Global Business MGT 3030 Exam #4 Study Guide

What are the common pitfalls involved with exporting?

- poor market analysis - poor understanding of competitive conditions - lack of customization for local markets - poor distribution arrangements - bad promotional campaigns - general underestimation of the differences and expertise required for foreign market penetration

a letter of credit

A promise by the bank to pay the seller a given amount if certain conditions are met ex. ■ A letter issued by the French importer's bank that states it will pay a specified amount to the exporter when they receive specific documents from the exporter ■ This letter is obtained through a credit check ■ The importer may have to provide a cash deposit or other form of collateral to approve the credit ■ There is a fee for the importer of between .5-2%

What does human resource management (HRM) mean and what does it do?

Activities an organization carries out to utilize its human resources effectively. · Determines human resource strategy · Staffing · Performance evaluation · Management development · Compensation · Labor relations

What is an expatriate manager?

Citizens of one country working abroad in another country

why do consumer needs vary from country to country?

Consumer needs vary from country to country depending on culture and the level of economic development

marketing strategy for a developing country

Consumers in developing nations prefer more basic products ■ i.e. vehicles- choose those without A/C, power steering, power windows, radios

How does the marketing mix differ from country to country?

Depending on the local differences in culture, economic conditions, competitive conditions, product and technical standards, distribution systems, government regulations, etc.

● What are the two issues with market segmentation that international managers must be aware of?

Differences between countries in the structure of market segments The existence of segments that transcend national boundaries

● Describe the two types of assistance provided to U.S. exporters:

EXIM bank and foreign credit insurance association

What happens when you work with intermediaries in-country

Each intermediary adds its own markup to the products—there is a link between channel length, final selling price, and profit margin. · If price is important, a shorter channel is better. · If a retail sector is very fragmented, a long channel is better.

● What is the purpose of international trade secretariats?

Entities established by labor unions to link together labor unions for the same industry worldwide so that they can have better bargaining power

What is a balance sheet and why can it be useful with expatriate pay?

Equalizes purchasing power across countries so employees can have the same standard of living

How can mass production and a worldwide marketing strategy be more difficult?

Governments may have different product standards for products that would make mass production and a worldwide marketing strategy difficult

What did Theodore Levitt state in the 1983 article titled "The Globalization of World Markets"?

He claimed that the emergence of global markets for standardized consumer products would end customized national or regional preferences. He also predicted that the multinational firm would cease to exist and instead be replaced with the global firm where products are sold the same way everywhere.

Why should firms alter their marketing mix based on market segmentation?

It is imperative for firms to alter their marketing mix - product, placement, promotion, and price - based on market segmentation because the goal is to optimize fit of the product for the market segment

What does training refer to and how has it shifted

It prepares the manager for the specific job; management development focuses on developing skills of the manager over their career. Training used to be seen as more important than management development, but the mindset is shifting due to greater global competition and more transnational firms.

What happens when there is expatriate failure and how can the failure be reduced

It represents a failure of the firm's selection policies and is costly; failure can be reduced by better selection and training techniques

what is market segmentation?

Market segmentation is when you identify distinct groups of consumers based on specific attributes - such as geography, demography, sociocultural, and psychological - to determine how their purchasing behavior differs.

What can companies do to address issues with performance appraisals

More weight could be given to on-site manager's appraisal than to offsite manager; a former expat who served in the same location could be involved in the appraisal process; 360-performance review; home-office manager should be consulted before an onsite manager completes a formal termination evaluation

What is an effective global marketing strategy?

One where the firm sees the world's consumers as similar in their tastes and preferences

what are country origin effects?

Refers to the extent to which the place of manufacturing influences product evaluations.

noise in communication refers to

Refers to the number of other messages competing for a potential consumer's attention

What are source effects and how does it differ in the international context)

Source effects are when receiver of message evaluates it based on status or image of sender. It differs in the international context because it depends on the country of origin. Also, its not always negative (i.e., French wine, Italian clothes, German luxury cars)

expatriate failure

The premature return of an expatriate manager to the home country

what is the purpose of management development programs?

