in the list below.
2) Choose the ‘target market (particular group of consumers, such as specific demographics) like KSA
or If it is a multinational company, choose ‘one country (such as UAE, etc.) – out of Saudi’ as a target
market.
[Choice 1]. Retail Industry [Choice 2]. Automotive Industry
Panda Carrefour Hyundai GM
[Choice 3]. Aviation Industry [Choice 4]. Electronics Industry
Saudia EgyptAir HP APPLE(MAC)
[Choice 5]. Finance (Insurance) Industry [Choice 6]. E-commerce Industry
BUPA Arabia Tawuniya Amazon
(Former Souq)
Noon
2. Gather secondary data (from websites, news articles, magazines, etc.)
considering the template provided below in ‘word’ file (as much as possible) as
below
Students must gather data as much as possible about the chosen company and topic, industry in
Word File considering the contents of template below:
3. Based on the collected data about the pair of company and industry
information, Choose the most appropriate topic which you can illustrate with
your collected data, then be prepared for the strategy analysis
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(To avoid plagiarism, you should not copy-paste original references. You can cite your source, or use
quotes (include quotations), paraphrase (rephrase), present your own idea as well, or use a plagiarism
checker:
Template for ‘Strategy Analysis’ (Pease follow this template to meet all requirements)
Include all below Strategy Analysis
Format
Total Page Number: at least 15 pages, Font size 11, Times New Roman ,
Please, SUBMIT in Word file (not PDF) for the check of Turnitin (plagiarism) program.
1. Target Market
1. KSA (Choose the target market – country, first)
only in KSA, or
out of KSA if your target market is a foreign country (not world market)
2. Industry Analysis
2. about Aviation Industry
1) Main characteristics of the Retail industry
2) Main competitors in a given target market (for example, inside the KSA)
3) Market size & market share (%) (use table or figure for effective illustration)
3. Company Analysis
(respectively)
3. Panda Carrefour
1) History
2) Founder profile & CEO profile
(no need to include Board of Directors)
3) Products and services offered
1) History
2) Founder profile & CEO profile
(no need to include Board of Directors)
3) Products and services offered
4. Strategy Analysis
* Before you decide the most appropriate strategy to the company,
you should search/collect the data first (websites, news, magazine, etc.)
to know the latest issues of the company you choose.
(This is one of the most important criteria for evaluation.)
Please don’t cover all types of strategy below.
Choose the only one strategy among them.
Your team must choose the most suitable (appropriate) strategy for the selected company.
Business level strategy
(CHAPTER 5)
Differentiation Differentiation
Business level strategy
(CHAPTER 5)
Differentiation vs. Cost Leadership
(or both)
Differentiation vs. Cost Leadership
(or both)
Business level strategy
(CHAPTER 5)
Focus strategy Focus strategy
Corporate level strategy related Diversification related Diversification
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(CHAPTER 6)
Corporate level strategy
(CHAPTER 6)
unrelated Diversification unrelated Diversification
Global strategy
(CHAPTER 7)
Globalization vs. Localization Globalization vs. Localization
5. Comparison
(Conclusion)
Compare the differences between the two companies’ strategies.
6. Discussion
Questions & Answers
6-1) Make At least 4 discussion questions & answers.
Particularly, create questions that discuss how the strategy will be
changed for companies in the post-corona era.
(This is not the question to test knowledge but to apply into practice.)
6-2) Also, Please provide your answers as well using the lessons what you
have learned from this course using theoretical framework, concepts,
etc.)
 This is one of the most important criteria for evaluation.
7. References
Do not forget to put all references (Followed the APA Reference style form
below)
a) Books: Korten, David. 1995. When Corporations Rule the World. San Francisco, CA: BerrettKoehler.
b) Edited Volumes: Spears, Larry (ed.). 1996, Reflections on Leadership. New York: John Wiley
c) Articles in Edited Volumes:
Moon, C. 1994. ‘Changing Patterns of Business-Government Relations in South Korea’, in A.
MacIntyre (ed.), Business and Government in Industrialising Asia, pp.222-46. St. Leonards, NSW:
Allen and Unwin.
d) Articles in Journals:
Park, Y.E (2018). The endless challenges of KIA motors for globalization: A case study on
KIA in Saudi Arabia. International Journal of Industrial Distribution & Business, 9(9), 45-5
2.
* Please, don’t put the photos (such as CEO, Founder, products,,,)
4. Submission:
1) Hard copy in the office (Dr. Park: A345) & Soft copy in Moodle
2) Deadline: further notice 3) see the ‘grading rubric’ for the strategy analysis
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[Formal Letter]
Prince Sultan University
College of Business Administration
To whom it may concern
It’s my pleasure to contact your company.
This is Dr. Park, assistant professor of College of Business Administration at Prince Sultan University. Prince Sultan
University aims to provide a high quality education for new learning opportunities and professional growth.
This semester, we are preparing for Strategy Analysis of top ranked companies in the Kingdom of Saudi Arabia and
abroad. The topic of the research is related to company’s strategic management such as a differentiation strategy, low
cost strategy, international strategy, diversification, etc. For this, PSU students would like to conduct a survey or have
an interview opportunity with senior manager of your company to get real sources to catch up the company’s strategy.
As their academic advisor, I highly recommend your company for this research case. Thus, I am writing to request
you a survey or interview for the quality study of your company.
I’d highly appreciate your interest and kind cooperation if you could give us some time and company data which can
be available. For further information and queries, Please do not hesitate to contact me.
We look forward to your prompt reply.
Thank you.
Sincerely,
Dr. Park, Young-Eun
Assistant Professor, Management Department, College of Business Administration
Prince Sultan University, in Riyadh, Kingdom of Saudi Arabia
Tel : 966-11-494-8564, Mobile : 966-50-945-1314, email : ypark@psu.edu.sa
هاتف : / 4535189فاكس – 2251466ص.ب 53073الرياض 11583المملكة العربية السعودية
Tel: 4548011- Fax: 2251466 – P.O Box 53073Riyadh11583 – Kingdom of Saudi Arabia
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Grading Rubric for Team’s case writing [Dr. Park’s Class]
Course Title: Strategic Management & Business Policy (BUS495)
Group: Student ID, Name:
Team Project
Rubric Assessment
Total score
(15)
Criteria
Perfect
Score
Given Score
Case Writing
Contents
All contents mentioned in the template 5
Application & Analytical skills (related to ‘Discussion 4questions& 4answers’) 5
Format Meeting Dr. Park’s guidelines & meeting the deadline(soft & hard copy both) 2
Language Grammar, Spelling errors, etc. 1
Ethical issue Plagiarism (more than 10%: -1 / 10~20%: -1.5 / 20%~: -2 deduction) 2
Sub Total 15 Out of 15
Presentation
Contents Overall contents (PPT Slides) 2
Delivery Effective presentation (voice, tone, eye contact, others) 2
Paper Submission Meeting deadline, All team members’ attendance on presentation day 1
Sub Total 5 Out of 5
Total
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Peer Evaluation Sheet [Dr. Park’s Class]
* Evaluate your group members including yourself. This will be done confidentially.
