Test 2 Flashcards by Liam Quinn

What did China do with regards to precious metals?

implement export quotas; claimed to be concerned about environmental impact, but resulted in higher prices for domestic Chinese manufactures; sued by WTO

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Free Trade

a situation in which a government does not attempt to restrict what its citizens can buy from or sell to another country

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Instruments of Trade Policy (7)

Tariffs
Subsidies
Import Quotas
Voluntary export restraints
Local content requirements
Antidumping Policies
Administrative Policies

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Who benefited on the tariffs placed on Chinese tires? Who was hurt?

Domestic and foreign tire producers excluding China benefited. Domestic consumers were badly hurt.

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How efficient are government subsidies generally?

Not very; they tend to promote excess capacity and inefficient companies

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Tariff Rate Quota

lower tariff rate is applied to imports within the quota than those over the quota

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The recent U.S. farm bill passed will:

cut food stamps, decrease support to farmers, restructure insurance

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Local Content Requirement

A requirement that some specific fraction of a good be produced domestically

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Political Arguments for governmental trade intervention: (6)

preserving jobs
protecting industries deemed important for national security
retaliating against unfair foreign competition
protecting consumers from “dangerous” products
furthering the goals of foreign policy
advancing the human rights of individuals in exporting countries

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Economic Arguments for governmental trade intervention: (2)

Infant Industry

2. Strategic Trade policy

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Trade barrier implications for managers: (3)

Plant location decisions
export decisions
suppliers

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“Greek TV” Case

bar owner circumvented high local Premier League rate, brought on lawsuit. lawsuit overturned, segmentation in Europe declared illegal

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The total number of regional trade agreements currently in force is:

more than 500

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Levels of Economic Integration: (5)

Free Trade Area (NAFTA, EFTA)
Customs Union (common external trade policy)
Common Market (factors of production move freely)
Economic Union (common currency, tax rates; EU)
Political Union (central political/federal body; US, Euro Parliament)

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What are 90% of regional trade agreements?

Free Trade Areas

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Political Pros/Cons for Economic Integration (2 each)

Reduce potential for violent conflict
Gain more political weight
- ——————————————————-
Threats to national sovereignty
job losses

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Trade Diversion

Trade diverted due to regional economic
integration; occurs when low-cost foreign suppliers outside a free trade area are replaced by higher-cost foreign suppliers in a free trade area (switching importing textiles from Brazil to importing from Mexico at higher cost)

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The EU is the result of two political factors:

(1) the devastation of western Europe during two world wars, and the desire for a lasting peace
(2) the European nations’ desire to hold their own on the world’s political and economic stage

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Five European Political Institutions

European Commission
The Council of the European Union
The European Parliament
The Court of Justice
Central European Bank (ECB)

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European Commission

proposes and implements legislation; monitors compliance with EU regulations; 28 commissioners appointed

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Council of the European Union

approves legislations proposed by commission; 28 members varying by topic; votes proportional to country’s population

European Parliament

754 members; debates legislation proposed by commission; can veto some laws; 2009 treaty of Lisbon made EP more powerful

Court of Justice

one justice from each country; act as independent judges; supreme EU law body

Central European Bank

manages monetary policy to ensure price stability; determining interest rates

NAFTA provisions include: (3)

1. Abolition of 99% of tariffs 2. Intellectual Property Rights 3. Environmental Standards

Mexican Trucking Case:

US unions wanted trucking jobs, feared loss to Mexican workers.

Opportunities from regional integration: (2)

1. More accessible previously protected markets | 2. Reduces cost and bureaucracy

Threats from regional integration: (2)

1. increased competition in group and out ("trade fortress") | 2. M&A may be restricted

How did Ford change its international strategy?

standardized design and car manufacturing across the globe to make use of economies of scale and cut overall costs

What two things will increase the overall value of a firm?

higher Profitability and higher profit growth

Efficiency Frontier

shows all of the different positions that a firm can adopt with regard to adding value to the product (V ) and low cost (C)

Two ways to increase profitability:

1. reduce costs | 2. add value and raise prices

Two ways to increase profit growth:

1. sell more in existing markets | 2. enter new markets

What two business aspects support strategy?

1. Operations Strategy | 2. Organizational Structure

Core Competence

Firm skills that competitors cannot easily match or imitate

Low pressure for Cost Reductions; Low pressure for Local Responsiveness

International Strategy

Low pressure for Cost Reductions; High pressure for Local Responsiveness

Localization Strategy

High pressure for Cost Reductions; Low pressure for Local Responsiveness

Global-Standardization Strategy

High pressure for Cost Reductions; High pressure for Local Responsiveness

Transnational Strategy

Advantages of Strategic alliances (4)

1. foreign entry 2. shared fixed costs 3. share skills/assets 4. set industry standards

Disadvantage of Strategic alliances

hollowing out of technology or core competence

Pressures for Cost Reductions (4)

1. Low product differentiation 2. Competitors based in low-cost locations 3. Excess industry capacity 4. Low switching costs for consumers

Pressures for Local Responsiveness (5)

1. National differences in consumer tastes 2. Different Infrastructures 3. Different Technical Standards 4. Different distribution channels 5. Different host-government demands

Factors affecting entry modes (5)

1. Transportation costs 2. Trade barriers 3. Political Risks 4. Economic Risks 5. Company Strategy

Six modes of entry

1. Exporting 2. Turnkey Projects 3. Licensing 4. Franchising 5. Joint Ventures 6. Wholly owned subsidiaries

Activities of Human Resource Management (6)

1. determining human resource strategy 2. staffing 3. performance evaluation 4. management development 5. compensation 6. labor relations

Ethnocentric Staffing Approach

all key management positions are filled by parent-country nationals

Polycentric Staffing Approach

requires host-country nationals to be recruited to manage subsidiaries, while parent-country nationals occupy key positions at corporate headquarters

Geocentric Staffing Approach

seeks the best people for key jobs throughout the organization, regardless of nationality

Four Characteristics of Expat Managers

1. Self-Orientaiton 2. Others orientation 3. Perceptual Ability 4. Cultural toughness

Types of training for expat managers (3)

1. Cultural 2. Language 3. Practical