international management exam 3

The gold standard

-A monetary system that defines the value of its currency in terms of a fixed amount of gold -established in Britain by Sir Isaac Newton in 1717 -government does not have monetary flexibility

Why Foreign Currency Exchange Occurs

-Buyers and sellers want to do business in own currency to avoid risk that accompanies currency exchange -Vehicle currency used as vehicle for international trade or investment, such as diamond market uses U.S. dollar -Intervention currency used to intervene in the foreign currency exchange markets

Exchange Rate Forecasting

-Efficient market approach -Random walk hypothesis -Fundamental approach -Technical analysis

Bank for International Settlements (BIS)

-Institution for central bankers -operates to build cooperation in order to foster monetary and financial stability -known as the most discreate financial institution in the world

Causes of Exchange Rate Movement

-Monetary policies -Fiscal policies -Law of one price concept -Arbitrage -Fisher effect -international fisher effect -Purchasing power parity

national currency conflict

-U.S. dollar is the most used central reserve since end of WWII -Holding large amounts of U.S. dollars eventually means they will lose value (triffin paradox) -IMF would like a non-national asset to become main reserve

Types of reporting

-financial reporting -technological reporting -reporting about market opportunities -political and economic reporting

Geographic Region Structure

-geographic area managers responsible for all activities and report directly to the CEO -simplifies task of directing worldwide operations-every country under control of someone in contact with headquarters

Inflation and Interest Rates

-inflation is a sustained increase in prices -determines real cost of borrowing in capital markets -rising rates encourage borrowing -inflated currencies tend to weaken -interest rates rise with inflation -inflation rates cause the cost of the goods and services to rise, so they become less competitive globally

Map-Bridge-Integrate model

-mapping lets team members discuss differences and similarities -bridging is an opportunity for team members to establish how they will work with one another -integration is the process of managing various differences

Mintzberg's global leadership roles

-monitor -spokesperson -liaison -leader -negotiator -innovator -decision maker -change agent

five abilities identified for a successful global assignment

-see differences -make connections -adjust -integrate and lead change -localize

Global Strategic Planning Steps

1. Analyze the company's external environments 2. Analyze the companys internal environment 3. define the companys business and mission 4. set corporate objectives 5. quantify goals 6. formulate strategies 7. make tactical plans

to achieve competitive advantage, a company must develop competencies that:

1. Create value 2. are rare 3. difficult to imitate or substitute 4. allow the firm to be organized to fully exploit the competitive potential of these competencies

steps to successful scenario planning

1. Determine the area, scope, and timing of the decisions with greatest relevance to or impact on your organization 2. Research existing conditions and trends in a wide variety area 3. Examine the drivers or key factors that will likely determine the outcome of the stories you are beginning to build 4. construct multiple stories of what could happen next 5. Play out what the impact of each of these possible futures might be for your business 6. Examine your answers and look for those actions or decisions youd make that were common to the stories you built 7. monitor what does develop so as to trigger your early response system

Kotter's 8 steps

1. Establish a sense of urgency 2. Create the guiding coalition 3. Develop a vision and strategy 4. Communicate the change vision 5. Empower the broad-based action 6. Generate short-term wins 7. Consolidate gains and produce more change 8. Anchor new approaches in the culture

three ways to measure if a strategy is proceeding successfully or need modification

1. Success in obtaining and applying required resources 2. effectiveness of company's personnel performance 3. progress toward achieving mission, vision, and objectives in a manner consistent with the company's stated values

three types of taxation

1. income tax 2. value added tax 3. withholding tax

4 overlapping dimensions of complexity

1. multiplicity 2. interdependence 3. ambiguity 4. dynamism

6 leadership styles

1. performance-oriented 2. team oriented 3. participative 4. humane 5. autonomous 6. self protective

four elements to consider when designing a structure

1. product and technical expertise 2. geographic expertise 3. customer expertise 4. functional expertise

two opposing forces in international market

1. reduction of costs 2. adaptation to local market

Current Currency Arrangements

1.Exchange arrangement with no separate legal tender 2. Currency board agreement 3. conventional fixed-peg arrangement 4. Stabilized arrangement 5. crawling peg 6. crawling band 7. managed floating 8. free floating exchange rates

Value Statement

A clear, concise description of the fundamental values, beliefs, and priorities expected of the organization's members, reflecting how they are to behave with each other and with the company's customers, suppliers, and other members of the global community

currency exchange controls

A government can limit the amount of its currency that can be exchanged for another currency in a particular transaction.

