International Business Final Exam – Flashcards
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Define Globalization
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A trend towards greater economical, cultural, political and technological interdependence.
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What happens when denationalization occurs?
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National boundaries become less important.
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What is the difference between denationalization and internationalization?
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The nature of interdependent relations. Denationalization = outgrowing national borders. They cooperate for their well being. Internationalization = source of interdependence comes from pressure.
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What is meant by the Globalization of Markets?
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The convergence of buyer preferences, emergences of global producers, new market opportunities.
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Globalization of Markets helps in...
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Marketing and Production
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What is the Globalization of Production?
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Producing at locations where it is low cost of quality maximizing. (Access to low cost workers, access expertise)
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Globalization of production efficiency lowers...
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Costs of production
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Name 3 factors causing Globalization.
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(1) Falling barriers to investment and trade (2) Technological innovations (3) Increase in Global Competition
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What is the WTO?
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A contract between member nations to maintain fair and open trade policies.
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What are the 3 goals of the WTO?
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(1) Help free flow of trade (2) Help negotiate further opening of markets (3) Settle trade disputes between members
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Name 4 impacts of technology innovation
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(1) Accelerate Data (2) Accelerate Good (3) Equipment (4) People
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Globalization impacts countries through....(5)
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(1) Jobs and Wages (2) Income inequality (3) Labor and environment (4) National sovereignty (5) Culture
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3 points to support "Globalization costs Jobs and lowers wages"
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(1) Eliminates Jobs in developed nations (2) Wages lower in developed nations (3) Exploits workers in developing nations
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3 points to support "Globalization creates jobs and boosts wages"
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(1) Increases wealth and efficiency (2) Generates labor market flexibility (3) Creates jobs in developing nations
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Name 3 types of inequality as an effect of Globalization.
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(1) Inequality within nations (2) between nations (3) Global inequality
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Name 2 key players in International Business
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International corporations, entrepreneurs and small businesses
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Multinational corporations are important in Globalization because...
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They employ many people
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Entrepreneurs are important in Globalization because...
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They are more active in international business (because of technology)
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What is culture?
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Backgrounds, assumptions, expectation, ways of communication, values beliefs, rules.
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Define ethnocentricity.
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The belief that one's culture is superior to anothers.
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Define Cultural Literacy.
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Knowledge and understanding of anothers culture which helps improve collaborative work.
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What is National Culture?
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Mostly linked to national territory. Governments try to promote this.
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What is subculture?
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Groups of people who share unique ways of life within a larger, dominant culture. Sometimes exists across national borders.
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Define culture.
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Set of values, beliefs, rules and institutions help by a specific group of people.
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What are 4 aspects in creating a Global-Mind-Set?
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(1) Cultural Adaptibility (2) Bridging the gap (3)Building global mentaility (4) Flexibility
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Name 5 aspects of culture to consider when launching a product.
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(1) Aesthetics (2) Social structure (3) Values and attitudes (4) Manners and customs (5) Physical environments
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Name 2 components of Aesthetics.
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Symbols and colours, and wording.
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Name 3 types of attitudes towards.......that can affect business (cultural aspects)
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(1) Time (2) Work (3) Cultural change
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Define Manners
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Manners are appropriate ways of behaving, speaking, dressing.
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Define Customs
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Customs are habits or ways of behaving which are passed down through generations.
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Name 3 important elements that differ across cultures. (Social ____(1,2,3)_____.
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Social Group, Social Status, Social Mobility.
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Name 2 types of communication that can be misinterpreted
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(1) Spoken language (2) Body Language
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Name 6 aspects of the Kluckhohn-Strodtbeck Framework.
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(1) Relation to Nature (2) Material or spiritual (3) Time orientation (4) Responsibility to others (5) Trust and Control (6) VIew of personal space
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Name the 4 points of examining culture for the Hofstede Framework.
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(1) Individualism vs. Collectivism (2) Power Distance (3) Uncertainty avoidance (4) Achievement vs. Nurturing
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Define Political Systems
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Structure, Processes, and Activities by which a nation governs itself.
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What are the extreme right, middle and left political ideologies?
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Totalitarianism Pluralism Anarchism
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How are leaders selected in a Democracy?
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Elected by people or by representatives.
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Name 4 Freedoms that should be provided with Democracy.
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(1) Expression (2) Periodic Elections (3) Minority Rights (4) Property Rights
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How are leaders chosen in a Totalitarian System?
