International Business 2 Flashcards

Terms Definitions
Countervailing Duties
Antidumping Policies
includes norway, iceland,switzerland; most enduring free tade agreement
Collective attempts between competing firms to reduce competition.
Regardless of other considerations such as image or the liability of foreignness, companies will virtually always opt for the least-cost production location. (T/F)
A penetration strategy involves charging a high price for a new product by aiming first at consumers willing to pay the price and then progressively lowering the price. (T/F)
What is individualism-collectivism?
Individualism-Collectivism – relationship between the individual and the group
This measurement tool determines a country's overall economic output per year:
the joining together of several entities, such as companies or governments, in order to strengthen the possibility of achieving some objective.
The trend toward greater economic, cultural, political and technological interdependence among national institutions and economies.
Two Key elements to achieving alignment for supply chains:
government restrictions on imports and occasionally on exports that frequently give direct or indirect subsidies to industries to enable them to compete with foreign production either at home or abroad
Push Strategy
emphasizes personal selling to potential customers rather than mass media advertising.
In reality, the term strategic alliance often describes a wide variety of collaborations, whether or not they are of real strategic importance.(T/F)
Consolidation is the process of restating foreign-currency financial statements into U.S. dollars.(T/F)
In general, companies are highly attracted to countries that share the same language.(T/F)
interaction between domestic and foreign environmental forces of between sets of foreign environmental forces. Increased complexity for decision making(decision making more complex)
international environment
high employment raises wages, which are embodied in consumer prices
Free trade pact btwn Brazil, Argentina, Paraguay, Venezula, etc
Money left after selling goods and services and costs of operating a business have been paid
Just-in-time (JIT)
economize on inventory holding costs by having materials arrive at a manufacturing plant just in time to enter the production process and not before
home-country national
expatriate employees who are citizens of the country in which the company is headquartered
oligopolistic industries
industries composed of a limited number of large firms
Knickerbocker explored the relationship between FDI and rivalry

¡Knickerbocker suggested that FDI flows are a reflection of strategic rivalry between firms in the global marketplace
Most important consideration in international business.
Theocratic law
elies on religious and spiritual principles solely to define the legal environment. Example: Islamic law or Shari’a, based on the Koran.
a product that is difficult to differentiate from those of competitors, such as raw materials and agricultural output
the means companies select to achieve their objectives
Currency Board
A country's currency authority that holds reserves of foreign currency equal at the fixed exchange rate.
In terms of market capitalization the 10 largest stock markets are in developed countries.(T/F)
Up to a third of returning expatriates typically leave their companies within one year of repatriation and nearly half within two years of returning home.(T/F)
The term metanational is used to describe a company that thrives on the process of seeking out uniqueness that it might exploit elsewhere or that might complement its own existing operations. (T/F)
When a company moves rapidly into many foreign markets, gradually increasing its commitments within each one it is said to be pursuing a _____ strategy.
make the best use of your resources
Regulatory factors of the environment:
a. Legal System
b. Protectionist laws
c. Tax laws
d. IP laws
e. Import/export restrictions
f. Foreign business regulations
i. Domestic equity ownership
ii. Local content requirements
iii. Exchange/capital controls
iv. Price controls
Communist Totalitarian
Advocating socialisism can only be achieved through a totalitarian dictatorship
Selling goods in a foreign market below costs of production
limit on the quantity of a product that may be imported and exported within a given year.
Counter purchase
Type of collaborative stratagy, it is when you sell technology or capital equipment in return for unrelated products (i.e oil for food).
Corporate Social Responsiblity (CSR)
concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities and other stakeholders, as well as the environment
appropriability theory
the theory that companies will favor foreign direct investment over such nonequity operating forms as licensing arrangements so that potential competitors will be less likely to gain access to proprietary information
Six Sigma
a highly focused system of quality control that uses data and rigorous statistical analysis to identify "defects" in a process or product, reduce variability, and achieve as close to zero defects as possible
European Council
The ultimate decion-making body of the EU. It passes legislation from the commission into law and is comprised of one representative from each member state's governments.
Diversification Theory
Prime Motivation for FDI is to diversify the risk of earning fluctuation (variance), not necessarily to maximize profits
multipoint competition
when two or more enterprises encounter each other in different regional markets, national markets, or industries)
a process by which both labor and management participate in the management of a company emphasizes cooperative decision making within firms that benefits both works and the company
bilateral integration
a form of integration between two countries in which they decide to cooperate more closely together, usually in the form of tariff reductions
liability of foreignness
foreign companies' lower survival rate in comparison to local companies for many years after they begin operations
Joint Venture
establishing a firm that is jointly owned by two or more independent firms.
The common values that a company's employees share constitute its _____.
corporate culture
On average, U.S. firms spend _____ for each expatriate during the course of a typical three-year foreign assignment.
$1.3 million
What tasks do UNCTAD undertake?
-globalization and development strategies
- international trade in goods and services
investment, technology and enterprise development
-services infrastructure for development and trade efficiency
a body of 27 european countries dedicated to economic and politcal integration. Romania and Bulgaria joined in 2007.
european union
What is accommodation?
Accommodation – one party merely adapts to the ethics of the other party.
What is universalism?
1. Ideas and practices should be applied everywhere without modification.
2. Objective
3. A deal is a deal
4. A focus on rules, not relationships
5. A trustworthy person honours contracts and promises
Forward Exchange
When 2 parties agree to exchange currency & execute a deal @ some specific date in the future.
Local Content Requirement
A requirement that some specific fraction of a good be produced domestically
Capital resources
Goods and money used in the production of goods and services
International JIT
inventory on a global level could cut your costs into lower production costs and inventory costs by accessing different regional markets around the world and can access lower labor or manufacturing costs.
network structure
a situation in which a group of companies is interrelated and in which the managemnet of the interrelation is shared among so-called equals
Treaty of Lisbon
2007 treaty designed to increase the power of the European Parliment.
International Trade Theory
Cosists of six (6) theories attempting to explain resons and motives for international trade
Market Orientation
A philosophy or way of thinking that places the highest priority on the creation of superior customer value in the market place.
Market Spreading
arketing to as many export markets as possible; characteristic: low penetration, low control, little effort in single markets, target market do not reflect national borders, diversification
Andean Community (CAN)
A South American form of economic integration involving Bolivia, Columbia, Ecuador, Peru, and Venezuela
Multipoint Pricing
pricing strategy in 1 market may have an impact on rival's pricing strategy in another market.
What are the different instruments in the foreign exchange market?
Spot contractsForward Contract
Which part of a company's sales gap can be accounted for by competitors who sell where the company does not?
distribution gap
foreign currency options?
- gives holder right but not obligation to buy or sell an underlying asset at a predetermined price or until a certain time (as opposed to forward contract which is an obligation)
US imports and exports, 1947. $3.093 million of capital + 170 person years of labor products (a bundle of US imports worth $1 million).. $2.551 million of capital + 182.3 person years of labor products.. (a bundle of US exports worth $1 million)
the leontief paradox
Describe the key elements of Buller et al.’s model for managing cross-cultural ethical conflicts (e.g., what are the principal strategies they propose in their model?).
(6 things)
Foreign Exchange Market
A market for converting the currency of 1 country into that of another country.
Effects of globalization of markets
preferences of consumers in different nations are beginning to converge on some global norm and helps create a global marketplace
Objective of the Economist
Maximise efficiency of the use of scarce resources.
The free market view