Course Title: BUS495
Student ID, Name:
Note: If you give everyone pretty much the same score, you will be hurting those who did the most and helping those who did the least.
Team members
Sincerity
(perfect score : 5)
Contribution
(5)
Leadership &
followership
(5)
Communication
(5)
Total score
(20)
Etc.
(any comments to Dr. Park
for the improvement)
attendance, time
management,
focus,
participation
creativity,
Brainstorming,
commitment
cooperation,
positive energy,
Supportive
attitude
team
communication,
solving
problems
Perfect
scores : 20
1 (you)
2 3 4
Score: 5(excellent work) – 4(good work) – 3(so so) – 2(improvement needed) – 1(strongly improvement needed)
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■ Sample Case: (Note: This is just for your reference.
Don’t use this manuscript for private usage or Don’t upload in public.)
eBay: Smart Entry Strategy into the Korean Market
Through M&A and its Post-Merger Integration
Park, Young-Eun, Alawiya Allui
Received: December 12, 2018. Revised: December 24, 2018. Accepted: January 05, 2019 (in Journal of Distribution Science, SCOPUS Indexed).
Abstract
Purpose – This case study illustrates the story of eBay Korea, which owns two most leading Korean open
market companies, AUCTION and Gmarket. The main concerns are to take over the Korean top domestic
companies one by one, then, emerge these two giants through its well-developed post-merger Integration
by eBay, an American multinational corporation.
Research design, data, and methodology – This case explores various secondary resources such as
periodicals, annual reviews, magazine, news articles, commentaries, even some interview materials related
to ‘eBay Korea’ and industry source on condition of anonymity based on the critical reviewing of existing
studies on these topics as well.
Results – The findings of this study show the merger and acquisition of two market leaders in Korea is the
only successful case in Asian Markets. The eBay’s choice of entry mode is appropriate considering the
timing, synergy and efficiency by sharing their resources.
Conclusions – This study examines the successful entry and settlement process of foreign, multinational
company through mergers and acquisitions in the Korean market. This would be a valuable in the studies
of International Business and Global entry or distribution strategy in the e-commerce and open market
dealing with M&A and its post-merger integration.
Keywords: E-commerce, Open market, Merger and Acquisition, Post-Merger Integration
 This paper was supported by Prince Sultan University, Riyadh, Kingdom of Saudi Arabia.
 First and Corresponding Author, Assistant Professor, Management Department, College of Business
Administration, Prince Sultan University, Riyadh, Kingdom of Saudi Arabia. Tel: +966-11-494-8564, E-mail:
ypark@psu.edu.sa

Co-author, Assistant Professor, Management Department, College of Business Administration, Prince Sultan
University, Riyadh, Kingdom of Saudi Arabia.
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1. Introduction Electronic commerce, or e-commerce, is a category of industry or form of electronic transactions where the trading occurs over electronic systems using computer networks or Internet. Modern electronic commerce usually uses WWW (World Wide Web) at the minimum at one point in the
transaction’s life cycle, while it may encircle different forms of technologies such as e-mail, social media, mobile devices, and telephones as well. As the Internet network service has become widespread, e-commerce appealed to both buyers and sellers. Maximizing the opportunities given by network effect of the increasing Internet users and freeness from geographical limitation, ecommerce has rapidly replaced traditional commerce (Hinz, O., & Jochen E., 2010; Sperdea, Enescu & Enescu, 2011). In 2017, e-retail sales represented 10.2 percent of all retail sales worldwide with expecting to reach 17.5 percent in 2021. Online shopping is one of the most favorite and popular online activities worldwide with global e-retail sales reaching 2.3 trillion U.S. dollars in 2017 (statista, 2018). This astonishing rise of e-commerce is largely due to the development in the Asia-Pacific area. Developed markets such as US and Europe, however, are still recording double-digit growth as well. Especially, South Korea is the third largest online retail market in Asia due to a well-developed internet infrastructure and its highest internet penetration1 (internet world stats, 2018). Although the growth is not exponential as it was in the last decade, the e-commerce and online shopping market are still rapidly growing in this region. Accordingly, this market attracts the leading multinational e-commerce corporate such as eBay to build the sustainable competitive advantage in Asian regions. With this market-seeking reason, many multinational enterprises have entered foreign marketplaces through foreign direct investment (henceforth, FDI). FDI is one of the form for investment made by a firm, which has a controlling ownership in a business in another country and most scholars have observed a dramatic surge in FDI through Greenfield or Merger and Acquisition (Charles & Tomas, 2017). However, the choice of entry mode between those two types is still the controversial issue in business with different perspectives (Blomstrom & Persson, 1983; Blomstrom, 1986; Blomstrom & Edward, 1989; Aitken & Harrison, 1999; César, Norman, & Luis, 2002; Charles & Tomas, 2017). Because there are critically different virtues and drawbacks to both types, for example, many scholars have observed most acquisitions fail without creating value in business while it seems to be a very alluring and attractive type to enter quickly
overseas markets. However, eBay’s acquisition of Korean domestic leading firms, AUCTION and Gmarket has proved as a successful case. eBay had grown to successfully compete in certain international markets, including Europe and Latin America as an US online shopping giant, but was still a relatively small player in the Asia Pacific market. In Asian markets, eBay has had a history of failures in Japan and China. With
eBay’s failure in Japan and China, they looked at the Korean market where they saw the giant and no.1 leader AUCTION as a viable partner, which had great technological base and market base to
1According to internet world stats (2018), Brunei (94.6%), Japan (93.3%), and South Korea (92.6%), they are 3 top
countries with the highest internet penetration rates. (source: https://www.internetworldstats.com/stats3.htm)
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————————– Copyrightⓒ Dr. PARK All Rights Reserved ————————– have a strategic alliance. In February 2001, eBay bought 50% plus 10 stocks from the major stockholders resulting in a successful takeover of the company. Another company eBay acquired after 7 years is Gmarket. By April 2009 eBay bought 29% of Gmarket’s share through AUCTION paying 440 billion won and Gmarket was delisted same as AUCTION. The acquisition of AUCTION and Gmarket in Korea is the only successful case in Asian markets. eBay, the leading open market corporation of the world, took over the two best e-commerce performers in the Korean online shopping industry by 2011. Considering that it was founded as one-man company in 1995, its unprecedented progress in less than twenty years is worthy of close attention. It has not only succeeded in making its own business prosper, but also contributed to the widespread use of e-commerce worldwide. Through successful acquisitions and mergers, eBay has able to keep its status as the US market leader in the e-commerce open market industry and currently eBay becomes Number 3 retailer in Korea behind the top two Korean giants, Lotte and Shinsegae (The Korean Herald, 2017). By inspecting the Korean market environment thoroughly and maximizing the core competencies of AUCTION and Gmarket, eBay was able to carry out the existing businesses to the best. Through the lessons eBay learned from the failures and successes in the Asian markets, it is now preparing to reenter the undeveloped markets with ‘eBay Korea’ as an Asian-Pacific outpost. Based on this background, this case study aims to describe the strategic entry and settlement process by eBay to take an opportunity of increased adoption of the internet in the highly wired Korean market. eBay’s choice of entry mode through merger and acquisition to enter into the Korean market is appropriate considering the timing, synergy and efficiency by sharing their resources. This study will provide multinational enterprises, which are interested in entering Asian markets with business insight and contribute to find best practices for merger and acquisition theoretically and practically.
