Ocean shipping final exam

T/F: CIP stands for Carriage and Insurance paid to

True

International Strategy At the corporate level

firms choose to use one of the following international strategies: home replication, multi-domestic, global, or transnational

5 types of screening

1. Market Screening 2. Financial and Economic Forces 3. Political and Legal Forces 4. Cultural Forces 5. Competitive Forces

Licensing

A contractual arrangement: one firm sells access to its patents, trade secrets, or technology to another Licensee pays fixed sum and sales royalties

Franchising

A form of licensing in which one firm contracts with another to operate a certain type of business under an established name according to specific rules

Michael Porter's Diamond Model

nation's relative ability to design, produce, distribute, or service products while earning increasing returns on resources Demand conditions Factor Conditions Related and supporting industries Firm strategy, structure, and rivalry this explains why certain industries within a particular nation are competitive internationally, whereas others are not.

Market Factors

Economic data that correlate highly with market demand for a product

Market Indicators

Economic data used to measure relative market strengths of countries or geographic areas.

Mercantilism

Economic philosophy based on belief that (1) a nation's wealth depends on accumulated treasure, usually gold and other rare metals (2) to increase wealth, government policies should promote exports and discourage imports Mercantilists viewed the economic system as a zero-sum game, in which any gain by one party required a loss by another.

Third Screening: Political and Legal Forces

Entry Barriers: Import restrictions, local participation requirements, local content restrictions, government-owned competition Profit Remittance Barriers: Undue restrictions on repatriation of earnings, limits to FDI, inability to provide foreign exchange Policy Stability: Political climate, government stability, public unrest

XTN

Exporter's Shipment Reference Number (26 digits in all)Transmitted electronically to US Customs ..Filing the US Shippers Export Declaration and Requests Approval to export the shipment

T/F: A disadvantage of bottom up planning is that it restricts initiative at lower levels of the organization

False

T/F: A horizontal structure increases hierarchy in an organization

False

T/F: Cultures with a polychromic concept of time, highly value punctuality

False

T/F: Environmental dumping is about selling a product at a lower price in a foreign country

False

T/F: In the theory of absolute advantage there is always scope for trade between two nations

False

T/F: Infant industry argument is often provided to withdraw tariffs

False

T/F: Private international law specifies legal relations between governments

False

T/F: Subsidiary detriment is when a small gain for the subsidiary results in a huge loss for the international company

False

T/F: The international product life cycle hypothesis explains how a product that begins as a nation's import eventually becomes its export

False

T/F: Voluntary Export Restraint is imposed by the importing nation

False

Subsidies

Financial contributions, provided directly or indirectly by a government, which confer a benefit; include grants, preferential tax treatment,

Public Incentives

Foreign Trade Zone: Duty-free area designed to facilitate trade by reducing the effect of customs restrictions Free Trade Zone: An area designated by the government as outside its customs territory Customs drawback: Rebate on customs duties

high-context culture vs Low-context culture

High Context: Relationships depend on trust, build up slowly, are stable. Business deals get done based on relationships Low Context: Efficiency is important. Relationships begin and end quickly. Things get done by following procedures and paying attention to the goal

IPLC explained

In the new product stage, the product is produced and consumed in the US. In the maturing product stage, mass-production techniques are developed and foreign demand expands; the US now exports the product to other countries. In the standardized product stage, production moves to developing countries, which then export the product to developed countries.

customhouse broker

Independent businesses that handle import shipments for compensation Customhouse brokers brings goods through customs and May arrange transportation for goods after they leave customs

Types of Products

Industrial Products (Many can be sold unchanged worldwide (computer chips) Consumer Products (Require greater modification to meet local market requirements than do industrial products) Services (Marketing of services similar to that of industrial products)

3 types of benchmarking

Internal: comparing one operation in the firm with another Competitive: comparing the firm's operation with a direct competitor Functional: comparing similar functions of firms in your industry

Linder Theory of Overlapping Demand

Linder's theory of overlapping demand suggests that international trade will be stronger between countries with similar per capita income levels.