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Not by the people.
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What are 3 features of a Totalitarian government?
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(1) Imposed authority (2) Lack of constitutional guarantees (3) Restricted participation
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Name 3 types of secular Totalitarian Systems?
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Communist, Tribal, Right-Wing
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What is the difference between Communism and Socialism?
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Communism: Social and economic equality for all. Socialism: Government owns and controls all types of economic activity. Ownerships of Factors of Production and government decides what to produce.
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What is considered as Political Risk?
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The likelihood that a government or society will undergo political change that negatively affects business.
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List 5 examples of Political Risk.
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(1) Corrupt/Poor political leadership (2) Frequent changes in the form of government (3) Unstable political system (4) Conflict among race, religion (5) Poor relations with other countries
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Name 5 events that can cause political risk.
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(1) Conflict/Violence (2) Terrorism/Kidnapping (3) Property Seizure (4) Policy Change (5) Local Content Requirements
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List 3 methods to help manage political risk for a business.
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(1) Adaptation (2) Information Gathering (3) Influencing Local parties.
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List 5 ways for a company to completely adapt to political risk?
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(1) Localization (2) Development assistance (3) Partnership (4) Insurance (5) Local Equity and debt
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What is a legal system?
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Consists of laws and regulations, processes by which those are enforced.
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What are legal systems influenced by?
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Cultural variables like religion, social structure.
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Name 3 types of legal systems.
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(1) Common Law (2) Civil Law (3) Theocratic Law
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What is Common Law based on?
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Legal History
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What is Civil Law based on?
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Tradition
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What is Theocratic Law based on?
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Religious teachings
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What are 5 global legal and ethical ways to help protect businesses?
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(1) Standardization (2) Intellectual Property (3) Product safety and liability (4) Taxation (5) Antitrust Policies
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What can legal differences cause for businesses?
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Problems in ethical issues.
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What is ethical behavior?
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A personal behavior in accordance with rules and standards for high conduct and morality.
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What is Social Responsibility?
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The practice of going beyond legal obligation as a company.
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Give 5 examples of social responsibility.
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(1) Respect for CONSUMER rights (2) Guard WORKERS rights (3) Protect the ENVIRONMENT (4) Improve HEALTH (5) Support EDUCATION
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Name 3 Economic Systems
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(1) Market Economy (2) Mixed Economy (3) Centrally Planned Economy
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What are the features of a centrally planned economy?
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Factors of production owned by the government.
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Name 3 reasons why Centrally planned economy is declining? (It fails to...)
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(1) Create economic Value (2) Achieve rapid growth (3) Satisfy consumer needs
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Who owns factors of production in a mixed economy?
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Equal split between private sector and the government.
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Name 2 problems with Mixed economy.
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(1) Government control results in lack of responsibility, accountability, rising costs... (2) Move towards privatization to increase efficiency and productivity.
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Who owns factors of production in a market economy?
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Privately owned firms.
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What is the governments role in a market economy? (4)
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(1) Enforcing Antitrust Law (2) Political Stability (3) Protecting Property rights (4) Fiscal and Monetary policy
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High economic development reflects...
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High economic well-being
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How do you measure economic well-being?
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output, infrastructure, health, education.
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Name 2 key economical figures.
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GDP and GNP
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What are 4 different classifications of countries in development?
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Developed countries Newly Industrialized Emerging markets Developing countries
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Name 3 characteristics of developed countries.
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Highly industrialized Highly efficient High quality of life
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Describe characteristics of newly industrialized countries.
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Increased national production and exports from industrial operations.
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Characteristics of emerging markets...
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Newly industrialized Those with the the potential to be newly industrialized.
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Characteristics of developing countries
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Poor infrastructure Extremely low personal income (Low GDP/Capita)
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Define economic transition.
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The process of changing a nation's economic fundamentals.
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What are 4 obstacles in economic transition?
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(1) Lack of managerial expertise (2) shortage of capital (3) Cultural differences (4) Economic degregation
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Define International trade
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The purchase, sale, exchange of goods/services across national borders.
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What is Mercantilism?
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Encourages exports Discourages imports
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What is absolute advantage
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Advantage in efficiency in producing a good over another country.
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What are 3 assumptions of absolute advantage?
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(1) 2 Countries (2) 2 products (3) No transportation costs.
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What is Comparative Advantage?
