BBB4M1-01
NAME:
Schoenhardt; Fall 2008 Final Examination Review
INTERNATIONAL BUSINESS (SCHOENHARDT)
Fall Semester 2008 FINAL EXAM REVIEW
Exam: Thursday January 22, 2009. 8:30 – 10:30
Date:
Your examination consists of three parts:
1. Part A: Multiple choice questions; 40 questions, 40 marks – key ideas as outlined below.
2. Part B: short answer questions; 8 marks per question, 24 marks total. You will have to choose three of five short
answer questions taken from, or developed from, the issues presented in your seminars. See the questions below!
3. Part C: Article responses; 20 marks. You will have to choose one of the case study or the articles and answer four
questions associated with your choice. Each case study relates to issues presented in three separate seminars.
NOTE: All seminars are present on this examination either in the case studies or the short answer questions. You will be required
to discuss the issues developed in the seminars as your responses to the questions. To prepare for Parts B and C, it is
recommended that you think and write practice responses to the “exam style” questions presented in each seminar and discuss
them with a friend.
PART A: Multiple Choice questions: 40 questions, 40 marks – choose the best answer and transfer your
choice to the scan-tron card. The key ideas of the MC questions are below:
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Import, export
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Service, knowledge economy,
manufacturing sector
Difficulties with international expansion
Differentiation
Pest analysis
SWOT analysis
NAFTA,
GDP, GDP per capita
Innovation
Research and Development
How international expansion can assist
and hurt a developing nation
Market segmentation, Target market,
demographics
Ethical dilemmas
Corporate social responsibility
Push vs. pull strategy
Market research
Branding, brand leveraging
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Importance of exports to Canadian
jobs, importance of the US as a trading
partner
Benefits of international expansion
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Outsourcing
The Canadian advantage: Quality of
life, business infrastructure, human
resources business climate
Competitive advantage
Infrastructure
Productivity
Market driven economy
Product lifecycle
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Code of ethics
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Ethical imperialism, cultural relativism
Sweatshops
Disposable income
Marketing mix: 4 P’s and 2 C’s
Economies of scale
PART B: SHORT ANSWER QUESTION SET; (24 marks - 8 marks per question, 45 minutes) Instructions:
Choose three of the following five questions; use a separate piece of paper for each question.
1. Strategic review: choose one of the following seminar topics: Research in Motion, Iraq trade, or the Canadian Film industry.
How would a business analyst use a SWOT analysis? (/1) Using one of: Research in Motion or trade with Iraq or the
Canadian film industry, complete a SWOT analysis on topic and outline the key factors that have made the respective
company / nation /industry successful (/4). Explain strategic recommendations for the future success of the company / nation
/ industry (/3). (8 marks total)
2. What has The Body Shop done to be considered a global leader in good corporate social responsibility (CSR)? Do you
believe that the Body Shop lives up to its corporate slogan of “Profits with principles”? Support and back up your position. (8
marks)
3. Define: consumerism. What are the problems with consumption / consumerism by the typical North American? (8 marks)
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BBB4M1-01
Schoenhardt; Fall 2008 Final Examination Review
NAME:
Date:
4. Describe the importance of the United States to the Canadian economy; provide data to support your answer. What is the
European Union? Compare the interdependence of Canada and the United States with the European Union. What would be
the effects of Canada seeking greater ties with the United States similar to the ties between countries in the European Union?
(8 marks)
5. Electronic commerce & digital music. How is downloading music similar to eBay? Explain how on-line digital music has
changed and affected the recording industry; and / or how eBay is changing the retail landscape. What can the recording
industry (companies such as Bertlesman, Sony or EMI) and / or retailers do to remain viable? (8 marks)
PART C: CASE STUDIES - Instructions: Choose one of the following two articles; (20 marks, 35 minutes)
Case A: The smell of old fish1 Seminar topics covered: cocoa fair trade, conflict diamonds, business ethics,
stakeholders and Tar-Sands Environment
Sole Food Limited was a small but extremely efficient manufacturer of men’s recreation shoes and hiking boots. Its
product lines had caught on well in North America and Europe because of their superior design and quality. Recently, although
sales had been steady, the market appeared to be saturated and no further growth seemed possible.
