GEB3373 Exam 3 - Flashcards

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General Agreement on Tariffs and Trade (GATT)

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International agreement that sponsors negotiations to promote world trade

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Most Favored Nation (MFN)

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Principle that any preferential treatment granted to one country must be extended to all countries

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Generalized System of Preferences (GSP)

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System of reduced tariff rates offered on goods exported from developing countries

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Uruguay Round

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GATT negotiations (1986-1994) that created the World Trade Organization, slashed tariff rates, and strengthened enforcement of intellectual property rights.

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World Trade Organization (WTO)

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Successor organization to the GATT founded in 1995; created by the Uruguay Round negotiations

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Doha Round

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World Trade Organization negotiations that began in 2001

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National Treatment

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Imposing the same standards, regulations, and so forth on foreign firms that are imposed on domestic firms.

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Free Trade Area

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Regional trading bloc that encourages trade by eliminating trade barriers among its members

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Trade Deflection

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Rerouting of exported goods to the member of a free trade area with the lowest barriers to import from nonmember countries

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Rules of Origin

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Rules to determine which goods will benefit from reduced trade barriers in regional trading blocs

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Customs Union

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Form of regional economic integration that combines the elimination of internal trade barriers among member countries (free-trade area) with the adoption of common external trade policies toward nonmembers.

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Economic Union

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Form of regional economic integration that combines features of a common market with coordination of economic policies among its members

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Political Union

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Complete political and economic integration of two or more countries

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Benelux Nations

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Belgium, the Netherlands, and Luxembourg

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Treaty of Rome

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Treaty signed in 1957 that established the European Economic Community

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European Council

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Consists of the heads of government or state of each of the member states, the President of the European Council, and the President of the European Commission

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Council of the European Union

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Main decision-making body of the EU

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European Commission

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28-person group that acts as the EU's administrative branch of government and proposes all EU legislation

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European Parliament

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Legislature elected from member countries that has a consultative role in EU decision making

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European Court of Justice

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28-member court charged with interpreting EU law; also interprets whether the national laws of the EU members are consistent with the EU laws and regulations

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Co-decision Procedure

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Procedure that shares decision-making power between the European Parliament and the Council of the European Union

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Harmonization

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Voluntary adoption of common regulations, policies, and procedures by members of a regional trade bloc to promote internal trade

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Treaty on European Union

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Signed in 1992 and came into force on November 1, 1993, furthering economic and political integration of the EC's members; important provisions included the creation of an economic and monetary union, a cohesion fund, a pledge to cooperate on foreign and defense policies, and the renaming of the EC as the European Union; commonly known as the Maastricht Treaty

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Maastricht Treaty

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Common name given to the Treaty on European Union

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Cohesion Fund

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Means of funneling economic development aid to countries whose per capita GDP is less than 90 percent of the EU average

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Economic and Monetary Union

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Goal established by the Maastricht Treaty to create a single currency for the EU, thereby eliminating exchange rate risks and the costs of converting currencies for intra-EU trade

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Convergence Criteria

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Criteria imposed on EU members wishing to adopt the euro as the national currency

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European Central Bank

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The central bank responsible for controlling monetary policy for all EU countries adopting the euro as their currency

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Stability and Growth Pact

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Limits annual government deficits of eurozone participants to no more than 3 percent of their GDPs

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Treaty of Amsterdam (Treaty for Europe)

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1997 treaty furthering integration among EU members

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Treaty of Lisbon

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An agreement among EU members to adopt many of the reforms proposed by the EU's Constitutional Convention; also called the Reform Treaty

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Treaty of Nice

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Became effective in February 2003, furthering the integration of the EU by reducing the number of areas in which unanimous votes are required for Council approval

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European Free Trade Association

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Trading bloc in Europe that works closely with the EU to promote intra-European trade; current members are Iceland, Liechtenstein, Norway, and Switzerland

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European Economic Area

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Common market created by the EU, Iceland, Liechtenstein, and Norway

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Screwdriver Plant

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Domestic factory that assembles imported parts in which little value is added to the parts

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Caribbean Basin Initiative (CBI)

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Program developed by the United States to spur the economic development of countries in the Caribbean Basin; allows duty-free importation of selected goods from these countries into the United States

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Association of Southeast Asian Nations (ASEAN)

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Established in August 1967 to promote regional political and economic cooperation

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Asia-Pacific Economic Cooperation (APEC)

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A group of countries on both sides of the Pacific working to promote trade among themselves by reducing or eliminating trade barriers

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International Strategic Management

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Comprehensive and ongoing management planning process aimed at formulating and implementing strategies that enable a fim to compete effectively internationally

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Distinctive Competence

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Component of strategy that answers the question "What do we exceptionally well, especially as compared to our competitors?"