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When costs are lower for one country to produce a good than another country.
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4 Assumptions of Comparative Advantage?
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(1) 2 Countries (2) 2 products (3) No transportation costs. (4) Companies are driven by maximization of production and consumption.
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What is the Factor Proportions theory?
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The cost of any resource is simply the result of Supply and demand.
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Why is the Factor Proportions theory different from other theories?
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Countries producing and exporting goods use cheapest factors of production, not the most efficient.
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What is the Leontief Paradox?
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Says that the proportions theory is not empirically valid.
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What is national competitive advantage the cause of?
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Why certain countries are leaders for certain products.
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What are 5 aspects of National Competitive Advantage?
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(1) Factor conditions (2) Demand conditions (3) Related and supporting industries (4) FIrm strategy, structure, rivalry (5) Government and chance
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Define Free Trade
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The Pattern of imports and exports that could result in the absence of trade barriers.
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What are 3 types of motives for governments to intervene in trade?
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Political, Economic, Cultural
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What are some political motives for governments to intervene in trade?
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Protect Jobs Preserve National Security Respond to unfair trade Gain influence over smaller nations
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What are some economical motives for governments to intervene in trade?
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Protect infant industries Pursue strategic trade policy
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What are some Cultural motives for governments to intervene in trade?
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Harmful to unique culture Preservation of Language (France)
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Name 4 methods governments can use to promote trade.
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(1) Subsidies (2) Export Financing (3) Foreign Trade Zones (FTZ) (4) Special gov't agencies
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What are 6 methods governments can use to restrict trade?
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(1) Tariffs (2) Embargoes (3) Quotas (4) Local content requirements (5) Admin. Delays (6) Currency controls
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What is the GATT?
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A treaty to promote trade by reducing barriers to international trade.
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What does GATT stand for?
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General Agreement on Tariffs and Trade
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What is a Golden Share?
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A share that gives the shareholders veto power over any changes in the company charter.
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Define FDI.
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Purchase of Foreign Assets (>10%) of ownership of another company to gain some measurement of control.
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What is portfolio Investment?
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It does not involve obtaining any degree of control in a company.
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What are 4 possible motives of wanting to form alliances?
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(1) Minimizes risks (2) R & D (3) New markets (4) Increase global compeitiveness
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List 3 reasons for FDI Growth?
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(1) Increased globalization (2) International Mergers and acquisitions (3) Entrepreneurship's and small firms.
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Which place holds 40% of global GDP?
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E.U.
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Explain the international product life cycle in terms of FDI.
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Company begins by exporting its product and later undertakes FDI as the product moves through its life cycle.
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Explanations for FDI Market Imperfections (Internalization)
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Company undertakes FDI to internalize transactions that are being made inefficient by a market imperfection. (1) Trade barriers (2) Specialized Knowledge
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What is the Eclectic Theory?
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A firm undertakes FDI when location, ownership and internalization advantage combine to make location appealing.
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Greater market power = Greater....
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Profits!
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Define vertical integration.
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Extends company's activities into stages of production that provides it inputs or absorb its outputs.
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What are 6 management issues with FDI?
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(1) Control (2) Production Costs (3) Following Clients (4) Following Rivals (5) Customer Knowledge (6) Purchase-or-Build decision
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Define Balance of Payments
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A national accounting system that records all payments to entities in other countries and all receipts coming into the nation.
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Define Current account.
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Records transactions involving import and export of goods & services, income receipts on assets abroad and income payments on foreign assets inside the country.
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Define Capital Account
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Records transactions involving the purchase or sales of assets abroad.
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3 reasons why host countries intervene in FDI for balance of payments.
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(1) Initial FDI boosts economy (2) FDI may decrease import demand (3) FDI may generate exports
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Why hosts encourage FDI? (3)
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Access to knowledge Access to management skills Creates employment
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Why is FDI bad for the home country? (3)
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Removes resources Can eliminate an export market Might eliminate domestic jobs
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2 benefits of FDI for home countries...
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May improve national competitiveness Can offshore "sunset" industries
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Name 2 main ways for host countries to encourage FDI?
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Financial Incentives Infrastructure Improvements
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What are 2 main ways for host countries to restrict FDI?
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Ownership restrictions Performance demands
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What are 4 methods for home countries to promote FDI?
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Insurance on assets abroad Loans Tax breaks Tax treaties
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What are 2 ways for home countries to restrict FDI?
