Multinational Business Exam 1 – Flashcards
Unlock all answers in this set
Unlock answersquestion
International Business
answer
performance of trade and investment activities by firms across national borders. Also refered to as Cross-Border Business
question
who conducts international business
answer
primarily carried out by individual firms, governments and international agencies also engage in international business transactions
question
Globalization of Markets
answer
ongoing economic integration and growing interdependency of countries worldwide
question
globalization
answer
refers to a macrotrend of intense economic interconnectedness between countries
question
Trade
answer
is accompanied by substantial flows of capital, technology, and knowledge Trade has resulted in the development of highly sophisticated global financial systems trade has brought about a greater degree of collaboration among nations through multilateral regulatory agencies
question
Flows of International Business
answer
Knowledge trade in Products Trade in Services Direct Investments
question
International trade
answer
the exchange of products and services across national borders
question
International Investment
answer
transfer of assets to another country or the acquisition of assets in that country
question
Exporting
answer
Outbound activity- the stratefy of producing products in one country and selling and distributing them to customers located in other countries
question
Importing or Global Sourcing
answer
Procurement of products or services from suppliers located abroad for consumption in the home or a 3rd country
question
Foreign Direct Investment
answer
internationalization strategy in which the firm establishes a physical presence abroad through acquistion of productive assets such as capital, technology, labor, land, pant. and equipment
question
GPD-Gross Domestic Product
answer
the total value of products and services produced in a country over the course of a year
question
4 Risks of Internationalization
answer
Cross-Cultural Risk Country Risk Currency Risk Commercial Risk
question
Cross-cultural Risk
answer
Cultural differences, negotiation patterns, decision-making styles, ethical practices
question
Country (Political) Risk
answer
Harmful or unstable political system, laws and regulations unfavorable to foreign firms, inadequate or underdeveloped legal system, bureaucracy and red tape, corruption and other ethical blunders, government intervention, protectionism, and barriers to trade and investment, mismanagement or failure of the national economy
question
Currency (financial) Risk
answer
Currency exposure-unfavorable exchange rate, asset valuation-exchangerate fluctuations will adeversely affect the calue of the firms assets and liabilities, foreign taxation-income, sales, other taxes cary widely worldwide, with implications for companu performance and profitability, inflationary and transfer pricing- complicates business planning and pricing of inputs and finished goods
question
Commercial risk
answer
Weak partner, operational problems, timing of entry, competitive intensity, poor execution of strategy. general commerical risks such as these lead to sub-optimal formulation and implementation of the firm's international value-chain activities
question
MNE Multinational enterprise
answer
large company with substantial resources that performs various business activities through a network of subsidaries and affiliates located in multiple countries. Ex: Samsung, Disney, Caterpillar
question
SME Small and medium sized enterprise
answer
companies with 500 or fewer employees, comprising over 90% of all firms in most countries
question
NGO Non-Governmental Organizations
answer
non-profit organizations conduct cross-border activities. they pursue special causes and serve as advocates for social issues, education, politics, and research. ex: Bill Gates Foundation, CARE
question
Why Internationalize
answer
oppotunities for growth through diversification earn higher margins and profits (the goal) gain new ideas about products, services and business methods better serve key customers that have relocated be closer to supply sources gain access to lower cost production
question
all roads lead to rome
answer
rome gave us law greek gave us culture
question
Phases of Globalization
answer
Phase 1: 1830 to late 1800s- aided by railroads and ocean transport, the rise of manufacturing and trading companies Phase 2: 1900-1930- fueled by electricity and steel; early MNEs Phase 3: 1948-1970- GATT, Post war era; reduction of trade barriers worldwide; riseof global capital markets Phase 4: 1980-present- fueled by internet and other technologies; rapid liberalization in emerging markets
question
Drivers of Market Globalization
answer
worldwide reduction of barriers to trade and investment market liberalization and adoption of free markets industrialization, economic development, and modernization integration of world financial markets advances in technology
question
Dimensions of Market Globalization
answer
integration and interdependence of national economies rise of regional economic integration blocs growth of global investment and financial flows convergence of buyer lifestyles and perferences globalization of production activities and of services
question
societal consequences of market globalization
answer
contagion: rapid spread of financial or monetary crises from one country to another loss of national sovereignty offshoring and the flight of jobs effect on poor effect on the natural environment effect on national culture
question
firm level conseqences of market globalization: internationalization of the firms value chain
answer
countless new business opportunities for internationalizing firms new risks and intense rivalry from foreign competitors more demanding buyers who source from suppliers worldwide greater emphasis on proactive internationalization internationalization of firm's value chain
question
dimensions of market globalization
answer
integration and interdependence of national economies rise of regional integration blocs growth of global investment and financial flows convergence of consumer lifestyles and perferences globalization of production and of services
question