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Scope of Operations

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Component of strategy that answers the questions "Where are we going to conduct business?"

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Synergy

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Component of strategy that answers the question "How can different elements of our business benefit one another?"

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Steps in International Formulation

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Develop a Missions Statement, Perform a SWOT Analysis, Set Strategic Goals, Develop Tactical Goals and Plans, Develop a Control Framework

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SWOT Analysis

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Analysis of a firm and its environment to determine its strengths, weaknesses, opportunities, and threats

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Value Chain

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A breakdown of the firm into its important activities - production, marketing, human resources management, and so forth - to enable its strategists to identify its competitive advantages and disadvantages

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Strategic Goals

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Major objectives a firm wants to accomplish through the pursuit of a particular course of action

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Tactics

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Methods used by middle managers to implement strategic plans

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Related Diversification

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Corporate-level strategy in which the firm operates in several different but related businesses, industries, or markets at the same time

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Unrelated Diversification

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Corporate-level strategy that calls for a firm to operate in several unrelated businesses, industries, or market

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Conglomerates

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Firm that uses a strategy of unrelated diversification

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Differentiation Strategy

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Business-level strategy that emphasizes the distinctiveness of products or services

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Overall Cost Leadership Strategy

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Business-level strategy that emphasizes low costs

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Focus Strategy

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Business-level strategy targeting specific types of products for certain customer groups or regions

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Foreign Market Analysis Steps

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Assessing Alternative Foreign Markets, Evaluate the Respective Costs ; Benifits/Risks of Each, Select Those that Hold the Most Potential for Entry or Expansion

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Ownership Advantages

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Resources owned by a firm that grant it a competitive advantage over its industry rivals

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Location Advantages

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Factors that affect the desirability of host country production relative to home country production

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Liability of Foreignness

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The informational, political, and cultural disadvantages that foreign firms face when trying to compete against local firms in the host country

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Forms of Exporting

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Indirect Exporting, Direct Exporting, Intracorporate Transfers

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Indirect Exporting

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Sales of a firm's products to a domestic customer, which in turn exports the product, in either its original form or a modified form

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Direct Exporting

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Product sales to customers, either distributors or end users, located outside the firm's home country

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Intracorporate Transfers

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Selling of goods by a firm in one country to an affiliated firm in another country

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Modes of Entry

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Exporting, Licensing, Franchising, Contract Manufacturing, Management Contracts, Turnkey Projects, Foreign Direct Investment

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Intermediaries

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Third parties that specialize in facilitating imports and exports

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Export Management Company

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Firm that acts as its clients' export department

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Webb-Pomerene Association

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Group of U.S. firms that operate within the same industry and that are allowed by law to coordinate their export activities without fear of violating U.S. antitrust laws

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International Trading Company

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Firm directly engaged in importing and exporting a wide variety of goods for its own account

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Manufacturers' Agents

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Agents who solicit domestic orders for foreign manufacturers, usually on a commission basis

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Manufacturers' Export Agents

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Agents who act as an export department for domestic manufacturers, selling those firms' goods in foreign markets

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Export ; Import Brokers

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Agents who bring together international buyers and sellers of standardized commodities such as coffee, cocoa, and grains

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Freight Forwarders

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Agents who specialize in the physical transportation of goods, arranging customs documentation and obtaining transportation services for their clients

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Licensing

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Transaction in which a firm (the licensor) sells the rights to use its intellectual property to another firm (the licensee) for a fee

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Licensor

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Firm that sells the rights to use its intellectual property to another firm

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Licensee

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Firm that buys the rights to use the intellectual property of another firm

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Royalty

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Compensation paid by a licensee to a licensor

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Franchising

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Special form of licensing in which the licensor authorizes the licensee to utilize is operating systems, brand names, trademarks, and logos in return for royalty payment

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Franchisee

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Independent entrepreneur of organization that operates a business under the name of another

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Contract Manufacturing

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Process of outsourcing manufacturing to other firms to reduce the amount of a firm's financial and human resources devoted to the physical production of it products

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Management Contract

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Agreement whereby one firm provides managerial assistance, technical expertise, or specialized services to a second firm for an agreed-upon time for a fee

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Turnkey Project

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Contract under which a firm agrees to fully design, construct, and equip a facility and then turn the project over to the purchaser when it is ready for operation

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B-O-T Project

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Variant of a turnkey project for market entry in which a firm builds a facility, operates it, and later transfers ownership to another party

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Brownfield Strategy (Acquisition Strategy)