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Higher tax rates on foreign income Sanctions on specific nations
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Define Regional Economic Integration
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Process where countries of a region cooperate with one another to reduce or eliminate barriers to the international flow of products, people, or capital.
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What is the goal of economic integration?
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To increase gross border trade and investment as well as living standard.
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What are the 5 degrees of integration?
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1. Political Union 2. EU 3. Common Market 4. Customs Union 5. Free-trade area
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Describe Customs Union a a level of regional integration.
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Establish common trade policy against non-members.
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Explain common market as a level of integration.
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Movement of labour and capital between members.
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3 Benefits of economic integration.
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(1) Trade creation (2) Political cooperation (3) Economic power
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Drawbacks of Regional Integration (3)
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(1) Trade diversion (2) Shift in Employment (3) Loss of national sovereignty
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EU Began in...
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1994
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How many EU members are there?
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25
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What does EFTA stand for?
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European Free Trade Agreement.
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EFTA began in....
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1960
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How many EFTA members?
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4
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NAFTA stand for?
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North American Free Trade Agreement.
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NAFTA began in...
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1994
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Number of NAFTA members?
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3
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Andean community consists of 5 members... who are....
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1. Bolivia 2. Columbia 3. Peru 4. Ecuador 5. South American Countries
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What does FTAA stand for
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Free Trade Area of the Americas
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What is TEP?
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A partnership between the USA and EU.
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What does TEP stand for?
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Transatlantic Economic Partnership
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Name 2 integration trade organizations in Asia.
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ASEAN - Association of South-East Asian Nations APEC - Asia Pacific Economic Cooperation
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GCC stands for....
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Gulf Cooperation Council
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Why are financial markets important?
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They are an essential element of the international business environment
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Why is it important to understand financial markets?
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To understand how exchange rates affect business International capital market.
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What is a Capital Market?
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A system of allocating financial resources in form of debts and equity.
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What do Capital Markets do?
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Borrow or invest money such as individuals, companies, governments, pension funds...
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2 purposes of national capital markets.
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1. external financing 2. types of banks (commercial & investment)
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What are the purposes of international capital markets?
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1. Invest and borrow across national borders 2. Expand money supply for borrowers 3. Reduce cost of money for borrowers 4. Reduce risk for lenders.
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Name 3 forces that are expanding the international capital market.
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1. Info technology 2. Deregulation 3. Financial Instruments
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Name the top 4 most important financial centers
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London NYC Tokyo Frankfurt
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Define International Bond Market
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Bonds sold by issuing entities outside their own country.
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What are Eurobonds?
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Bonds issued outside the country, another currency.
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What are foreign bonds?
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Bonds sold outside the country but in the currency of country in which is sold.
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What does the international equity market consist of?
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All stocks bought & sold outside the issuers home country.
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What is a euro currency?
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A currency that is deposited outside of its origin. Yen deposited in USA.
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Name 4 functions of the exchange market.
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1.currency conversion 2. currency hedging 3. currency arbitrage 4. currency speculation
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Define quoted currency.
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Currency with which another currency is to be purchased
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Define Base currency.
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Currency that is to be purchased with another
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Define spot rates
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Exchange rates that require delivery within 2 days
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Forward rates definition
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Exchange rate at which 2 parties agree to exchange currencies on a specific future date.
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Define Forward Market:
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Markets for currency transaction at forward rates.
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Define Forward Contracts
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Agreement about amount of currency on a specific date at a specific exchange rate
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Define Forward exchange rate
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Can be higher or lower than spot rate
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Currency Swaps
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Simultaneous purchase and sale of foreign exchange for 2 different rates
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Currency Options
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Right or option to exchange a specific amount of a currency on a specific date at a specific time.
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Currency Future Contracts
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A contract requiring the exchange of a specific amount of a currency on a specific date at a specific rate
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Exchange rates affect _____ & ______ business.
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International and Domestic
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Exchange rates affect 2 things...
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1. Demand for company's products 2. Amount of profit a company earns from international subsidiaries in home currency
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2 Reasons why companies derive a stable and predictable exchange rate.
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1. Stability can improve financial planning 2. Predictable rates reduce the change of surprising changes and reduce need for insurance
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Law of one price
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An identical product must have an identical prive in all countries when the price is expressed in a common currency
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What is the Big Mac Index?
