International Business Final Exam Flashcards

Question

Transnational strategy and IKEA

Answer 1

- some 90% of the product line is identical across more than two dozen countries. IKEA modifies some furniture offerings to suit tastes in individual countries -An overall, standardized marketing plan is centrally developed at the firms headquarters in sweden, but is implemented with local adjustments -Management decentralizes some decision-making to local stores, such as product displays and language to use in advertising

Answer 2

The reporting relationship inside the firm, "the boxes and lines" that specify the linkages among people, functions, and processes, allowing the firm to carry out its operations -export department -international division -geographic area structure -product structure -functional structure global matrix structure

Answer 3

-closely aligned with home replication strategy -unit of firm changes with export operations; resource commitment small -little involvement with foreign operations due to use of intermediaries

Answer 4

-all international activities run by one division of the firm -increased focus on international -greater managerial expertise -can fire competition between international and domestic units

Answer 5

-management and control pushed to individual geographic regions -rather standardized products within regions -greater responsiveness to regional customer needs -regional versus worldwide focus, may loose efficiencies

Answer 6

-organized based on product lines -each product division responsibilities for producing and marketing products worldwide -product expertise and knowledge sharing duplication of some company activities (R&D,ACCR,HR)

Answer 7

Organized by functional area  Some HQ staff aids in coordinating activities  Challenging for coordination

Answer 8

Blends geographic, product and functional structures  Goal is to gain the benefits of global strategy and responsiveness  Emphasizes interorganizational learning and knowledge sharing  Dual reporting – not good  High level of complexity

Answer 9

Importing or global sourcing exporting countertrade foreign direct investment Collaborative ventures Licensing Franchising

Answer 10

Procurement of products and services from foreign sources

Answer 11

Producing products or services in one country (often the producer’s home country), and selling and distributing them to customers in other countries.

Answer 12

International transaction in which all or partial payments are made in kind rather than cash. The firm receives other products in payment

Answer 13

(F D I) implies establishing a presence in the foreign market by investing capital and securing ownership of a factory, subsidiary, or other facility there

Answer 14

include joint ventures in which the firm makes similar equity investments abroad, but in partnership with another company

Answer 15

the firm allows a foreign partner to use its intellectual property in return for royalties or other compensation

Answer 16

is common in retailing. McDonalds, Dunkin’ Donuts, Century 21 Real Estate, and many others have used franchising to internationalize worldwide.

Answer 17

1.Goals and objectives 2. Control 3. Firm resources and capabilities 4. Risk 5. Conditions in the target country 5. Competition 6. Partners 7. Value-adding activities 8. Strategic importance 9. Characteristics of product or service

Answer 18

A favorable combination of circumstances, locations, or timing that offer prospects for exporting, investing, sourcing, or partnering in foreign markets. Typical opportunities include the option to:  Sell/market products and services;  Establish factories or other production facilities to make offerings more competently or cost-effectively;  Procure (source) raw materials or components, services of lower cost or superior quality; and  Enter collaborative arrangements with foreign partners.

Answer 19

1.Analyze organizational readiness to internationalize. 2. Assess the suitability of the firm’s products and services for foreign markets. 3. Screen countries to identify attractive target markets. 4. Assess the industry market potential, or the market demand, for the product(s) or Service(s) in selected target markets. 5. Choose qualified business partners, such as distributors or suppliers. 6. Estimate company sales potential for each target market.

Answer 20

(internal to the firm) Assessing a firm’s readiness involves examining company strengths and weaknesses for international business, by evaluating availability in the firm of key factors, such as:  Appropriate financial and tangible resources.  Relevant skills and competencies.  Management’s commitment to internationalization.  Eliminate deficiency that hinder achieving firm goals

Answer 21

Assessing suitability of the firm’s products and services for foreign markets is achieved through evaluating the fit between the offerings and foreign customer needs for each possible target market:  Identify factors that may hinder market potential.  Determine how the offering may need to be adapted to the market.  Assess offering in terms of foreign customers characteristics, laws and regulations, channel intermediary requirements and the nature of competitors.

Answer 22

Sell well in the domestic market. For example, Microsoft Xbox, wireless headphones. * Cater to universal needs. Such as a cancer drug, an energy efficient refrigerator. * Address a need not well served in foreign markets. For example, mutual funds, mini notebooks. * Address a new or emergent need abroad. For example, a major earthquake creates urgent need for portable housing; A I D S in Africa creates need for drugs and medical supplies

Answer 23

Screen countries to identify target markets.  Goal is to reduce the number of countries to those that hold the best potential (5 or 6)

Answer 24

 Size and growth rate  Market intensity (customer buying power)  Consumption capacity (size and growth rate of the middle class)  Country’s receptivity to imports  Infrastructure for doing business  Economic freedom  Country risk

Answer 25

Cultural similarity with target market may matter. Some firms target countries that are “psychically” similar in terms of language and culture. * Nature of information sought varies with product and industry. For farming equipment, consider countries with much agricultural land and farmers with higher incomes. For semiconductors, target countries that manufacture computers. * Targeting a region may make sense. For example, the European Union, Latin America.

