November 1 Flashcards

Question

Offshoring vs. Outsourcing

Answer 1

_Offshoring_ Relocation of a business process or entire manufacturing facility to a **foreign country** _Outsourcing_ Procurement of selected value adding activities , including production of intermediate goods or finished products, from **independent suppliers**

Answer 2

Business process outsourcing (BPO) **Outsourcing** of **business service functions** , _such as accounting , human resource, travel services, IT services, customer service or technical support to independent suppliers_

Answer 3

Firms usually internalize those value chain activities they consider a part of their **core competence** , or which involve the use of **proprietary knowledge**and trade secrets they**want to control**.

Answer 4

**R&D, Design (high)** **Marketing and Branding (high)** **--\> keep in the company** Manufacturing (medium) Sales and Distribution (medium) Customer Service (medium) Manufacturing of Parts and Components (low) --\> externalize

Answer 5

• Availability of an appropriate labour force • Wage rates • Worker skill level • Language • Culture • Infrastructure • Legal system • Economic environment • Tariffs / Taxes

Answer 6

**Cost efficiency** • Faster corporate growth • Access to qualified personnel • Improved productivity and service • Increased speed to market • Access to new markets • Technological flexibility

Answer 7

• Lower than expected cost savings • Environmental factors • Weak legal environment • Inadequate or low skilled workers • Overreliance on suppliers • Risk of creating competitors • Erosion of morale and commitment among home country employees

Answer 8

Go offshore for the right reasons • Get employees on board . • Choose carefully: captive souring vs contract manufacturing • Choose suppliers carefully • Emphasize communications & collaboration with suppliers • Safeguard interests

Answer 9

**Facilitator** A firm or individual with _special expertise in banking, legal advice, customs clearance_ or related **support services that assists** **focal firms** in the performance of international business transactions.  Freight forwarders = logistics provider for international shipping **Distribution channel intermediary** A specialist firm that provides various **logistics and marketing services for focal firms** as part of international _supply chains_, both in the home country and abroad.

Answer 10

 **Information Technology (IT)** Is the science and process of creating and using information resources.  **Communications** The Internet, intranets, social media and e-mail, connect billions of people and companies. This can be used to promote services and products around the world. Has also opened the global marketplace for SME and other firms that would lack the resources to do international business.  **Manufacturing** Computer-aided design (CAD) of products, robotics and production lines have transformed manufacturing, mainly by reducing production costs. It also allows firms to adapt products more efficiently to individual foreign markets.  **Transportation** Firms consider the cost of transporting products when deciding either to export or manufacture abroad. The development of fuel-efficient jets and giant ocean-going freighters have greatly reduced shipping times and costs.

Answer 11

Sometimes firms engage in reshoring (the return of manufacturing and services to the home country) due to increased wages abroad and the desire to locate closer to key customers.

Answer 12

- poor commercial infrastructure - lack of access to foreign capital - high illiteracy (unable to read or write) - government corruption - the spread of AIDS - wars

Answer 13

- sustainability - gorporate governance - corporate social responsibility (CSR) - Ethics

Answer 14

 Falsify or misrepresent contracts or financial statements  Pay or accept bribes or inappropriate gifts  Sweatshop conditions or otherwise abuse of employees  False advertising and other deceptive marketing practices  Engage in discriminatory pricing  Engage in harmful activities for the natural environment

Answer 15

* *Relativism** * *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 Rom, do as the Romans do.” Thus, a Japanese firm being against bribery, would nevertheless pay bribes in countries where the practice is customary and acceptable. * *Normativism** * *The belief that** **ethical behavioral standards are universal**, and firms should seek to uphold them consistently around the world. According to this view the Japanese firm who believes bribery is wrong will enforce this standard everywhere in the world.

Answer 16

 Centralize currency management with the MNE  Monitor changes in key currencies  Monitor long-term economic and regulatory trends  Decide on the level of risk the company can tolerate

Answer 17

* *Investment Bank** (underwrite stock and bond issues and advise on mergers) * *Merchant Bank** (provide capital to firms. Does not service general public. Specializes in international operations) * *Private Bank** (manages the assets of the very rich) * *Offshore Bank** (located in jurisdictions with low taxation and regulation, Bermuda, Panama) * *Commercial Bank** (deal mainly with corporations or are businesses)

Answer 18

Governed today by 188 countries, the **IMF** stands ready to _provide financial assistance in the form of loans and grants to support programs intended to correct macroeconomic problems_. The IMF has established a reserve known as the Special Drawing Right (SDR) to help manage currency valuation worldwide. Central banks may use SDRs to purchase foreign currencies to manage the value of its currency on world markets. The IMF focuses on countries economic performance and gives short-term loans to stabilize exchange-rates.

Answer 19

Aims **to reduce world poverty** and is active in various development projects to bring water, electricity, and transportation infrastructure to poor countries. Is a specialized agency of the United Nations and is supported by some 187 member countries that are jointly responsible for how the institution is financed and how its money is spent. **The World Bank emphasizes longer-term development and gives out long-term loans.**

Answer 20

- Government takeover of corporate Assets - Embargoes and Sanctions - Terrorism - War, Insurrection, and Violence

Answer 21

 **Not right or wrong**: Culture is relative. People of different nationalities simply perceive the world differently.  **Not about individual behavior**: Culture is about groups. It refers to a collective phenomenon of shared values and meanings.  **Not inherited (nicht geerbt)**: Culture comes from people’s social environment. No one is born with a shared set of values and attitudes.

Answer 22

**Socialization:** _The process of learning the rules and behavioral patterns appropriate to one’s society._ Each society has do’s, don’ts, expectations, etc. that guide behavior of children as they mature. **Acculturation:** _The process of adjusting and adapting to a culture other than one’s own_. It is commonly experienced by people who live in other countries for extended periods.

Answer 23

States that it may be beneficial for two countries to trade with each other **_as long as one is relatively more efficient at producing goods or services needed by the other_**. The principle behind this theory is free trade. It implies that a nation need not be the first-, second-, or even third-best producer of a product to benefit from international trade. **A country needs to be only relatively capable in producing varies types of goods.**

Answer 24

- **Nature of the Market** (Income, local regulation, climate, infrastructure) - **Nature of the Product or Industry** (Specialized/high-end vs. ordinary products) - **Type of distribution system** (Distributers, FDI, direct sales) - **Location of the production facility** (Low-cost labor countries, FX fluctuactions)

Answer 25

1. Shorten the distribution channel. 2. Redesign product to remove costly features. 3. Ship products unassable, as parts and components, to qualify for lower import tariffs 4. Having products reclassified using different classification to qualify for lower tariffs 5. Move production or sourcing to another country

Answer 26

**- Rigid cost-plus pricing** fixed price for all export markets by adding a flat percentage to the domestic price to compensate for added cost for doing business abroad **- Flexible cost-plus pricing** set price to accomodate local market conditions, such as cusotmer purchasing power, demand, and competitor prices. **- Incremental pricing** set price to cover only variable costs (fixed costs are already paid form sales in the home or other countries)

Answer 27

_Intra-corporate pricing_ - pricing of intermediate or finished products exchanged among subsidiaries located in different countries - may be used to shift profits from countries that restrict MNES from taking their earnings out of the country - shift profits to low corporate tax country

Answer 28

1. Exporting Approach (distribution via independent firms) 2. FDI based Approach (distribution via subsidiaries)

Answer 29

* A free market is one where voluntary exchange and the l**aws of supply and demand** provide the sole basis for the economic system, **without government intervention**

November 1 Flashcards

(66 cards)