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Uses the law of one price to determine the exchange rate that should exist between the USA and other countries
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Define Purchasing Power Parity (PPP)
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Measures the ability of 2 countries currencies to buy the same basket of goods
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What causes inflation? (2)
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Demand and Supply of money - interest rates Unemployment
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Why do exchange rate adjust to inflation?
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To maintain PPP between nations.
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Nominal interest rates include...
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are adjusted for inflation
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2 reasons why PPP fails to predict exchange rates...
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1. forgotten added costs (transp. costs) 2. forgotten trade barriers
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Name 2 types of techniques used to forecast exchange rates.
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1. Fundamental Analysis 2. Technical Analysis
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Mission statement vs. Vision statement
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Mission - What the company does now Vision - What it hopes to do in the future
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Define Mission Statement
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A general declaration of the purpose of the organization and the very long term objective that its leader wants to achieve.
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3 stages of international strategy
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1. Identify Company Mission and goals 2. Identify Core competency 3. Formulate stategies
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When forming a strategy a company should do ___(3)____ analysis.
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Company Industry Nation
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Name the 2 international strategies
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Multinational and Global
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4 Options for corporate level strategy
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Growth Retrenchment Stability Combination
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3 Strategies for business
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Low cost leadership Differentiation Focus (narrow market)
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2 Strategies for department level
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Primary Activities Support Activities
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Name 3 international organizational structures
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1. organizational 2. centralized 3. decentralized
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4 types of organizational structure
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1. Product 2. Division 3. Area 4. Matrix
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3 ways to enter a new market
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Export, import, countrtrade Contractual Entry Investment Entry
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3 reasons to export
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1. expand sales 2. diversify sales 3. gain experience
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4 steps in developing an export strategy
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1. Identify potential market 2. Match needs and abilities 3. Initiate Meetings 4. Commit Resources
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What is Direct Export?
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Sell directly abroad to consumer or sales rep. or distributors
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What is indirect export?
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Sell to intermediary who then sells abroad... Agents Distributors Export Companies
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Reasons for countertrade (2)
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1. Lack of hard currency 2. Restricted currency conversion
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4 Types of countertrade
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1. Barter 2. Counter purchase 3. Offset 4. Buyback
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Risks for importer
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Risk of non-shipment
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Risks for Exporter
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Risk of non-payment
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4 ways to reduce import/export risks...
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1. Advanced payment 2. Documentary collection 3. letter of credit 4. Open account
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Name 2 contractual entry modes
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1. Licensing 2. Franchising
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Facts of Licensing
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Licensor grants licensee right to use property for production - patents, copyrights - compensation: royalty payments - could be a future competitor
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Facts of Franchising
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Supplied with intangible assets - brandname, trademark - compensation: flatfee, royalty payments - low risk
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Name 3 Investment Entry Modes
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1. JV 2. Owned Subsidiaries 3. Direct investment in plant and equipment
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5 strategic factors in selecting entry modes
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1. culture environment 2. political, legal environment 3. market size 4. prod and shipping costs 5. international experience
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3 Global product strategies
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1. product extension 2. product adaptation 3. develop new product
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What can you adapt if you want to adapt your product?
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Tangible and intangible
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4 reasons to standardize products when going international
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1. R&D 2. Production costs 3. Lower marketing costs 4. Allows central control of marketing
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4 reasons to adapt a product when going international
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1. Diff lang. and culture 2. diff consumer preferences 3. maximize profits 4. laws and regulations
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3 Promotional strategies
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1. promotion 2. standardize 3. advertising
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Define Distribution
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Physical flow from original to destination
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2 things to consider when designing distribution channels
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1. degree of exposure 2. channel length and costs
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2 Distribution problems
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Lack of market understanding Theft and corruption
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2 Pricing strategies
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1. world wide price 2. dual pricing
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Name 5 deficits of legal rules/framework
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1. Deficit of control 2. Time lag 3. Deficit of enforcement 4. Range 5. Moral function
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Define CSR
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Firms have responsibilities to society including economic, legal and philanthropic
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What is social contract?