Mr. Sacks, Sole Food’s owner and general manager, was concerned with this situation, as he was convinced that new
and different markets should be opened up in order to keep his company innovative, thus, he was extremely interested when he
met Mr. Romeniz at the Shoe Association’s annual convention. It seemed that Mr. Romeniz was a “representative”. When asked
what or whom he represented, he was vague, but confided that he had extensive “commercial contracts” in both Africa and
Central America. In fact, one of these “contacts” was about to place an order for 200,000 army boots. Would Mr. Sacks care to
submit a quote? There were further hints of more orders to follow.
Sensing an imminent foothold in the lucrative military market, Mr. Sacks upon hi return hurriedly summoned his design
staff, hand produced several prototypes and sent them to Mr. Romeniz. At the same time, he had a credit check done on Mr.
Romeniz’s company. Within two days, Mr. Sacks’s banker reported that Mr. Romeniz owned an export firm of good reputation
and sound financial standing.
Mr. Sacks was delighted, therefore, when a letter containing a substantial advance payment and confirmation of contract
terms was received. Production started immediately.
Several weeks later, Mr. Sacks held a dinner party to celebrate his good fortune. After he had told his guests about his
new business venture, on of them spoke up: “I’m on the local committee for Amnesty International. We have reports that Romeniz
is a prime supplier for the republic of Rotania, one of the world’s most brutal dictatorships.”
This revelation shocked and embarrassed Mr. Sacks. Later in the weeks he confronted Mr. Romeniz, who smiled and
said softly: “You don’t have to worry about who wears the boots, my friend. Besides, the name ‘Republic of Rotania’ never
appears on the purchase order or other paperwork. You deal only with me. I sell to someone else, who sells to the Rotanians.
The money is good, isn’t it?”
With those words, Mr. Romeniz produced another contract, even more lucrative than the first. Mr. Sacks knew that it
represented enough long-term work to keep his small company healthy for at least five years. Only this time, Mr. Romeniz was
speaking in terms of “pay-offs” to certain “influential officials “ in Rotania’s corrupt government. He assured Mr. Sacks that these
“favours” were “normal business practice.” How did Mr. Sacks think he had obtained the first contract?
OR…
Articles B: The bleeding continues in the desert2. & Phoenix keeps cutting as losses keep growing3. Seminar
topics covered: NFL Toronto expansion, NHL business difficulties, why professional sports is international
business, and GM strategy / bailout / restructuring
Phoenix keeps cutting as losses keep growing. DAVID SHOALTS, January 13, 2009
The Phoenix Coyotes' losses this season are expected to hit $45-million (all currency U.S.) once their debt servicing is taken into
account, according to two sources, and the club is making further cutbacks after layoffs last week. Among the austerity measures
pushed on the club by the NHL, which is monitoring the Coyotes' financial and player-personnel moves, is a reduction in travel by
1
Source: Dr. P. C. Wright, Faculty of Administrative Studies, University of New Brunswick. Business and the Canadian Environment, 6th ed.,
Fuhrman, Peter H., Prentice-Hall, 1998; p. 596.
2
The bleeding continues in the desert, David Shoalts, Globe and Mail, January 9, 2009
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Phoenix keeps cutting as losses keep growing, David Shoalts, Globe and Mail, January 13, 2009
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BBB4M1-01
Schoenhardt; Fall 2008 Final Examination Review
NAME:
Date:
the club's scouts, according to sources. Last week, the Coyotes laid off 18 people in the front office, about 10 per cent of their
staff. Sources have said the Coyotes owe about $80-million to SOF Investments LP, an equity fund owned by computer tycoon
Michael Dell and his family. The club has pledged almost all of its assets and revenue to the company as collateral.