Answer 26

1. Gradual elimination - start with list of countries and narrow list by increasingly specific info (macro to micro level analysis) 2. Indexing and ranking -firms assign scores to countries based on their overall market attractiveness -Attractiveness is based on a set of market-potential indicators and a ranking of each country in the indicators

Answer 27

-Researchers who attempt to identify the best locations for FDI consider these: -long term growth prospects for growth and sizeable returns -cost of doing business, based on variable infrastructure, tax rates, wages, and worker skills -country risk, including regulatory, financial, political, and cultural barriers, intellectual property protections -competitive environment -government incentives such as tax holidays, subsidized training, grants, or low-interest loans

Answer 28

Global sourcing is the practice of procuring finished products, intermediate goods, and services from suppliers locates abroad Look at factors such as: -cost and quality of inputs -stability of exchange rates -reliability of suppliers -presence of workforce with superior skills

Answer 29

The firm estimates the most likely share of sales that can be achieved in each target country, including consideration of market entry barriers. Firm should develop a 3 to 5-year forecast of industry sales.

Answer 30

-Size and growth rate of the market, and industry trends. – Tariff and nontariff trade barriers to market entry. – Standards and regulations that affect the industry. – Availability and sophistication of distribution. – Unique customer requirements and preferences. – Industry-specific market potential indicators.

Answer 31

simple trend analysis-aggregate production monitoring key industry specific indicators- industry drivers of market demand monitoring key competitors- sales levels and market potential following key customers around the world- likely sales in industry that firm supplies tapping into supplier networks- assessing sales and competitor activity attending international trade fairs- learning market characteristics and sales potential

Answer 32

The firm decides on...  the type of foreign business partner  determines what value-adding activities must be performed by foreign business partners  clarifies ideal partner qualifications  assesses and selects partners based on criteria such as industry expertise, commitment to the venture, access to distribution channels, financial strength, quality of staff, and appropriate facilities.  then crafts an appropriate market entry strategy

Answer 33

The firm estimates the most likely share of industry sales that the company can achieve over a specific period of time  Develop a 3 to 5 year forecast of its own sales in the target market  Forecast takes into account a range of factors (distribution, partner capabilities, competition, pricing, risk tolerance of senior managers)  Determine the factors that will influence company sales potential

Answer 34

FDI International collaborative venture Joint venture

Answer 35

Strategy in which the firm establishes a physical presence abroad by acquiring productive assets such as capital, technology, labor, land, plant, and equipment.

Answer 36

A cross-border business alliance in which partnering firms pool their resources and share costs and risks of a venture

Answer 37

A form of collaboration between two or more firms to create a jointly-owned enterprise

Answer 38

Market factors Human resource factors Infrastructural Factors Political and government factors Profit retention factors Legal and regulatory factors Economic factors

Answer 39

1. Represents substantial resource commitment. 2. Implies local presence and operations. 3. Firms invest in countries that provide specific comparative advantages. 4. Substantial risk and uncertainty. 5. Direct investors deal more intensively with specific social and cultural variables in the host market

Answer 40

Falling fixed costs Managerial resource efficiencies Specialization of labor Financial economies

Answer 41

Many industries and productive tasks have high per-unit fixed costs that decline the more the task is performed. F D I helps concentrate production and/or results in high sales volumes.

Answer 42

Highly international firms employ a relatively fixed number of headquarters staff across more subsidiaries and affiliates

Answer 43

F D I facilitates hiring more specialized workers, which increases efficiencies

Answer 44

Large firms with extensive international operations usually can access capital at lower cost

Answer 45

Greenfield Investment vs. M&As Greenfield investment: The firm invests to build a new manufacturing, marketing or administrative facility, as opposed to acquiring existing facilities. Merger: Special type of acquisition in which two firms join to form a new, larger company. Acquisition: Direct investment or purchase an existing company or facility.

Answer 46

Equity participation: Acquisition of partial ownership in an existing firm. Wholly owned direct investment: Investor fully owns the foreign assets Equity joint ventures: Partnership in which a separate firm is created through the investment of assets by two or more parent firms that gain joint ownership of a new legal entity.

Answer 47

Vertical integration: The firm owns, or seeks to own, multiple stages of a value chain for producing, selling, and delivering a product. E.g., Toyota owns some Toyota car dealerships around the world. Ford once owned steel mills that produced steel used to make Ford cars. Horizontal integration: Arrangement whereby the firm owns, or seeks to own, the activities involved in a single stage of its value chain. E.g., Microsoft acquired a Montreal-based firm that makes software used to create movie animation.

Answer 48

A partnership between two or more firms. * Includes equity joint ventures and non-equity, project-based ventures. * Sometimes called partnerships or strategic alliances. * Collaboration helps overcome the often substantial risk and high costs of international business. It makes possible the achievement of projects that exceed the capabilities of the individual firm.

