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International Business > Ch 13, 14, 15 Quiz > Flashcards

Ch 13, 14, 15 Quiz Flashcards

1
Q

Exporting

A

-One of the foreign marketing entry strategies
-Small to medium sized companies who may not have financial resources

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2
Q

Why is exporting good?

A

-For the company: generate more revenues

-For the country: help reduce trade deficit and create more jobs

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3
Q

Direct Exporting

A

If you do market research, find and negotiate with potential buyers in other countries, and ship the goods

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4
Q

Indirect Exporting

A

If you use services of an outside firm, an Export Management Company (EMC)

-EMC’s help companies with their exporting needs

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5
Q

Steps to Exporting

A

1.Let them know how much your product will cost them for different quantities

2.Clarify to what extent international shipping and insurance will be arranged
-Exworks quotation
-CIF, _____ quotation
-FOB (Free On Board) Quotation

3.Agree on payment terms
-Cash/Payment In Advance
-Open Account
-Letter of Credit (L/C)

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6
Q

Exworks quotation

A

-Does not include any transportation or insurance charges

-Ex: I would instruct my freight forwarder to make all
arrangements for shipping and insurance (to pick up the goods in Mankato and ship them to me)

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7
Q

CIF, ____ quotation

A

(CIF = Cost, Insurance, Freight)

Ex: I may ask you to include transportation and insurance charges, from Mankato to Naples, in
your quotation. This would be CIF, Naples quotation

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8
Q

FOB (Free On Board)

A

-Partially include transportation and insurance charges in your
quotation

-Ex: to the port of New York/until the goods are loaded on the ship [FOB, New York, NY]

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9
Q

Incoterms

A

Facilitate effective communication between exporters and importers

(Exworks, CIF, FOB)

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10
Q

Payment Terms

Cash/Payment In Advance

A

-safest method of payment for the exporter is to get payment in advance before you ship the goods

-Importers concern is will they get the goods if they pay first?

-Risky

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11
Q

Payment Terms

Open Account

A

-Importer pays after receiving the goods

-“Ship the goods on open account”

-Risky

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12
Q

Letter of Credit (L/C)

A

-International Banking System comes to the rescue to alleviate concerns of both exporter and importer

Ex: As an exporter, you would request a (L/C) from the other country’s bank. The country’s bank would then issue the L/C and send it to the exporters bank. The exporters bank would review the L/C carefully and notify the exporter that the L/C has been received. The exporter would then ship the goods. The other countries bank would release the payment after receiving the shipping documents from the bank.

-L/C states that the other countries bank will pay the exporters bank subject to meeting certain stipulations stated in the L/C (by certain date.. etc.)

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13
Q

Can you export your products to any country?

A

-No. There are export controls by the U.S government and governments of other countries

  1. Nature of political reasons between the home country (U.S) and other countries. If the nature of the political relations are less than friendly or hostile with certain countries you can expect more export controls, or a total ban on trade
  2. Type of Product your company wants to export. The U.S government does not want U.S companies to export certain products to certain countries because the government does not want those countries to get ahold of certain U.S technologies
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14
Q

If you are not allowed by law to export your product to Country X, can you get around that restriction legally by first exporting your product to a company in a friendly country to the U.S and then that company would export your product to Country X?

A

No, violates the U.S law

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15
Q

Can you export products without getting a special license?

A

-Yes
-Some products are subject to special licenses though, espcecially related to National Security

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16
Q

Global Sourcing

Boeing

A

-Leading U.S exporting company

-Buys many component parts from suppliers located in other countries

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17
Q

Global Sourcing

Walmart

A

-#1 company on the Fortune Global 500 list, imports a lot from China

-If Walmart had been a country, it would have been the 8th largest importer of Chinese products

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18
Q

Global Sourcing

A

-Importing of component parts, finished products, or services from international (foreign) suppliers

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19
Q

What has facilitated unprecedented levels of Global Sourcing?

A

-World Wide Restrictions in Trade
-Advances in Transportation and Communication

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20
Q

The main/common sense rationale for Global Sourcing is

A

*cost reduction/profit margin increase

-Ability to source globally also allows firms to tap into specialization of foreign (absolute advantage)

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21
Q

Global Sourcing

Who do you buy products from?

A
  1. Independent Foreign Companies (when an American furniture chain buys furniture from a Malaysian furniture manufacturer)
  2. Your own subsidairy
    (you may have to set up a manufacturing facility in another country with the objective of exporting the product to the U.S and perhaps to other countries as well)
22
Q

Outsourcing

A

-When you decide to have a foreign firm perform a business activity for your country

Ex: India’s IT industry. U.S has IT work done in India. (English-speaking and educated/competent workforce is available at lower pay)

23
Q

Contract Manufacturing

A

A product is designed in the U.S but produced by a foreign company to the specifications provided by the U.S company

-Allows a company to take advantage of lower wage rates in another country without having to make FDI in that country as production facilities are owned by foreign suppliers

24
Q

Offshoring

A

Moving a plant from the home country to another country

Ex: Michigan to Mexico

25
Q

Global Supply Chain/Global Manufacturing Network

A

-Suppliers in different countries

-A company with a global supply chain will have to rely on foreign suppliers to produce its products