International Strategy

A plan that guides the way firms make choices about developing and deploying scarce resources to achieve their international objectives

Strategic Business Unit (SBU)

A self-contained business entity with a clearly defined market, specific competitors, the ability to carry out its business mission, and a size appropriate for control by a single manager

global mindset

A set of ideas and attitudes that combines an openness to and an awareness of diversity across markets and cultures with a propensity and ability to synthesize across this diversity 2 key components 1. intellectual intelligence 2. global emotional intelligence

Competitive Strategies

Action plans to enable organizations to reach their objectives

fiscal policies

Address the collecting and spending of money by the government

fixed exchange rate

An exchange rate policy under which a government commits itself to keep its currency at or around a specific value in terms of another currency or a commodity, such as gold.

Special Drawing Rights

An international reserve asset established by the IMF

Matrix Organization

An organization in which specialists from different parts of the organization are brought together to work on specific projects but still remain part of a line-and-staff structure.

matrix overlay

An organization in which top-level divisions are required to heed input from a staff composed of experts of another organizational dimension in an attempt to avoid the double-reporting difficulty of a matrix organization but still mesh two or more dimensions

Reserves

Assets held by a nation's central bank, used to back up government liabilities

what is known to be the most discreet financial institution in the world

Bank for international settlements

Affiliates

Companies controlled by other companies, but less-than majority owners may exercise control by a variety of means, both those involving stock ownership and those involving non-ownership mechanisms

in which type of currency arrangement would a currency be readjusted periodically at a fixed preannounced rate?

Crawling peg

floating exchange rate

Determined by supply and demand that allow currency values to float against one another -Jamaica Agreement established flexible exchange rates among IMF members

Companies rely on a mission statement to determine where it is going in the future, how it will get there, and whether or not goals are achieved (T/F)

False

International Fisher Effect

For any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between countries

reciprocal currency

In FX, using the dollar as the base currency, a currency that is quoted as dollars per unit of currency instead of in units of currency per dollar

international division structure

International operations are in a separate autonomous division. Most domestic operations are kept in other parts of the organization

what is a disadvantage of top-down planning?

It restricts initiative at lower levels of the organization

Hybrid Organizational Structure

Organizational structure that combines departmentalization by division and function to gain the benefits of both.

SDR refers to

Special drawing rights, an international reserve asset

spot rate

The exchange rate between two currencies for delivery within two business days

The Bretton Woods system

The international monetary system in place from 1945-1971, with par value based on gold and the U.S. dollar

Fluctuating Currency Values

The major currencies are allowed by their central banks to fluctuate freely against each other

knowledge management

The practices that organizations and their managers use for the identification, creation, acquisition, development, dispersion, and exploitation of competitively valuable knowledge

Strategic Planning

The process by which an organization determines where it is going in the future, how it will get there, and how it will assess whether and to what extent it has achieved its goals

forward currency market

Trading market for currency contracts deliverable 30, 60, 90, or 180 days in the future

Sir Isaac Newton established the price of gold in 1717 in terms of British currency. (T/F)

True

A fixed peg currency arrangement means that

a country's exchange rates fluctuate around a fixed rate within a narrow band

The Triffin Paradox refers to what occurs when....

a national currency that is also a reserve currency runs a deficit

Triffin Paradox

a national currency that is also a reserve currency will eventually run a deficit, which leads to lack of confidence in the reserve currency and a financial crisis

organizational design

a process that determines how a company should be organized to ensure its worldwide business activities are integrated in an efficient and effective manner two management concerns 1. finding most effective way to take advantage of specialization of labor 2. coordinating a firms activities to enable it to meet its overall objectives

balance of payments

a record of all economic transactions between residents of one country and residents of the rest of the world during a given period -Shows flow of capital in and out of the country -reveals demand for a country's currency

Mission Statement

a statement of the organization's purpose and scope -what it wants to accomplish in the larger environment

competitive advantage

ability of a company to achieve and maintain a unique and valuable competitive position both within a nation and globally, generating higher rates of profit than its competitors

Companies controlled by other companies, in which less-than-majority owners may exercise control by a variety of means, both those involving stock ownership and those involving non-ownership mechanisms, are known as

affiliates

Purchasing Power Parity

amount of of adjustment that must be made in the exchange rate for two currencies for them to have equivalent purchasing power