¡So, the MNE increases the overall efficiency of the world economy 

¡The free market view has been embraced by advanced and developing nations, including the United States, Britain, Chile, and Hong Kong

argues that international production should be distributed among countries according to the theory of comparative advantage
3 types of attacks-
thrust - classic frontal attack with brute forces feint - firm’s attack on a focal arena important to a competitor but not the attacker’s true target area gambit - withdraw from a low-value market to attract rivals to divert resources into it and then to capture a high-value market
regional integration
a form of integration in which a group of countries located in the same geographic proximity decide to cooperate
Turnkey Project
A project in which a firm agrees to set up an operating plant for a foreign client and hand over the key when the plant is fully operational.
In a 2002 survey conducted by Accenture that questioned 150 executives from Fortune 1000 companies what was the most commonly identified barrier to expanding their use of outsourcing?
loss of operational control
what are cross rates?
number of DC/FC units received for each foreign currency unit
"produce and export those goods and services for which it is relatively more productive than other countries" "import those goods and services for which other countries are relatively more productive than it is"
the theory of comparitive advantage
What is the sense of time?
i. PAST—People should learn from history. Draw values they live by from history. Strive to follow tradition.
ii. PRESENT—The present moment is everything. Seize/live for the day.
iii. FUTURE—Planning and goal setting make it possible for people to develop, change and grow. A little sacrifice today will bring a better tomorrow.
Administrative Trade Policies
rules adopted by govts that can be used to restrict imports or boost exports
What are the other factors in International Pricing?
Government Intervention: this includes such things as price ceilings and price floors.

Market Diversity: Includes competition by other companies, price elasticity, and product perception and use.

Exchange Rate Fluxuation

Pricing Practice (Philosophy)

Extra Cost factors (such as transportation etc)
Single European Act
Adopeted by memers of the EC in 1987, this act committed member countries to establish a single market by the end of 1992.
Oligopolistic Theory (Knickerbocker)
FDI made in the 1960s by US companies (all in the same industry, hence Oligopoly) for following reasons:1.Few suppliers2.Nonprice competition (differentiation of product)3.Companies were defensive (Copied each other)
Foreign Direct Investment (FDI)
a company from one country making a physical investment into building a factory in another country
Asia Pacific Economic Cooperation (APEC)
A cooperation formed by 21 countries that border the Pacific Rim to promote multilateral economic cooperation in trade and investment in the Pacific Rim
What are the various forms of tariffs and what are the objectives of each?
1.Revenue tariff:Increases gov't revenue2.protective tariff:protect domestic tariff:discourage luxurious imports4.Retaliatory Tariff:Retaliate against foreign tariff5.Countervailing tariff:Offset foreign subsidies6.Punitive tariff:Punish unacceptable behavior of foreign gov't
To pursue the imitation lag strategy, companies will move first to those countries whose companies invest _____ in technology and whose government offer _____ protection for the innovator's intellectual property rights.
a great deal; very little
Give two examples of IMF involvement in a country.
- russian fiancial crisis (demonstrating the failings of IMF)
1) inadequate risk assessment
2) overestimated growth
3) deal w/ indiv. who then disappeared from political scene

