International Management Flashcards
Benefits of exporting (3)
+ Market expansion and revenue growth
+ Increasing sales can also result in economies of scale.
+ Utilization of modern technologies
* Advancements in communication and transportation technologies have made exporting more accessible than ever.
Risk of exporting (3)
- Navigational challenges in foreign markets
Exporters must identify potential customers, understand foreign business cultures and regulations, ensure timely payment, and manage exchange rate fluctuations.
- Shifting trade barriers
Dynamics of international trade barriers present a continual challenge.
- Logistical and financial complexities
Complex logistics and financial arrangements, specially the different financing mechanism. This affects smaller firms more heavily.
Export product readiness
What international customer needs does your product satisfy
Export company readiness
Do you have top-level commitment, resources, skills, and knowledge?
Product import readiness
What needs does the product satisfy for your value chain
Company import readiness
Do you have top-level commitment, resouces, skills and knowledge?
Steps to improve the export performance and leverage international markets (5)
- Hiring experienced partners
- Focusing on select markets
- Starting small
- Building strong relationships
- Hiring local personnel
- Being proactive
- Retaining the option for local production
Service providers which support exports (3)
A. Freight forwarders: combine small shipments into larger ones
B. Export management companies: Manage export documents
C. Export trading companies: provide comprehensive service (documentation, logistics, transport..)
D. Export packaging companies: optimized and outsourced packaging.
E. Customs brokers: Comprehensive services advisable when exporting to different countries
F. Confirming houses (buying agents): Foreign companies that want to buy your products
G. Export agents and merchants: buy from manufacturers, package and relable afterwards.
H. Piggyback marketing: firm distributes another firms products; complementary products/ same target market.
I. Economic processing zones: Includes foreign trade zones, special economic Szones
Exporting and Importing financing mechanisms (4)
B. Letter of credit
C. Draft or bill of exchange
D. Bill of lading
E. Export-Import Bank
A. Trust and financing in international trade:
Lack of trust between trading partners who don’t know each other, operate in different legal systems. This requires reliable financial mechanisms. It ensures that the seller receives the payments and the customer the product or service.
B. Letter of credit:
Is issued by a bank and guarantees the seller will receive payment as long as the terms and conditions stated in the letter of credit are met.
C. Draft or bill of exchange:
A signed promise from the buyer to pay the seller.
Bankers acceptance: a bank accepts it as a payments method
Trade acceptance: a business accept it as a payment method
D. Bill of lading:
Functions as a recipe send from the logistic company to the exporter which proofs that the good has been received by the client.
E. Export-Import Bank:
- Finances U.S. exports to support employments and market competitiveness.
- Supplements private lending with different loan programs such as (1) Guarantee for loans foreign firms make to buy U.S. products (2) Lends U.S. dollars to foreign importers.
- Foreign credit insurance provides insurance against the default of foreign importers.
Government institutions help to bridge the knowledge gap and provide professional assistance.
- U.S. Department of commerce:
-Small business administration (SBA) - Centers for International Business Education and Research (CIBERs)
- State, regional and city trade commissions.
def. countertrade
Countertrade is that a substitute for conventional payment methods, which involve various arrangements where goods and services are traded instead of money. Used by countries which lack foreign trade reserves.
Benefits of countertrade (2)
+ Facilitating trade: Countertrade can enable transactions when traditional payment methods are not viable, particularly in countries with non-convertible currencies or limited foreign exchange reserves.
+ Strategic marketing and competitive advantage: Flexibility in terms of payment methods opens a larger variety of markets to the company.
Disadvantages of countertrade (2)
- Complexity and risk: Risk of receiving poor-quality and unusable goods. Managing countertrade is challenging.
- Firms usually prefer trad in currency
Case summary - Education
- U.S. commercialized education
- Diversity at universities is beneficial
- Nationalistic movements are against international students
General questions/ possibilities in international business (3)
- Where should we produce?
- Long-term strategic role of foreign production sites?
- Should the firm outsource or own foreign production?
- Role of information technology in the global supply chain in terms of logistics, purchasing (sourcing), and operations?
- Should the firm outsource the management of the supply chain?
Strategic objectives - Global supply chain management (3)
- Cost minimization: processing raw materials into finished products should be operated as cost efficient as possible.
- Efficiency/quality in production: Executing tasks at whatever location it is most efficient. (Upstream and downstream)
- Supply and demand matching: Being always able to serve the customer without high storage cost.
Total quality management: (def)
-> Focuses on improving the company products and service by improving the following:
(1) Reduce defects
(2) Boost
(3) Productivity
(4) Eliminate waste
(5) Cut costs throughout a company
(6) Source: Unsplash.com
Six sigma (def.)
-> Data-drive (statistically) approach for eliminating defects in any process .
- Define, measure, analyze, improve and control
Lean (def)
-> Focuses on minimizing waste within organizations and processes while simultaneously maximizing customer value.