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Form of foreign direct investment involving the purchase of existing assets in a foreign country

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Greenfield Strategy

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Form of foreign direct investment in which the firm designs and builds a new factory from scratch, starting with nothing but a "green field"

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Joint Venture (JV)

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Special form of strategic alliance created when two or more firms agree to work together and jointly own a separate firm to promote mutual interests

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Strategic Alliance

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Business arrangement in which two or more firms choose to cooperate for their mutual benefit

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Comprehensive Alliance

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Two or more firms agree to together perform multiple stages of production and integrate different operating procedures to bring goods or services to the market

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Production Alliance

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Strategic alliance in which two or more firms each manufacture products or provide services in a shared or common facility

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Marketing Alliance

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Strategic alliance in which two or more firms share expertise or services related to distribution, pricing, and communications.

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Financial Alliance

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Strategic alliance in which two or more firms work together to reduce the financial risks associated with a project

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R&D Alliance

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Strategic alliance in which two or more firms agree to undertake joint research to develop new products and processes for world markets

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R&D Consortium

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Confederation of organizations that band together to research and develop new products and processes for world markets

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Public-Private Venture

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Joint venture involving a partnership between a privately owned foreign firm and a government

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Shared Management Agreement

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Management arrangement in which each partner in a strategic alliance fully and actively participates in managing the alliance

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Assigned Arrangement

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Management arrangement in which one partner in a strategic alliance assumes primary responsibility for the operations of the alliance

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Delegated Arrangement

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Management arrangement in which partners in a strategic alliance play little or no management role, delegating responsibility to the executives of the alliance itself

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Promotion

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Set of all efforts by an international firm to enhance the desirability of its products among potential buyers

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Promotion Mix

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Mix of advertising, personal selling, sales promotion, and public relations used by a firm to market its products

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Message

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Facts or impressions an advertiser wishes to convey to potential customers

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Medium

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Communication channel used by an advertiser to convey a message

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Personal Selling

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Making sales on the basis of personal contacts

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Sales Promotion

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Specialized marketing efforts using such techniques as coupons and sampling

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Public Relations

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Efforts aimed at enhancing a firm's reputation and image

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Distribution

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Process of getting a firm's products and services to its customers

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International Order Cycle Time

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Time between placement of an order and its receipt by the customer

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Channel Length

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Number of stages in a distribution channel

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Direct Sales

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Selling products to final customers; distribution channel with the shortest length

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International Service Business

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Firm that transforms resources into an intangible output that creates utility for its customers

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Capacity Planning

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Deciding how many customers a firm will be able to serve at a given time

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Product-Support Services

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Assistance a firm provides for customers regarding the operation, maintenance, and/or repair of its products

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Franchisor

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Firm that allows an independent entrepreneur or organization to operate a business under its name

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Internalization Advantages

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Factors that affect the desirability of a firm's producing a good or service itself rather than relying on other firms to control production

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Economic Community of West African States (ECOWAS)

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Organization created by 16 West African countries to promote regional economic cooperation

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Economic and Monetary Community of Central Africa (CEMAC)

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Organization promoting regional economic cooperation in Central Africa

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ASEAN Free Trade Area (AFTA)

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Established in January 1993 to promote intra-ASEAN trade

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Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA or CER)

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An agreement between Australia and New Zealand to eliminate trade barriers between them

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Mutual Recognition

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Legal concept created by the European Court of Justice; implies that if one EU member determines that a product is valid for sale within its borders, then other EU members must also recognize its validity and allow it to be sold within their borders

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Common Market

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Members eliminate internal trade barriers, adopt a common external policy toward nonmembers, and eliminate barriers to the movement of the factors of production.

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The Economic ; Monetary Community of Central Africa, The Economic Community of West African States, and The Southern African Development Community

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All African free-trade agreements, but The African Union is NOT.

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Proactive Motivations

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Pull a firm into foreign markets as a result of opportunities available there

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Indirect Exporting of Intel's Chips

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When H-P buys microchips from Intel to use in manufacturing computers and then exports the completed computers to Europe, __________ has occurred.

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Licensing is the mode of entry described in this example

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The Nintendo Company manufactures electronic video consoles and game cartridges. Nintendo provides game-design firms with technical specifications for how Nintendo consoles function. The game-design firms create the games and then pay Nintendo a fee to manufacture those games.

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Avoiding Tariffs

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Carmichael Candies, a U.S. firm, is considering the idea of entering the EU market through an international franchising agreement. _____ is the MAIN advantage to Carmichael if the firm chooses this entry method.

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Financial Capital

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Burger King has established a franchise agreement with an individual in Tokyo. Burger King will most likely provide the Japanese franchisee with intellectual property, operating systems, and training; NOT ______.