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A tacit social contract between a firm and society
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Stake holder theory (ethics)
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It is in the company's strategic interest to respect the interests of its stakeholders
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4 Key issues in CSR
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1. Labour rights 2. Environment conditions 3. Human rights 4. Poverty Alleviation
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3 key drivers of CSR around the world
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- NGO activism - Responsible investment - Government and IGO
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4 Key drivers of CSR in developing countries
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1. foreign countries 2. domestic countries 3. FDI 4. Governments
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Drivers in NGO activism
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internet, meia, low cost of travel
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4 key drivers of responsible investment
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- size (big) - rules of CSR - shareholder activism - influence corporate reporting and disclosure requirements
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5 principles of responsible investment
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1. incorporate ESG 2. be active owners 3. seek appropriate disclosure 4. promote acceptance and implementation 5. work to enhance effectiveness
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7 things investors look for
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1. respect human rights 2. good corporate governance 3. transparencies on social practices 4. environmental policy 5. quality of consumer relations 6. work conditions 7. training policy for employees
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What must enterprises do because of CSR? (3)
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1. new social and product liability patterns 2. development of code of conflict 3. expand sphere of influence
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How do companies address environmental and legal compliance issues?
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1. policies 2. systems 3. reporting
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8 principles of social responsibility
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1. ethical behavior 2. respect for law 3. respect for international norms 4. respect for shareholders 5. accountability 6. transparency 7. human rights 8. precautionary approach
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What are the 4 categories of the BCG matrix?
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Cash Cow Star Dog Q marks
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Describe the market share and what kind of industry a cow has.
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Large market share. Slow growing industry
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Describe a stars market share.
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Large market share Fast growing industry
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Describe a Qmark's market share and industry.
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Small market share Fast growing industry
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Describe a dog's market share and industry.
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Small market share Mature industry
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The BCG Matrix helps businesses decide how to
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allocate resources
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Name the 3 Cs in the Thornton leadership model
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Challenge Confidence Coaching
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What is value chain analysis
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A systematic approach in examining the development of competitive advantage
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Name 5 primary activities in the value chain analysis model
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Inbound logistics Operations Outbound logistics Marketing and Sales Service
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Name 4 support activities in the Value chain analysis model
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Firm infrastructure Human Resource Management Technology development Procurement
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Name the 4 Ps in marketing mix
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Product Place Price Promotion
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The 4 Ps of the marketing mix hep managers to
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satisfy customers in a target market
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What dos the product diffusion cycle help managers do
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Group customers according to how quickly they adopt to anew product
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What are the 5 types of groups in the product diffusion curve
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Innovators Early adaptors Early majority Late majority Laggards
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What does SWOT analysis stand for
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Strengths Weaknesses Opportunities Threats
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What is internal analysis in the SWOT analysis
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A comprehensive evaluation of the internal strengths and weaknesses of a company
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What is external analysis in the SWOT analysis
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Analysis of customers, competitors, market trends, supplies,partners, technolog, economy,political,legal
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What are the 4 different growth strategies in the Ansofts matrix
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Market penetration Market development Product development DIversification
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Market development in Ansotts matrix is
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least risky has limits-once approaches saturation another strategy must be pursues
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Market development in Ansotts Matrix
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the pursuit of market segments development of new markets more risky than penetration strategy
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Product differentiation in Ansott's
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Strategy is appropriate if the firms strengths are related to specific customers than customers the product more risky than mkt development
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Diversification in the Ansott matrix
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Most risky Requires product and market development Usually suicidal unless high chance of high rate of return
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Name the 4 mechanisms of Foreign entry modes
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Exporting Licensing Joint venture FDI
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Define the marketing process
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Identifying customer needs and bringing products that satisfy needs in the market
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What are the 4 steps in the markting process
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Situation analysis Markting analysis Marketing mix decisions Implementation and control
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From step 1 of the marketing process, define situation analysis
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identifying needs and opportunities to satisfy those needs and understand its own capabilities and analise its external and internal environment
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From the marketing process define step 2, marketing strategy
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The strategic plan for pursuing the oportunity can be developed. it invloves market research and -segmentation -targeting -positioning the product -value proposition to target market
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Define step 3 of the marketing process, marketing mix decisions
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Detailed tactical decisions that are nade for the controllable parameters of the marketing mix. including product development, pricing, promotional development, distribution contacs
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Define implement and control(step 4 )
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Implementation, monitoring and adaptation
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What is break even analysis?