What are the 3 Corporate statements

Mission statement (A broad statement that defines the organization's purpose and scope) Vision Statement (Description of the company's desired future position if it can acquire the necessary competencies and successfully implement its strategy) Values Statement (Clear and concise description of the fundamental values, beliefs, and priorities of the organization's members)

Pioneers vs. Fast Followers

Pioneers: Can gain and maintain competitive edge in new market Overall pioneers may not perform as well in the long run as followers Fast Followers: May be an advantage to let pioneer take initial risks

Contingency Plans

Plans for the best-or-worst-case scenarios or for critical events that could have a severe impact on the business

Two reasons not to Export

Preoccupation with the home market( Reluctance to become involved in a new, unknown and therefore risky operation) Not active in international markets (due to Lack of knowledge)

International Strategic Planning

Provides a means for top management to: Identify opportunities and threats Formulate strategies to handle them Stipulate how to finance and manage the implementation

Quantitative barriers

Quotas: numerical limits placed on specific classes of imports Voluntary export restraints (VERs): Export quotas imposed by exporting nation

Outsourcing

Relocating some or all of a business's activities or processes outside of the company. - Focus on core competencies - Leverage skills of other companies - Reduce costs

Fourth Screening:Cultural Forces

Screening on the basis of cultural factors is challenging These factors are fairly subjective, they are Difficult to assemble data, particularly from a distance. Social Media influencers are playing a big role these days in market assessment through their fan base

Foreign Environmental Forces

Sociocultural Forces Legal Forces (Laws concerning Pollution Consumer protection Operator safety) Economic Forces (Many industrialized country products are too expensive for developing country consumers. they Must either simplify the product or provide a less costly option) Physical Forces (Climate and terrain prevent international product standardization)

Dumping

selling a product abroad for less than the cost of production, the price in the home market, or the price to third countries Price dumping Environmental dumping

Global Sourcing

some Considerations could be (Costs, Control, Expertise, Distance, Languages, Laws and regulations)

Alternative Scenarios

the "what if" questions that reveal weaknesses in present strategies "what if we enter a global pandemic"

Home market effect

this effect says that goods with high transport costs, will tend to be produced in and exported by countries with a large domestic demand.

Reasons to export

to serve markets where the firm has no or limited production facilities To remain price-competitive in the home market

Socio-cultural Forces

understanding how culture can affect international business is critical in order to avoid misunderstandings between colleagues and clients, and also to ensure that businesses are performing in their new markets optimally.

trend analysis

Statistical technique by which successive observations of a variable at regular time intervals are analyzed to establish future values. This assumes past conditions will prevail in future unless adjustments are made.

Tariff

Taxes on imported goods for the purpose of raising their price to reduce competition for local producers or stimulate local production

ITN

The internal transaction number is a 14-digit number that corresponds to an export transaction in the Automated Export System. It serves as proof that an exporter met his or her legal obligation to inform the U.S. government about the details of an export shipment.

Fifth Screening: Competitive Forces

The number, size, and financial strength of the competitors Their market shares Their marketing strategies The apparent effectiveness of their promotional programs The quality levels of their product lines

Methods of Planning

Top-down planning Begins at the highest level in the organization and continues downward Bottom-Up Planning Begins at the lowest level in the organization and continues upward Iterative Planning Repetition of the bottom-up or top-down planning process

T/F: A mission statement broadly defines an organization's purpose and scope

True

T/F: Antitrust laws are intended to promote fair competition and curb monopoly practices

True

T/F: CISG is automatically applied to international sales contracts

True

T/F: David Hume pointed out the shortcomings of Mercantilism

True

T/F: In strict liability the victim does not need to prove negligence in the design or manufacture of the product

True

T/F: Leontief paradox disputed the accuracy of the Huckster-Ohlin theory of trade

True

T/F: Linder theory of overlapping demand explains why nations with similar standard of living tend to trade with one another

True

T/F: The evolution of an international company usually starts with exports

True

Transnational Strategy

Used when a company confronts pressures for both cost effectiveness and local adaptation Company locations based on where most beneficial for each activity

Global Strategy

Used when a company faces strong pressure to reduce costs and limited pressure to adapt products for local markets

home replication strategy

Used when companies typically centralize product development functions in their home country

Multidomestic Strategy

Used when there is strong pressure for adaptation to local market A strategy that enables individual subsidiaries of a multinational firm to compete independently in different domestic markets.