A report from ESPN.com said the Coyotes also failed to hit at least some of the mandatory targets last season for a full portion of
the league's revenue sharing. The Coyotes had their expected share cut to $10.5-million from $15-million, one ESPN.com source
said. The league's sharing agreement distributes money from the top 10 clubs in revenue to the bottom 10 among the NHL's 30
clubs. The lowest-ranked club, the Coyotes last season, receives the most money, but to qualify for a full share, clubs have to hit
certain targets, such as showing a specified improvement in their revenue and attendance over the previous season.
Last season, the Coyotes finished last in the NHL in ticket revenue with a total of $18.4-million, according to figures obtained by
The Globe and Mail. That was a decrease from $22.55-million in 2006-07. Club officials claim ticket sales are up this season by
99,000 overall from the same period last season. But the Coyotes are receiving advances from the NHL on their share of
expected revenue from league-wide broadcasting, merchandising and other sources.
NHL deputy commissioner Bill Daly declined to comment yesterday on the Coyotes' total losses and whether the club was denied
some of its revenue-shared allotment. He also declined to say whether the travel cuts were demanded by the league or whether
Coyotes managing partner and head coach Wayne Gretzky agreed to defer some of his salary.
"I am not sure the league is in a position to answer or confirm any of these questions," Daly wrote in an e-mail message. "These
would appear to be better directed to the club." Jeff Shumway, the Coyotes' chief executive officer and governor, was asked the
same questions by e-mail and declined to comment. "I have no comment at all," he said when reached by telephone.
The Coyotes are trying to renegotiate their lease at Jobing.com Arena in Glendale in an effort to get more money from the building
or the city, although they already receive most of the revenue from the complex. Sources say city officials have so far refused to
change the 30-year agreement, which calls for huge financial penalties if the team tries to relocate.
The bleeding continues in the desert. DAVID SHOALTS, January 9, 2009
Almost everything the Phoenix Coyotes own or earn is pledged as collateral to SOF Investments LP of New York,
according to financial documents obtained by The Globe and Mail. Two NHL governors say the financial situation is
distressed to the point that the Coyotes have had to draw on advances from the league to meet a $42.4-million (all
currency U.S.) annual player payroll and operational expenses. The advances are made from anticipated NHL broadcast
rights, merchandise sales and revenue sharing.
It is not known exactly how much money the Coyotes have received from the NHL. The game schedule is at the halfway point,
which could mean, under NHL bylaws, the club cannot have received more than half of the money it expects from shared revenue.
NHL deputy commissioner Bill Daly said the Coyotes have not yet received as much as half of their expected share of the NHL
revenue, which could come to $22-million.
In return for the advances, the Coyotes need the NHL's approval for any major player or financial transactions, according to
sources. Daly wrote in an e-mail message yesterday that the arrangement "is not as much 'approval' as it is 'consulting.' "
Interestingly, according to documents, the contract between the Coyotes and managing partner and head coach Wayne Gretzky is
“specifically excluded” from the assets.
Earlier this week, the Coyotes laid off 18 employees, about 10 per cent of the club's front-office staff. The employees worked in
ticket sales, game operations, administration, public relations and community relations. Daly said the NHL was "aware" of the
layoffs before they were announced, but he did not say whether the league recommended them.
With the club's losses again expected to exceed $30-million this season, it is practically impossible to find new investors or
someone to buy the team from Jerry Moyes, whose trucking company is also in serious financial trouble. Unless the franchise
declares bankruptcy, it is locked into a 30-year lease at Jobing.com Arena with the city of Glendale, on the western outskirts of
Phoenix.
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BBB4M1-01
Schoenhardt; Fall 2008 Final Examination Review
NAME:
Date:
The uniform commercial code financing statements obtained by The Globe show that, starting on Dec. 29, 2003 — only two days
after the Coyotes played their first game at newly constructed Jobing.com Arena — the franchise signed over almost all assets
and revenue to SOF, its primary lender at the time.