To increase the skill of the managers, provide education, rotate managers through jobs, and also build a strong unifying culture and informal management network

● What is price discrimination and what can it help with?

When customers in different countries are charged different prices for the same product. It can help a firm maximize its profits.

how do large and small firms engage differently with exporting?

While larger firms may be proactive in seeking out new export opportunities, many smaller firms are reactive and only pursue international opportunities when the customer calls or knocks on the door.

Did Levitt's prediction come true, especially for consumer products?

While some globalization has occurred, specifically with industrial products such as steel, bulk chemicals, and semiconductors, there is still customization needed for consumer products as they would rather prefer local options if they exist Also, economic, political, and legal barriers make it difficult to standardize all products, specifically when it comes to trade implications and product and technical standards established in countries

By seeking an effective global marketing strategy, what can firms not ignore?

a firm cannot completely ignore differences in consumer tastes and preferences as that can lead to failure

counterpurchase

a reciprocal buying agreement; happens when a firm agrees to buy back a specific amount of materials from a country to which it has made a sale

time draft

allows for a delay in payment

Piggyback marketing is

an arrangement whereby one firm distributes another firm's products

Export management company (EMC) acts as

an export marketing department for client firms

Customs brokers can help companies

avoid the pitfalls involved in customs regulations. The customs requirements of many countries can be difficult for new or infrequent exporters to understand, and the knowledge and experience of the customs broker can be very important

a product is a ____ of attributes

bundle example of product attributes: ■ Vehicle- power, design, quality, performance, fuel consumption, comfort ■ Computer- speed, storage capacity, memory, functionality, user interface

Export agents, merchants, and remarketers buy

buy products directly from the manufacturer and package and label the products in accordance with their own wishes and specifications

A firm's communications strategy is partly defined by its

choice of communication channel

Freight forwarder's primary task is to

combine smaller shipments into a single large shipment to minimize the shipping costs.

maker (draft)

entity who initiates the draft

drawee (draft)

entity who receives the draft

Export trading companies

export products for companies that contract with them

foreign service premium

extra pay for working outside country of origin (offered as an inducement)

benefits

firms often ensure that their expats receive the same level of medical and pension benefits abroad as they would receive at home

Economic processing zones (EPZs) include

foreign trade zones, special economic zones, bonded warehouses, free ports and customs zones. Companies can use EPZs to receive shipments and then reship smaller lots to the surrounding areas.

allowances

hardship allowance (paid when expat is sent to a difficult location where basic necessities are grossly deficient by home country standards); housing allowance (to afford same quality of housing); cost-of-living allowance (to enjoy the same standard of living); education allowance (to ensure children receive adequate schooling)

marketing

helps a firm identify the customers' needs and wants by identifying gaps in the market for the firm to fulfill

r&d

helps determine the degree of product standardization best to meet customer demand

business analytics

helps enhance international marketing research

polycentric staffing

host-country nationals manage local subsidiaries and parent-country nationals hold positions at headquarters advantages: - alleviates cultural myopia - inexpensive to implement disadvantages: - limits career mobility - isolates headquarters from foreign subsidiaries

bias by distance in international performance appraisals

if the manager is in the home country, they may be biased by distance since they are not on-site and may not have experience working abroad

bill of lading

issued to the exporter by the carrier responsible for transporting the goods

What do they say about a truly "globalized" product?

it's an illusion. not achievable

ethnocentric staffing

key management positions are filled by parent-country nationals advantages: - overcomes lack of qualified managers in host nation - unifies culture - helps transfer core competencies disadvantages: - produces resentment in host country - can lead to cultural myopia

pull strategy emphasizes

mass media advertising

marketing strategy for a developed country

more developed nations are more interested in extra performance attributes ■ i.e. vehicles- willing to pay more for customization ■ Contrary to Levitt's suggestions, consumers in most developed countries are not willing to sacrifice preferred attributes for lower prices.