Equity-Based Modes of Entry

Wholly Owned Subsidiary: -build a new plant (greenfield investment) - acquire an existing company. Joint Venture: - corporate entity formed by international company and local owners - corporate entity formed by two international companies for the purpose of doing business in a third market - a corporate entity formed with a government Strategic Alliance -Partnerships between competitors, customers, or suppliers that may take various forms Aims to achieve: - Faster market entry and start-up - Access to new Products, Technologies, and Markets

Cluster analysis

can be a valuable tool to use towards the goal of determining homogeneous groups of geographic areas. Marketers use cluster analysis to identify markets where a single promotional strategy will be effective.

T/F: A quota generates revenue for the local government

False

Environmental Scanning

A procedure in which a firm scans the world for changes in the environmental forces that might affect it

Market Screening

A version of environmental scanning in which the firm identifies desirable markets by using the environmental forces to eliminate the less desirable markets

Exchange Rate and International Trade

A weaker domestic currency stimulates exports and makes imports more expensive. Conversely, a strong domestic currency hampers exports and makes imports cheaper.

Industrial Espionage

Act of spying on a competitors to learn secrets about strategy and operations

Competitive Strategies

Action plans to enable organizations to reach their objectives

absolute advantage

Adam Smith showed that trade need not be a zero sum game and it was possible for both parties to benefit from trade. Trade allowed for specialization. A nation has absolute advantage when it can produce a larger amount of a good or service for the same amount of inputs compared to another country or When it can produce the same amount of a good or service using fewer inputs compared to another country

Countervailing duties

Additional import taxes levied on imports that have benefited from export subsidies

The Promotional Mix

Advertising Sales promotion Public relations (Improves image and overcomes negative perceptions)

Nontariff barriers (NTBs)

All forms of discrimination against imports other than import duties

Mercantilism Criticism

As gold flowed into one country, its supply would increase, and the value of gold would steadily decline relative to other goods leading to inflation.

Payment terms offered by exporters to foreign buyers

Cash in advance (When credit standing of the buyer is unknown or uncertain) Open account (When sale is made on open account Seller assumes payment risk Offered to reliable customer)

Michael Porters three forms of generic competitive strategy

Cost leadership strategy (Ability to produce a product or service that will be at a lower cost than competitors) Walmart Differential strategy (A differential advantage is gained when a business's products or services are different from its competitors.) Apple Focus strategy (Focus or segmentation strategy ideally tries to get businesses to aim at a few target markets rather than trying to target everyone) REI

Two Types of Market Screening

Country Screening: Using countries as the basis for market selection Segment Screening: Using market segments (groups of consumers) within a country as the basis for market selection

CTPAT

Customs-Trade Partnership Against Terrorism A certification Process in the overseas Supply Chain whereby US Customs visit Overseas Seller/Exporter facilities and Investigate the whole supply chain for security purposes. The Form must be filed by the US Importer with US Customs 24 Hours prior to Vessel being loaded in a foreign port for a US destination.

comparative advantage

David Ricardo argued that a nation having absolute disadvantages in the production of two goods with respect to another nation will still have a comparative or relative advantage in the production of the good in which its absolute disadvantage is lesser.

International Strategy

The way firms make choices about acquiring and using scarce resources in order to achieve their international objectives. this involves ensuring competitive advantage or ability to achieve greater returns than the competitors

International Product Life Cycle (IPLC)

Theory was authored by Raymond Vernon in the 1960s. He explains the cycle that products go through when exposed to the international market, It explains why a product that begins as export eventually becomes an import for a nation.

Monochronic Vs Polychronic cultures

monochronic cultures always try to be on time. Showing up late is considered to be disrespectful Polychronic cultures tend to take time a little lightly. They appreciate punctuality but may not always reciprocate