-READ about another example :ADD
What is external?
1. What happens to me is beyond my control
2. I should let things take their course
3. Nature moves in mysterious ways and you never know what will happen to you
North American Free Trade Agreement (NAFTA)
The free trade agreement among Canada, Mexico and the US and officially implemented in 1994.
Competitive Advantage Theory (Ricardo & Torrens)
-Used if one country has an absolute advantage in both goods -Since actual cost is not useful, use the opportunity cost of goods-In order to maximize net worth, specialize in commodity in which we posess a competitive advantage in and then trade-Compare opportunity costs-"The opportunity cost of A in terms of B"="How much B is sacrificed to produce on more unit of A"
Expatriates must play important roles:

Strategist: enable headquarters to control subsidiaries but also facilitate the socialization process to bring subsidiaries into MNEs global orbit.

Daily manager: Run operations and build local capabilities. One of the reasons they are sent is due to lack of local management talent.

Ambassadors: representing headquarters interests they build relationships with host country stakeholders such as local managers and government officials. Expats are also ambassadors representing the interests of the subsidiaries when interacting with headquarters.

Trainers: self explanatory- train locals how to work
Describe the Balance of Payment argument used for import restrictions.
Less imports in order to reduce balance of payment or trade deficitProblem:Political ramifications
what happens when the dollar is very high? (low 80s)
- difficulties for exporters
- cheapter for importers to import
- less expensive for cdns to travel overseas for business and pleasure
-pro: more leverage mor ebuying power south of border; makes cdns travel outside country
con: drive down US buying power - so export sector hurt which means slow production, hinder competitiveness, loss of jobs
What are indirect and direct communication?
Indirect (don’t say exactly what you mean)

Direct (say what you mean)
New Rule of the game under Globalization
If you arnt globally competitive, you cant survive even in your own domestic market.
Read the Ventus Case, pp 676-681 of the Daniels’ text. Be prepared to answer the following question:a. What will be the best path for growth for Ventus? Evaluate the various options discussed in the case. What path would you recommend? Briefly explain y
Options for growth for Ventus:Should Ventus drive growth by expanding the number of seats held by existing customers or should it build a new pipeline of customers?Should the company attain all the new customers it can, or should it be selective in obtaining only lucrative verticals, such as health care, financial services, and high technology?Should the company focus on new customer segments arising in the US and China that are growing fast? If so, should they build new facilities or acquire or partner with companies near the US, like Mexico or Costa Rica.I would recommend that Ventus follow a combination of these two recommendations: first, they should drive growth by building a larger customer base, acquiring newly emerging market segments from the US and China, while also offering services via partnering with SPI Technologies, under PLDT. In telecommunications, just as with the technology industry times are changing fast – and companies must excel or be left behind. Ventus is much more apt to survive and maintain its competitive edge that it has carried for so long if it expands its customer base while offering new technologies in new markets. Following these recommendations Ventus should build new facilities in or near its new market segments, placing close to their customers and increasing exposure. Facilities will be built in the United States and China capturing the Hispanic market, and US multinationals in China.Two challenges Ventus may face and what to do:Increased competition. Ventus is competing in a market that is expanding quickly, specifically business process outsourcing. To deal with increased competition, Ventus should build facilities in or near the markets they wish to obtain to increase their exposure in these areas and boost sales of their services.Lack of interest from the Hispanic segment in the US. Ventus does not currently have a presence in the US. This may pose a potential problem for Ventus to acquire the newly forming Hispanic market. Ventus can battle this challenge by creating sales teams and advertising specifically geared toward the Hispanic market.
If a negotiator has a low familiarity with his counterparts culture and his counterpart has a low familiarity with the negotiator's culture, what is the most feasible strategy?
employ an agent or an advisor.
outgrowth of _____ _____ __ ____ __ ____, that functioned to encourage trade between nations (GATT)
general agreement on tariffs and trade
Why does the U.S. require the currency to float?
The U.S. requires a floating rate because any differences in supply and demand will automatically be corrected in the market. Another reason the U.S. requires it is because the efficient means of determining the long term value of a currency and creating equilibrium in the international market.
Why is there continual turmoil in the political environment after the fall of the Soviet Union
Because there is no bipolar system of power. The communist system controlled many countries which are now in regional warfare.
What are the 3 main goals of the WTO?
1. Help the free flow of trade.2. Help negotiate the further opening of markets.3. Settle Member trade disputes.
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