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Flashcards in chapter 7 Deck (29):
1

has to do with the rise of market capitalization around the world

Globalization

2

what are challenges with globalization

balancing between emerging markets & developed markets

3

explains why some nations and their industries outperform others

diamond of national advantage

4

a nation’s position in factors of production

factor endowments

5

refer to the demands that consumers place on an industry

Demand conditions

6

Factor endowments involve factors of production:

Land
Capital
Labor

7

Factors of production must

be industry and firm specific

8

A company decides to become a multinational firm in order to:

Increase market size

Take advantage of arbitrage opportunities

Enhance a product’s growth potential

9

potential threat to a firm’s operations in the country due to fluctuations in the local currency’s exchange rate.

Currency risk

10

potential threat to a firm’s operations in a country due to the problems that managers have making decisions in the context of foreign markets.

Management risk

11

= potential threat to a firm’s operations in the country due to ineffectiveness

Political risk

12

new products developed by country multinational firms for emerging markets that have adequate functionality at a low cost.

reverse innovation

13

an opportunity to profit by buying and selling the same good in different markets

arbitrage opportunities

14

a characteristic of legal systems where behavior is governed by rules that are uniformly enforced.

rule of law

15

using other firms to perform value-creating activities that were previously performed in-house.

outsourcing

16

shifting a value-creating activity from a domestic location to a foreign location.

offshoring

17

a strategy based on a firm’s diffusion and adaptation of the parent company’s knowledge and expertise to foreign markets, used in industries where the pressures for both local adaptation and lowering costs are low.

international strategy

18

a strategy based on firms’ centralization and control by the corporate office, with the primary emphasis on controlling costs, and used in industries where the pressure for local adaptation is low and the pressure for lowering costs is high

global strategy

19

strategy based on firms differentiating their products and services to adapt to local markets, used in industries where the pressure for local adaptation is high and the pressure for lowering costs is low

Multidomestic strategy

20

a strategy based on firms optimizing the trade-offs associated with efficiency, local adaptation, and learning, used in industries where the pressures for both local adaptation and lowering costs are high.

transnational strategy

21

increasing international exchange of goods, services, money, people, ideas, and information; and the increasing similarity of culture, laws, rules, and norms within a region such as Europe, North America, or Asia

Regionalization

22

groups of countries agreeing to increase trade between them by lowering trade barriers

trading blocs

23

producing goods in one country to sell to residents of another country

exporting

24

= a contractual arrangement in which a company receives a royalty or fee in exchange for the right to use its trademark, patent, trade secret, or other valuable intellectual property

licensing

25

a contractual arrangement in which a company receives a royalty or fee in exchange for the right to use its intellectual property; it usually involves a longer time than licensing and includes other factors, such as monitoring of operations, training, and advertising

franchising

26

ventures allow firms to increase revenues and reduce costs as well as enhance learning and diffuse technologies.

Strategic Alliance or Joint Venture

27

a business in which a multinational company owns 100% of the stock.

Wholly-Owned Subsidiary

28

reveals the most corrupt countries in the world

Transparency International Corruption Perceptions Index (CPI)

29

two opposing forces that firms face when they expand into global markets:

cost reduction and adaptation to local markets