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A technique widely used by production management and management accountants. It involves identifying fixed and variable costs to find break even point
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Define fixed costs
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Business costs that are not directly relate to the level o production or output
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Define variable costs
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Costs which vary directly with the level of output
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Define direct variable costs
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Those costs which can be attributable to the production of a particular product and allocated to a particular cost centre
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Define indirect variable cost
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Costs which cannot be directly attributable to production of a product
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Define Concentration ratio
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The percentage of market share owned by the largest firms int he industry
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If CR is close to zero or less than 40%
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this indicates an extremely competitive industry
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If CR is more than 90
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it indicates the market is a monopoly
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What is the Herfindahl Hirschmann Index
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HHI uses the market share of all firms in the industry. it provides a more complex picture than CR
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What can the HHI be useful in evaluating
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Mergers(used by US Justice)
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What does HHI less than 1000 represent
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a relatively unconcentrated market
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What does a HHI between 1000 and 1800 represent
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moderately concentrated market
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What does HHI above 1800 represent
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highly concentrated market
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What is the Net Present Value? What does it measure?
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NPV measure the net benefit of a project in todays dolar terms
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What are the 2 financial concepts (n NPV) that evaluate a set of costs and benefits over time?
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1. Net diff between all costs and benefits 2.Present value takes into account the time value of money
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The 3 steps in calculating NPV?
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1. Determine expected cash flows 2. Establish the discount rate for the project 3. estimate the present value of cash flows
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What are the 4 main stages of the product life cycle?
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1.Introduction stage 2.Growth stage 3.Maturity stage 4.Decline stage
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What are the 4 business strategies that can be used to gain a competitive advantage?
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1. Differentiation focs 2.Differentiation 3.Cost focus 4.Cost leadership
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Describe the differentiation strategy
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Involves selecting one or more criteria used by buyers in a market then positioning the business uniquely to meet those criteria
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Describe cost leadership strategy
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Objective is to become the lowest cost producer in the industry
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What are Porters 5 forces that determine industry attractiveness and industry profitability?
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1. Threat of new entants 2,Threat of new substitutes 3. Bargaining power of buyers 4.INtensity of rivalry
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Define market segmentation
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The identification of portions of a market that aare different from one another. Segmentation allows the firm to better satisfy the needs of the customers.
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What are the 4 requirements of market segmentation
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Identifiable Accessible Substantial Unique needs
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Name 3 customer characteristics that consumer markets can be segmented into
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Geographic Demographic Psychographic
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What are 2 important factors to consider when making market selection
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1. the attractiveness of the segment 2. the fit between the segment and the firms objectives, resources, and capabilities
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Name 5 target market stategies
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1. single segment strategy 2. selective specialization 3. product specialization 4. market specialization 5. full market coverage
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Describe the single segment strategy
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One market segment is served with one marketing choice (usually a choice a smaller firms with few resources)
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Describe the selective specialization strategy
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Different marketing mixes are offered to different segments. The product itself may or may not be different.
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Describe the product specialization strategy
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The firm specializaes in a particular product and tailors it to different market segments
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Describe market specialization
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The firm specializes in service a particular market segment and offers that segment an array of different products
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Describe full market coverage strategy
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The firm attempts to serve the entire market. Can be achieved by means of either a mass market strategy or by a differentiated strategy
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Define premium pricing
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Use a high price where there is a uniqueness about the product or service
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Define penetration pricing
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The price charged for products and services is set artificially low in order to gain market share.
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Define economy pricing
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No Frills Low price. The cost of marketing and manufacture are kept at a minimum
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Define price skimming
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Charge a high price because you have a substantial competitive advantage
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Define Psychological Pricing
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Customers respond to an emotional, rather than rational basis ($0.99)
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Define Product line Pricing
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Where there is a range of products or services the pricing reflects the benefits of parts of the range
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Define Optimal Product Pricing
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Companies will attempt to increase the amount customer spends once they start to buy
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Define Product Bundle Pricing
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Sellers combine several products in the same package
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Define Promotional Pricing
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Pricing to promote a product is a very common application (buy one get one free)
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Name 4 key analyses/guidelines of market data and preparation that are needed for a good country profile
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1. cultural analysis 2. economic analysis 3. market and competitor analysis 4. preliminary market plan
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Name the 2 different types of exporting
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1. Direct 2. Indirect
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Direct exporting has...(control?)
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High, direct control, Direct contact with consumer, High investment needed
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Indirect exporting has...(control?)
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Low control, No contact with consumer, Low investment needed
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What does the PEST analysis stand for?
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Political Factors Economic Factors Social Factors Technological Factors