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Business Process Outsourcing (BPO)

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Juanita recently purchased an FDX Computer. She needs assistance setting it up and contacts the firm's customer-service center, which is located in Bangalore, India. FDX Computer most likely engages in _______.

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Business Process Outsourcing

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To carve out an internal business process such as IT or HR and outsource it to a private entity in an attempt to reduce costs and improve efficiency

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Forming a Strategic Alliance

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Executives at Bantam Bicycles realize that the firm lacks the necessary internal resources to compete internationally. _________ would most likely enable Bantam to compete in the global market.

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Shared Risk

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Boeing collaborated in a strategic alliance with Fuji, Mitsubishi, and Kawasaki in the development and production of the Boeing 777 to minimize Boeing's financial exposure. Boeing was seeking the benefit of __ from this strategic (financial) alliance.

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Research & Development

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Micron Technology, Intel, Samsung, Hyundai, and Siemens have formed an alliance to develop the next generation of DRAM chips. This is an example of a _______ alliance.

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Make Entry into the Chinese Market Easier

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IMAX, the entertainment firm, recently entered into a joint venture with Wanda Cinema Line, a Chinese theater chain. IMAX was primarily seeking to _____________ by forming this arrangement.

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Comprehensive

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General Mills and Nestlé created a joint venture that fully integrated all the efforts necessary to compete against Kellogg in the European cereal market. This is an example of a ____ alliance.

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Production

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Avia Battery and Simon Battery both manufacture batteries in a shared facility. The two firms have most likely established a ___ alliance.

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Marketing

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The Japanese company, Bandai, and the U.S. toymaker, Mattel, entered into an agreement. Bandai distributed Mattel products like Barbie dolls in Japan while Mattel distributed Power Rangers in Latin America. This is an example of a ___ alliance.

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Economic Factors (NOT generic brands or popularity)

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The extent of product customization varies according to the following factors: target customers, capital influences, legal forces, and ______.

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Potato Chips & Soap

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Petroleum, chemicals, and bulldozers are unlikely to be customized. Which products are more likely?

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Sales Promotion (NOT group selling)

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Promotion encompasses the following components: advertising, public relations, and ____.

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Message (NOT cost)

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According to Chapter 16 in Pustay and Griffin, advertising strategy includes the following decision factors: global vs. local, medium, and __.

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Ships

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Gator Inc. produces painted, life-size aluminum alligators. These alligators have recently become very popular in Japan and the company needs a low-cost way to ship its product overseas. Gator Inc. will most likely choose _____ as their distribution method.

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Safe & Costly; Cheap & Slow

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Choosing airplane distribution has the advantage of being ____ and disadvantage of being ____. Choosing ship distribution has the advantage of being ____ and disadvantage of being ____.

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Joint Ventures (NOT foreign-country methods)

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Home-country methods, local-market systems, and ___ are all international distribution strategies.

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75% (3/4)

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Services account for almost ___ of U.S. GDP.

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Customer Participation

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Because ________ is often required when services are purchased, services must often be customized to meet buyers' needs.

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Have Associated Products

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Services are intangible, nonstorable, ________, and require customer participation.

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Treaty of Maastricht

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The 12 member countries became known as the EU when the _____ was signed.

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Mercosur Accord

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The _____ is an agreement to create a customs union among the governments of Argentina, Brazil, Paraguay, Venezuela, and Uruguay.

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Exporting

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___ is the most common form of international business activity.

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Intracorporate Transfer

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When BPships crude oil from its storage facilities in Kuwait to its Australian subsidiary, an ______ has occurred.

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Sogo Shosha

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The Mitsubishi Corporation is a firm that is directly engaged in importing and exporting a wide variety of goods for its own account and is a part of a keiretsu system. It is a ____ type of export intermediary.

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Miami

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Which city received the overwhelming majority of flower imports?

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40 Years

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Flower importing from Colombia began about ___ ago.

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Off-Shore Growers, to Airlines, then Importers

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The flower chain supply begins with...

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Truck

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Once flowers arrive in the U.S., most are delivered to their point of sale via ____.

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Rising Costs (NOT airplanes that are too cold)

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Challenges that flower importers face include: too many box sizes, last-minute orders, and ___.

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African

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In the future, Latin American flower growers may face increased competition from ___ producers.

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Reactive Motivations

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A declining domestic market or the expansion of a competitor into a foreign market that pushed the firm into a foreign market to stay afloat

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Reactive Motivations

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A declining domestic market or the expansion of a competitor into a foreign market that pushed the firm into a foreign market to stay afloat

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