Technical Analysis

analyzes data for trends and then projects these trends forward

Value Chain Analysis

assess where and to what extent value is added to the final product or service

Random Walk Hypothesis

assumption that the unpredictability of factors suggests that the best predictor of tomorrow's prices is today's prices

fundamental hypothesis

based on econometric models that attempt to capture the variables and their correct relationships

strategic management approach

combines strategic thinking, strategic planning, and strategic implementation

subsidiaries

companies controlled by a parent company

to be effective a company's international strategy must be

consistent among all the functions and activities of the company

monetary policies

control the amount of money in circulation and its growth rate

most significantly for the international manager, the balance of payments reveals

demand for a country's currency

Vision Statement

describes the company's desired future position if it can acquire the necessary competencies and successfully implement its strategy

research indicates that many ceos feel that a prerequisite for global industry dominance is

developing a company global mindset

objectives

direct the firms course of action, maintain it within the boundaries of the stated mission, and ensure its continuing existence -Tend to become more quantifiable as they get to the operational level

international product structure

domestic product division is given responsibility for global line and staff operations -avoids duplication of product experts but creates a duplication of area experts

forward rate

exchange rate at which two parties agree to exchange currencies on a specified future date

Connor works at the headquarters of FiberNet Corp. He receives bimonthly reports that reveal if surplus funds are available. It is then Connor's job to determine how those funds should be allocated. What type of report would provide Connor with this information?

financial

what is found at the base, or bottom level, of the pyramid model of global leadership

global knowledge

leading teams

global teams characterized by a high level of diversity, geographic dispersion, and virtual rather than face-to-face interaction three main activities when leading teams 1. establishing the team 2. coaching team members 3. setting team norms

complexity for teams in the global context

globalization increases complexity -increased multiplicity -increased interdependence -increased ambiguity

Melanie is known at work for being the manager with the greatest concern for the well-being of others. Which leader style does she possess?

humane

Madison enterprises is an international corporation that sells sporting equipment and has had regional units for the past ten years. Recently, the company acquired an international business that specializes in skincare products for athletes. Madison Enterprises has brought that company in and retained its products division setup. What type of structure does Madison Enterprises now use?

hybrid

changes in the way corporate planning is done today include

interaction with important customers, distributors, and suppliers

tactic knowledge

knowledge that cannot be codified; concerns knowing how to do a certain task and can be acquired only through active participation in that task

explicit knowledge

knowledge that is easily communicated and available to everyone

When selecting the manager for the new global team, the company wanted to find someone who understood the importance of developing relationships with co-workers, vendors, and suppliers. Which of the traits identified by Aperian Global does this represent?

make connections

Caroline works in Asia for an affiliate of Sheppard Electronics based in Oklahoma. She has learned that a large geographic sector in Asia would benefit from the company's master recharging station and shares that information with headquarters in her monthly report. Which aspect of reporting does this reflect?

market opportunities

An organization in which top-level divisions are required to heed input from a staff composed of experts from another organizational dimension in an attempt to avoid the double-reporting difficulty of a matrix organization but still mesh two or more dimensions is known as a

matrix overlay

Global leaders confront increased ambiguity because

much of the information they receive is difficult to give meaning to

balance of payments accounts

national accounts that track both payments to and receipts from foreigners -Payment TO other countries are debits -Payments FROM other countries are credits

according to mintzberg and others, the roles of the global leader include

negotiator and change agent

exchange rate fluctuations are best described as

not yet fully understood by economists

Global Functional Structure

operations are integrated into the activities and responsibilities of each department to gain functional specialization and economies of scale

after acquiring two new foreign affiliates, Henson Manufacturing created a new organizational chart to indicate where formal authority would lie within the organization. this organizational chart is an indication of....

organizational structure

A value-added tax is actually a sales tax that is

paid in stages along the process from raw materials to consumer

ask price

price at which dealer will sell security

Arbitrage

process of buying and selling instantaneously to make a profit with no risk

when designing the structure of an IC, the element a company considers while it assess population groups is.....

product and technical expertise

law of one price

says that in an efficient market, like products will have like prices

par value

stated value

the time horizon of a strategic plan will vary according to

the age of the firm and the stability of its market

Fisher effect

the one-for-one adjustment of the nominal interest rate to the inflation rate

bid price

the price a dealer is willing to pay

Value Chain

the series of internal departments that carry out value-creating activities to design, produce, market, deliver, and support a firm's products

Efficient Market Hypothesis

the theory that asset prices reflect all publicly available information about the value of an asset

Managers of international companies that are attempting to develop a competitive advantage face a formidable challenge because

time, talent, and money are scarce

An evolving structure for an international organization over time is normal, as the company's involvement in foreign markets increases over time. (T/F)

true

Lewin's Three-Step Model

unfreezing, moving, refreezing

some ways that an IC can exercise control over a subsidiary's activities include all of the following EXCEPT

using its ownership to outvote its partner

an assessment conducted on the chain of interlinked activities of an organization or set of interconnected organizations, intended to determine where and to what extent value is added to the final product or service is known as

value chain analysis