-Selective when choosing making sure suppliers are reliable, trustworthy, and maintain quality standards

26
Q

FDI (Foreign Direct Investment)

A

-Foreign market entry strategy available to firms with operations in both manufacturing and service sectors

-Requires more financial resources (invest in other countries) and human resources (to manage subsidairies) than exporting

-A company making FDI in other countries has a higher level of control over its internal operations

-FDI entails a higher level risk

27
Q

U.S FDI

A

U.S FDI in other countries is greater than FDI in the U.S by all other countries

28
Q

Factors to take into consideration when choosing where to invest FDI

A

-Wage Rates

-Infrastructure

-Availability of qualified workers

-Incentives offered by foreign governments in order to entice foreign companies to invest in their country

-Tax Rates

-Political Stability

-Whether or not a country is a member of a Regional Economic Integration ( for ex if you manufacture your product in any member country of the European Union you can export it to other EU member countries without facing trade restrictions)

29
Q

Forms of FDI

A

-Greenfield Investment
-Acquisition
-Privatization

30
Q

Greenfield Investment

A

-Break ground, build a plant, import machinery, and start production

Ex: Toyota

31
Q

Acquisition

A

-When a company buys a foreign company

Ex: When a U.S pharm company buys a foreign pharm company

32
Q

Ownership Structure

A

-Wholly Owned

-Joint Venture

33
Q

Ownership Structure

Wholly Owned

A

-Wholly owned subsidairy in another country (100% ownership of the investment in a foreign country)

-No local or international partners

34
Q

Ownership Structure

Joint Venture (JV)

A

-when a company has local and/or international companies as it’s partner

-Oil companies from several countries investing jointly

-Joint venture partners share control, profits and risks, which is not the case when a company has a wholly owned FDI.

-If the U.S Company owns more than 50% of the JV is has majority position, <50% minority position, or it could be 50/50 ownership

35
Q

International Strategic Alliance

A

-Various kind of cooperation between companies from differet countries in order to achieve mutually beneficial objectives

Ex: Airline industries

36
Q

Why do some companies prefer to work with other companies in SA framework?

A

-Streamlining operations
-Sharing financial risk
-Learning from SA partners
-Increasing market share/sales

-Rationale is that companies would be better off by working together than by working alone

-The significant increase in the number of SA’s is contributable to Globalization (and reduction in trade restrictions)

37
Q

Strategic Alliances

A

-R&D projects
-Equity Ownership
-Joint Ventures

38
Q

Strategic Alliances

R&D Projects

A

SA may be limited to R&D projects, in which partner companies would try to increase the probability of success (developing a new product/technology) by working together

39
Q

Strategic Alliances

Equity Ownership

A

One of companies in the SA may acquire a certain percentage of the shares of the other company

40
Q

Licensing Strategy

A

-When a company shares it’s intellectual property/asset such as patented technology, trademark, logo, copywright with another domestic or international company in exchange for compensation

41
Q

Licensor

A

Provider of intellectual property

-Charges the licensee an upfront transfer of technology fee + ongoing royalities based on sales

42
Q

Licensee

A

Recipient of intellectual property

-Can either be a independent company or a subsidairy of your company in another country

-Would be willing to pay the licensor because the product is already developed by the licensor, so the licensee would not have to expend time and money to develop something similar

43
Q

Licensing

A

-Allows a company to exploit its intellectual property internationally without having to make investment in another country as the Licensee alresdy has its production facilities in place

-Faster way to enter foreign markets

-Viable alternative foreign market entry strategy when entering foreign markets through exporting or FDI may not be possible due to restrictions by foreign governments

44
Q

Trademark Licensing

A

Licensor allows a licensee to use it’s globally known trademark logo on licensee’s products in exchange for compensation

45
Q
A
46
Q

Licensor takes a number of precautions

A

-Choosing a trustworthy licensee who would make the royalty payments

-Define/restrict the licensee’s sales territory

-Not allow the licensee to sub-license the technology

47
Q

Violation of Intellectual Property Rights

A

-Using software illegally, counterfeit products

-Organizations like WTO and WIPO (World Intellectual Property Organization) do work to prevent

48
Q

Franchising

A

Ex: If you open a McDonalds restaraunt in Mankato or in Mongolia, you would be the franchisee and McDonald’s USA would be the franchisor

-Franchisee pays the franchisor an upfront franchising fee + ongoing royalties

-Franchisees could be independent companies or company owned

-Most of the franchisees are independently owned, franchising does not require much investment by the franchisor

-Facilitates faster internationalization for the franchisor. The franchsior provides a complete business model and maintains a high level of control over the franchisee’s operation

49
Q

Foreign Market Entry Strategy

Turnkey Operations

A

A company is contracted to design and build a plant in another country and transfer it to host country upon completion of the project.

50
Q

BOT (build, operate, transfer)

A

If the U.S firm also manages the plant for X number of years after it’s completion and then transfers it to a host country

51
Q

Foreign Market Entry Strategy

Management Contracts

A

A company is contracted to manage a facility in another country

-The local investor finances the project and other company provides the management expertise in exchange for compensation

International Business (12 decks)

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