2. Literature Review
2.1. The Choice of Entry modes: M&A or Greenfield? The studies on the choice of entry modes in global marketplace are attained from traditional theories of international business (Barkema & Vermeulen, 1998; Kogut & Singh, 1988; Pan & Tse, 2000; Park, 2017). According to various perspectives in terms of the choice of entry mode in foreign markets, it has evolved from several theories. Among them, different choice of entry modes could be decided based on the level of controllability or control preferences. Listed from the lowest controllability, externalization (e.g., exports, contracts (licensing), and joint ventures) and internalization of foreign direct investments (M&A and Greenfield) are the entry modes used by multinational enterprises (Root, 1987; Park, 2017). Unlike the previous view, definite rank exists among entry modes in this theory (Chu & Anderson, 1992). Existing theories such as the life cycle theory, the eclectic paradigm, and the stage model share common points in explaining the dynamics of foreign market entry. They put forward that entering a host country in overseas market usually takes notably large amount of time and efforts, therefore, entry strategies should be implemented gradually as firms accumulate knowledge and skills acquired through experience in
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————————– Copyrightⓒ Dr. PARK All Rights Reserved ————————– the global marketplace (Johanson & Vahlne, 1977, 1990; Buckley & Casson, 1998; Park, 2017). Especially, multinational firms have the choice between two types of investment, greenfield investment and mergers and acquisitions as a foreign direct investment (Charles & Tomas, 2017). A firm can create a subsidiary or a new company in a country such as building a wholly owned subsidiary from ground up (commonly named greenfield), or by acquiring an existing business in a local market. However, the choice between two modes is not an easy one. Both modes have different advantages and disadvantages (César, Norman, & Luis, 2002; Charles & Tomas, 2017). In general, the choice is determined by each condition facing up the firm. If the firm is trying to get to enter a market where there are already firmly established or well-known businesses, and where leading competitors globally are interested in creating a presence, it may lead the firm to enter quickly via an acquisition. Currently, the volume and its growth of cross-border acquisitions have been tremendous at a rapid rate for two decades. In such occasions, a type of greenfield may be too slow to establish a substantial presence. However, if the firm is going to decide an acquisition, its management should be aware of the potential risks joined with this mode and think carefully when determining which target firm to be purchased. It may be better to choose the idea of slower mode with greenfield than to make a negative acquisition. If the firm is considering a country, where there are no incumbent candidates to be acquired, then, a greenfield may be the only way. Even though when target firms are present, if the competitive advantage of the firm is formulated on the transfer intangibly of embedded competencies, routines, skills, and culture organizationally, it may still be desirable to enter through a greenfield. Embedded resources such as skills through experience and organizational culture, which are placed on significant knowledge that is challenging to enunciate and codify, are much more easier to entrench in a new venture business than in an acquired body, where the firm may be required to prevail the established routines and organizational culture of the acquired firm (César, Norman, & Luis, 2002; Charles & Tomas, 2017). Accordingly, there are many previous studies to explore the distinction or association between the two modes empirically with different perspectives (Blomstrom & Persson, 1983; Blomstrom, 1986; Blomstrom & Edward, 1989; Aitken & Harrison, 1999; César, Norman, & Luis, 2002; Charles & Tomas, 2017). This is still a very controversial issue among scholars and businesspersons in the practical world as well because each type has very different pros and cons. For instance, many scholars have found that most acquisitions fail for several reasons even though it seems to be a very attractive entry mode to extend a business geographically, quickly. First, the acquiring firms generally outbid the equities and assets of the acquired firm. Moreover, the management of the acquiring firm is typically too promising and optimistic about the value that can be generated through an acquisition and is therefore willing to pay an extraordinary premium over a target firm’s stocks. Second, most acquisitions fail to create more value because there is a conflict between the cultures and differences in management philosophy of the acquiring and acquired firms. Thus, they run into barrier and take much longer than expectation. After an acquisition, many acquired firms face high management resignations or turnover, possibly because their employees are not pleased by the acquiring firm’s way of doing things. Finally, many acquisitions fail caused by insufficient pre-acquisition assessment and investigation. Many firms decide to vet and acquire others without comprehensively analyzing the conceivable benefits and costs. This may be a distinct problem in cross-border acquisitions
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because the acquiring firm may not fully understand the target firm’s national culture and business practices (Charles & Tomas, 2017). However, those problems can all be overwhelmed if the firm is cautious about its acquisition strategy, especially ‘Post-Merger Integration’ process. PMI, the abbreviation of Post-Merger Integration is a complicated and impenetrable process of combining two firms’ resources and rearranging businesses system to actualize possible efficiencies and synergism that typically motivate mergers and acquisitions. This approach affirms that all significant decisions that shape the success of integration built in a proper manner and under reflection of all relevant issues. The process of combining two or more organizations into a single one involves several organizational systems, such as assets, people, resources, tasks, and the supporting information technology (Charles & Tomas, 2017).
