Lecture 4O Advantages: A Closer Look

DR. VICTOR Z. CHEN

UNC CHARLOTTE

OLI paradigm by John H. Dunning Ownership advantages (O)

Knowledge advantage Management, marketing, financial skills Vertical integration

Control of resources Control of markets

* Note: O advantages should be non-location-bound and are always relative to your target peers (firstly home-country peers and then target host-country peers).

Location advantages (L) of the host countries/regions National production functions Government controls and regulations Political risk Cultural values * Note: such advantages should support O advantages

above and may change as a result of the MNE’s entry.

Internalization benefits (I) To enforce property rights and overcome other transaction costs To reduce buyer uncertainty To overcome government regulations * Note: some I benefits are a response to some L disadvantages

A successful business model

Competitive advantages? Everyday Low Prices (EDLP), through aggressive

bargaining with suppliers (and non-unionized employees) (with critics)

Zoning: efficient distribution system and inventory control

3% saving per item in purchasing costs due to logistics Retail Link satellite/computer system, a $4 billion

investment Each store is within a day’s drive of a distribution

center, which supplies 85% of inventory (compared to 50%-60% for competitors)

Super-large market construction in suburban areas. Unique culture

Sam Walton’s three key principles: To respect the individual To provide superior customer service (e.g.,

24-hour service; helping bag purchases) To strive for excellence

Sundown Rule: all concerns be addressed on the day of occurrence

Stringent zoning requirements

Labor relations

Price

regu

latio

ns

Limite

d store

hours;

cultural

differences,

etc.

What are the O advantages for Wells Fargo Investment Banking (IB)?

Competitive advantages? Brand advantages:

What is Wells Fargo known for? Control of resources:

Assets/capitals/existing global networks? Control of markets:

Who are Wells Fargo’s customers and what do they do (e.g., size, sectors, regions, etc.)?

Management advantages: What are the unique managerial

skills/experiences of Wells Fargo IB’s senior executives?

Knowledge/experience advantages: What successful experiences Wells Fargo

have gained in M&A advisory services?

Who are the peers?

by All Fees by M&A Fees

x 12% = 282.63

O Advantages – A Comparison Table

For each region (e.g., Asia, Middle East/Africa, Europe, North America, Central/Latin America, Oceania, Others), you can informally compile a comparison table below.

Eventually, you will choose the region in which Wells Fargo has the most O advantages compared to the other major M&A service providers.

The table below for the region you select will be the O-advantages to be presented in your first report (due midnight October 18, Sunday) and final presentation (11am-2:00pm, December 18 Friday).

 

Wells Fargo

Goldman Sachs &

Co

Morgan Stanley

Bank of America Merrill Lynch

Barclays Lazzard Citi Deutsche Bank

Credit Suisse

Rothschild

Brand                   

Resources                   

Customers                   

Management                   

Knowledge/Experience (M&A Advisory Services)

                   

This Week

ContactVictor Z. ChenBelk College of BusinessUNC Charlotte

+1 (704) 687-7645

zchen23@uncc.edu

www.ChenZitian.com