- A more consumer focused approach, identify the value for the costumer and see where it is created and cut everything else out. Doing that also minimize waste such as: defects, overproduction, waiting …Kaizan (continuous improvement)Kanban (visual workflow management)
How countries differ (3)
A. Political and economic system: political stability, regulations, economic conditions…
B. Culture: influences labor practices and consumer preferences.
C. Relative factor costs: cost for labor, land, and capital differs a lot between countries.
Production strategy in terms of location and scale/ cost (3)
A. Fixed costs: having one large production location and achieving economies of scale to serve global demand.
B. Minimum efficient scale: researching which production strategy ends up with the minimum cost per unit.
C. Flexibility (lean): if production has to respond quick to changes in customer preferences, it is rather geographically close to the target market.
Production factors which influence the location and scale (3)
A. Production features: value-to-weight ratio influences transportation cost and production location
B. Location of production facilities: central production for economies of scale vs. decentralizing to be closer to the customer
C. Strategic roles of production facilities: The production location should have access to skilled labor, proximity to key markets, participation in global learning and innovation.
Foreign subsidiaries (def)
(= company in a foreign country owned by parent company) is key in the production strategy of multinational firms. Operating in different countries contributes to the companies global learning and is critical for innovation and competitive advantage. Subsidiaries play a crucial role of the company’s global knowledge gathering process and production network.
Risks/ downsides of foreign locations: (4)
- High employee turnover
- Shoddy workmanship
- Poor product quality
- Low productivity
Strategic implications regarding subsidiaries (2)
- Strategic flexibility: Subsidiaries enable a more efficient response to global market dynamics
- Innovation: Foreign subsidiaries foster global learning which is crucial for maintaining a competitive advantage in international markets.
Core factors of if the production should be internal or outsourced: (6)
- Cost and production capacity: main driver of make-or-buy decision depending on what is more cost-effective.
- Quality control: In house production gives more control over quality
- Proprietary technology: protect proprietary technology (nobody else has it).
- Control over production: Over processes and timelines
- Assurance of supply: more reliable supply of essential components
- Industry drivers and marketplace dynamics: industry influenced by industry-specific factors and competitive landscape
Strategic considerations for outsource vs. internal. (3)
A. Specialized knowledge and strategic fit: In-house production is preferred if it requires specialized knowledge, critical to the products success to maintain a strategic fit with the company’s core competencies.
B. Capacity utilization: less incentive for outsourcing if the company has free capacity
C. Supply chain and competitive priorities management: make-or-buy decisions affect the entire supply chain.
Logistics in global supply chain: (5)
A. Management of flows: the goals is the efficient flow of inventory and raw material, parts and finished products.
B. Distribution centers: functions like a warehouse
C. Inventory management: appropriate level of inventory is maintained, to serve demand
D. Packaging and materials handling: protects products during the shipment process
E. Transportation: efficiently moves products from A to B
F. Reverse logistics: manages return of products
Just in time inventory (5)
+ Speeds up inventory turnover
+ Reduces inventory holding costs
+ Frees up working capital
+ Boosts profitability
+ Can improve product quality
- Leaves the firm without a buffer of inventory
Core components for efficient management. (5)
- Sourcing (flow of inventory and materials)
- Just-in-time (JIT) (reduce warehouse cost)
- Information technology (IT) integration (fast communication)
- Global supply chain coordination (connects supply chain)
- Interorganizational relationships: (partnerships across boarders)
Case: Production in China
- China is responsible for 28% of global production
- Possibility of trade wars with china
- Pandemic distruptions
- Fast economic rebound from pandemic
- Supply chain diversification (to have less risk)
Market segmentation (def.) (3)
- Identify groups of consumers with different purchasing behavior
- Market is segmented by: geography, demography, sociocultural and psychological factors.
- A lot of markets have overlaps which make it difficult.
Three applications of business analytics:
- Descriptive
- Predictive
- Prescriptive
Business Analytics (company focused):
- Analyzing a business activity by collecting data to optimize the current efficiency of the business, identify future opportunities and optimize marketing.
International Market Research (market focused):
- Analyzing data to get deeper insights international customer needs. It helps to make strategic decisions. It is more complex than the domestic approach due to cultural and language differences. The single steps start from gathering of the data to forecasting customer demands.
What influences the preferences of different product attributes: (3)
- Cultural differences
- Economic development
- Product and technical standards
-> It is difficult to balance these attributes and grasp the largest target market.
Cultural Differences: (2)
- Cultural dimensions impact strategy, such as social structure, language, religion, and education.
- Traditional preferences means that firms prefer products they have experience and connection with.
How economic development of a country influences consumer choices (perspective poorer country)
- Consumers in less developed countries prefer simple goods with fewer functions.
- Reliability of products is more important for consumers in less developed countries.
Product and Technical Standards:
- Differences in local standards can limit a global product distribution.
Def. distribution system
Describes the intermediaries between production and the customer. This includes wholesalers, retailers, and possibly import agents, especially for firms manufacturing outside the country.
Retail Concentration:
Concentrated (a few large ones) vs. fragmented (many smaller ones)
Channel Length
Number of intermediaries between production and customer. A longer channel can mean higher cost.