Standardization and customization are not

mutually exclusive

base salary

normally this is in the same range as a similar position in the home country

What is an intermarket segmen?

one that spans multiple countries

sight draft

payable once drawee receives it (on sight)

push strategy emphasizes

personal selling

The following three factors influence the decision between a push or a pull strategy:

product type and consumer sophistication (firms in consumer goods industry usually prefer the pull strategy when trying to sell to a large segment of the market; firms that sell industrial or complex products tend to favor the push strategy) channel length (The longer the channel, the more intermediaries are involved; therefore, pull strategy uses mass advertising to create consumer demand, while a push strategy is more attractive when access to mass media is limited) media availability (pull strategy uses advertising media, whereas push strategy is more attractive when there is limited access to mass media)

Export packaging companies, or export packers for short, provide

provide services to companies that are unfamiliar with exporting.

What is repatriation and what does it involve?

repatriation is the re-entry of expatriate mgrs into their home-country org it involves HRM planning the role of the employee in the home country at the end of the assignment and how to utilize their knowledge acquired while they were abroad

Confirming houses, sometimes called buying agents...

represent foreign companies that want to buy your products.

Describe the four main differences between distribution systems

retail concentration channel length channel exclusivity channel quality

Describe Mendenhall and Oddou's four dimensions that predict expatriate success

self-orientation others-orientation perceptual ability (empathy) cultural toughness

offset

similar to counterpurchase - one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale

compensation/buybacks

takes place when a company constructs a factory or provides tech, equipment, training, or other services to a country, then agrees to receive a certain percentage of the factory's production as partial payment for the contract

How can firms overcome cultural barriers for international communication?

the best approach for a company is to develop cross-cultural literacy.

geocentric staffing

the best people are sought for key jobs throughout the org regardless of nationality advantages: - uses HR efficiently - helps build strong culture and informal mgt networks disadvantages: - national immigration policies may limit implementation - expensive

the four elements of a firm's marketing mix are

the four p's: product attributes, distribution strategy, communication strategy, and pricing strategy

countertrade

the trade of goods or services for other goods or services

switch trading

the use of a specialized third-party trading house in a countertrade arrangement ■ A firm may receive counterpurchase credits when it enters a counterpurchase or offset agreement with a country. ■ These credits can be sold to a third-party trading house, which can then sell them to another firm that can better make use of them.

unintentional bias in international performance appraisals

there can be bias by the evaluating manager based on their own cultural frame of reference and expectations

reliance on hard data in international performance appraisals

want data such as subunit's productivity, profitability, or market share, which does not take into account other soft variables that are important, such as local connections, cross-cultural awareness, and networking

trade acceptance

when a draft is drawn on and accepted by the firm

banker's acceptance

when the draft is drawn on and accepted by the bank

What are the drawbacks of countertrade?

· Countertrade contracts may involve the exchange of unusable or poor-quality goods that the company cannot dispose of profitably. · Countertrade is most appealing to large, diversified multinational corporations that can utilize their worldwide network of contacts to sell goods acquired through countertrading. (Not advisable for smaller firms that have small networks as it would be more risky)

Pull strategies tend to be more effective in the following circumstances

· For consumer goods products · When distribution channels are long · When sufficient print and electronic media are available to carry the marketing message

foreign credit insurance association

■ Association of private commercial institutions operating under the EXIM Bank

taxation (reciprocal tax treaties)

■ How do reciprocal tax treaties work? A treaty between two countries that help to alleviate individuals and businesses paying taxes twice when working abroad; if there is not a reciprocal tax treaty in place, the firm will typically pay the expat's income tax in the host country

● What is export credit insurance and who issues it?