More documents show that SOF tightened its grip on the club as the Coyotes borrowed more money. The loans now total about
$80-million and will expire on Dec. 29, 2013, under current terms, according to a source. The timing of some documents suggest
the Coyotes increased their loan from SOF in January of 2007 in order to pay off another loan, to a New York hedge fund,
Fortress Credit Opportunities LP.
Assets signed over to SOF Investments include the rights to the franchise, all equipment, inventory, all government licences,
trademarks, logos, copyrights and insurance policies. Further, all revenue is pledged to SOF, except $2.5-million annually in
arena-naming rights, $1.50 a ticket owed to the city of Glendale (for paying $180-million toward the $220-million arena) and $9 a
ticket for "all NHL hockey events" to the club. Other revenue includes NHL broadcasting rights, any share of future expansion or
relocation fees, revenue sharing, merchandise sales, concessions, sponsorship contracts and practice facility rentals.
The $9 cut from ticket sales does not go far. Through 21 home games, the Coyotes ranked 26th among the NHL's 30 teams in
attendance with an announced average crowd of 14,789 a game. The Coyotes received a reported $15-million in revenue sharing
last season from the NHL's wealthiest clubs, the most of any franchise that qualified for the handout.
SOF Investments is a private equity fund owned by another New York company, MSD Capital, which was set up in 1998 to
manage exclusively the capital of computer tycoon Michael Dell and his wife. Its mandate is to invest in publicly traded securities,
make private equity investments (venture capital), invest in real estate (in the Phoenix area, among others) and engage in other
market activities. Its aim is to build an investment portfolio designed for long-term capital appreciation.
Neither Moyes nor Coyotes chief executive and governor Jeff Shumway responded to requests for comment. Daly said earlier the
league is aware of the extent of the Coyotes' indebtedness to SOF. "We have no doubt that the Coyotes' secured loan is more
than covered by the value of the franchise," Daly said. Forbes magazine recently valued the franchise at $142-million. Daly
declined to confirm or deny that the Coyotes are receiving money from the league, but did say that it is not unusual for clubs to
draw on revenue-sharing amounts in advance of scheduled payment periods.
One document, filed with the state of Delaware on Jan. 17, 2007, says simply that "the collateral consists of all assets of debtor."
Another, filed on Nov. 6, 2008, as a continuation of the agreement with SOF Investments, goes into much more detail about the
Coyotes' collateral.
A six-page statement lists everything signed over to the financing company, starting with "the franchise to own and operate the
team and all assets of the debtor related thereto (including, without limitation, all rights under the NHL governing documents)." In
addition to physical assets, the team also pledged all of its bank accounts.
These assets will not belong to SOF unless the Coyotes break one of the loan covenants, such as missing a specific debt-capital
ratio. But the more onerous the conditions of a loan, the more unstable a borrower is considered by a lender. One interesting item
states that "for the avoidance of doubt," the contract between the Coyotes and managing partner and head coach Wayne Gretzky
is "specifically excluded." Just about the only thing not mentioned in the documents is the office equipment. But that in itself is the
subject of liens to two office-supply companies, which have control of the equipment.
Moyes's personal financial problems call into question his ability to continue covering the Coyotes' losses. His main business,
Swift Transportation Co., was hit hard, like every other trucking company, by the rise in fuel costs and collapse of the economy in
the past 18 months. The fuel costs began skyrocketing about the time Moyes took Swift private in May of 2007 with debt financing
of $2.74-billion. Like his hockey team, Moyes also has pledged significant personal assets as collateral to lenders. Moyes, his
wife, Vickie, and their family trust all have liens against them, according to documents obtained by The Globe.
The Moyeses' list of creditors includes Morgan Stanley, the merchant bank involved in taking Swift private; Swift Transportation;
U.S. Bank National Association, a trustee of asset-backed securities and registrar of corporate bonds; and First United Funding
LLC, a short-term business credit institution. According to Eiad Asbahi, the managing partner of Prescience Investment Group of
New York, who has studied Swift's situation, the trucking company loaned Moyes $560-million as part of his takeover in May of
2007. Moyes personally guaranteed the loan, Asbahi said in an analysis of Swift done earlier this year.
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