2.2. Electronic commerce in Korea and eBay Electronic commerce (also known as e-commerce) or internet commerce represents the dealing of goods or services over the internet as a type of industry where the trading occurs over electronic systems. Along with the brisk and wide expansion of e-commerce, open market companies grew up significantly. Open market, which is a kind of online shopping mall, is a platform where everyone can be a seller just by registering his or her goods to the open market site. Open market is different from other online shopping malls in the way that open market companies do not take responsibility for transaction between sellers and buyers. The Asian-Pacific open markets are the most promising markets that have lead the global growth in e-commerce and open markets. For instance, Chinese online shopping sales recorded 77 billion dollars in 2012. Although it is very small compared to the 174 billion dollars of US markets, Chinese market has a lot more potential for faster growth (Jeong & Wang, 2016). Moreover, South-East Asian developing countries are actively investing in network infrastructure, making them the open market ‘gold mine’. Open market players in Korea such as AUCTION, Gmarket, and 11ST have become the most popularly used online marketplaces. In addition, open market became the fastest growing sector in Korea. Started in 1998 with the service of AUCTION, the size of Korean open market came to be 17 billion dollars in just 15 years. Considering that the size of completely Korean online shopping market is about 41 billion dollars, it is natural to say that Korean online shopping market is now led by open market companies. Meanwhile, eBay, an American multinational, leading e-commerce corporation, facilitates
‘business-to-consumer’ and ‘consumer-to-consumer’ sales as well through its website. In 1995, a French-born computer programmer Pierre Omidyar built a personal auction website. The website was just one of his hobbies until the Internet service provider informed him of the extra charges for the increased internet traffic. The extra charge forced him to collect fee from users. This was the very beginning of eBay, one of the most successful dot-com companies in the world. In 1998, the number of users grew to about half a million, and its revenue, 4.7 million dollars. In the same year, the record-breaking growth of eBay led into the IPO price of 53.5 dollars in NASDAQ, which was approximately three times more than the target stock price. In 1998, CEO Meg
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————————– Copyrightⓒ Dr. PARK All Rights Reserved ————————– Whitman was hired to fulfill the need of a management specialist. In the following decade, the promising venture turned into an open market giant under her leadership. In 2008, when she resigned, the number of employees was about 15,000 and especially the revenue was 8.5 billion dollars. During the ten years under Meg Whitman, eBay succeeded in multiple mergers and acquisitions of possible competitors in the US. It also bought PayPal to reinforce its payment system, and Skype to diversify its revenue models. Figure 1 shows the annual net revenue of eBay
from 2013 to 2017. Moreover, in 2017, eBay’s online auction and selling website’s net revenue amounted to close to 9.7 billion U.S. dollars, up from 8.99 billion in the previous year (statista, 2018). As one of the oldest online shopping destinations with operations in over 30 countries, eBay became the global platform, allowing people and businesses to buy and sell a large volume of various goods and services worldwide.
Source: statista (2018)
Figure 1: eBay’s annual net revenue from 2013 to 2017 As it kept the number-one position in the open market business in the US, eBay started pushing its frontiers worldwide. Through takeovers of well-performing or promising open market companies from Europe, Middle-East, and Asia, it has become the world-wide giant of ecommerce. Although not all the acquisitions are considered successful, some of its subsidiaries are thriving and making up for the loss of revenue in the home country, US market, due to the strong competition from Amazon.com. eBay Korea, which owns two most famous Korean open market companies, AUCTION and Gmarket, became the prime example. Currently, eBay Korea has been
a key player for the parent firm’s global push. In 2016, Korea with 863.3 billion was the thirdlargest market for eBay globally after the US and UK (The Korea Herald, 2017).
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3. Methodology The importance of case study is the ability to find the in-depth information on a topic using real life examples. This case study aims to promote our understanding of entry strategy in overseas markets through merger and acquisition, then the process of post-merger integration. For this, the case explores the successful entry strategy and settlement process in the Korean market by eBay,
the world’s leading e-commerce company to broad its business and build its competitive advantage. In this paper, we used a qualitative research methodology. Accordingly, to investigate this case study, we explored various secondary resources such as periodicals, annual reviews, magazine, news articles, commentaries, even some interview materials related to ‘eBay Korea’ and industry source on condition of anonymity based on the critical reviewing of existing studies on these topics as well.
4. The case of eBay in the Korean Market
4.1. Entering into the Korean Market The business environment of the highly wired Korean market was quite promising and as the AUCTION Company offered joint marketing alliance in July 1999, eBay started to pay attention to the Korean market. Looking for a chance to enter Asia after settling down at the Europe market, eBay was quite serious about the proposal. And finally in June 2000, based on the scrutiny and analysis of the Korean market, eBay accepted the offer and the two firms began their partnership. Not long after that in February 2001, eBay took over AUCTION. It took only 1 year and a half from the alliance offer to the acquisition, which executes quickly for a company to go into another international market. This must have been possible due to the attractiveness and the potential that the Korean market had. First of all, Korean government’s policies concerning Internet, IT, and e-commerce must have been a very critical factor for them to decide whether entering the market was good or not.
According to ‘Cyber Korea 21’ plan which was announced in March 1999 by the government executives under president Dae-Jung, Kim, his goal was to make Korea a knowledge-based advanced country by building IT infrastructure so that Korea could cope with the fast growing IT trend and overcome the country’s economic recession. This idea was the base of ‘Cyber Korea 21’ plan. The total budget for the project was 28 trillion won for 4 years and it was invested in several phases. The first step of this plan was to establish a fast information technology network and provide it at a low price to the customers so that a high-quality Internet atmosphere would be exposed to all citizens. Then, the government planned IT education programs for all the citizens, especially students, soldiers and government officials. This included for example, designating an IT specialized teacher in schools and requiring all soldiers and government officials to complete an IT lecture course. Based on these changes, the government encouraged all citizens and economic agents in the country to move to the new information technological way of doing things; public organizations using online mailing system, corporations changed their accounting system into digital programs, consumers buying goods on the online market, etc. The ultimate goal of
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‘Cyber Korea 21’ was not only to revolutionize existing industries but also to develop new online businesses in order to make 1 million new jobs and 118 trillion economic values. The Korean government has increasingly over the past two decades, encouraged, urged, and embraced not only the development of information computer technology (henceforth, ICT) industries but also the application and use of ICT in all spheres of government, industry, education, and sociocultural atmospheres. Korean Government’s active role in supporting the ICT industry has been a strong factor and a green light for eBay to enter this market. Otherwise, technological environment is not crucial for all corporations because not all businesses need particular technological infrastructure as their main base. However, eBay’s online commerce system cannot succeed without technological environment such as the Internet. Specially, the informatization level of Korean society is very important for eBay. ‘Informationization’, the term increasingly employed to describe this overall process, become a linchpin of central and many local development strategies, upgrade the old ailing parts of the economy, turn the Koreans into true citizens of the 21st century, and plug Korea into the wider world.