Drivers of Market Globalization
answer
worldwide reduction of barrriers to trade and investment, facilitated by World Trade Organization Market liberalization and adoption of free markets-China and Soviet Union Industrialization, economic development and modernization- help rise standard of living making countries more attractive as target markets Integration of world financial markets advances in technology
question
Societal Consequences of Market Globalization
answer
Contagion: Rapid spread of monetary or financial crises ex: housing market Loss of national sovereignty Offshoring and flight of jobs effect on the poor
question
Value Chain
answer
sequence of value-adding activities performed bu the firm in the process of developing, producing, and maketing a product or a service
question
Upstream Value Chain Activities
answer
Market research: direct interaction with thousands of customers everyday R&D: research and development Sourcing:
question
Between Upstream and DownStream VC
answer
Production
question
Downstream Value-Chain Activities
answer
marketing Distribution After-sales service
question
Focal Firm
answer
Initiator of an international business transaction examples: MNE, SME most prominent international players in emerging markets and centrally planned economies focal firms are partly or wholly owned by the governement
question
Distribution Channel Intermediary
answer
Specialist firm that provides distribution, logisitics and marketing services in the international value chain
question
facilitator
answer
a firm that provides special expertise in banking, the law, customs clearance, market research or other
question
governments
answer
are active in international business as suppliers buyers and regulators
question
MNE Multinational Enterprise
answer
Large organization with a network of production plants, marketing subsidiaries and regional headquarters, in numerous countries Historically the most important type of Focal Firm ex ford, Sony
question
SME Small and Medium sixed Enterprise as a Focal Firm
answer
small player in its respective industry, usually defined as firms with 500 or less employees consititute the great majority of firms worldwide, usually create the most new jobs Internationalize via exporting not via FDI
question
Licensing
answer
Granting the right to a foreign partner to use certain intellectual property in exchange for royalties
question
Franchising
answer
Granting the right to a foreign partner to use an entire business system in exchange for fees and royalties
question
Trading Company
answer
an intermediary that engages in import and export of a variety of commodities, products and services
question
agent
answer
acts as middleman for a commission but does not take title to the goods
question
Distribution Channel Intermediary
answer
Specializes in physical distribution and marketing. COnnects the focal firm with the end user in the foreign market assists focal firm by providing logistics services such as warehousing and customer support Critical to exporters that do not engage in FDI
question
Facilitators in International Business
answer
Assist the focal firm with specialized services required in international transactions
question
governments
answer
exist at the local, provincial, national, and supranational levels to make and enforce laws and regulations and provide essential economic security by devising fiscal and monetary policies
question
Central Banks
answer
each country issues currency and regulates national money supplies
question
Sovereign wealth funds
answer
state-owned investment funds that undertake systematic, global investment activities to generate income or to achieve policy objectives
question
Country Risk
answer
Philip Baxter reported on the risks associated with establishing the plant in Coutnry A. the most significant risk, in his view, was posed by the governments complex bureaucratic stucture. phillip reported the likelihood of significant administrative delays in opening the plant. the risk is an example of?
question
Currency Risk
answer
LeShaun Golding researched the risks linked to establishing the plant in country b. he cited government intervention, lack of local managerial talent, and unethical business practices as the most prominent risks for this location. leshaun noted all risks except?
question
Level of national debt
answer
Rosa Suarez reported on her analysis of cross-cultural risks involved with establishing the plant in Country C. each was discussed except?
question
Culture
answer
the learned, shared and enduring orientation patterns in a society
question
Cross Cultural Risk
answer
a situation or event in which a cultural misunderstanding puts some human value at stake
question
Ethnocentric Orientation
answer
using your own culture as the standard for judging other cultures
question
Polycentric Orientation
answer
refers to a host country mind set in which a person develops a strong affinity with the country in which she/he is doing business
question
geocentric orientation
answer
a global mind set in which you can understand a business or market without regard to country boundaries
question
Culture is
answer
not right or wrong, not about individual behavior (about groups) not inherited (it derives from the social environment)
question
Aspects of Culture
answer
Language, food, dress, religion, business contracts and meetings, toilets, gift giving
question
Cultural Metaphor
answer
refers to a distinctive tradition or institution strongly associated with a particular society
question
Stereotypes
answer
generalizations about a group that may or may not be factual, often overlooking real, deeper differences
question
Idiom
answer
an expression whose symbolic meaning is different from its literal meaning
question
Low Context Cultures
answer
rely on elaborate verbal explanations, putting much emphasis on spoken words
question
high-context cultures
answer
emphasize nonverbal messages and view communications as a means to promote smooth, harmonious relationships. Negotiations tend to be slow and ritualistic and agreement is founded on trust
question
Independent dimensions of national culture
answer
individualism vs collectivism power distance uncertainty avoidance masculinity vs femininity long term vs short term orientation