■ This insurance will protect exporters against risk if the foreign importer defaults on payment; Foreign Credit Insurance Association issues it

Draft (aka bill of exchange)

■ an order that is written by the exporter to demonstrate to the importer what amount of money is due and at what time

EXIM bank

■ provide financing aid to facilitate exports, imports, and the exchange of commodities between the U.S. and other countries ■ With EXIM, there needs to be a reasonable assurance of repayment, and thus it will supplement any private financing

Explain the following components of training for expatriate managers

○ Cultural- foster an appreciation for host country's culture ○ Language- improves the effectiveness of managers and helps them better relate to foreign nationals ○ Practical- helps expatriate manager and family ease into day-to-day life in the host country

Push strategies tend to be more effective in the following circumstances

○ For industrial or complex new products ○ When distribution channels are short ○ When few print or electronic media are available

What are tips that will help a small business enter the export market?

○ For novice exporters, it's helpful to hire an EMC or an experienced export consultant. They can help identify opportunities and navigate the paperwork and regulations involved in exporting. ○ It's often wise to initially focus on one or a few markets. ○ Entering a foreign market on a small scale can reduce the costs of any subsequent failure. ○ The exporter must recognize the time and managerial commitment involved in building export sales. Hiring additional personnel to oversee this activity can be helpful. ○ Building strong relationships with local distributors and/or customers is important, especially in many countries. ○ Hiring local personnel can help the firm establish itself in a foreign market. ○ Keeping the option of local production in mind is important.

What role does lack of trust play in international transactions?

○ It is difficult to trust someone blindly when you may have never met them due to the distance between you, a language barrier is present, and other cultural differences are difficult to navigate ○ These three components - space, language, culture - are exacerbated when there are significant economic, legal, and political issues to be navigated

What is the main advantage of engaging in countertrade instead of a traditional cash transaction?

○ It provides a means for a company to finance an export deal when other options are not available. ○ If a company is not willing to enter into a countertrade agreement, it may miss out on an export opportunity to a competitor that is willing to do so

What are the main concerns of labor unions associated with multinational corporations?

○ Multinationals can counter union bargaining power by threatening to move production to another country. ○ Multinationals will keep highly skilled tasks in the home country and farm out only low-skilled tasks. ○ Imported employment practices and contractual agreements will reduce union influence and power.

● How has organized labor responded to the increased bargaining power of multinational corporations?

○ Trying to establish their own international organizations. ○ Lobbying for national legislation to restrict multinationals. ○ Trying to achieve regulations of multinationals through international organizations such as the United Nations.

channel exclusivity

○ distribution strategy that is difficult for outsiders to access ■ This often occurs because retailers prefer to market the products of established manufacturers

retail concentration

○ how many retailers are supplying the market ■ Concentrated system- a few retailers are supplying most of the market ■ Fragmented system- many retailers are supplying the market, none of which have the major share

channel quality

○ refers to the expertise, competencies, and skills of established retailers in a nation, and their ability to sell and support the products of international businesses ■ The quality of retailers is good in most developed countries, but is variable when it comes to emerging markets and less developed countries

channel length

○ the number of intermediaries that lie between the producer and the consumer ■ Short channel- not many intermediaries ■ Long channel- selling through import agent, wholesaler, retailer fragmented retail systems tend to have longer channels

disadvantages of a letter of credit

● Disadvantage is the fee that the importer must pay, plus it may lower their ability to borrow funds for another reason

three purposes of the bill of lading

● Receipt- indicates that the carrier received the merchandise ● Contract- acts as a contract for the transportation of the goods from the exporter to the importer for a specific charge ● Document of title- can be used as a document of title to either obtain payment or a promise of payment before the merchandise is released to importer

advantages of a letter of credit

● The advantage of a letter of credit is that both the importer and exporter can trust a bank when they do not trust each other. Also may allow the exporter to obtain pre-shipment financing, which can help them with the processing of the order

Experience curve pricing

● pricing low worldwide to build global sales volume as rapidly as possible, even if this means taking large losses initially