Table 1: Broadband internet subscribers and Internet usage in Korea Year 1998 1999 2000 2001 the percentage of broadband internet subscribers 0.03% 0.61% 8.42% 16.89% the rate of people using all kinds of Internet usage 6.78% 23.55% 44.70% 58.6%
Source: The World Bank, International Telecommunication Union, World Telecommunication/ICT (2005) As the broadband Internet service started in June 1998, the online atmosphere improved greatly allowing people to download and upload data at the high speed. This progress triggered more people to utilize the internet and developed Korea’s ICT level one step further. As Table 1 shown, the percentage of broadband internet subscribers was consistently increasing during the period of 1998 to 2001. There’s a big jump every year; 20 times between 1998 and 1999, 14 times between 1999 and 2000, 2 times between 2000 and 2001. Accordingly, the rate of people using all kinds of Internet usage was also increased. These usage rates shows that, behind eBay’s decision to enter the Korean market which lay a big advancement in the ICT infrastructure (see Figure 2, 3, 4).
Figure 2: Broadband Internet subscribers (per 100 people)
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Figure 3:
GDP growth rate
Figure 4: Percentage of household final consumption expenditure In addition, the economic environment of the Korean market is another factor that attracted eBay to enter the Korean market. On account of the currency crisis in 1997, the emerging Asian economies collapsed and Korea’s economic system started to be disciplined by the International Monetary Fund (namely, IMF). However, thanks to Korean government’s fast reaction and
citizens’ commitment, Korea succeeded in overcoming this economic recession in just one year.
Amazed at Korea’s revival, eBay set a high value on Korean economy’s potential and decided to enter this market. The GDP growth rate showed a big fluctuation around the currency crisis. Slowly stagnating from mid-90’s recording 7% in 1996, 4.65% in 1997, Korean economy hit the bottom in 1998 recording -6.85%, right after the currency crisis. However, taking this period as an opportunity rather than a threat, Korean economy recovered rapidly and the growth rate skyrocketed to 9.49% in 1999 and 8.4% in 2000. In the same context, as the economy got in the right path, people began to spend more money. Actually, the expenditure made by consumers is more important to eBay since they need more people to buy things through their online market. This can be checked out
by looking at the growth rate of households’ final expenditure which changed from -14.05% in 1998 to 10.71% in 1999. Hence Korean economy’s recovery and growth must have been a very attractive incentive to eBay to enter the Korean e-commerce open market.
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4.2. Acquisition of AUCTION
4.2.1. Foundation and Growth of AUCTION The history of eBay Korea started in 1998 with the foundation of Internet Auction Inc., which changed its corporate name later to AUCTION. It started its service and gained popularity as the first dotcom auction company. It was renowned for its excellent bidding services including bulletin board bidding, which enabled real-time bid and prevented repeated bid at the same time. It also provided multiple bidding for the customers and improved transparency in the ongoing auctions. The most distinctive point was its system for protection of deals named Escrow. This
program could effectively protect customer’s online deals. However, despite AUCTION’s excellent business system, it did not have a successful model to make profit and had trouble running the business. This financial crisis was overcome as Future and Human Inc. purchased 73% of its stocks. With this capital it started to enter other Asian markets with international strategies such as joint alliance with Goodwill of China and Hikari telecom of Japan. In this process, however, it realized the need for more professional approach in marketing and brand management. This led Future and Human Inc. to suggest a strategic alliance to the global online auction company, eBay in July 1999. In those days, AUCTION went through many changes. In September 1999, Kum-Lyong Lee was scouted as the CEO. In the following month, it changed its corporate name to AUCTION Inc. In these radical changes, it also promoted various events and TV commercials. As a result, its number of members increased from 800,000 to 2,800,000. Furthermore, it began to charge fees over deals and its financial statements, previously in red ink, improved significantly. Finally AUCTION Inc. achieved getting 62% of market share and began to lead Korean online market.
4.2.2. Strategic Alliance, and then Acquisition of AUCTION From 1999, eBay and AUCTION had been discussing alliance and 6 months later, on June 2000, as AUCTION listed it on KOSDAQ they finally allied with each other. eBay and AUCTION established joint marketing alliance and launched a page named Korean City. For the customers who accessed the page and became a member of eBay through AUCTION, eBay paid $3 to AUCTION. It also had alliance with Lycos, the leading Internet portal service company at that moment. This decision was placed on eBay’s failure in Japan, where they started their business as a joint venture and failed to beat the market leader, Yahoo Japan. As it examined the alliance offer from AUCTION, eBay found business opportunity in Korea market expanding. AUCTION had great technological base and market base as well, and this made eBay interested in having more cooperation with AUCTION. Accordingly eBay sent its board members to Korea and at last suggested taking over AUCTION by purchasing 100% stocks of the company. In return, AUCTION board also sent over its team to America to discuss this issue. Finally in four months’ time, they came to an agreement over the acquisition. In February 2001, eBay bought 50% plus 10 stocks from the major stockholders including Sung-Moon Kwon of Future and Human Inc. and KTB resulting in a successful takeover of the company. Remaining stocks were bought in 2004 and AUCTION was delisted from KOSDAQ. Purchase of the stocks
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————————– Copyrightⓒ Dr. PARK All Rights Reserved ————————– and delisting from KOSDAQ gave eBay complete control over the company. Through the delisting eBay became free from the complicated regulations of stock market, business information sharing, and managerial pressure from the investors. Without pressure from general investors and regulating offices, eBay ran their business more independently.
