Chapter 19

Joint venturing

When a firm joins with foreign companies to produce or market products or services. Joint venturing differs from exporting in that the company joins with a host country partner to sell or market abroad.

Quotas

limits on the amount of foreign imports a country will accept in certain product categories to conserve on foreign exchange and protect domestic industry and employment.

Raw material exporting economies

rich in one or more natural resources but poor in other ways. Much of their revenue comes from exporting these resources.

direct exporting

whereby they handle their own exports. The investment and risk are somewhat greater in this strategy, but so is the potential return.

An international company must take a _________ of the problem of distributing products to final consumers.

whole-channel view

General Agreement on Tariffs and Trade (GATT):

-A 61-year-old treaty -Designed to promote world trade -Reduces tariffs and other international trade barriers

World Trade Organization:

-Enforces GATT rules -Mediates disputes -Imposes trade sanctions

Income Distribution:

-Low-income households -Middle-income households -High-income households

Rank potential global markets based on:

-Market size -Market growth -Cost of doing business -Competitive advantage -Risk level

According to the text, what location does coca cola consider a promising long term growth opportunity?

Africa

Formed in 1957, the ________ set out to create a single European market by reducing barriers to the free flow of products, services, finances, and labor among member countries and developing policies on trade with nonmember nations.

European Union

Which of the following was designed to help foster trade between nations?

GATT

_______ and _______ economic factors reflect a country's attractiveness as a market.

Industrial structure, Income distribution

global firm

Minimizes the importance of national boundaries and develops global brands: -operates in more than one country -gains marketing, production, R&D, and financial advantages not available to purely domestic competitors -sees the world as one market

Before a company decides to go global it must evaluate all of the following environments except the _____ environment.

Natural

Bias against bids made by American companies is an example of _____.

Non tariff trade barriers

_____ was established to replace GATT in 1995, and now oversees the original GATT provisions.

WTO

Exchange controls

a limit on the amount of foreign exchange and the exchange rate against other currencies.

Management contracting

a low-risk method of getting into a foreign market, and it yields income from the beginning. The arrangement is even more attractive if the contracting firm has an option to buy some share in the managed company later on.

Standard markup pricing

a price based on a percentage of cost but can cause problems in countries with high costs.

Nontariff trade barriers

biases against bids or restrictive product standards that go against American product features.

Uniform pricing

charges the same price in all markets but does not consider income or wealth where the price may be too high in some or not high enough in other markets.

Product invention

consists of creating something new for a specific country market. -Maintain or reintroduce earlier products -Create new products

Which of the following major decisions should a company make immediately after it decides to operate internationally?

deciding which markets to enter

The drawbacks of contract manufacturing are...

decreased control over the manufacturing process and loss of potential profits on manufacturing.

The biggest involvement in a foreign market comes through ______.

direct investment

A _____ community is a group of nations organized to work toward common goals in the regulation of international trade.

economic

Certain countries have formed free trade zones or _______.

economic communities

A _____ serves to limit the amount of foreign exchange and exchange rate against other currencies?

exchange control

emerging (industrializing) economies

fast growth in manufacturing results in rapid overall economic growth.

Economic communities are also known as _____.

free trade zones

Risks of global trade include all the following except ______.

increased opportunities for growth

A ____ firm is one that by operating more than one country gains advantages that are not available to purely domestic competitors.

global

Immediately after deciding which markets to enter, a company should determine ____.

how to enter the market

The country's ________ shapes its product and service needs, income levels, and employment levels.

industrial structure

Adapted marketing mix

involves adjusting the marketing mix elements in each target market, bearing more costs but hoping for a larger market share and ROI.

Product adaptation

involves changing the product to meet local conditions or wants.

Standardized marketing mix

involves selling the same products and using the same marketing approaches worldwide.

Industrial economies

major exporters of manufactured goods, services, and investment funds. They trade goods among themselves and also export them to other types of economies for raw materials and semifinished goods.

Straight product extension

means marketing a product in a foreign market without any change.

Channels within nations

move the products from their foreign point of entry to the final customers.

Channels between nations

move the products to the borders of the foreign nations.

A _____ is a limit on the amount of goods that importing country will accept in certain product categories.

quota

Seller's headquarters organization

supervises the channel and is also a part of the channel.

Tariffs

taxes on certain imported products designed to raise revenue or to protect domestic firms.

Direct investment

the development of foreign-based assembly or manufacturing facilities. It offers a number of advantages including: -Labor -Logistics -Control -Government incentives -Lower costs -Raw materials

Contract manufacturing

when a firm contracts with manufacturers in the foreign market to produce its product or provide its service. Benefits include faster startup, less risk, and the opportunity to form a partnership or to buy out the local manufacturer.

Licensing

when a firm enters into an agreement with a licensee in a foreign market. For a fee or royalty, the licensee buys the right to use the company's process, trademark, patent, trade secret, or other item of value.

Joint ownership

when one company joins forces with foreign investors to create a local business in which they share joint ownership and control. Joint ownership is sometimes required for economic or political reasons.

Exporting

when the company produces its goods in the home country and sells them in a foreign market. It is the simplest means involving the least change in the company's product lines, organization, investments, or mission.

Subsistence economies

where the vast majority of people engage in simple agriculture. They consume most of their output and barter the rest for simple goods and services.

indirect exporting

working through independent international marketing intermediaries. Indirect exporting involves less investment and risk because the firm does not require an overseas marketing organization or network.