Answer 49

Corporate governance: -Ethics -Corporate social responsibility -sustainability

Answer 50

is the system of governance, which maximizes shareholder wealth and minimizes managerial opportunism, thus enabling ethical behaviors, CSR and sustainability Done via: * Set values that guides employees Code of Ethics * Set the ground rules for guiding behavior Code of Conduct

Answer 51

managers taking advantage for own-selfish needs

Answer 52

Ethics are moral principles and values that govern the behavior of people, firms, and governments, regarding right and wrong.

Answer 53

is the abuse of power to achieve illegitimate personal gain.  Corruption is a major or severe concern in the global activities of a large proportion of M N E s.

Answer 54

is common and may take the form of grease payments, small inducements intended to expedite decisions and transactions, or gain favors.

Answer 55

EX: Falsify or misrepresent contracts or official documents.  Pay or accept bribes, kickbacks, or inappropriate gifts.  Tolerate sweatshop conditions or abuse employees.  Do false advertising or other deceptive marketing.  Engage in deceptive or discriminatory pricing.  Deceive or abuse intermediaries in the channel.  Undertake activities that harm the natural environment.

Answer 56

International patents and protections  Intellectual Property Rights (IP) – ideas or works that individuals or firms create including:  Trademarks – distinctive signs and indicators that firms use to identify their products or services  Copyrights – grant protections to the creators of music, art, books, software, movies and tv shows  Patents – confer exclusive right to manufacture, use, or sell products or processes  IP infringement comes in the form of piracy and counterfeiting, unauthorized reproduction or use of copyrighted or patented work for financial gain.

Answer 57

Fair competition unfair competition

Answer 58

A free market whereby all players operate on a level paying field  Firms (competitors) compete on price, service, product offerings, etc. versus engaging in unfair practices (predatory pricing

Answer 59

Predatory Pricing Dumping Tacit collusion deceptive pricing

Answer 60

direct attempt to buy a major competitor to drive other companies out of business by setting prices unrealistically low

Answer 61

selling goods below costs in another country or pricing a product in one country lower than the price of the product in another country. The goal is to capture market share in the country with the low price (drive out competition)

Answer 62

actions that one firm takes that does not solicit a response from its competitor(s); hence they (unspoken) agree to not compete (avoiding the opportunity to price cut)

Answer 63

a marketer promotes one price, yet due to hidden fees, add-ons and such, the actual price is much higher

Answer 64

Top management sets goals and incentives aimed at promoting good outcomes (e.g., profits) that instead encourage bad behaviors. * Employees overlook unethical behavior in others because of peer pressure or self-interest. * Managers tolerate lower ethical standards in value-chain activities performed by suppliers or third-party firms. * Unethical practices are allowed to accumulate in the firm slowly over time. * Bad means are justified by good ends.

Answer 65

Ethical behavior is simply the right thing to do.  Often prescribed within laws and regulations.  Demanded by customers, governments, and the news media. Unethical firms risk attracting unwanted attention.  Ethical behavior is good business, leading to enhanced corporate image and selling prospects. The firm with a strong reputation is advantaged in hiring and motivating employees, partnering, and dealing with foreign governments.

Answer 66

Ethical standards vary from country to country In China, counterfeiters may publish translated versions of imported books without compensating the original publisher or authors. * In parts of Africa, accepting expensive gifts from suppliers is acceptable. * In the United States, C E O compensation is often 100 times greater than that of low-ranking subordinates. * Finland and Sweden ban advertising aimed at children, but the practice is accepted in other parts of Europe.

Answer 67

is the belief that ethical truths are not absolute but differ from group-to-group; according to this perspective, a good rule is, “When in Rome, do as the Romans do.

Answer 68

is a belief that ethical behavioral standards are universal, and firms and individuals should seek to uphold them consistently around the world. (United States)

Answer 69

Imagine you are a manager and visit a factory owned by an affiliate in Colombia, and discover the use of child labor in the plant.  You are told that without the children’s income, their families might go hungry. If the children are dismissed from the plant, they will likely turn to other income sources, including prostitution or street crime.  What should you do? Make a fuss about the immorality of child labor, or look the other way?

Answer 70

Corporate social responsibility (C S R): Operating a business to meet or exceed the ethical, legal, commercial, and public expectations of customers, shareholders, employees, and communities.  Helps recruit and keep good employees.  Can help differentiate the firm and enhance its brands.  Cuts costs, as when the firm reduces packaging, recycles, cuts energy usage, and minimizes waste in operations.  Helps the firm avoid increased taxation, regulation, or other legal actions by local government authorities.

Answer 71

Meeting humanity’s needs without harming future generations. The sustainable firm pursues three types of interests:  Economic interests refer to the firm’s economic impact on the localities where it does business, such as regarding job creation, wages, and public works.  Social interests refer to how the firm performs relative to social justice, such as avoiding the use of child labor, sweatshops, as well as providing employee benefits.  Environmental interests refer to the extent of the firm’s impact and harm to the natural environment.

Answer 72

Beneficial agricultural practices that do no harm.  Water conservation. Clean water is scarce worldwide.  Air quality protection.  Reduced energy and fuel consumption.  Increased use of solar and wind energy.  Improved work processes that improve sustainability reduce costs and support the natural environment.

International Business Final Exam Flashcards

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