4.2.3. After Taking over AUCTION Since April 1998, when AUCTION initiated auction service by using the internet in Korea, other competitors appeared such as Esale, Dacom, Samsung AUCTION, Wawa, AUCTION Plus, Yes world and so on. In 2001, when eBay took over AUCTION, AUCTION occupied 70% of the market share in the open market of Korea, followed by Esale getting 20%. AUCTION had dominated the open market in Korea at that time. In addition, when eBay took over AUCTION in 2001, other companies expected to be in terminal crisis about their survival and started restructuring. In February 2001, however, other competitor, Dacom declared suspension of business and in the same year, Samsung C&T closed down their site. Moreover, in June 2001, second tier in the open market, Esale and third tier Sellpia merged together and launched Esellpia to compete with eBay AUCTION but could not help closing down their site in 2004. These show
that eBay’s acquisition of AUCTION was very harsh to the other open market players and made Korean open market to rapidly rearrange.
4.3. Acquisition of Gmarket to become a Market Leader
4.3.1. Foundation and Success of Gmarket Another company eBay acquired after 7 years is Gmarket. It started as a venture company of Interpark in April 2000. At first its buyers and sellers were distinguished clearly but later it changed its model to C2C system. In 2004 it attracted the investment from Oak Investment
Partners, the world’s biggest venture capital and next year its billing increased by 500% and ranked its name as No. 1. internet shopping mall in Korea. Its billing exceeded trillion won in half a year for the first time as an online shopping company and gained international interest. Whereas the other competitors like Esellpia, Samsung Auction did not have competitive priority over AUCTION, Gmarket tried lots of fresh services and marketing strategies. For instance, Gmarket made administration fee free, attracting a great number of vendors. Its aggressive marketing strategy included targeting women in 20s, immediate purchase option, star shop, brand outlet, bargaining, and blog style mini shop. In January 2005, the difference of market share between AUCTION and Gmarket was 37.5% but changed to 11% at the end of the year. Along with this success in the market, Gmarket was listed in NASDAQ in June 2006 and launched global service establishing branch in Japan and Singapore. Furthermore, in 2007, Gmarket recorded 2.5 trillion won in transaction scale.
4.3.2. Acquisition of Gmarket As Gmarket became the No.1 leader of Korean open market, AUCTION had trouble in its business. Whereas net profit of AUCTION decreased to 10 billion won, that of Gmarket grew up
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————————– Copyrightⓒ Dr. PARK All Rights Reserved ————————– to 30 billion won. In this market status, as Interpark showed its intention to sell Gmarket, eBay began to participate in the acquisition discussion. The discussion was ceased because of unstable market in March 2008. However, they resumed it soon after and applied for an approval on their acquisition plan to Fair Trade Commission (henceforth, FTC) in Korea. The application said that eBay will buy 37% shares from Interpark and it was approved before the year changed. Yet, the negotiation took longer than expected and in April 2009 they finally get to the agreement done.
eBay bought 29% of Gmarket’s share through AUCTION paying 440 billion won and Gmarket was delisted same as AUCTION. At last the competition between two big companies ended and their market share summed up to 86%, causing a huge sensation in the press.
4.4. Merging AUCTION and Gmarket: eBay Korea
4.4.1. Creation of the new name of corporation
The open market giant with more than 70% market share is born. Today, Fair Trade Commission
(FTC) decided to allow the merger of the open market leader AUCTION and the second best
Gmarket without further regulation. FTC cleared up that the merger would not bring restraint on
competition. …… The name of merged corporation is ‘eBay Korea ’. The mother company of both
is eBay, the world leader in open market industry.
Pressian, July 5th, 2011. Since it now owned both AUCTION and Gmarket, eBay decided to officially merge the two companies. When it applied for its merger to FTC, it faced opposition from some part of the country. Some people criticized that eBay was a foreign company, and would monopolize Korea’s open market. In addition, it is believed that eBay Korea’s monopoly would necessarily cause negative effect such as price fixing, high rate auction fee and so on. In fact, 11ST, the competitor of Gmarket and AUCTION repeatedly sued them on monopoly rules and regulations. However, its merger was approved in September 2011, and the name of corporation changed into eBay Korea, achieving 72% of the market share. The merger was intended to improve management efficiency by reorganizing the company. It was expected to reduce administration cost and help to increase the revenue. FTC explained its approval in that eBay’s market share had dropped 15% from last year having powerful competitor 11ST of SK Planet and potential market enterer, NHN (Next Human Network; new name of Naver).
4.4.2. Post-Merger Integration (PMI) of eBay Korea However, even though eBay obtained complete ownership of both companies, there were still many problems. To overcome those hurdles experienced by an acquiring firm typically after consolidation, eBay has worked in many ways. First, eBay has made the effort to minimize the modification on the existing competences of AUCTION and Gmarket as part of its integration process to combine them thoroughly to make a single unit of eBay since its acquisition. One key feature showing this intent is the brand and
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————————– Copyrightⓒ Dr. PARK All Rights Reserved ————————– domain names of AUCTION and Gmarket. eBay kept their original brand name and the domain names (auction.co.kr/gmarket.co.kr) in use even after the integration. Actually it’s hard to find out whether eBay owns them just by looking at the website. In other cases of eBay’s acquisitions
overseas, however, eBay usually changed the existing brand names into ones that included ‘eBay’ in them. For other countries like America and Europe it uses unified URL such as ‘ebay.com’,
‘ebay.co.uk’, and ‘ebay.co.de.’ Yet, in Korea, the address ‘auction.co.kr’ and ‘gmarket.co.kr’ are
still in use. It’s because the brand identities are maintained and also reflects the Korean customers’ preference over domestic brand. AUCTION and Gmarket were already well performing open market companies when eBay acquired them. By maintaining the brand names, eBay successfully absorbed the core competency of two Korean companies, and the customer loyalty to the brands.
Other key feature can be found from eBay’s careful approaches in managing human resources. eBay did its best to keep existing employees in their posts. In the process of M&A, brain efflux is typically one of the most troublesome and frequently occurring issues that managers should fight. Especially for the Internet companies, it can always be a deathblow. To avoid this, eBay clearly showed its cooperative manner. It appointed the former AUCTION CEO Joo-Man Park as the CEO of eBay Korea. And the former Gmarket CEO Young-Bae Goo started his job as a leading manager of eBay Asia-Pacific sector. Not only the chief officers, but also other employees were provided with stock options and the highest-industry salaries. After the merger, stock prices of the firm fell significantly and the existing employees got enraged because they had bought the shares in the early days as a policy of their company. To pacify their anger, eBay promised the best salary in the field and stock option to guarantee fair stock price for them. Moreover, for workers in AUCTION and Gmarket, working with eBay was a great chance to learn advanced business skills
for global online market. Some of the workers were excited to have eBay’s system in the company and they put great effort to learn from small things. By respecting employees’ needs, eBay didn’t have to suffer from the inside resistance. eBay also attempted to maximize the technological capability of AUCTION. eBay did not replace the buyer & seller protection system of AUCTION with its own system. It just modified a little and made the best use of the existing system. By doing so, eBay could cut the cost of replacing the legacy system while maintaining its own core competency in the open market industry.
Finally, eBay Korea built ‘eBay Kingdom’ in the open market of Korea. eBay Korea as a joint corporation has started with 830 employees, and among them, some business divisions like financing and purchasing have been undertaken both by AUCTION and Gmarket, however, some divisions such as marketing and sales have been operated separately. Through integration, eBay Korea has achieved synergy by sharing their resources. Keeping each brand name, eBay Korea has pursued efficiency in regard with management like sharing human resources. In other words, eBay does not abandon both advantages of AUCTION which has strong market power in IT and home appliances category and Gmarket which has strong power in fashion category. With these integration strategies, eBay Korea can achieve their synergy with AUCTION and Gmarket.
4.4.3. Market Competition after the Integration
“Mobile continues to rewrite the commerce playbook, and we continue to be a mobile commerce
and payments leader” John Donahoe, the CEO of eBay
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————————– Copyrightⓒ Dr. PARK All Rights Reserved ————————– In 2009, at CNBC interview, CEO John Donahoe strongly emphasized the importance of mobile
market’s potentiality. This insightful comment of CEO can be praised because the incredible growth of mobile shopping market during the past 4 years has confirmed its importance. Korean mobile shopping market would reach 4,000 billion won in 2015. It showed 49% growth rate in 2009, 370% in 2010, and 1,325% in 2011, which is continuously growing to become a bigger market. As users of smart phones steeply increases, online shopping customers are moving to mobile shopping platform. In 2012, Korea mobile shopping market as recorded 600 billion won in scale mainly by 20~30 aged people. In 2012, mobile shopping market grew up to 1,700 billion won, which has increased more than twice in 2011, and this tendency will last until it reaches an online market maturity. However, this mobile shopping market has intensified competition as it has a great potentiality. According to research data of DMC Korea, in mobile market 60.1% of customers use social platforms, and 57.6% of customers use open market platforms at the same time. Social commerce companies like Coupang, Wemakeprice, Ticketmonster and an open market company 11ST are all strong competitors of mobile shopping market. Even 11ST of SK planet took its first place in market with about 50% market shares. This competitor operates service centers for 24 hours, and guarantees the lowest price and delivery delay. These kinds of customer-centered services and Korean-oriented marketing strategies make powerful market position. Moreover, SK uses its information technology infrastructures or user networks through its subsidiary, SK Telecom. As lots of smartphone users are connected to SK Telecom, this open market company continuously expands its market power in mobile shopping markets. Based on the well-developed IT
infrastructures, competitors like 11ST and Interpark have been growing, and also ‘Naver’ is coming into the market with its price comparing options. Recently, NHN (the new name of Naver) has launched open market business in 2012 and it has been anticipated that NHN is going to be the one of the main open market players in the near future. Different from the apprehension of the monopoly of eBay in the market, Korean online market has been in severe competitions. Competitions are getting aggressive in this market, and merged companies (AUCTION and Gmarket) of eBay are said to change and respond more actively. There are many key factors to succeed in this market; the convenience of using mobile application for searching product or paying bills, and maximized customer services or high brand awareness and etc. Accordingly, they must be considered to catch customers in Korea.
Figure 5: Market Share in 2007 (Before and after launching 11ST)
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5. Findings and Implications Based on this case, we can summarize some noteworthy and evident implications as following. First, many multinational enterprises, even small and medium sized businesses are going global by various entry modes, especially through foreign direct investment (using Greenfield or M&A) with the aim of covering overseas markets in a broad manner, finally raising profits and market share in the world market. However, the question of which approach generates more economic value is still one of the arguable debate issues in the study of international business. Nonetheless, eBay is a good example of overcoming many obstacles to acquisitions and then creating success equations in the Korean market. This case study shows the strategic entry approach used by eBay successfully through merger and acquisition, then highlights the importance of the process of post-merger integration to combine two giants into a single organization in the foreign marketplace. This merger and acquisition of two market leaders in Korea is the only successful
case in Asian Markets. Moreover, the eBay’s choice of entry mode through merger and acquisition to enter into the Korean market is appropriate considering the timing, synergy and efficiency by sharing their resources. Second, this case once again reminds us of the importance of the
integration process after the acquisitions. There were still many obstacles while eBay obtained complete ownership of both companies. Accordingly, eBay has made much effort to overcome those hurdles in many cooperative ways such as keeping their original brand name and the domain names (auction.co.kr / gmarket.co.kr) even after the integration, then keeping existing employees in their posts as well and providing with stock options and the highest-industry salaries. eBay also
endeavored to maximize the technological capability of AUCTION. eBay used AUCTION’s own system for the buyer & seller protection instead of replacing that system. It just modified a little and made the best use of the existing system. All of which helped to prevail over all of the internal resistance of the acquisitions. Lastly, eBay is now preparing to reenter the undeveloped markets
with ‘eBay Korea’ as an Asian-Pacific outpost or as a hub of other host countries. That is, this case represents that multinational corporations can leverage their major overseas market such as Korean market to prepare for entry into another foreign markets. Based on those critical implications, this case extends a strong essence of e-commerce and open market sector, and shows the best practices how to deal with M&A and its post-merger integration in the host countries globally.
6. Conclusion This case focuses on whether eBay has entered the Korean market by applying the method of entry (Foreign Direct Investment), especially through mergers and acquisitions. Thus, we mainly described the detailed process of merger and acquisition by eBay in the Korean market since the issue of whether multinational corporations prefer the greenfield or merger-and-acquisition approach is still controversial both among academic world and among practical field. In addition, while there are many research cases where most mergers and acquisitions fail to create their economic value, this study, which examines the successful entry and settlement process of multinational company through mergers and acquisitions in the foreign market, would be a very
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————————– Copyrightⓒ Dr. PARK All Rights Reserved ————————– valuable and noteworthy case in the study of ‘International Business’ and ‘Global Entry or Distribution Strategy’ as an educational and practical example. While the findings of this case were very significant and noticeable theoretically and practically, there are some weak points to be examined in future research. First, the current study was confined to the Korean marketplace as one of the host countries of eBay. Therefore, the main findings cannot be generally applicable to other foreign countries due to different political, economic, social and cultural environments, even internet infrastructure. Second, this study focused mainly on the process of acquisition and post-merger integration issue as a main entry strategy. Thus, after entering the Korean market, the case about how eBay is currently competing in the market environment of Korea has become so enormous and broad that it has had to divide its contents separately. Therefore, we will look at another case study through future studies. Moreover, it is necessary to compare other entry modes used by eBay to operate its business in other overseas markets to see which approach creates more value and outperform. Lastly, it also
can be tested empirically to build a theoretical model of successful online retailer’s business practices. Such limitations of research will be reflected in future researches.
7. Discussion Questions & Answers (see page 57 for samples)
8. Reference Aitken, B. J., & Harrison, A. E. (1999). Do Domestic Firms Benefit From Direct Foreign Investment? Evidence From Venezuela. American Economic Review, 89(3), 605-618. Barkema, H. G., & Vermeulen, F. (1998). International expansion through start-up or acquisition: A learning perspective. Academy of Management Journal, 41(1), 7-26. Blomstrom, M. (1986). Foreign Investment and Productive Efficiency: The Case of Mexico.
Journal of Industrial Economics, 35(1), 97-110. Blomstrom, M. (1989). Foreign investment and spillovers. London: Routledge. Blomstrom, M., & Persson, H (1983). Foreign Investment and Spillover Efficiency in an Underdeveloped Economy: Evidence from the Mexican Manufacturing Industry. World
Development, 11(6), 493-501. Buckley, P. J., & Casson, M. C. (1998). Models of the multinational enterprise. Journal of
International Business Studies, 29(1), 21-44. Charles W. L. H., & Tomas M. H. (2017). International Business: Competing in the Global
Marketplace. UK: McGraw-Hill. Chu, W., & Anderson, E. M. (1992). Capturing ordinal properties of categorical dependent
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————————– Copyrightⓒ Dr. PARK All Rights Reserved ————————– variables: A review with application to modes of foreign entry. International Journal of
Research in Marketing, 9(2), 149-160. Hinz, O., & Jochen E. (2010). The Impact of Search and Recommendation Systems on Sales in Electronic Commerce. Business and Information Systems Engineering, 2(2), 67-77. Jeong, D. B., & Wang Q. (2016). Evaluation on Development Performances of E-Commerce for 50 Major Cities in China. Journal of Distribution Science, 14(1), 67-74. Johanson, J., & Vahlne, J. E. (1977). The internationalization process of the firm – a model of knowledge development and increasing foreign market commitment. Journal of
International Business Studies, 8(1), 23-32. Kogut, B., & Singh, H. (1990). The mechanism of internationalization. International Marketing
Review, 7(1), 11-24. Koo, J. S. (2014). The Impact of Acquisition Announcements on Acquiring Firms’ Alliance Partners: A Research Review and Compositive Research Model for Retail Industry.
Journal of Distribution Science, 12(5), 15-26. Lee J. (2017). eBay becomes No. 3 retailer in Korea. The Korea Herald Retrieved June 23, 2017 From http://www.theinvestor.co.kr/view.php?ud=20170623000423. Pan, Y., & Tse, D. K. (2000). The Hierarchical Model of Market Entry Modes. Journal of
International Business Studies, 31(4), 535-554. Park, Y. E. (2017). Dynamics of Global Distribution after Initial Entry. Journal of Distribution
Science, 15(12), 5-19. Park, Y. E. (2018). The Endless Challenges of KIA Motors for Globalization: A Case Study on Kia in Saudi Arabia. International Journal of Industrial Distribution & Business, 9(9), 45-52. Park, Y. E., Allawiya A., & Raneem A. (2017). Determinants of Entry Modes Choice for MNEs:
Exploring Major Challenges and Implications for SaudiArabia. 1st AUE international Research Conference, in Dubai, UAE, Springer. Root, F. R. (1987). Entry Strategies for International Markets. Lexington, MA: D.C. Heath. Sheikh M. J., Ahmed M. M., Arshad Q., & Shakeel W. (2015). Mergers and Acquisitions as Vital Instruments of Corporate Strategy: Current and Historical Perspective. The Journal of
Asian Finance, Economics and Business, 2(1), 15-21. Sperdea, N. M., Enescu, M., & Enescu, M. (2011). Challenges of Managing E-commerce,
Economics, Management and Financial Markets (Woodside), 6(2), 194-199. Statista (2018). eBay’s annual net revenue, Retrieved October 30, 2018 from https://www.statista.com/statistics/507881/ebays-annual-net-revenue/
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“Strategic Management & Business Policy”
CLOs (Course Learning Outcomes) Checklists
For Course Exit Survey in Moodle (at the end of the semester)
College of Business Administration at Prince Sultan University is dedicated to conduct a course exit survey
of students who enrolled in course ‘Strategic Management & Business Policy’ BUS495, every
semester. This information is needed to improve our course learning outcomes as well the quality CBA
Program.
Course learning Outcomes
How important were the following course learning outcomes to your learning experience?
Domain 1: Knowledge
CLO1: Understand some of the most important concepts and theories of strategic management.
CLO2: Recognize how these concepts and theories can help to understand various factors
necessary for cultivating a competitive advantage in global environments.
Domain 2: Cognitive Skills
CLO3: Analyze both the internal and external environments of the firm.
CLO4: Evaluate potential alternative strategies for corporations.
Domain 3: Interpersonal Skills &Responsibility
CLO5: Show a teamwork output in the tasks given.
Domain 4:Communication, Information Technology, Numerical
CLO6: Demonstrate ability to express ideas and apply related technology.
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Individual Assignment Questions for Discussion & Learning Activities: 1 Mark
Student ID : Name :
Date : Topic : Movie Talk – Jerry Maguire
1. During you watch the movie, try to find out some issues related to business from the
movie and List them (by words).
2. Let’s suppose that you open your own business.
What kind of business do you want to open?
What is the most important issue to you (for example, money, human, success,
reputation, etc.)? Discuss it in detail.
3. What is Strategy in your opinion? Define that by your own words.
What did you discover from the movie when it comes to Strategy for Business?
* Once you are done, upload your file for submission on LMS (Deadline: Movie day only).

 

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